SMT's: The Correct Way to Use Them

A lot of projects in cryptocurrency are not logical. A nice sounding crypto with a catchy technology is all that is needed for many people to think it is a worthwhile asset. This mentality is no doubt going to occur with SMT's. In this article, I hope to help guide the use of SMT's so they are not just a bunch of junk tokens with no purpose or reason behind them.

Cryptocurrency Use Cases

To begin, I believe it useful to just list the known uses of cryptocurrency. SMT's will only be useful for a subset of activities on this list, but being aware of all known uses is helpful:

• Currency (BTC, Monero, Dash)
• System Use Currency / Token (Ethereum, Ethereum Classic, EOS, Siacoin)
• Specialized Currency for a specific market place (Ripple)
• Tokenized Real World Asset (Tether, Gold-backed Cryptocurrency)
• Tokenized Intangible Assets (EOS ICO on Ethereum Blockchain, Bitcrystal Cards)
• DAO (decentralized autonomous organization)

Use Cases for SMT's

We are not reinventing the cryptocurrency wheel. SMT's are tokens, plain and simple. This means they are not suited for many types of applications in cryptocurrency.

SMT's are not good for pure currency

This makes sense. Your SMT token project is not going to compete with Bitcoin, Dash, ect. as a true internet, decentralized currency. Tokens, since they exist atop another blockchain, are generally subservient to the currency that backs their core blockchain. In this case that would be the Steem currency.

Many cryptocurrencies, and most junk ones, are an attempt to just be a pure currency. In the case of SMT's, this would be someone launching an SMT and advertising it as follows... "Buy things online with S-coin! Fast, zero transaction fee expenditures! Works better than bitcoin!" ... This is NOT how to use SMT's. It's just dumb and it is basically a scam to implement an SMT along this line, even if those statements are true. Just use Steem as a currency instead.

SMT's as System Use Tokens

To me, this is one place SMT's may shine. A lot of people in the Steem community like building exterior websites that integrate with the Steem blockchain. Now their exterior project can have its own token to underpin transactions with their systems. This is highly useful because this gives them control over the economics of such tokens.

Such tokens could exist as a marketplace token, such as an attempt to govern Steemit advertising transactions to manage that type of marketplace. An example: Joe the blogger issues a token along with 20 other bloggers. One token buys a placed advertisement on their blogs. In such a way they open up their blog advertisement slots to a market place of bidders. If they create more tokens over time to accommodate for the placed advertisements, they've effectively created an active bidding market for advertisements in their blogging community.

SMT's as Specialized Currencies

This is perhaps not the best use of SMT's, but since SMT's will be simplier to manage than operating your own blockchain network, I believe some SMT's will be useful in this market.

For certain specialized marketplaces, it does sometimes make sense to have a currency specifically geared toward that market. In such cases, SMT's may meet the right criteria to be the best candidate for launching a specialized currency.

Imagine a currency for an MMORPG. The MMORPG may not wish to launch their own blockchain. The MMORPG company may wish to advertise and blog on the Steemit.com website and be tied to the Steemit community. In such a situation, it would make a lot of sense to have their game currency exist as an SMT.

SMT's as Tokenized Real World Assets

While I think people may try this with SMT's, this is not a great use case. It all then boils down to trusting random person X on the internet. With Steemit.com at least, there are Steemers I trust. I trust them more than most people you meet online, so at the very least, the Steem's methodology for creating third party trust exists.

This means that using SMT's as tokenized real world assets is not impossible. Even so, third party trust is better done with a corporation which has teams of people to manage things if something goes wrong. Trusting one person puts things under the risk of life circumstances. The guy who manages Gold-token suddenly dies and no one can login to his account. This is a problem, but some Steem users are in fact corporations which can adequately handle third party trust, such as @bittrex .

SMT's as Tokenized Intangible Assets and ICO's

Intangible Assets is another way in which SMT's are going to shine. SMT's are great for ICO's, whether the end project stays on the Steem blockchain, or it does an EOS and transitions to another blockchain. It is also great for just creating useful intangible assets that do things on other websites, or do things within the communities themselves.

As an example, if we create a reward asset and the reward asset grants the bearer the right to a resteem of their posts on a Steemit blog with 20,000 followers. Someone could sell that asset to another. They could be traded and have a going rate.

There are many ideas and avenues in this area. What is not good for these types of SMT's is those systems relying on too much third party trust. BTC-coin SMT which has 1 BTC backing each token. Such a token use third-party trust, so it is only a good use case if we trust that third party reasonably well.

SMT's as a DAO?

I believe SMT's would be great for a DAO, but I am unsure if the complexity of voting rights can be handled by SMT's. We will have to wait and see what SMT's can accomplish for us.

What it boils down to...

An SMT needs a reason to exist. This reason should fulfill a need or be a useful new way of conducting business in a specific marketplace. By creating an SMT with a useful reason for existing, it benefits your project and it also benefits the Steem community by not having useless junk being promoted.