The Secret About Utility Tokens

September 14, 2022

How to boost growth with utility tokens

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Utility tokens will be the next big thing for real-world companies.
To adopt them, you need to know about tokenization.
And how to boost growth via the concept:

1. What is tokenization?

It means tokens as a replacement for actual money and banknotes.
Like Subway tokens and casino tokens in the real world.
With the public blockchains, anyone can create a token to represent anything of value, and trade it on an open network.

2. What’s the problem with tokenization?

Tokenization can supercharge the growth of web3 projects, even though they’re not sustainable.
Nothing left in these products/projects if you take the token away.
The Ponzi eventually implodes.

3. Real businesses are only waking up to the power of tokenization.

The bear market gives breathing room for real innovations.
With viable products, companies that manage to integrate utility tokens into existing business models early will be rewarded.

4. Utility tokens unlock more potential.

Utility token has a clear usage within the product life cycle.
They offer holders access to products and services.

5. 3 ways to benefit from utility tokens

Loyalty programs with liquidity

Simplest utility token use case is as a reward program.The more tokens users earn, the more they use the product.Tokens can then be redeemed for more products in the future.

The key is to create liquidity.

Unlike traditional loyalty programs that set the discriminated pricing like Starbucks rewards and credit card points.Allow the points to have liquidity in secondary markets on public blockchains.

That means you’re giving everyone the same discount.

= token price x amount of your product 1 token can redeem for.It gives users stronger incentives to earn rewards: monetary benefits can be immediately cashed out.

You can fund growth marketing without affecting the current cashflow.

Signup bonus is in token form.It gives out today's subtracts from tomorrow’s revenue.Users are redeeming tokens for the company’s products & services in the future.

With help from secondary markets to extend liquidity, you can use future revenues to fund growth.

You can also adjust the redemption ratio depending on the market prices of tokens/products.
i.e., X amount of tokens can be redeemed for Y amount of product.

This monetary policy is an additional marketing lever.

It also helps set the floor price for your token and keep the price stable.

Broadening stakeholder base

Tokenization increases the number of direct & indirect stakeholders.You need to build long-term trust in your utility token by aiming for a relatively stable price.So users’ incentive is to earn more tokens, not to expect tokens to appreciate.

Tokens circulating on secondary market mean they interacted with more people than your direct user base.

And an asset of stable value can be incorporated into other financial instruments.It further extends your reach.

6. Who is ready to launch utility tokens?

  • You already have a product-market fit with a low churn rate.Test your products in the market first.
  • Your marginal cost is declining.Keep in mind token rewards are issued at the expense of your future revenue.
  • You’re in a large addressable market
  • Your business model allows tokens to have clear utility.

This thread is inspired by @TaschaLabs.

for mariel, here tascha’s profile pic should also be put in the first image. and with the word “Inspired by @@TaschaLabs ”)

Check out her original thread here:

Key takeaway:

Tokenization is a powerful economic tool to drive growth.

But it won’t go far until integrated with good products and services.


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