Giving value to tokens - Some possible use cases

in #sptlast year (edited)

If you are a regular on the Steem blockchain, no doubt by now you would have seen the explosion of new tokens and new projects that have been birthed. There's SCT, AAA, SPT, PAL and much much more.

But the question you might be wondering is: What value do these tokens have?


From time to time I like to dabble in new crypto projects, it use to be ICOs and pre-sales, but now all the rage is around IEOs (Initial Exchange Offerings).Now, whenever a new coin is traded on an exchange for the first time, there is always a price discovery phase. Often the new coin would trade wildly, bouncing up and down in price, until it eventually settles down into a rhythm, and more narrow price range. It's the same process with many of the new projects that have launched on Steem recently.

How to build value for the long term

When the initial hype around the launch of a coin is over, that is when we see the real strength of a project. Without creating demand for the coin through providing value to investors, the coin will most likely gradually decline in value and fade away. But how do we create value for investors?

Coin utility

Most of the coins we see launched are categorized as Utility Coins. This means that the underlying value of the coin needs to come from its utility.

DEC is a good example of a coin that has excellent utility. It is the native token of Splinterlands, and with it, players can purchase potions, Skins and Orbs which all have inherent value, as well as upvotes from the @steemmonsters account. As a result, we have seen DEC retain its value and trade in a narrow range, with decent volumes each day.

Some possible use cases and utility for tokens

If some of the other projects such as SPT, PAL, SCT or AAA are to have longevity, it needs to develop utility and use cases. We have seen projects such as SCT utilizing the Promote function, where posts can be promoted with SCT. We have also seen projects such as Actifit using their tokens to purchase upvotes.

Here are some other ideas for projects to have utility for their coin:

  • Staking tokens provide airdrops/mining of other tokens. I believe JJM is doing something like that. But I think this is a good way to encourage staking of the coins, whilst adding no downward pressure on the native coin.
  • Staking tokens provide access to daily upvotes. This is similar to the SCT UBI idea.
  • Tokens can be redeemed for other tokens. In the case of SPT, perhaps SPT can be redeemed for DEC, or staked SPT given DEC airdrops.

These are just some initial ideas I had around how projects can create utility and use cases for their tokens. Please feel free to share your suggestions in the comments below.

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This is the major problem I have with a lot of the tokens coming out now. Subjective value is derived from subjective utility. And that's true even for monetary coins as the utility is found in exchange for goods, services, and other monies.

When I look at coins like #spt or #palnet right now they have a couple uses:

Stake in order to give upvotes, which increases your coin.
Promote your post, which gets your post seen by more, which might increase your coin.

There's no exchange happening that is external to the coin itself. I'll even grant that a user might promote a post that is advertising some other thing, which gives a slight use case.

But until someone rolls out a way to create value external to the coin, it's just ex nihilo and has all the support of that nothing.

That's not to say that it won't happen, I just haven't seen any yet.

Exactly. I agree, there needs to be utility in a coin to create sustained demand, or else it’s just all speculation. We’re probably going to find very few tokens like DEC, but I’m hoping the Splinterlands team can do something with SPT tokens.

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I actually think they will, mainly because aggro is too aware of this issue.