Token, ICO, dApp
Hello and welcome back for another week of diving into Blockchain for business! By now we have seen what is a blockchain, some use cases, and the connection to sharing economy. This week we are going to continue exploring, by checking out 3 expressions and topics often mentioned in the blockchain world: tokens, ICOs and dApps.
Let the adventure begin!
Lately it has been impossible to escape the hype around tokens, such as Bitcoin, Ether and their roller-coaster values. But what are exactly these tokens?
Simply put, a token is a unit of value. A token is a digital resource, which you can use in exchange of a service, or keep as an asset. We use tokens to execute certain functions in a smart contract, because they provide a simpler form of trading on the blockchain. Just as using tokens for drinks at party, or in an arcade- tokens makes transactions faster and more efficient.
We can define 3 kinds of tokens by their use:
Usage token: tokens, which act as currency within their own applications (dApps - see below). You use these tokens to access the services the application can offer. Similarly to an arcade- if you want to play a game, you pay a token.
Work token: these tokens signify ownership in the specific blockchain application. Decentralized networks do not have one owner, all of the people who have tokens are shareholders. As an owner of a work token, you can influence the direction in which the network develops.
Hybrid tokens: tokens which can be considered both as usage and work tokens.
ICO- Initial Coin Offering
ICOs are the blockchain kind of way of crowdfunding. They provide a simple and effective way for the founders of decentralized applications to get funding. On the other hand, ICOs give access to anybody to invest in the projects of their choosing by purchasing work tokens.
Developers issue a limited amount of tokens, for either a set price, or a flexibly changing price according to demand. People interested in buying the token can exchange their ethers (coin of the Ethereum network, where most decentralized applications are built) for the token of the app. The ICO is a success if at the end there is no majority owner- this ensures the decentralized nature of the app.
ICOs only in the first quarter of 2018 have been valued at $6.3 billion, surpassing by 117% the total sales of 2017. It marks a huge growth and promise in the blockchain technology. However, ICOs have also been under a lot of heat, for the sheer amount of value and novelty. Several ICOs have been branded as scam only created to pocket investors money.
Airdrops: Several applications choose to do a limited time free give-away of their usage tokens to get audience for their service.
DAPP- Decentralized Applications
Let's say you would like to rent the free room in your house. You can put your offer on social media, rental sites, Airbnb, Craigslist. You need to use a middle-man to rent your room. You need a platform. If you are lucky, the platform will be free, and the only charge you have is the information shared and time spent before you find a good tenant. But, if you would like to have more options, use Airbnb or a rental agency, you are going to pay a the middle-man for the service.
The goal of decentralized applications is to eliminate these middle-man, making true peer-to-peer transactions possible without someone charging you a supplement. P2P applications are not necessarily new- BitTorrent, PopcornTime are all running on a P2P network, but not on blockchain.
Decentralized applications run on a blockchain base, and give a whole new range of possibilities with self-executing smart contracts. They can replace all services which today require centralized leadership from businesses to governments, and connect providers directly to consumers. With its secure, unalterable structure, flexible use, transparency, and no central entity it makes a wide-array of transactions available.
Let's discover some dApps!
- Aragon - Aragon wants to empower everyone to lead better organizations with the power of blockchain, and letting people set up their own DAO- decentralized autonomous organizations. It is one of the most exciting projects in the blockchain field. See the video embedded (by clicking the pic) to learn more.
2. Golem- the worldwide supercomputer. Golem connects people in need of high computing power with unused computing power, creating short term access to supercomputers to everybody. Golem works with its own GNT token, which serves as payment to access someone's free CPU capacity (usage token).
3. Waltonchain- matching the power of IoT and Blockchain- Waltonchain combines 2 of the most innovative technologies of our era. By using RFID and IoT Waltonchain connects immense amounts of data, which are saved on the blockchain- shared, transparent and safe. This technology is truly revolutionary for smart contracts, as with the help of IoT meeting contract conditions could be confirmed without human interference (simple example: we agree, that I will give you $20 if the temperature is below 30 Celsius tomorrow. By connecting the thermometer to the Waltonchain, the system can define by itself, if you deserve the $20 dollars.)
So there you have it, 3 more important expressions in your blockchain dictionary. I believe we are only in the beginning of the journey to see how this technology can transform business, and the way all of us own, share or use any product and service.
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Is there something you would really like to read about? Was there something in tech which confused you? Is blockchain still a mistery? Or does just innovation excite you? Do not hesitate, comment and chat!