by Ralph Tkatchuk

How blockchain tokens can be key to nurturing ecosystems

Nov 27, 2017
E-commerce SoftwarePayment SystemsTechnology Industry

Ultimately, successful ecosystems are those that inspire users to consolidate activities within them. Tokens make the participation in these ecosystems not only convenient but also potentially profitable.

2 token authentication locks
Credit: Thinkstock

The major players have shown that the key to dominating their respective industries is to expand services and build ecosystems. Ecosystems encourage customers to comprehensively use the whole range of the companies’ offerings. This provides convenience to customers since it only requires a single account to use all available services. Ecosystems also allow companies to maximize the business from each customer with easy opportunities to upsell and cross-sell.

One only has to observe how the tech giants are doing it. Apple made their devices highly interoperable with each other while restricting compatibility with others. This compels users to stick exclusively with the brand. Google has successfully branched out from search and now offer other services that cater to people’s online productivity. Today, a Google account is central to all Google services including Android devices. In Facebook’s 10-year plan, the company showed that it’s on track to develop its ecosystem that includes applications such as Messenger and Instagram, artificial intelligence and virtual reality technology, and other infrastructure platforms.

Since this ecosystem strategy appears to work, many startups are plotting similar roadmaps for their businesses. For instance, European fintech group Naga is intent on building its own ecosystem of finance related services. Currently, Naga operates two flourishing services – trading app SwipeStox and virtual item marketplace Switex. To do consolidate these into an ecosystem, Naga will use blockchain and make tokens essential to user activities.

Given the developments in blockchain technology, tokens could enable even fledgling startups to pursue such a direction. Here are key reasons how tokens can be instrumental to building a healthy ecosystem of services.

Payments are critical

Companies need clear business models to effectively generate business through its ecosystem. Google, for example, continues to rely on its advertising platform to monetize its services especially services like search, Gmail, and YouTube which have free service tiers. For its other services, Google charges users through monthly or usage-based fees. To get paid, Google allows users to link funding sources such as a credit card as payment method.

This method seems straightforward enough especially if the transactions are exclusively between the company and its users. However, services like trading and publishing platforms function as intermediaries and facilitate trade among users. As such, there must be a mechanism that would allow these parties such as buyers, merchants, content creators, and advertisers to effectively transact with each other. This can be further complicated by differences in currencies and preferred payment methods if the service caters to a global market. A payments system becomes crucial to address this issue.

Economic activity within ecosystems promotes growth. This is why eBay owes much of its success to its implement PayPal as its default payments service. eBay enjoyed wider adoption when users finally were able to easily and securely to pay and get paid. Other ecosystems are all keen on building their own payments systems. Google and Apple both are promoting their digital wallets. Facebook also has enabled payments through its Messenger platform.

Tokens facilitate exchange

It’s in this regard that blockchain and tokens could greatly be of use. Payments has been one of blockchain’s most tried and tested use cases especially in the case of bitcoin. Other blockchains such as Ethereum even allow developers and companies the ability to easily create their own tokens. Businesses could then use these tokens as the primary means of exchange for their ecosystems instead of worrying about supporting a variety of payment methods and currencies.

To capitalize on this, Naga will be releasing its Naga Coin for use in its ecosystem. This token can be used for all transactions on SwipeStox, Switex, and all of the other services Naga may soon make available in the ecosystem. For example, buyers and sellers of virtual items on Switex will be able to use Naga Coin for trade. As incentive, token users can get discounts unlike those who will use fiat currencies.

By using blockchain and tokens, transactions can be securely recorded. Users can be confident that transactions are transparent in case issues and disputes arise. Crediting of tokens among users will also be quicker compared to conventional payment processing and fund transfers. These traditional methods usually require batch processing and clearing from banks before merchants can enjoy the proceeds from their sales.

Tokens encourage use

Aside from being a medium for exchange, many tokens have utility in the context of their respective services.

Some technologies are designed to actually use the tokens in order to function. Ether, the token of the Ethereum blockchain, may be more popularly known today as a traded cryptocurrency. However, its main purpose is to be used as fuel to be paid to the network’s miners for performing requested operations. Blockchain file storage service Filecoin uses its token as means for users to avail of storage services and to reward miners who share their resources to the network.

Token sales can also be seen as a means of pre-paying for services at a discount. Naga, which is set to run its token sale this December, will be offering a discount to those who will buy tokens early. People who are keen on trading financial instruments and virtual items would be able to do so more cheaply if they secure Naga Tokens during the sale.

Token sales could even serve as a barometer for the public’s interest in the service. Many token sale participants buy to get essentially get cheaper access to services. Inversely, if a service proves popular or useful enough investors who participated with investments in mind could also be inspired to use the services themselves.

Nurturing a healthy ecosystem

Aside from creating useful services to become part of ecosystems, it is essential for companies to establish means to exchange value within them. Blockchain tokens can be the safe and secure means to do this. In addition, tokens can also be created to be integral fuel to the service so that they can serve as the ecosystem’s economic foundation.

Given the trend in crypto activities, the value of tokens isn’t limited to ecosystems as well. Many companies also list their tokens on exchanges to allow trading for other tokens or even for fiat currencies. The more valuable the ecosystem become, the higher the price these tokens command. This gives tokens more versatility compared to simply creating a store credit or loyalty point system. The potential to be rewarded beyond the scope of the ecosystem could only encourage more users to participate. Ecosystems thrive from increased activity and growth.

Ultimately, successful ecosystems are those that inspire users to consolidate activities within them. Tokens make the participation in these ecosystems not only convenient but also potentially profitable. Users always appreciate such streamlined and rewarding experiences.