Galia Benartzi, the co-founder and business development head at Bancor, the developer of a protocol which specifies “a standard for the creation of intrinsically tradable tokens,” has said that the initial coin offering (ICO) “phase … has shown us that people can [easily] create tokens.” She added that for now, these are “not billions of people, but [rather only] thousands of people.”
Agreeing with the statements made earlier by Bill Barhydt (the founder and CEO of Abra) that the retail investor will increasingly be using cryptocurrencies in the coming years, Benartzi noted that Bancor is mainly interested in “people using crypto.”
Benartzi, whose comments came during the TOKEN2049 conference held in mid-March 2019 in Hong Kong, explained that (in Bancor’s view) “investors are a small subset of [the crypto economy].” She pointed out that “some people ask about their [family members] buying bitcoin (BTC).” In this case, Benartzi said she always asks whether they are buying other assets such as gold or traditional commodities and stocks.
She continued: “Most people do buy stocks, but most people that use the products that we think of as the most successful products of the internet age … your Facebook, your YouTube, your Reddit … are buying or consuming the products that they want to use.” This, “rather than [thinking of them as products] they want to invest in and wait until they appreciate [in value] and then cash out” to make a profit, Benartzi argued.
Focusing On The Usefulness Of Tokens, Rather Than Being An Investment Opportunity
She added:
When tokens are useful, when tokens can buy me products in the commerce paradigm, when my token gets me access to things [like] backstage at a concert or a WhatsApp group with someone I want to be in touch with. When my token can give me things I want … when my token [actually has real utility] … that’s where we can see the billions of users adopting crypto.
According to Benartzi:
[Consumers] won’t think of it as crypto, they’ll think of it as a product, or a service, they’ll think of it as access to something they want to be in. They won’t think of it as liquidity networks, they won’t think of it as blockchains … which blockchain is my token on? No consumer will ever say that.
Tokens Have Been Around For Decades
While Benartzi has made some interesting arguments, the nascent blockchain or crypto-based tokenized economy does not yet offer any significant new value. Token-based rewards systems such as frequent flyer programs (FFP) have been offered (successfully) to consumers for many years.
As described in an extensive report from the European Central Bank (ECB) (published in October 2012):
Frequent-flyer programs can be seen as a certain type of virtual currency, one with unidirectional flow of money to purchase points, but no exchange back into money.
FFPs are useful which is why people actually use them. While distributed ledger technology (DLT) and cryptographic assets are a technological innovation, effective token-based incentive models and economies have existed well before blockchains. Currently, it remains unclear what unique added value blockchain-powered tokens will bring.