For some people tokens appear to be a brand new concept that they’ve never seen before. But in reality, we all have seen use cases for tokens. Frequent flyer miles is an example of tokenizing a network. Airlines came up with the frequent flyer program many years ago by giving “miles” to those who flew on their planes. They offered miles or tokens to reward those who joined their network and used it. One can think of an airline as a network of services such as booking agents, baggage handlers, pilots, and more.
For those who flew more often the airlines gave frequent flyer “tokens”. They did not give cash for flying. Why? Because the airline wants you to continue using their network for flying and not a competitors’ network. At some level, it locks you into their network.
The frequent flyer program is just one example. There are many others such as cash back on credit card usage, loyalty points for department stores, that free tenth cup of coffee at the coffee shop and there are many more. The only difference with ICO tokens is that there are many more examples of how you can use tokens and keep track of them. Instead of using a punchcard every time you order a coffee, the usage is stored on the blockchain.
Just as frequent flyer miles are not a currency but rather a pseudo currency so tokens are the same—they represent value but not necessarily legal tender. Just like the tokens used in an ICO they are designed to encourage you to use a specific network.
Hall T. Martin is the founder of TEN Capital and a builder of entrepreneur ecosystems by startup funding through angel networks, funding portals, syndicates, and more. Connect with him about fundraising, business growth, and emerging technologies.
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