Definition and explanation
A token is a digital asset that can be transferred (and not copied) between two parties over the Internet, without the need for third-party agreement.
Tokens are at the heart of the ICO (Initial Coin Offering) mechanism.
During an ICO, also called dirty token, tokens are issued and sold in large numbers to multiple Internet investors (hence the term crowdsale), to finance the launch and development of a blockchain project. These tokens should in principle be an integral part of the operation and / or business model of the project.
In return for the tokens sold, the organization behind the ICO receives the money paid by Internet users in the form of cryptocurrency. This organization can be a business or a non-profit foundation. Thus in 2014 the founders of Ethereum undertook an ICO whose funds (the equivalent of more than 18 million dollars) went to the Ethereum Foundation (non-profit), to develop the blockchain of the same name.
As a result, ICOs are an alternative to venture capital financing, thanks to the issuance of these famous tokens.
But beware: the tokens do not represent equity investments (equity). They do not dilute the shares of the shareholders of the company. In addition, unlike equity, which can take years to become liquid, a token can be sold in 10 minutes (except for restrictions imposed by the project’s founders). The liquidity of the tokens is a flagship asset of the ICOs.
Nature and uses of tokens
To schematize, it is possible to distinguish two types of tokens:
- Tokens related to protocols. Examples of protocols: Bitcoin (eponymous token), Ethereum (token: ether), Tezos (token: Tez, plural Tezzies) … (comparison with Internet: Http is a protocol)
- Tokens designed to work in specific applications, called dApps in the Ethereum universe. The tokens are then built over an existing protocol. They are sometimes called App Coins, or Token Apps. (Internet comparison: Facebook is an application, built on top of Http).
A token is distinguished from a financial title, and therefore from the associated regulation, by the fact that it has a use value. The possibilities of using a token are very numerous. Among other things, a token may represent a right (use of a product / service, access, voting, etc.); a way to pay; a reputation (example of the Augur token, decentralized predictive market); or , more generally, a unit of exchange value within a given application or ecosystem. This opens the way to a transactional economic system between buyers and sellers, where users can earn tokens either actively (via a specific task) or passively (eg accept to monetize their data, or to monetize their data. free storage space as Storj offers), and then spend them in the services of the given ecosystem.
History of tokens
The domination of Bitcoin among all tokens was almost total until 2016. Bitcoin has become a minority since 2017.
The first token in history, created in 2009, is bitcoin , this peer-to-peer electronic money, requiring no intermediary to be exchanged. Bitcoin solved a fundamental digital problem: the inability to transfer value to the Internet. When a user X sends a movie or song to a user Y, he actually sends a copy of the file, since he himself keeps the original file. This mechanism is obviously problematic when it comes to monetary value. With Bitcoin, if an individual sends an amount in cryptocurrency, he then no longer has this amount.
Other tokens were then born in the wake of Bitcoin:
- Either based on the characteristics of Bitcoin with some variations in the protocol. This is for example the case of Dogecoin, ZCash (more anonymous than Bitcoin) and many others. These tokens are born with their own blockchain: so they are tokens based on entirely new strings, but whose codeconsists of a derivative of Bitcoin .
- Either relying on new channelstoo, but this time with a completely redesigned code . The most famous example is Ethereum, whose code was not built from Bitcoin, and whose features are supposed to allow a wider range of decentralized applications. It should be noted that Ethereum is at the origin of one of the first ICOs in history: in 2014, Ethereum raised the equivalent of more than 18 million dollars (by emitting 60 million exchangeable ether against bitcoins). A more recent example is the blockchain Tezos ($ 232 million raised in 2017).
- Or based on both chains derived( fork ) a main blockchain, and codes them as derivatives of an original code . The most famous examples are the tokens of the Ethereum Classic and Bitcoin Cash blockchains, created respectively as a result of hard forks of Ethereum blockchains (in 2016) and Bitcoin (in 2017).
As previously explained, a different type of tokens has also developed in parallel: it consists of the creation of tokens overan existing blockchain (which is most often Ethereum). These are decentralized applications, not protocols themselves . Let’s mention Status or Basic Attention Token, which raised respectively the equivalent of 95 and 35 million dollars in 2017
Ranking of the biggest lifts in ICO
More than $ 1.6 billion has been invested in blockchain projects as ICO (Initial Coin Offering). Find below the top 10 of the biggest fundraisers in ICO, updated monthly (last update: October 2017):
- Tezos: 232 million dollars (July 2017)
- FileCoin: $ 200 million (September 2017). Nb: lifting completed by a pre-sale of 52 million from VC.
- EOS: $ 200 million ( 2018 - ICO still in progress)
- Bancor: $ 153 million (June 2017)
- TheDAO: $ 152 million (May 2016)
- Status: $ 107 million (June 2017)
- Kin: $ 98 million ( September 2017)
- TenX: $ 83 million (June 2017)
- Salt: $ 54 million ( August 2017)
- MobileGo: $ 53 million (May 2017)
Precision: the sums are indicated in dollars but have been raised in cryptocurrencies. It is therefore the dollar equivalent of the amounts raised in ether and / or bitcoin.