Token: view from different stakeholders

Token — founder’s tool for achieving project goals

The tokenomics of a project is developed taking into account the needs of founders and is aimed at solving the tasks of the project of paramount importance. At the nascent stage, the token is the main tool for attracting investment. In the active development stage, the token solves the issue of attracting primary and expanding the existing user base (reducing the actual CAC as well as offering users a unique experiential experience). In the mature stage, the use of the token facilitates activity maintenance and long-term user retention. We will discuss the importance and goals of each of the fundamental utilities of tokenization for a project below.

Raising money

Tokens allow for rapid capital raising from a wide range of investors, stimulating the development and expansion of the project. This is achieved through several key aspects:

• Broad accessibility. Tokens can be offered to a global audience, regardless of geographical location or investor accreditation status. This significantly expands the base of potential investors compared to traditional financing methods, such as venture capital or bank loans.
• Simplicity and speed. The process of issuing tokens (for example, through an ICO) is usually simpler and faster than raising funds through traditional financial institutions. Founders do not need to go through lengthy evaluation and approval procedures, allowing for a quicker project launch.
• Flexible financing. Founders can set the parameters of the token sale to attract both strategic and mass investors. For example, bonuses or discounts can be offered in the early stages of the token sale to incentivize participation.
• Community building. Investors who purchase tokens often become active participants in the project’s community, promoting its popularity and growth. This is especially important for projects based on network effects, where success depends on the number of active users.

Increasing community involvement

Tokens incentivize community members to participate in the project’s ecosystem, enhancing engagement and loyalty. This is achieved through several key aspects:

• Incentivized participation. Tokens can be used as rewards for various activities within the ecosystem, such as contributing to development, providing feedback, or promoting the project. This encourages active participation and continuous involvement from community members.
• Ownership and investment. When community members hold tokens, they have a vested interest in the success of the project. This sense of ownership can lead to higher levels of engagement, as members are motivated to contribute to the project’s growth and stability.
• Network effects. As more people hold and use tokens, the value of the network increases. This creates a positive feedback loop where increased participation leads to greater value for all members, further driving engagement and loyalty.

Decrease in Customer Acquisition Cost (CAC)

Tokens can be used as rewards in referral programs and promotions, effectively reducing the cost of acquiring new users. This is achieved through several key aspects:

• Cost-effective marketing. Utilizing tokens for marketing purposes is often more cost-effective than traditional advertising methods. Tokens can serve as a direct, tangible incentive for user actions, resulting in a more efficient allocation of marketing budgets.
• Referral programs. Tokens can be offered as incentives for existing users to refer new users to the platform. This not only motivates current users to promote the project but also leverages their personal networks to bring in new users, thereby reducing marketing and advertising expenses.
• Promotional campaigns. Tokens can be distributed through various promotional campaigns, such as airdrops, giveaways, or contests. These campaigns generate buzz and attract attention, drawing new users to the platform without the need for extensive and costly marketing efforts.

Increased retention

By offering tokens as rewards for ongoing participation, founders can increase user retention and encourage long-term engagement. This is achieved through several key aspects:

• Loyalty programs. Tokens can be part of loyalty programs where users receive rewards for continuous use of the platform or for reaching certain milestones. This creates additional incentives for users to stay active and engaged.
• Social recognition and status. Tokens can be used to recognize and reward top contributors, enhancing their social status within the community. This recognition can motivate people to remain active and engaged, striving for respect and acknowledgment from their peers.

Token — investor’s tool for wish fulfillment

Now you have a better understanding of the purposes of a token. However, the mere existence of a token cannot help a project. It needs holders — the main driving force behind the platform.

Users who purchase a project token can have different goals: from buying a token to enhance the user experience to using it as an investment. In the case of the second category, each investor has different perceptions and expectations, so they tend to pay special attention to documentation (including tokenomics) in order to look for confirmation or refutation of the project’s capabilities.

Of course, it is difficult to fight with inflated expectations, but often the majority of investors pay attention to the same points in the process of selecting a project. By having insights into their areas of interest, a project can significantly improve its chances of attracting investment.

High upside

High growth potential refers to the ability of a project or asset to significantly increase its value or revenue. In the context of cryptocurrencies, this could mean an increase in market capitalization, an increase in the number of users, or the adoption of the technology by a wide audience. Projects targeting markets with the potential to generate revenues in excess of $100M are attractive to investors.

Proof of the demand

High demand in the market is very important for investors, as it demonstrates that there is a need for the project solution and that customers are willing to pay for it. It is a key indicator of a project’s potential financial success and sustainability. The main metrics that can digitize the demand for a project are revenue, user growth, and retention rates.

Exit opportunity

Exit opportunities are important for investors because they provide a way for them to realize profits on their investments. Without clear exit strategies, investors may be stuck with their investment for an extended period of time, potentially missing out on other investment opportunities or needing to liquidate their investment at a loss. Having viable solutions for liquidity and profit realization allows investors to have more control over their investments and the ability to make informed decisions about when and how to exit their investments.

Team

The success of a project largely depends on the team that implements it. A capable and experienced team can effectively realize the project vision and achieve the objectives. An experienced team is more likely to have the necessary knowledge and resources to overcome challenges, make informed decisions, and effectively realize the project vision. In addition, investors are more likely to have confidence in their investment if they know that their money is being managed by a team with a track record of delivering results.

Bottom line

Thus, on the funders’ side, tokenomics is first and foremost developed with the primary needs of the project in mind. The definition of its individual parameters (the size of the total offer, categories, and individual allocations) during development should answer one question — how will this decision affect the project in the long term? While for investors, it is crucial to see the impact of the project and its ability to meet their requirements at all stages of development, constantly answering the question — what will I get from this investment in the future?

The main purpose of the project is to align its goals with the goals of the investor through the token, as only in symbiosis will both parties be able to get what they want in the end.

Token: view from different stakeholders was originally published in Coinmonks on Medium, where people are continuing the conversation by highlighting and responding to this story.