Crypto-Assets and digital tokens are becoming an increasingly important of many modern economic trends. Today, the market has over 80 tier-1 digital currencies and protocols such as Bitcoin, Ether or LiteCoin as well as thousands of digital tokens and crypto-assets produced by ICOs and, very soon, Reverse ICOs( read my previous articles about that topic). The total market capitalization of crypto-assets is valued somewhere above $100 billion which might not seem very large by financial market standards but it is sizable enough that it should not be ignored. More importantly, crypto-assets agree growing at a multiple higher than any other asset class in financial markets.
If we can picture a world in which a large number of companies use some sort of digital token, then the economics of that world would look different than the current standards. We will be entering the token economy.
Some Thoughts About the Token Economy
If crypto-assets become part of financial portfolios of mainstream citizens, we are likely to start seeing their impact in areas of the economy beyond digital currency exchanges. How would an economy of combined digital and traditional assets look like? I have no idea :) However, I’ve summarized a few thoughts that might help you think about crypto-assets in a macro-economic context and get the debate started.
1 — Crypto-Assets & Commodities
These days, digital currencies such as Bitcoin are accepted by a growing number of merchants around the world but, in general, its usage remains constrained to small transactions. In the near future, we should expect traditional industries such as real estate, agriculture or oil & gas to warm up to digital currencies. So don’t be shocked if you can buy your next house using Bitcoin( its kid of happening already in some markets :) ).
2 — Two-Tier Crypto-Asset Economy
In the same way that fiat currencies are influenced by macro-economic factors such as fluctuations in commodities or central bank policies, crypto-assets are influenced by their underlying digital protocol such as Ether or Bitcoin. In that dynamic, fluctuations in a tier-1 digital protocol can have an impact on many digital tokens that depend on it.
3 — Crypto-Assets in Financial Portfolios
The number of asset management firms dabbling into digital currencies remains small. However, it is expected that some of the most progressive asset managers will start including Bitcoin or Ether as part of financial portfolio packages. That model is likely to become the main channel by which mainstream citizen get exposed to the token economy.
4 — Crypto-Tokens in Salaries and M&A
Getting paid in Bitcoin. Well, it has happened; just ask the founders to CoinBase or PolyChain Capital. However, those remain isolated cases .In the near future, compensation using digital should become more common as part of salaries or bonuses. Similarly, leveraging digital currencies as part of M&A transactions should be a viable alternative to traditional cash and stock acquisitions.
5 — National Digital Currencies
We are already seeing efforts by countries such as Estonia or Singapore exploring national digital currencies. Also, the world’s recent socio-political climate indicate that we are likely to see the number of countries in the world increase in the upcoming years. Just take a look at the recent independence efforts in regions of Spain, Iraq, Africa, UK and many others. for new countries and emerging economies, the usage of digital currencies and crypto-assets offering very interesting options to be immediately competitive in financial markets.