The economics behind utility tokens, and how they appreciate/ depreciate, and incentivise the use of any product or service offered by a company hosting a token generation event are, at times, murky. Strong economic logic and careful consideration of relevant incentives are requisite in the design of a successful token that will facilitate the provision of the relevant product or service offered rather than hinder it. It is all too often that start-up companies seeking funding will put minimal effort into tokenizing their service, and do so merely to facilitate a token sale, rather than to actually enhance their product. This is not just a problem for token behaviour associated with such endeavours, but for the industry as a whole as wanton tokenization stands in the way of further legitimisation and distracts from the true value provided by Blockchain technology.
One project that excels in this regard is Bee, with their Bee Token. Firstly, it is important to understand what, in a broad sense, this project is doing. Beenest, the dApp for the project, is house-sharing platform, a crypto competitor to Airbnb. Citing both the prevalence of share-economy services and use of digital currencies amongst young people – the team believes that Beenest is coming at a ‘growth inflection point.’ The system is constructed through the linking of a few key protocols: with any given transaction, the reputation protocol will first be used to check the reputation of a user and determine whether or not to allow payment, the payment protocol will then be employed to send a receive tokens until the service is fulfilled, and finally the arbitration protocol will allow for disputes to be resolved through trustless voting.
Though the design is elegant, based off of this explanation it seems there is nothing that sets Beenet apart from competitors. However, the clever use of tokenization here has created an environment that, through incentives, will greatly improve the utility and strength of the platform as well as providing a vast range of benefits to hosts and guests. As expounded in the whitepaper, the token is sued to ‘incentivise good behaviour and punish malicious behaviour’ and to reduce costs and inefficiencies. For hosts, the use of a token will lead to increased revenue due to the lack of commission associated with this network, this should also service to lowers costs for guests in that savings may be passed on to guests given the competitive nature of home-sharing. For guests, early adoption of this platform is incentivised in that as the platform grows and the token grows – early adopters will be able to book more expensive properties with the same number of tokens. Guests also benefit from the arbitration protocol (the arbitration protocol’s function is dependent on the usage of tokens) which allows for funds to be returned far more quickly when bookings are cancelled. Additionally, guests and hosts alike will be incentivised to behave appropriately due to the rating system which, unlike the systems used by Uber or Airbnb, are stored on the Blockchain and thus immutable and not subject to manipulation. Lastly, arbiters are incentivised through the reward of tokens – allowing the system to function fluidly.
The multitude of advantages and a more in-depth explanation of their function is available on the Bee Token Whitepaper, but it is already clear just how much tokenization can serve to enhance the provision of a service rather than merely facilitate funding.