Security Tokens Offerings (STOs)

Before we step into the world of NFTs & tokenomics, let’s take a step back and understand what blockchain is.

What is blockchain at a high level?

Blockchain’s entire system is divided into 3 layers. The language that these systems utilize are called “Protocols”.

• Dapps
• Layer 2
• Layer 1

Layer 1’s protocol is from the base technology layer, Layer 2 is usually focused on solving scalability issues in layer 1, and Application Layers are where specific applications are built & used.

Think about layers 1 & 2 as iOS and Android operating systems on a phone.

Application layer is the same for both! The businesses and services created for the operating system provide more functionality and efficiency.

Interoperability

Interoperability is the protocol that allows one to speak to the other in their own language. Interoperability is also called “cross-chain functionality”.

The ability to “cross” the various chains to transact is thus the value within the blockchain ecosystem.

Consensus Modeling

Consensus models are mechanisms to achieve decision-making in a decentralized system. There are many ways to coordinate economic agents to make decisions together.

The two most popular are “Proof of Work” (Bitcoin mechanism), & “Proof of Stake” (Eth’s mechanism).

Token-Based Economy

The difference between the physical traditional world and the digital decentralized world (e.g., token-based) is the state of the economy.

Tokens can be used to incentivize a particular utility strategy, be it with financial incentives (Fungible Token) or non-financial incentives (Non-Fungible Token).

A token is a security token when it represents an underlying asset.

A token is a utility token when it is used to access the platform.

NFTs

Think of NFTs as a transformation tool to transform an asset into the digital space.

Assets can be split into 100 identical parts (Fungible Tokens) based on the NFT.

The fungible sub-token can be used as collateral, to borrow crypto-US dollars against the fungible token.

The primary function of a token is to capture the economic value accrued from within the ecosystem.

Network Effect

In general, networks are interconnected systems of people or things. Networks can be found in almost any complex system – from power grids and streets to social media and the human brain. Networks of all types, however, share several common characteristics. Networking components are useful for founders who want to build their own business with networking effects.

Network effects are mechanisms in a product/service & business where each new user makes the product/service or experience more valuable to all other users.

Network effects account for the majority (roughly around 70 percent) of value created in the tech industry over the past 4+ decades, as many successful tech companies were fueled by network effects. However, not all network effects are the same, and understanding the nuances is key to creating your own network effects in products/services.

EdgeWork Capital has the expertise to assist companies in assessment, strategy, architecture building, branding, marketing, and management consulting services in our disciplines.