The Relationship Between Blockchain And Token Design

Coins and Tokens

In the blockchain system, the most commonly mentioned ones are tokens or certificates. Commonly known as coins and tokens. Coin or currency projects generally refer to the incentive system in public chain projects, while Token or pass projects generally refer to token points issued based on Ethereum or other public chains. At present, most projects also belong to Token type projects. The biggest difference between Coin and Token is that Coin is an incentive system after the development of the public chain, while Token is an incentive system issued before the development of the blockchain project. The second difference is that the development of Coin is difficult and difficult to achieve in the short term. The difficulty of developing Token is almost zero. You only need to publish a smart contract on Ethereum or other public chains to complete the issuance of Token.

The significance of token design

Token design is a very complex and tedious matter. In Bitcoin, the earliest Coin project, its token logic is very simple. Bitcoin itself was created to encourage other personal computing devices to join the Bitcoin network and compete for accounting rights. Then the output of Bitcoin is controlled through algorithms and the total amount is limited, thereby artificially giving Bitcoin natural scarcity. As people’s understanding and acceptance of blockchain increases over time, the value of Bitcoin will increase. It will gradually improve.

In the blockchain 2.0 era, the logic of token design has gradually become more complex. Ethereum is no longer a simple Coin project, but more of a productivity tool, and the ETH it generates also has a more complex economic model. For example, in Ethereum smart contracts, ETH is used as GAS (fuel). Turing-complete scripting languages ​​can achieve more powerful functions, but they also bring a lot of risks of malicious code, such as writing infinite loops. Code circulates unrestrictedly on the Ethereum network. If there are enough such smart contracts, it will bring down the Ethereum network. Therefore, GAS settings are very important. Each smart contract or transaction will have a GAS value. When the GAS value is consumed, the execution of the smart contract will stop. This design enables forced termination of infinite loop code. If infinite loop smart contracts are forced to be deployed, the gas fees generated will also be sky-high. Limiting the means of doing evil by raising the threshold for malicious code is also the subtlety of Ethereum.

Inflation and Deflation of Token Design

In the blockchain 3.0 era, projects represented by EOS have made further progress in token economic design. In the entire EOS ecosystem, EOS is used in almost all interactive links. Node election voting, EOS account generation, CPU resources, RAM resources, etc. all require the use of EOS. In this large ecosystem, EOS realizes the currency attributes within the ecosystem.

The difference between EOS and Ethereum is the token economic model. Although both are inflation economic models, the core difference is that EOS is a controllable inflation economic model, while Ethereum is currently an uncontrollable inflation economic model. In layman's terms, there is currently no upper limit on the number of Ethereum, with a fixed annual growth of 18 million ETH, while EOS is within a controllable range. In the blockchain network, any transaction requires nodes to package and broadcast, and package broadcast requires the resources of the entire network. This packaged broadcast operation is called a miner fee or transaction fee. In the Ethereum network, this behavior will charge GAS fees, and nodes competing for accounting rights will receive a certain amount of ETH rewards. There is no such thing in the EOS network. There are no mining fees or transaction fees in EOS, but are replaced by EOS's inflationary economic model. EOS will issue an additional 5% of EOS every year, allowing all EOS holders to bear the transaction fees of the entire network in disguise. Of the 5% of the additional issuance, 1% will be allocated to super nodes and backup nodes according to the number of blocks produced, and the remaining 4% will be managed by the EOS fund and made available to the community through application proposals.

In the entire EOS network ecosystem, CPU, NET, and RAM all need to be pledged to EOS, and the size of the resources that can be used is determined based on the amount of pledged EOS. To give a popular example, if you hold 1% of EOS, then you will be able to use 1% of the entire EOS network resources, and the EOS team holds and locks 10% of EOS, then the theoretical highest peak value of the entire EOS network is only It will reach 90% and will not be fully loaded. Because of this clever setting, the economic model design logic of EOS is superior to that of Ethereum. Unfortunately, there are too many speculators in EOS's network resources, which makes the cost of using the EOS network too high for developers. So far, there are no outstanding DAPPs on EOS.

Both Ethereum and EOS are inflationary economic models, but the current enthusiasm and number of developers are not ideal, so it is difficult for supply to exceed demand at this stage. There aren’t a lot of tokens being used, there’s just constant hype from changing hands, and we’re currently in a very awkward position.

Bitcoin’s minimalist design

As the first blockchain project, Bitcoin has a unique deflation model, which is different from the inflation model of Ethereum EOS. In addition to the total number of Bitcoins being limited to 21 million, the block reward output is also reduced by half every 21,000 blocks. The current output per block is 12.5 BTC and will be halved again in 2020 to 6.25 BTC. Under such a deflationary model, Bitcoin would theoretically become increasingly rare. If the consensus on Bitcoin remains the same or even increases, the price of Bitcoin will increase. Of course, this is under very optimistic theoretical conditions.

After briefly explaining the economic models of the first three projects, let’s review the blockchain projects under the ICO boom. These projects tend to have a lot of holes. For example, without reasonable token economic model design and without technical support, fundraising valuations have been exaggerated to billions or even tens of billions. Although blockchain technology is the current craze, and flexible and powerful smart contracts such as Ethereum EOS have also lowered the threshold for blockchain fundraising, this does not mean that blockchain projects can be counterfeit or even fraudulent.

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