Blockchain of Fashion
Tokenomics: Three Definitions
The cryptocurrcency economy continues its endless expansion, taking with it the traditional world of cryptocurrency and its offspring, the blockchain phenomenon.
The most recent addition to the scene has been firey, combining radical decentralism inclinations with an entrepreneurial spirit similar to that of the Wild West: this can be seen in the initial coin offering (ICO). And what has been the most visible marker of this trend has been the spread of a new class of asset, the ERC-20 token, regularly representing a share in loose terms, in an emerging business, project, or organization
Let us think about a simple scenario: a startup chooses to create a role-playing game (RPG) on the Ethereum blockchain. In order to raise the required capital needed to create and develop the game, as well as cover all expenses (from salaries to advertising), the company decides to start an ICO.
This normally translates into creating a specific token which can be purchased in a sale, often via other cryptocurrencies, and the capital raised is then fed back into the overall project.
This is a process that allows to skip past the need for venture capital and leads to establishing a direct relationship between the startups and the field of crypto investors. In a lot of cases, there could be more traditional startup funding or private sales involved in the process, but it is the sale to the public that is going to generate the most capital.

This is what is known as "tokenomics" defined in its most pure sense, a self-funding mechanism for projects that exist within the crypto economy.

What has the wider public and mainstream media paying attention is that with this new mechanism, the sheer scale of funding. For instance, the much-watched Telegram Open Network (TON) ICO is building its way towards a massive $2.5 billion through the course of three fundraising cycles.
Even Goldman Sachs, never the biggest fans of the crypto-economy, issued a report noting token sales have surpassed venture capital as the main source of finance for emerging tech companies.
Given the surplus of money coming into this zone, it can be surprising the token and the economy it underpins is still so ill-defined. However, the ambiguity is not coincidental; it is a direct outcome of the regulatory grey zone in which ICOs operate.

Tokens by function
At present, financial regulators worldwide have a reasonably casual attitude regarding cryptocurrency worldwide. As long as fraudulent behavior and glaring neglect of security laws are avoided, a form of self-governance that is not too restrictive has been tolerated.
When it is not explicitly stated as security, and is operating in full compliance of what that involves, a token has usually been defined by its use. This means the token is defined via its function. A token defined as a security is a financial tool mirroring the traditional securities found in the "normal" economy.
Defining the token as a financial instrument is a difficult situation and many ICOs make sure they cannot be considered as an instrument, usually by defining their token via its use.
In the example of the RPG we presented earlier, the token could be used to purchase in-game weapons or to boost a character's power.


Tokens through economic activity
While the present market has taken the ERC-20 token as the default for token implementation, this doesn't mean it's the only way to make tokenomics function.
The most important thing about cryptocurrency is it symbolizes the ability for a token to do what it is programmed for and to continue performing that function. In the current market this is the comparison between utility and security tokens, but this does not mean the market is set.
These tokens can bring about any solution, and it is possible we are only beginning to see the potential of the token economy.
In similar fashion to the cryptoeconomy being built on the back of bitcoin as a method for transferring value, at present, tokenomics is founded on self-funding. To that end, we can define tokenomics as being intentionally open, and the set of all economic activity generated through creation of crypto tokens (in contrast to cryptocurrencies) and mainly, but not exclusive to, the standard ERC-20 token.
At the moment, we give the three definitions of tokenomics as 1. A means of self-funding within the crypto economy. 2. The deployment of a token in the ecosystem of an ICO project. And 3. All economic activity generated via the creation of tokens.