A New Dawn for Tokens: Forging Decentralized Networks & Usage – Ejaaz Ahamadeen

hello everyone thank you for coming to my talk my name is EJ's and I'm from codify and I hope you enjoy it so better so this is a question I get asked a lot by people who are confused as to what I do mainly it's my mum who still to this day thinks of the tokens that I design are the ones that you use in arcades but I give her a simple answer I say mum I do token design she goes what's that sorry say mum I designed the micro economic incentive systems for digital assets which drive utility on a decentralized network and our response is usually what so I try again and I go mum I design ways to incentivize people who use decentralized networks to behave in ways that benefit the system with tokus and I want to focus on this last point but in particular because I think that after watching growing trends in token design and token models in general and how decentralized networks are launched I think it's fair to say that token design they started to evolve so let's look at some of these metrics if you like so I think all characteristics firstly projects are starting to mature and by that I mean that they're building they're building infrastructure that people can use interfaces that make sense and that is intuitive for a user secondly there's a focus or less of a focus on corrupt scams and Ponzi's mostly I'm not going to mention any specific names but I heard that I Otis had a pretty tough 24 hours and the final thing is better questions are being asked in general I want to focus on this last point in particular now don't be too impressed by by my image editing skills here but some of the questions that are being asked are ok so I have a token but what is this utility serve how do I use it where can I use it who's allowed to buy it how is it distributed etc so I think in order to answer this we need zoom out a little bit and look at decentralized networks as a whole so what are the key defining characteristics of a decentralized network well they usually provide a service or a function so firstly it could be an infrastructure layer function so this could be a second layer scaling solution like scale for example or it could be market specific like prediction markets like Olga and the second most important thing is that it needs to be community driven so what I mean by that is you have a bunch of stakeholders usually when you decentralized you need to allow more stakeholders to get involved with how things are governed and how things are used on a network so then when we're looking at requirements in particular we've got to figure out a few set points firstly there's governance which is an iterative process a good governance model or mechanism allows you to iterate on an existing protocol standards and rules as you move forward the second is infrastructure there needs to be some kind of base layer finality or notable structure that's being run which helps you sustain your network economically and technically and finally there's economic design which for the purpose of this talk I'm going to be digging into a little bit more for you guys I put tokens may be required because I want to make a point about utility tokens as we go along mainly that you don't need it for everything so the way that I like to think about economic design essentially is in two different buckets you've got network design which basically defines the parameters or boundaries within a system it's the rules it's the service that you provide it defines who the stakeholders are in particular the second thing is community interaction itself so now that you've defined who your community participants are your stakeholders how do you incentivize to actually engage with this network how do we make people act in the way that supports the network and how do we sort of like figure out whether token can drive utility in a sense and I think this kind of like sort of like services a different kind of thought where new network and token design models are creating new forms of digital communities that are label anyone to interact with open ecosystems a prime example is shown very much in this hackathon where it's very doubtful this for example now I think it's good now that I've given you a like a brief primer on toca design to look at where we are in aetherium right now so if the rim still needs the smart contract game if you like they hold over 50% of the market share closely followed well not really closely followed by the likes of eos and tron i think that's worth noticing to the right is tehsil slowly creeping up and is definitely a platform to watch carefully now obviously we want to know where all the smart contract architecture is actually being used and probably to no one's surprise it's D Phi which is commonly being propagated as potentially if there is primary use case now as a sovereign open banking ecosystem potentially and this is obviously led to a sporadic growth of different networks and services within the D Phi ecosystem and they funnel with in several different pockets whether it's decentralized exchange or liquidity whether it's decentralized lending services derivatives you name it this has led to a growth of tokens I pulled this tweet from Jake Brockman he posted it a few days ago which I thought summarized the high level principles of the whole blockchain ecosystem as a whole the number of tokens grow pretty quickly nowadays you've got a protocol token there is a wrapper token and then you got to find something that aggregates all of this and you know what he's pretty right in that sense I mean dye the native stable coin of megiddo has several different variants usually different kinds of interest-bearing instruments but the fact is that they we see like myriad production of these different tokens and its uses users are now putting into question who a greats who uses these and why would they but for the purpose of this talk I wanted to focus on a few tokens which have taken my interest over the last year or so primarily because they've done some pretty cool things for their token models which I believe is going to become more popular over the next year or so the first is make it out and as everyone or most people know this is the protocol behind the stable coin dye which is a cryptocurrency that maintains the one-to-one peg with the US dollar and then token is mkr now the fundamental mechanism here is that the spread between the die savings rate and the stability P is burned in maker mega can also be used to vote on changes to protocol governance or governance in itself for example if you wanted to change the percentage of the dye savings rate an interesting point that I wanted to make here is despite make it out holding the largest I guess market cross by far or the defy ecosystem they only made 6.7 or they only generated 6.7 million dollars worth of fees to the stability fee burning just by being the largest holder and typically the incentive here is if you purchase and burn maker it reduces the supply and increases the value of the holding that you have and I think this burning mechanism is quite interesting for a variety of different reasons and I think it's going to become quite popular as we move along the most probably obvious being etherium that might implement VIP one five five nine which introduces a burning mechanism to the token the next one I wanted to talk about was pretty cool is kind of network hyper networks on chain liquidity aggregator protocol which pulls in a wide array of reserves which allows you to securely exchange your tokens and its native token is the khyber network crystal or KNC now what's so interesting about khyber is that they've recently announced the catalyst implementation which actually changes their token design slightly and I've summarized kind of like the key highlights at the bottom over here so KMC holders themselves can stake and earn network fees now the reserve managers which the easiest way to think about them is they're the liquidity providers will earn a percentage of the fees depending on the volume that they make now this is an interesting attribute that I want you to keep in your head because it starts to measure actual volume and usage on a network tied to a token versus just how a token is being used and then you have gaps which are now able to set their own spread of fees now typically previously on the network they attributed a blank 30 percent on the north point two five percent fee and now they've changed that to allow just general market competition which I thought was quite interesting you then go to your wax I like 0 it's a lot they've been around for a long long while and I'd argue they're one of the few protocols that have put their hands up and said maybe our token model doesn't work but we can change it and make it work and adapted to the newer infrastructure layer that we're building so they completely overhauled their token design in the sense that they've introduced what they call state-based liquidity incentives where basically if you're a market maker you can earn fees depending on the number of ZRX tokens that you stake as well as the general profitability that you have in accordance to other market makers it's quite similar to Qyburn that way and if you don't wanna be a market maker what's cool here is that you can just delegate your tokens but it comes at a cost because there's a governance aspect with 0rx where if you delegate your tokens the market makers themselves can control around 50 percent of the governance attributes that come with that so it's an interesting model in that sense and finally I want to talk about synthetics synthetics has probably had their recent rise to fame particularly in the dphi space it's essentially a protocol that allows you to generate synthetic assets on ethereum and then native token is SN acts the way it works is you stake a xanax usually around a seven hundred fifty percent collateral at this point and you can create synthetic assets called sins and whenever you trade a sin you generate a fee fees are distributed to whoever is taking a xanax so it's a simple model and I know I've just very quickly run through those token models there are certain trends that you can listen to and pick up so for example I think that staking is quickly becoming the most popular crypto native function for utility tokens that in fact we actually see this in the infrastructure layer a lot of staking infrastructure and validated services are maturing quite rapidly you've got bison trails leading the infrastructure as a service in my opinion you've got large-scale large-scale exchanges that are now offering staking services you've got staking as a service independent providers as well as native wallets now like the most recent being the ledger integration the second thing to notice here is the reward is usually some sort of protocol native feed generation and to go back to my earlier point about maked out only making six point seven million dollars worth and fees look how much synthetics made in a very recent and rapid time they made almost thirty three million dollars worth of fees and I I expect to see this trend increased with a lot of protocols that are operating these kinds of tokens as we go forward so this got us thinking at consensus I was thinking about a bunch of different questions that still remained unanswered in a sense those questions in particular were ok so you have networks launching and they have these tokens and they have a designated model but who are they distributing these tokens to now we've seen classic cases of airdrops things like lock drops or different novel ways to distribute a mechanism as opposed to a traditional thing which is seen as an ICO or an IE or whatever it might be which is definitely just focused on raising capital so how do we distribute tokens to a diverse and active community and that point is important the reason why it's important is most of these tokens get launched distributed and they're never used this is for a variety of different reasons maybe the infrastructure layer hasn't actually been built up yeah so I can't use my tokens maybe there's no easy way to use my tokens in the first place well maybe I just care about secondary liquidity exchange and I just want to trade my tokens all of those don't really need to prosperous growth of a network the second point is what's the easiest way to actually use my tokens and get rewarded so I understand that the basic incentive here is I use my tokens and I get some kind of a reward but why isn't it easy and intuitive for me to do that the third thing is okay so if I understand that I used my tokens and I can earn rewards well how do I manage my risk here is there a good management interface we've seen like loads of interfaces pop up or into the round d5 but what about the broader scope of infrastructural services and networks that are being launched so in effect what's the easiest way for me to use a decentralized network we were very proud to announce recently the launch of a product called activate which is a novel way to purchase and user tokens to earn rewards through decentralized networks so rather than give you a long and massive spiel I'm going to go through this as easy as possible and if you have any questions at the end let me know so what is it on activate it allows you to buy tokens and with these tokens you're allowed to use them and manage them and also in your rewards from these certain interactions that you make all within one simple platform there's three main stakeholders that we identify that use our platform the first is token holders so that could be the majority of the users that jump on our platform and they're able to essentially use their tokens seamlessly within a few simple clicks and easy to manage interfaces they are understood and they understand the effects of earning rewards using their tokens and we provide analytical tools for them to be able to digest the gravity of the decisions that they're actually making the second is you might ask well what's the purpose of a decentralized network wanting to launch an activate like what's the deal here if we're not focusing on just raising large amounts of capital well the fact is the most important thing for any decentralized network is effectively bootstrapping use on your network this is important for the fostering security and network performance so if you don't have a active community on a decentralized network high regards is it's it's going to turn out quite centralized and the service itself is going to be less than adequate and the second thing is we're able to distribute tokens in a very fair and transparent manner I'm going to speak about our recent launch partner in a second but as an example we're engaging in a Dutch auction which allows for much fairer price transparency and determination for users that participate in a token distribution for example and the final stakeholder are enable us or something that we call enablers which could potentially be a validator marketplace where they're able to run nodes so what's the incentive for them well they'll have simple access to people that want to delegate their tokens why is this important one thing that you see what's taking as a service providers is they largely have to deal with large capital funds who have like purchased a large amount of tokens and their aim at the game is they need to kind of entice them to stake with them with activate we aggregated a wide and diverse community of token holders that have the same initiative which is to use their tokens so if there is a staking function they could simply delegate to you whilst listing on activate and off you go and the final thing is you support a wider distribution of token holders one sort of mechanism that I want to focus on because I'm sure a question that pops up is well if I am a user and I buy tokens I don't want to stake I don't want to use my tokens there's no point I don't see any incentive well we've incorporated a mechanism or programmatic mechanism on activate where anyone who purchases tokens is required to use the percentage of them for a set period of time this is a requirement that we've set into activate which guarantees a network bootstrapping of use and liquidity of usage what this means is that you're able to generate rewards and understand how the protocol native rewards work also also effectively securing a network so with the interfaces that we're building up and there'll be tranche launches as we go along and development gets released the summary here is that you are able to utilize your tokens in a very easy simplest interface for example if you wanted to delegate you'd be able to take delegate if you wanted to stake you a big stake you're able to earn rewards quite easily the importance of how we designed our interface is to provide a macro level overview as well as a micro level overview what that means is network stuff that happens is very complicated so if we're able to break down for example how many nodes have been running in the network of which the tokens I hold right now how many tokens are staked across the whole network how many tokens are in a circulating supply right now these are all pointers that are useful for me to make a decision on what I want to stake vote or whatever crypt energy function I wanted to do and the second thing is I can now make informed decisions on my own Holdings what that means is there'll be an interface which shows you your tokens how much is staked your prospective earning potential if you were to stake on a certain interface or whatever might be and your ability to earn rewards all transparent and life for you directed it and with that I wanted to introduce our recent and valued launch partners the scale Network which is a very unique partnership that we're very proud to announce which we're going to help scale connect their token holders validators and dabs this has been in the works for a while now as we wanted to make sure that scale is the project that we really wanted to launch with they have a very mature ecosystem they're making fantastic infrastructural progress and more importantly there's actually demand for use with scale daps want to launch and they want to solve the scalability problem without ease to even being involved they're always neat aspects to serve and with that I wanted to say thank you if you wanted to check out the platform if you want to check out further information about scale of what we're doing feel free to visit our website or join the conversation on our official telegram page or the scale network telegram all just pester all of us individually with our very innovative telegram handles and I'm here all weekend if you want to chat thank you for listening [Applause] [Music] you [Music]