Blockchain and token technology have ushered in a major societal shift where people can take ownership of their assets in the digital world. We explain why this is such a decisive breakthrough.
✨ Tokens let people take ownership of their digital assets in a way that was never possible before blockchains existed.
✨ The rise of digital art, social tokens, and ownable token addresses hints at how the technology could grow in the future.
✨ As tokens can represent almost anything, their impact on the world around us could be enormous.
When Bitcoin launched in 2009, its pseudonymous creator, Satoshi Nakamoto, wanted to give the world the first “peer-to-peer digital cash.” Bitcoin was different to traditional money as it removed trust in third parties. So when someone “owns” one Bitcoin, they really do own it. Fourteen years later, the token space has evolved in tremendous ways. However, digital ownership remains one of its core principles. In this piece, we explain how tokens help us own assets in the digital world and why that’s such a significant breakthrough.
Digital assets are changing our understanding of value and ownership. But most people think about what they own in terms of their money and physical possessions. We can examine how traditional money works to understand why digital assets are groundbreaking.
When you hold a banknote, you don’t truly own anything other than the piece of paper it was printed on.
For centuries, people have exchanged coins and banknotes to pay for goods and services. For example, a $20 bill is known as “legal tender” and is what we usually think of when we talk about money.
But when you hold a banknote, you don’t truly own anything other than the piece of paper it was printed on. A banknote is really just a printed note that can legally be used to settle a debt. Historically, banks would redeem banknotes for coins such as gold, but that changed with the end of the Bretton Woods system in 1971.
Token tips: Under the Bretton Woods system, banks kept gold reserves to back dollars and other traditional currencies. President Nixon brought an end to the system in 1971 and many currencies became free-floating fiat money 💡
With the advent of the Internet, the concept of money has evolved. As a result, cash has started to fade out. Today, most money is little more than a series of numbers stored on bank databases. Banks use these numbers to determine what each of us owns and who owes what to whom.
You have to trust a bank whenever you use regular money.
Money is a vital tool for a functioning society. But the biggest token advocates believe it is flawed because it depends on trust. You have to trust a bank whenever you use regular money.
When Satoshi created Bitcoin, they wanted to create digital cash that removed trust in central authorities such as banks. Anyone can check the Bitcoin price and blockchain anytime to see the transaction history and who owns what. Though most Bitcoin owners prefer to hold their coins rather than spend them today, it changed our understanding of value forever.
The front page of The Times newspaper on the day Bitcoin launched. That day, Bitcoin price in USD was almost zero. Satoshi embedded a message in Bitcoin’s first block that read “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.” (Source: The Times)
Digital ownership is the crux of why tokens are so important.
Following Bitcoin’s success, many newer tokens have launched on different blockchain networks. Token technology has ushered in a digital ownership revolution, where blockchains allow us to own our assets in the digital realm.
Digital ownership is the crux of why tokens are so important. Today, tokens can represent many different things. They can take the form of shares in a blockchain network like Bitcoin and Ethereum through to digital wearables and membership passes. But all of them give people ownership in something.
To date, Bitcoin and Ethereum have been the most successful tokens. BTC price is around $43,840, and Bitcoin market capitalization ascends to $858 billion. On the other hand, as Ethereum hosts applications, many projects have used the network to launch their own platforms and tokens. DeFi was the first innovation to take off on Ethereum; many similar networks have their own vibrant DeFi ecosystems, too.
NFTs are useful for proving the owner of any given asset.
Another significant breakthrough in the space has been the advent of NFT technology. NFT stands for “non-fungible token,” which is another way of describing a token as unique.
DANKRUPT by XCOPY, one of the NFT art scene’s most celebrated pioneers (Source: XCOPY)
NFTs first caught on in the digital art scene. This was largely because they helped digital creators sell their work directly to fans. Since then, musicians, celebrities, and various creatives have used them to form closer ties with their fans.
NFTs have become a key emblem of token culture. As the technology grows, it’s likely that they’ll increasingly impact disciplines such as sports and music. NFTs can also offer provable ownership for event tickets, luxury goods, and even houses.
Similar to NFTs, social tokens have also grown with the broader token space. Social tokens are popular in the sports industry, where they’re typically used like membership cards. As with NFTs and other tokens, they give people a way to own part of something they believe in.
Many of the world’s most famous football clubs such as FC Barcelona have released their own social tokens in partnership with Chiliz as a way of engaging with their fans (Source: AFP via Getty Images)
Tokens allow us to own almost anything. They are even helping people own their online identities and content.
Projects such as Ethereum Name Service and Lens Protocol are accelerating this trend. Ethereum Name Service issues token users with NFTs that turn their Web3 address into a readable format. Lens, meanwhile, lets people tokenize their social posts.
Ethereum Name Service lets Ethereum users turn their wallet address into a readable name of their choice ending “.eth” (Source: ENS)
These innovations contrast Big Tech platforms like Facebook and Google, which own their users’ data. These nascent projects are fundamental to a movement known as Web3, which aims to use tokens to dismantle powerful centralised entities.
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The Web3 vision is to build a world where regular people genuinely own their assets, and no central part has control.
This movement is still in its infancy. But as the world goes more digital and online spaces evolve, tokens will be the key to helping people claim their identities, content, and other assets.
If token technology succeeds, it’s likely to impact many areas of our lives in unimaginable ways. Tokens are not just useful for exchanging value over the Internet. We’ll use them to signal our beliefs through groups and causes we align with, own projects that have meaning to us, and express our interests. In fact, this is already happening today.
The token economy is currently home to thousands of projects and tokens. But as the space grows and more people find ways to take ownership of things they believe in, we could enter a world with millions of tokens.
The token movement started as an alternative system to traditional money. But its meaning has evolved through the years. Tokens have radically changed how we perceive value by letting people own what matters to them. While tokens are just getting started, they have changed the world by enabling digital ownership. With the rise of Web3, the power of digital ownership will become more apparent. To learn more about why tokens are important, read on to find out how tokens empower people to shape the world around them.
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Please note: Investing in cryptoassets is risky. Due to the volatile nature of the cryptocurrency market, investors run the risk of losing their funds when they make an investment. Returns from cryptoasset investing are not guaranteed, therefore users should always be aware of the risks.