Babbitt column | How to identify the quality of a token? High frequency, rigid demand, big market

The token is the most representative thing in the blockchain world. Some people joked that it is the token that divides the blockchain project and the Internet project into two: with the token, there are many traditional Internet projects, which will change from one to the other. It has become a blockchain project; without a pass, many authentic blockchain projects do not look much different from those Internet projects that do cloud computing and distributed systems.

It can be seen that the importance of the token is precisely because of this. Regardless of whether it is necessary or necessary, most blockchain projects will issue a token, issue a token to get an ICO, and then make a transaction. So, this has formed a fixed routine. But we rarely think about these questions: What kind of token is really meaningful? What kind of pass is a good pass? Are there any good evaluation criteria for the quality of the token?

I thought about these questions for a long time, and there was no satisfactory answer. Until one day, I re-read "The Road to Wealth and Freedom" written by Li Xiaolai and saw the principles of his choice of entrepreneurial direction mentioned in the article. : "High frequency, rigid demand, big market", every time he looks at entrepreneurial projects and chats with founders, he usually chats like this for a while:

"It is said that the choice of entrepreneurial direction must meet the high frequency, rigid demand, and large market". What do you think? Do you think your project meets these conditions and why? If there is any dissatisfaction, can you tell me why it doesn't matter if you are not satisfied?

I suddenly found it appropriate to use these 7 words to measure whether a token is really useful.

1. High frequency

Tokens are designed for use, and the frequency of different tokens is very different. Some token projects are used very frequently, and they are basically used every day, such as exchange fee deductions; some token projects may only be used once or twice a year, or even for several years. .

Generally speaking, high frequency is better than low frequency, and low frequency ratio is not necessary at all.

If the token is understood as a commodity, the higher the use of the token, the stronger the demand for such a commodity in the market. The more useful it will be, and its price will increase in the long run.

Observe a token from the frequency of use and see the vitality of the token.

But there are also special cases, such as the above-mentioned exchange tokens used to deduct handling fees. For those who like to do short-term trading, like to make contracts, like to buy and sell, and sell and sell, the exchange's Proof is a very high-frequency thing that needs to be used for every transaction; but for those who hoard money parties or make long-term investments, the frequency of use is not so high. Some tokens can be used as miners' fees. If they are used by people inside the ecology, DAPP development, and users, they will be used every day; but for ordinary people, the frequency of use is not so high.

Of course, the use frequency of the pass is only one aspect of our observation, because the use frequency of the pass is also related to the underlying positioning of the project. The exchange token is located at a fee deduction, and the frequency of use is high, but it does not necessarily indicate how significant this token is; on the contrary, the low frequency of use is not necessarily meaningless. For example, Bitcoin, which is located in the world currency, is People who often do cross-border trade may use a high frequency, but for people who are not exposed to cross-border trade, the frequency of use will be relatively low, but you can't explain that Bitcoin is worthless.

Second, just need

If we can only observe the vitality of the project through whether it is "high frequency", but can not identify the value of the project, then the word "just needed" will help us accurately identify whether the project is valuable.

A truly valuable project is one in which the market has a strong need for it: the stronger the market's need for it, the greater the value of the project; the smaller the market's need for it, the smaller the value of the project.

Note that what is mentioned here is just demand, not ordinary demand. If the demand is divided into "rigid demand" and "non-rigid demand", then there is another category of "non-rigid demand", which requires us to be able to identify a non-rigid demand token. For example, I often cite examples. Although the exchanges ’tokens are used frequently and the market demand for them is strong, this is not really just needed. These exchanges are completely feasible even if they do not have a token. What will be affected, so I will classify it into the category of non-just need.

The real need is that some functions can only be realized by this token, you must use it, and you can't do it if you don't use it. If a token project can achieve this, it will be quite powerful. For example, Bitcoin has this meaning. In the world's currency field, Bitcoin is basically in an absolute leadership position. Although there are some competitors, the influence of competitors is temporarily far from Bitcoin.

Speaking of which, we need to note that the code of many blockchain projects is open source, which means that even if it is technologically innovative, it may attract many people's attention in the early stage, but this advantage will not last long. Later, competitors will copy his code and copy its technology, and because competitors are latecomers, they can also innovate in certain aspects, making the original project at a competitive disadvantage.

Therefore, the competitive advantage of blockchain projects generally lies not only in technology, but also in the ecology and consensus formed by technological advantages. Technology can be copied, but once the ecology and consensus are formed, it will not change randomly. The competitiveness in ecology and consensus is the real competitiveness, so the market's rigid need for tokens is largely the rigid demand for consensus and ecology behind it.

Others say that as long as the token goes to the exchange and there are price fluctuations, some people will naturally trade, so is this trading demand just needed? Although the transaction demand is a rigid demand, it is not a rigid demand unique to a certain token, so this feature can be ignored. The rigid demand we call must be a unique rigid demand.

Many users of tokens will form a circle, and I give it a name called "Just Need Circle". This circle has both internal members of the ecology, as well as external users and believers. The more people there are in this circle, the stronger the people in the circle need the token, and the more irreplaceable the token, then we say this token Proof may be truly valuable.

Third, the big market

If a token is used very frequently within the ecology, and there is really just need for it in the circle, does it mean that it is a good token?

The answer is not necessarily.

As we mentioned above, behind "high frequency" and "just need" may correspond to some people, corresponding to a "circle", so how many of these people? How big is this circle? This is also very important.

If there are only a few early ICO participants who just need this token, and only a few initial customers use this token very frequently, then its significance is also limited. We also need to consider how large the market this token is facing. How many potential customers will there be in the future.

Is a token project like Bitcoin, directly facing the global market, or is there a regional restriction? For example, some tokens only restrict the participation of people from a few countries. With more types of tokens in the future, I believe it will be more targeted, such as only targeting specific groups of people.

If you are targeting the global market, then you have 6 billion target customers; if you are targeting the Chinese market, then you have 1.4 billion target customers; if you are targeting a market in a European country, then you may only have a few million Target customers; if you are targeting a more segmented group of people, the fewer your target customers.

Blockchain has a characteristic that it has been facing the world from the beginning, and it represents freedom and value circulation from the beginning. If the Internet has connected people all over the world, then I believe that the blockchain will connect the world ’s assets, data, and value together. This is a deeper connection, this is a kind of greater The connection of business value, the trend of globalization in the future of the blockchain world will only be stronger than it is today.

Another interesting point is that traditional manufacturing industry generally expands slowly. It is a city-by-city and a province-by-province expansion, so its market value is also increasing by millions. Generally, traditional manufacturing companies It ’s already pretty good to have a market value of RMB 100 million; but in the Internet era, a company that has been established for a few years has suddenly become a 1 billion unicorn, and in a few years it has become 10 billion, and this At the time it was not profitable. Because the Internet project is directly aimed at users across the country, it has a different user base and growth rate than the industrial era. An enterprise like Alibaba may not be profitable for 10 years, but once it starts to profit, it will be from 0 within a few years. The process of reaching 100 million, from 100 million to 10 billion, so the valuation of Internet companies has grown rapidly, and the number of Internet companies with a market value of more than 10 billion has increased.

In the coming blockchain era, whether it is the degree of connection to stakeholders, the size of the population it can cover, or the profit it can generate (of course, there is no concept of profit in the blockchain industry, and the profit is fully reflected in the currency price ) Will be more exaggerated than the Internet, so I think that in the future, the market value of giant companies in the blockchain industry will likely increase by another order of magnitude on the basis of the Internet. The emergence of companies with market value of 100 billion or trillion dollars should be a high probability event. Of course, the premise is that you find such a true potential, and it is a token project for the global market.

4. Conclusion

The frequency of the use of the token represents the vitality of the project;

The market's rigid need for tokens represents the real value of the project;

The target market of the token is small, which represents the future potential of the project;

Using the three principles of "high frequency, rigid demand, and big market" to check, we have a general understanding of whether a token is valuable and has potential.