The idea of blockchain and decentralized ledger technology(DLT) is growing at a very fast rate. The benefits of this technology and the essence of its protocol is powered by underlying tokens, otherwise known as cryptocurrencies.
Every blockchain has its own peculiar cryptocurrency. It is these cryptocurrencies that enhance the decentralized interaction between members of any given blockchain network and the entire blockchain community.
Independently Interactive Entities
Cryptocurrencies and product communities are exclusive entities that can actually exist independently. However, while communities can find alternative vehicles of interaction and transaction, cryptocurrencies no matter in which form they exist, rely on the principle of supply and demand by the community to achieve any form of value whatsoever.
Since the introduction of the ICO concept and its rapid growth in popularity since the last few years, placing the proper order in terms of the two independent entities have not been of keen concern until recent times.
The ICO boom of 2017/2018 saw majority of the projects attempt to grow their communities while introducing their tokens simultaneously. With the benefit of hindsight, this approach now appears to be deficient towards achieving the actual goals of most blockchain projects.
An Abused System
Introducing platform tokens before the building of communities, or merging both processes at the same time eventually attracted more of market speculators rather than technology adopters.
Most investors in majority of the ICOs embraced projects just for the benefit of making profit with anticipated rise in price of tokens, instead of hodling for actual implementation when price will be determined organically by demand and liquidity. This is one of the major reasons why many ICOs today have their tokens selling at ridiculously low prices after listing on exchanges.
As its name stands, cryptocurrencies are meant to be vehicles for transaction and interaction within specific communities. In the actual order, the community should predate the cryptocurrency.
Consider the wider world where nations have their own peculiar currencies; no group of people create a currency before coming together to form a country. Rather, currencies are created to serve existing currencies in enhancing both internal and external trading.
Therefore, the actual order should be to first of all build a community that is fully engaged and adequately functional, then introduce an underlying cryptocurrency to power its activities.
An Alternative Perspective
Having noted this, one should also not overlook the intention of ICOs to raise funds for project development from the onset. This is the main complication in determining the actual order for the two entities being considered here. Projects are not expected to build a community of nothing. At the same time, with the benefit of experience, it can be said that selling tokens before building the communities is one of the setbacks of the cryptocurrency ecosystem today.
In order to sanitize the industry without stifling innovation, there is the need to strike a balance. This however, or a semblance thereof is what most running ICOs are beginning to adopt. It is a system that focuses on community building, and at least and initial level of project development in the form of Minimal Viable Products(MVP).
This serves two purposes which include the provision of a basic working product that keeps actual users within a given network, and building a community of real adopters for the project. Perhaps down the road, this might emerge as a natural regulatory system to ensure that only genuine projects enter the market.
Redefining The Process
While originally for ICOs, the common system adopts the softcap and hardcap module, there could emerge a trend where after achieving the softcap, an MVP must be developed upon which a robust community will sit before actual token sale.
Maybe this would serve as a way to get rid of insincere vendors who use the system for exit scams, and also discourage perpetual speculators who have been largely responsible for the elaborated volatility experienced in the cryptocurrency marketplace.
Whatever the case and scenario, it is an obvious fact that the blockchain and cryptocurrency industry is in dire need of some sanitization. This is not out of place, considering the newness of the technology and the rapid evolution that it is experiencing.
While governments and regulatory institutions are seeking ways to find the appropriate approach towards the industry, the pressure to succeed is on its own naturally forcing participants to find suitable adaptive measure to thrive in the industry. For now, it appears that paying more attention to the actual users of the project favours the long term sustenance of project and organic appreciation of the values of their cryptocurrencies.
Iyke Aru is a seasoned author and educator in the blockchain and cryptocurrency industry. He has been in the business of crypto content writing for many years with thousands of his articles across several platforms on the internet. Iyke is based in Nigeria where he stands out as one of the most informed and credible figures in the cryptocurrency industry. Outside blockchain and crypto, you will most likely catch Iyke playing or discussing football with friends and family.