The third wave of blockchain solutions brings technology CATs

    In the December article “ How Altcoin Success Looks, ” we promised to publish a post in which the principle of operation of special application tokens — Custom Application Tokens (CATs) —is described in more detail. This article will focus on this technology, which allows any business to issue its own internal digital currency on the blockchain to pay for goods and services within its project.

    image

    The blockchain technology underlying CATs has attracted the attention of representatives of various industries: from finance and insurance to show business and agriculture . Such close attention to this technology is not accidental.

    The third wave of development of blockchain solutions is approaching, forcing attention to be paid to CATs technology. But in order to better understand the trends of today, it is worth starting with prehistory.

    The First and the Second Wave: Enthusiasts and Anarchists


    The first wave of the blockchain can be considered the initial stage of technology development. At the very end of the zero, the blockchain was inseparable from the Bitcoin cryptocurrency, and almost no one knew about it. Then it was used by amateur enthusiasts and anarchists. In a word, the pioneers who saw in this technology something special and explored its capabilities with undisguised curiosity and enthusiasm.

    Around 2011, Bitcoin began to attract some public attention. Increased overall user activity, contributing to the expansion of the system. Bitcoin then gained recognition as a blockchain-based protocol. Its security mechanisms have been tested, the user base has grown significantly, the bugs have been debugged. And all this before the appearance of any real competitors.

    The first wave culminated during a global sensation in 2013, which rose first due to the economic problems of Cyprus and then due to the Chinese stock bubble of November-December, when the exchange rate of bitcoins for yuan became equal to the exchange rate of bitcoins for dollars. These events triggered a rise in the price of Bitcoin to a record high at that time - $ 1,149, as of November 30, 2013.

    That was the heyday of speculative activity: the MtGox Bitcoin Exchange was still working and was among the market leaders. Bitcoin regularly got into the general flow of news due to its volatility. And then the bubble burst as suddenly as it once began to grow.

    The second wave was marked by the collapse of the MtGox exchange. Bitcoin rate dropped. Leading media have sharply criticized the situation - skeptical moods prevailed in their assessments.

    Despite the launch of several hundred new cryptocurrencies, units became popular with users at that time. One example is Litecoin, which has achieved growth in market capitalization, which today amounts to more than 179 million US dollars. Cryptocurrency is based on the same technology as Bitcoin, but unlike the latter, it offered almost nothing fundamentally new.

    Tangible changes occurred in 2014–2015. Then new solutions were developed quickly, passing the test already on the market. The driving force behind this process was the fall in the rate of Bitcoin, whose holders began to invest its tokens in other projects in the hope of extracting profit from it. Money moved from one project to another. These two years have served as an experimental ground not only for technologies, but also for business models, developers and entrepreneurs.

    Third Wave: Platforms, Not Currencies


    The growing professionalism of the sector, a clearer regulatory environment, a more conscious understanding of bottlenecks and those business needs where the blockchain can really make a difference for the better are all characteristics of the current stage. Leading the analogy, we can say that this is the very moment when the TCP / IP Internet protocol has grown into e-commerce. Today companies have already begun to understand how blockchain can increase their efficiency and productivity, and blockchain developers and entrepreneurs are ready to provide them with the necessary solutions.

    The key feature of the third wave is the emergence of non-cryptocurrency (not blockchain-based monetary systems), but multifunctional blockchain platforms that solve a number of tasks and are more used as an infrastructure that supports a wide range of applications than the applications themselves.

    Therefore, to begin with, let's define what special application tokens are, or, as they are called, apptokens or appcoin. To refer to this concept, I suggest using the name Custom Application Tokens, reducing it to CATs. I must say that I really do not like the name appcoin, because it focuses on the monetary side of the issue and has already managed to get bad advertising in the press.

    Apptoken or CAT is a cryptographically protected blockchain-token to be transmitted. As a rule, it is an important functional element of the application, with some actual cost, established through open market mechanisms.

    Let's take a little deeper look into the essence of this definition. Cryptographically protected means that the public key encryption is used to support the operation of the registry and that the holder of tokens retains control over them until his private key is known to an outsider.

    In fact, the token is an entry in the public registry. Its interpretation is beyond the scope of the registry as such and must be determined externally, based on the characteristics of the application using the registry. The token integrates into the functionality of the application, which can be done in different ways.

    The actual cost is assigned to the token through its integration into the application. As long as the application offers some value, the token associated with it also has value.

    The real value of the token is determined in the course of trading on the open market, which is formed naturally. Their decentralized nature contributes to the emergence of trading platforms on top of them. Blockchain systems can have their own set of tools for trading.

    Since this all sounds very abstract, let's look at a small example that shows how versatile this approach can be. Imagine that we are launching a social network and want to attract money for its development. We can create an internal currency for our network by issuing tokens based on the public blockchain. The choice of an open blockchain can be a very important step, as it allows to achieve transparency and inspire confidence. Domestic currency can be transferred within the network and used to pay for certain services. We can also promise to provide banner advertising throughout the network for, say, 100 tokens. If the network becomes successful, our user base will begin to grow and more and more people will begin to see ads. This, of course, means that the value of our token should also grow,

    By issuing such tokens, we provide network users with a valuable service (the ability to transfer value in the form of certain conventional units), raise funds for development, and even provide an investment mechanism for those who wish. We get the opportunity to raise funds directly “from the crowd” and from social network users who are able to verify the value of the network in practice. We do not need to go to venture capital investors, we remove intermediaries by contacting our users directly.

    The nature of tokens may differ, but they are all united by two things: integration into some external applications and determination of the actual value using the mechanism of free market bargaining.

    Of course, the first examples of the use of CATs include the Bitcoin network with its own token, as well as the own tokens of thousands of other cryptocurrencies created following Bitcoin. In this case, the blockchain itself acts as an application. Own tokens play an important role in the existence of open blockchain systems. Such tokens can be called "native" CATs.

    Shortly after the appearance of Bitcoin, people realized that blockchains are nothing more than distributed registries, and as such, they can store records associated with more than one token. So there were special tokens (NXT, Bitshares, Ethereum, Wavesand etc.). The ways of their application can be extremely universal and are actually determined by the external application that uses them. In the end, they are only CATs, and therefore their field of application is limited only by the imagination.

    In addition to the case with applications, many are interested in using them to attract funding. One of the results of the development of a cryptocurrency ecosystem has become a scheme called ICO (initial coin offering). Own tokens of the new system are sold to investors, and the funds collected in this way are used to develop the project. Investors, in turn, are hoping for profit if the new cryptocurrency succeeds. ICO is currently experiencing a boom in popularity because it is a fairly well thought out scheme for raising funds for blockchain-related projects. Special tokens allow you to apply the ICO scheme not only to cryptocurrency systems, but also to a wider range of projects. To do this, a special blockchain token should become one of the functional elements of your application. Besides,

    The advantages for attracting financing are obvious. Turning to your user base, you receive not only money, but also feedback, services of testers and promoters.
    Raising funds in the form of crowdfunding tokens can be much easier to implement than a regular venture capital investment. Moreover, each dollar attracted in this way is of much greater value, since it is ensured by community activity. This market is rapidly gaining momentum and may soon seriously change the state of affairs in the field of venture capital investment.

    Of course, in this way the market is waiting for a lot of obvious obstacles. It is important to note that special tokens are applicable not for all types of projects. Let's list certain approaches that should be avoided.

    • You cannot promise dividend buyers of tokens, as this will already be an offer of securities. If you really need to do so, contact the Securities and Exchange Commission and apply for an IPO there.

    • Tokens cannot represent a share in the share capital of your company without the approval of the relevant supervisory authorities. You can assign certain voting rights to them, for example, to give users the opportunity to determine the direction of development of the project. However, you cannot associate these rights with a share in equity without proper legal treatment of the issue.

    • You cannot issue tokens and promise to buy them back with a surcharge afterwards. There is clearly traced the offer of securities.

    • CATs are essentially a flexible value digital product. By selling them, you do not break any laws. They should be used in a working version of the application or, at least, in a workable prototype. CATs are not considered securities until they have passed the proper registration process with the relevant authorities. Attempts to use them in this capacity are actually doomed to failure and adversely affect the entire ecosystem.

    It is possible that we are already witnessing a paradigm shift in the business practice of crowdfunding, but this mechanism is still very fragile. Most likely in the near future there will be many new applications and tokens. Think about how CATs can be used in your product? Perhaps a new and cool idea will come to your mind.

    The fourth and fifth wave: the state blockchain and the seizure of everyday life


    In the future, we can expect the onset of the fourth wave: blockchains that have received the support of government structures and commercial banks. Such projects are currently in the process of rigorous research and development. It is mainly about controlled registries, and therefore it’s too early to talk about how they will compete or coexist with open platforms of earlier blockchain waves. Along with them, the fifth wave will probably come, which will turn the blockchain into a practically ubiquitous element of everyday life with the help of the Internet of Things and network-connected items, devices and devices.

    image

    Also popular now: