Should blockchain projects care about business models?

1 year ago

Opinion by Vinicius ‘Vini’ Farias Riberiro, EEA Regional Representative for Portugal

A little treatment astir blockchain concern models.

IMHO, decidedly yes. But wherefore does it look that galore bash not care?

First, let’s specify what a concern exemplary is. Simply put, it is an organization’s program for making money. But wait, galore blockchain projects are not-for-profit. Should they besides interest astir a concern model? Considering that they person expenses and they volition request wealth to screen them – sure, they should.

Now let’s instrumentality a look astatine immoderate of the astir communal concern models connected the blockchain. Please enactment that the database is not exhaustive.

Blockchain Business Models

- Utility Token: perchance the astir predominant model, but its conception has been stretched and distorted much often than not. The captious portion present is the ‘utility’. Arguably galore tokens bash not person a existent utility, which poses a important menace to their sustainability.
- Transaction fees: fixed oregon adaptable chopped connected each transaction. It applies to antithetic contexts, specified as:
  - Assets: minting, selling, follow-up fees for transactions, royalties, etc.
  - Finance: withdrawal, deposit, trading, swapping, derivatives, trading, lending, liquidity pools, etc,
  - Blockchain: mining, sequencers, validators, etc.
- Blockchain arsenic a Service (BaaS): permissioned concatenation for business, for instance. It tin beryllium marketed to businesses, specified arsenic banks and different backstage companies, that bash not privation to usage a permissionless chain.
- Services: companies complaint fees for performing services.
  - Consulting
  - Research
  - Development
  - Auditing
  - Bug Bounty
  - Digital Identity
  - KYC and AML
  - Infrastructure
  - Oracle
  - Data Management
- Gaming: in-game transactions and NFT-related activities. Moreover, determination is the gamification of fiscal applications, oregon GameFi.
- Licensing, Royalties & Trademark: similar to accepted business, but successful the blockchain.
- Venture Capital: a VC subdivision wrong blockchain companies. It operates likewise to a accepted VC.
- Staking: projects tin involvement their tokens and get much tokens arsenic a reward.

Traps and biases connected tokenomics

From the supra list, tokens, and staking are the ones that whitethorn person a higher associated risk. If the blockchain task does not person coagulated tokenomics, determination is simply a important accidental that the token volition clasp worth chiefly owed to the Greater Fool Theory.

Greater Fool Theory

People whitethorn bargain overvalued assets with the anticipation of selling them for a higher terms to idiosyncratic else. This is known arsenic the Greater Fool Theory. The contented arises from the token not having an intrinsic worth comparable to its price. It whitethorn lucifer a location of cards. To debar this, radical indispensable cautiously recognize the assets’ intrinsic value. Many assets connected the blockchain, bash not person wide inferior and value, and their terms whitethorn beryllium explained by the Greater Fool Theory.

Halo Effect

Another bias that whitethorn interaction the plus worth is the Halo Effect. It is the inclination for generalized impressions of a task to power one’s sentiment oregon feelings successful its token. An example: if a task has a bully brand, galore users, oregon a bully reputation, therefore, their token should beryllium a bully plus for investment. Not necessarily. This tin beryllium a cognitive bias starring to questionable decision-making.

Concluding Remarks

A project’s semipermanent economical sustainability indispensable person a coagulated concern model, arsenic discussed above, otherwise, it volition astir apt fail. People should ever beryllium capable to recognize however projects make worth and make currency flow. Although blockchain has galore differences from mainstream business, immoderate concepts and principles should inactive apply, similar having a dependable concern model.