Can a blockchain operate without a token or a community?

Previously covered: 

  • There is an economically stable model used in most blockchains.
  • Decentralization is expensive. Incentivization of parties and Economic balance costs a lot and it is reflected in every transaction.
  • There is a possibility to use accounts and create new algorithms of interactions without asking anybody. Interactions can be algorithmized, coded and planned with the help of smart-contracts

Tokens are the “footsoldiers” of smart-contracts. They’re programmable, traceable money that cannot exist outside of a blockchain. They play a decisive role in supporting and expanding the economic systems of these blockchains and act as units of trade.

Can a blockchain operate without a token?

For us to understand the possibility of a blockchain without a token or without a community, we must understand its economic model. First of all, we have to understand how to guarantee functionality of a distributed trustless blockchain system and have long-term profits? Token can answer both of these questions. 

But a token in a blockchain is not only a neat and useful investment feature or a coupot, but also a system of economic balance between the actors and nodes. The basic token or “Grease the Wheels” token, as we have called it in our previous installment, is indeed an instrument ensuring the stable function of blockchain. This token is used to reward nodes for the recording of each transaction and keep the incentivisation going. Remember, that in a decentralized system, all of the transactions are paid for, as there is no centralized authority, ensuring their upkeep except for the individual actors and nodes. 

And the second layer of token is also used to drive the transactions, increasing the number of records made by nodes, thus bringing them more profit and strengthening decentralization further.

The blockchain is still technically possible without a token (hence, they’re just blockchains that don’t support smart-contracts). We don’t even have to verge that far for an example. Take our old and familiar Bitcoin, that doesn’t support smart-contracts and tokens and is very much alive nevertheless. 

Yet, even while respecting the relative simplicity of Bitcoin, we cannot overstate its vast pioneering privilege. In the case of Bitcoin, we must account for the sheer volume of the network, which prevents it from being vulnerable to malicious actors even with generous resources. Thus, we must assume that Bitcoin has dealt with those important questions that we’ve stated earlier, but in a more primitive way than newer blockchains. The role of the node-rewarding resource in bitcoin is …bitcoin, you know, the coin itself. But the possibilities of its usage are rather limited, compared to next-gen blockchains of today.

Can a blockchain operate without the community?

An even more important role in this equation is played by the community. In fact, the community is an absolutely integral part of this equation. 

It is the people who provide any type and amount of value to a cryptocurrency token or a coin. Quite simply, it is the number of people who agree to accept the currency that provides its value. The more people – the more demand, and higher the cost.

When people agree to exchange it on other valuables, the blockchain obtains a possibility to recoup its system.

Let’s take a simplified timeline of a cryptocurrency price. First, a blockchain is launched. The amount of coins is fixed – 1000. A flood of people comes, agreeing to trade the currency for USD. The demand is high. People are willing to buy coins for $1.

Then the community thins out, demand declines. When the majority of people leave, those remaining are willing to pay less and less for a coin. At one point the price dropped to $0.1. 

Low prices drive interest from investors, so a number of those willing to pay for the currency rises again. Demand increases, so as the price, people are willing to pay. 

And it’s really the number of participants and holders, but a number of those willing to pay for the currency that directly shapes the price of the currency. 

Because it is actually impossible to form a cost of a given digital asset without the consensus of the community, and thus, without the supply and demand. You can have all the technology and algorithms you want, but with no one willing to pay for those assets (are they even considered assets at this point?) and participate in those algorithms, there won’t be any interest for nodes to validate transactions and get rewarded in futile cryptos. As there won’t be any interest for actors to participate in “nodeless” unreliable network.

Results

So, there you have it. A blockchain without a token is kind of possible (at least it was), but archaic and niche. A blockchain without a community is unfeasible as it will not translate to an economic model and won’t register any value. 

Share:


You may be interested

Resources:

• Whitepaper

• Roadmap

• Docs

• Blog

FAQ

• IDO Sales

• Apply a Project

Polkapad Github dApp

Referral Program

© Polkapad Network Corporation

2022 All Rights Reserved

Subscribe to our news:

Choose the relevant blog categories:

Thank you for subscription!