The problem with tradeable blockchain assets

[saor]

Telegram recently announced their proposed ICO to raise a billion dollars for their new blockchain platform. They'll have their own cryptocurrency called GRAMS, which will serve as a means of payment & utility on their platform. However, GRAMS won't have a value determined from within the environment where it serves utility; it's value isn't pegged to fiat or determined by the company itself - but instead has a value determined by traders: GRAMS, like almost every coin or token will be traded on crypto exchanges.

To see how strange this is, consider the failed project FLIK:



FLIK's idea was to be Netflix on the blockchain.
The FLIK token was to be the exclusive mode of payment on the FLIK platform.

Like all crypto projects the FLIK token was a tradeable asset with a value determined by traders. So imagine using the FLIK platform to rent a movie: You spend $10 and buy two FLIK tokens at a price of $5 each.

Today a movie costs 1 x FLIK token ($5).
Next week the market flops and the value of one FLIK token drops to $2.5 - it's value halved.

In order for FLIK to maintain it's revenue stream, you now need to pay 2 x FLIK tokens (2 x $2.5) for one movie. A week later the price is back up to $5 and yet you've used up both your tokens. Now maybe I'm looking at this too simply, but I've never once seen mentioned a means by which these projects intend to smooth out the price fluctuations in order to maintain a steady price and consistent perception of value in these tokens (like FLIK). I can't imagine FLIK swallowing the losses due to price differences brought about by trading.

These projects are trying to create these closed ecosystems but they have these fundamental utility assets (like the FLIK token) which have a value that's constantly in flux and determined not by supply and demand or some other local or internal governing factor - but by the whims of traders on exchanges. The users of these tokens on the platform are forever subject to a currency with no logical & persistent value.

There are far too many projects who's tokens are being pushed into this absurd position by the ICO fundraising process, and until this changes, I think a lot of projects with an embedded token or coin will struggle to appeal to the sensibilities of people who'd prefer transacting with a currency that makes sense and is grounded firmly within the platform and it's ecosystem. So long as these currencies have a value almost entirely determined by traders and their coffee - it's going to be a long time before blockchain finds a friendly & functional home in our society.

 

[Temujin]

See what you're saying, not sure how to address it, I'd say maybe something like Neo model could work. Neo is a 'share' basically, and you get paid in Gas on how much Neo you own. /inserts brainfart
In this case, maybe they need to make Grams a 'share', have a fixed number of Grams which can be traded on exchange and then introduce a 'gramlet' at a fixed fiat price on the platform for users. The 'gramlets' are then paid out to the Gram holders, which as said are fixed price, and can be sold back to users on the platform at that fixed price. Value of Gram is then determined by Telegrams revenue, ie more users, higher revenue, more gramlets paid out, holding more Grams means you get more of the gramlets /shrug

 

[saor]

In this case, maybe they need to make Grams a 'share', have a fixed number of Grams which can be traded on exchange

Yup.
This is the case for many crypto projects right now and while I trade these things, it's still a strange state of affairs to be trading something with no value outside the exchange. These tradeable assets are not intended as stores of value or even designed as such - they are merely pawn-pieces in the ICO fundraising process; something to give investors but which have no real integration or value determined by the platform itself. Many of these projects can safely divorce themselves from their token and still function.

The few projects that have an asset that's both tradeable and integrated as utility or value in their platforms have yet to release any kind of mainstream working versions.

and then introduce a 'gramlet' at a fixed fiat price on the platform for users. The 'gramlets' are then paid out to the Gram holders, which as said are fixed price, and can be sold back to users on the platform at that fixed price. Value of Gram is then determined by Telegrams revenue, ie more users, higher revenue, more gramlets paid out, holding more Grams means you get more of the gramlets /shrug

In this case I'd prefer the company to issue GRAMLETS as a way of generating revenue, rather than arbitrary GRAM holders being the stockpile of GRAMLETS that people buy from. I'm not entirely convinced that an integrated utility asset (like GRAM or FLIK) can effective serve the platform whilst also being tradeable. It's value, like you say - needs to arise from within the system its utility is intended.