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How Utility Drives Value Through Demand
With the rise of deflationary currencies, as blockchain and cryptocurrency took the world by storm, a common question that is on the mind of many is: What is the right amount of currency supply? As one of the key aspects of a deflationary currency is its scarcity, it is naturally important to find the right balance between having an asset scarce enough to multiply its value, while at the same time having enough units for its universal adoption.
A Place for Every Crypto
Not all crypto is made equal and a custom-tailored approach per type (coin, utility token, security token) and per project is likely the best way to resolve this question. Out of the three types, however, utility tokens are by far the trickiest and most interesting to explore in that sense, as their primary purpose is not in serving as a store of value, or means of transaction within the existing financial system, but rather to power a specific set of tools in a closed loop, which we can call an “ecosystem” for easy reference. What makes it a particularly interesting example to look into is that this ecosystem has its own internal currency cycle, in addition to its link to external financial systems, such as fiat, or other digital assets.
Utility, Adoption & Scarcity
Considering the speculative aspect of cryptocurrencies, what many people have a hard time grasping is that without utility there is no value and thus no adoption. This is especially the case for utility tokens, although it also applies to coins and security tokens.
Looking at Bitcoin, the king of kings in crypto, many people forget that it is not the fact that there are a limited amount of BTC that makes it valuable, but rather the fact that it is an efficient ...
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