Tokenization of business models

Businesses continue to look for better ways to reach more customers and facilitate their revenue growth. Today, the platform business model is taking shape as businesses look to add blockchain-based tokenization into their business. Through tokenization, businesses create value for their customers as the latter can easily transact within the platform. Digital matching of supply with demand enables the business models to provide an easy base for scaling as new value propositions. The process is known to boost revenue and asset value for participants. Some of the known platform business models adopting tokenization are food delivery apps, ride-hailing apps, social networks, mobile phone companies, and software operating businesses.

The network effects

Platform business models rely on network effects, hence a company’s ability to widen its network is what will propel it to greater success. Over the years, platform businesses have always incentivized potential users (sellers and buyers) with subsidies to join their networks. For example, a food delivery company providing a higher than market rate fee to delivery vehicle/motorcycle owners, or giving reduced offers to potential customers. However, the subsidies approach has proven to be sustainable as competitors also apply it.

Tokenization as a more sustainable incentive

One of the best things that blockchain has brought about in the modern economy is digital scarcity, which is the ability to transfer digital files with the proven scarcity of scarce commodities, including gold. Blockchain has brought about a new way of giving incentives to network users, in place of the expensive and unreliable subsidies method. Through digital scarcity, businesses can leverage their services by tokenizing their operations.

Tokenization is known for this business model because of the limited supply features, ability to exchange the tokens into fiat currencies, and ease of accessing the token via an exchange. It means that suppliers/sellers can be incentivized with the promise of co-ownership of the network and the promise better returns when the token rise in value and the business grow. Co-ownership solves the problem of multi-homing, which is the most common trend with users of the traditional network model businesses. The growth of token value is an attractive proposition for network users. But the success of tokenization is dependent on specific criteria, such as token economics and governance, transaction, and exchange usability among other things.

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