Cryptocurrencies are commonly known as stores of value, but as the blockchain realm continues to mature, utility tokens are being created that expand their benefits beyond mere financial gains.
Scott Gralnick, director of global partnerships at ShapeShift – a Swiss cryptocurrency exchange – told Cointelegraph that cryptocurrency can help launch Web 3.0 as more utility tokens provide functionality beyond market value:
“At ShapeShift, we look beyond the idea of whether a token has a value and can be traded or held. We hope that in the future tokens will not only be a digital good, but also offer more functions. Rather, we believe that tokens will enable a fully decentralized ecosystem. “
While there is still no clear definition of “Web 3.0”, the term is used to describe technologies that will determine the future of the Internet. Hence, many in the crypto community believe that this future version of the web will be decentralized.
Don Tapscott, a famous writer and co-founder of the Blockchain Research Institute, told Cointelegraph that Web 3.0 is in the eye of the beholder. “There are a lot of definitions, but in general I am not keen on stage theories. I find that over time people begin to shape reality to match their own theory,” he said.
Multi-utility token for Web 3.0
To enable true decentralization, Gralnick stated that ShapeShift’s FOX loyalty token, launched in November 2019, has become a multi-utility token that can now be used in three ways across the ShapeShift ecosystem.
Although FOX tokens have value, Gralnick mentioned that they also allow users to trade for free on the ShapeShift platform. In addition, Gralnick announced that ShapeShift recently released a product feature called “Rainfall,” which rewards ShapeShift users for holding FOX tokens. “If you are a verified ShapeShift user and you have FOX in your wallet, you will be automatically enrolled in Rainfall,” said Gralnick.
Rainfall is designed to reward ShapeShift users who hold FOX with the US dollar backed stablecoin, USD Coin (USDC). For example, every time a ShapeShift user makes a trade on the platform, they are entered to win free USDC funds. Gralnick said that users who own larger amounts of FOX tokens have better chances of winning the stablecoin. Though the project kicked off on Oct. 28, Gralnick said it had given over 5,000 rainfall rewards to users and found that 3% of users received USDC worth over $ 25.
It is important to note that rainfall is different from staking. Eric Voorhees, founder of Shapeshift, told Cointelegraph that while some consider Rainfall a “working for rewards,” it’s actually a lot simpler. “Our users don’t have to commit their FOX tokens anywhere. As long as they hold onto them, they earn the rainfall payments, ”he said.
Binance, one of the world’s largest cryptocurrency exchanges, also uses its native BNB (Binance Coin) token to provide multiple functions to users.
Changpeng Zhao, CEO of Binance, told Cointelegraph that Binance’s BNB token has several types of uses. While BNB is known for providing the Binance ecosystem with the underlying gas, Zhao mentioned that it is also used for trading fees on both the company’s exchange and the decentralized exchange.
In addition, BNB is used for token sales on the Binance Launchpad as well as for merchant payments. For example, it was announced in May that CoinPayments, a leading provider of cryptocurrency payments, would be supporting Binance’s BNB token for merchants around the world. The BNB token was also used to reward users, as demonstrated when Binance was offering BNB tokens for testing Binance’s decentralized exchange when it was launched. Zhao commented:
“There are so many uses and use cases for NBB, from gaming to cross-border transfers. There is currently a large, diverse community in the BNB ecosystem. I don’t know what they will come up with next, but I am sure that many of them will be very exciting. “
Zhao further noted that Binance believes in long-term value investing, which is what the platform aims to build for the crypto community as a whole. Zhao stated that as the industry matures and the participants interact with utility tokens, there will be more multi-utility tokens designed to fuel the global ecosystem.
DeFi will run multi-utility tokens, but what about Web 3.0?
Zhao believes that new multi-utility tokens are emerging quickly, especially with the advent of decentralized funding. There are 216 DeFi projects listed on Defiprime.com, along with a list of reputable DeFi tokens associated with specific projects.
And while many DeFi tokens are viewed by the crypto community as a means to “get rich quick,” some go way beyond financial value. For example, Ichi.farm is a new DeFi project that uses a governance token called “ICHI”.
A founding member of Ichi.farm told Cointelegraph that tokens that represent an elaborate exposure to assets are already more common. For example, they noted that ICHI is used for voting to ensure the economic policy of the Protocol. In addition, 0.5% of Ichi.farm exchange trading volume is automatically converted to ICHI and distributed to those who participate in ICHI. Finally, the token is used as an incentive to provide stock exchange liquidity. Other DeFi projects like Uniswap also allow token for multiple utilities. For example, the UNI tokens are used by Uniswap to facilitate community governance.
While this may be the case, ShapeShift’s Gralnick pointed out that many DeFi projects often enable the most common utility: governance options. However, Gralnick mentioned that ShapeShift’s FOX token goes way beyond governance:
“We appreciate a benefit that goes beyond governance and voting rights. We can and should continue to innovate in this area. Rainfall tries to show the crypto and developer community that tokens are suitable for multiple utilities. This means that users should have benefits that do not depend on the value or governance of the token. We’re taking steps to demonstrate how tokens should span multiple utilities in the future and will continue to provide new rollouts. “
Blockchain projects like Polkadot also use cryptocurrency to build Web 3.0. For example, Polkadot’s DOT token serves three purposes: network governance, operating the network, and creating parachutes. In this case, the third function plays an important role as it can be used to create new parachutes – or new blockchain projects – in your network.