Shermin Voshmgir is the author of the book Token Economy, the founder of Token Kitchen and BlockchainHub Berlin. In the past she was the director of the Research Institute for Cryptoeconomics at the Vienna University of Economics which she also co-founded. She was a curator of TheDAO (Decentralized Investment Fund), an advisor to Jolocom (Web3 Identity), Wunder (Tokenized Art) and the Estonian E-residency program. In this podcast we discuss "How to design your own token system".What is blockchain?Blockchain is a collectively maintained public infrastructure where people are incentivised to keep the ledger up to date in a trustful manner. It is the backbone of this new generation internet often referred to as the Web 3.

Blockchain allows its participants to collectively settle data transactions, whether its value transactions or data flows on a shared public infrastructure that everyone can trust. This contrasts to today’s Web 2 which is managed by private client server infrastructure where data is managed and stored behind the walled gardens of a server that belongs to a specific institution or a private entity.

Shermin believes that blockchain itself isn’t particularly interesting. What is interesting is that blockchain brought the back-end revolution for a decentralised web or Web 3. Tokens are the killer application of the Web 3 as websites were the killer application of the early internet in the 1990s when the World Wide Web came about.

 Types of tokensCryptocurrencies and crypto assets are specific type of tokens.

A token can represent money, whether it’s state issued money, often referred to as CBDC (central bank digital currency) or virtual currencies such as cryptocurrencies.

Tokens can represent any type of assets such as commodities, physical assets and fungible assets like art or real estate. Any virtual or real asset can be tokenized and have a digital representative that is easily traded.

Tokens can also be used to represent an identity of a person, machine or an institution. Credential tokens are tokens that are tied to an identity or that have limited transfer abilities.

 Token SystemA system is use to described how people and objects interact in this physical world. Token systems can have varying degrees of complexity.

Usually, the more actors are involved in a system, the more complex the system and its interactive parts become.

An example of a complex token system is the Bitcoin network which is a network of physical computers operated by humans or institutions. It has a three-layered network composed of tokens, machines, and peer-to-peer network.

An example of a less complex system is a token system that represents tokenizing shares in a company which can be settled on a public or semi-public infrastructure.

 Creating a token system, the questionsSource: Token Economy, Shermin Voshmgir

When creating a token system the main questions that one should ask themselves are:

What do you want to do?What is the purpose of your venture?

For example, if you want to tokenize real estate, the question of how to design your token system is very different than if you want to create a token based social network where the token creation needs an intelligent incentive design for how to incentivize people to upload and curate posts. An example of such a token system is Steem. However, such token systems are very complex and have a lot of unanswered questions.

Tokenising real estate whilst it involves a series of complex legal questions sits within an understood legal framework. Whilst they may seem less complex they can very easily become more complex where your individual real estate objects can be tokenised allowing for fractional tokenization of a single object, like an apartment.

There is a series of technical, legal, economic and ethical questions to be asked when we design our token system, but the first question is always, what do I want to do?