Buy Crypto

CZ’s FAQ 4 - One Coin to Rule Them All? Or Millions of Coins?


Spoiler, I believe the latter. Here is why.

Benefits of Issuing Coins

There are many benefits of issuing a coin. Some are obvious, some are not.

Many people know that you can issue a new coin and get some money from the initial sale, if you have some credibility. It can be an ICO, IEO, IDO, etc. I’d say this is probably less than 0.1% of the total value you get from issuing a coin. If you look at BNB, it raised $15m USD equivalent in bitcoin at the ICO, while that is a fantastic raise for a project at such an early stage, today, the total market cap of BNB is $90 billion USD, about 3000x.

The second small benefit is the coins the project team retains. In the case of BNB, the team allocation was about 40% of the coins, which is now worth $45 billion USD. While this sounds like a real sum, I’d dare say it is still just a small portion of the value you get from issuing a coin.  

Note, the team allocation of BNB was and will never be distributed to any members on the team. The team has committed to burning them all, which makes BNB a fair launch coin, i.e. the team did not keep any tokens for themselves. All the BNB our team gets will be earned through providing our services.

The real benefit of issuing a coin is it creates a whole new ecosystem, from user interactions to user retention, and development of the ecosystem. This is something that cannot be done using company equity (securities) or fiat currencies, or even using bitcoin. You have to create your own coin for it to work.

First, let’s look at how companies work. You have your users, who pay, then you have the company who builds the products and pays its colleagues, then gives the profits to their shareholders. In this model, money flows one way only. From users to company to shareholders.

It’s different with a token, you do an initial sale (ICO or IEO), and assuming the token offers some utility or benefits in your platform or ecosystem, the people buying and holding your token are typically your users.

When the price goes up, the token holders, your users, benefit. Thus, they are incentivized to use your platform more and get more friends onto your platform. They become your best salespeople. (Your users typically have more friends in your typical demographic.) And they get rewarded through token economics. It creates a positive virtuous cycle, a very sticky ecosystem. 

You can’t do the above with fiat currencies. It just doesn’t work. You can’t do this even with bitcoin. You have to create a new token for your platform or ecosystem, otherwise, you can’t create a symbiotic growth environment with your users.

What about equities? You could grow with your shareholders. True, but they are typically small in number (especially for early stage companies), and they may not be your users. More importantly, you can’t use equity to pay for your services. You can’t do airdrops or other user incentives with equities. 

For the above reasons, I believe people will continue to create new tokens for their projects. And there will be millions of tokens. Like start ups, most will fail. But the ones that succeed will succeed tremendously and create a lot of value for the world.

So, go create your own token?

On Creating Tokens.

I advise you to not create a token until you have product-market-fit. Tokens should be an acceleration mechanism, AFTER you have built a product that people want. Once you issue a token, it becomes harder to pivot your business. You have to get consent from your community.  So, it is not ideal for trials, MVPs (minimum viable product), or the experimental stages. There are many considerations on issuing a coin. I wrote an article a few years ago about it. It’s a little dated. Maybe I will write that as a separate article in the future.

When you are ready to create a token, I advise you to talk to Binance Labs before you finalize your plan. If your project is attractive, Binance Labs team can review your token design. Most crypto projects want to list on Binance (the “when Binance?'' question), and we will care about your token economics, such as how much is allocated to the community vs founders, their unlocking schedule, etc. It is better to talk to us before you even issue your token. Having said that, our Labs team does get overwhelmed with requests. There is no guarantee they will be able to respond to your requests.

There you go. Create your token and change the world.