Why is it better to hold more tokens (Token Functions)?

Why is it better to hold more tokens? Editor’s Note: This article is from Crypto Valley Live (ID: cryptovalley), authored by Sasser, translated by Li Hanbo, and authorized reprint by Odaily Star Daily.

In the past few months, the price of Bitcoin has fallen more than 70% from its all-time high. With the continuous rise in price and increasing trading volume, Bitcoin has now dropped to around $10,000, but this does not mean that it will always remain in this range. However, if this trend continues, is it better to hold more tokens? Why is it better to hold more tokens? When you buy tokens, it always means that you have more funds to support your investment projects, rather than increasing or decreasing your own risks.

If you want to participate more in a project, you can manage it as an asset class. For example, if you want to deposit a token into a wallet or use a DeFi application to pay fees; or you can use these tokens for other purposes, such as decentralized exchanges (DEX). But you need to have a platform like Ethereum, and the value of this platform will grow based on the number of tokens you hold.

Of course, this is a very complicated study. We are trying to study how to build more accessible solutions by leveraging different protocols while avoiding excessive decentralization. Although this article is only about some issues and perspectives of token economics, I will provide answers in this article.

I think token economics is one of the greatest and wisest work in human history. “There is nothing that can be better than existing products.” Tokens have advantages compared to traditional stocks because they allow investors to access the companies they like and provide services to them- and, due to their unique nature, it is difficult for people to obtain them. “For most people, this may be because many investors do not like cryptocurrencies. In fact, some people even pay little attention to cryptocurrencies and their impact on the environment. “Many people may say that digital gold is a good way to store value,” he said, “so I do recommend everyone to consider cryptocurrencies.”

However, there are still reasons to believe that “security” of cryptocurrencies is high. For example, there are security vulnerabilities in blockchain networks, and users usually do not trust certain node operators, so there have been no cases of hacker attacks even before the Bitcoin block height reaches 105,000. However, it is worth noting that since the tokens themselves do not have value, the possibility of manipulation cannot be completely ruled out.

The issuance of tokens plays a crucial role in the blockchain world, as its significance is not only a means of value transfer. Tokens reduce transaction costs and increase efficiency and transparency by using encryption technology to make them more replaceable. In addition, tokens can be used for transfer services on payment networks and promote the use of economic activities, monetary systems, or other public goods.

Currently, Bitcoin has become the most popular cryptocurrency, but it is also considered a scam, and it is associated with many projects such as Bitcoin Cash (BCH) and Ethereum Classic (ETH). However, this is not the only thing people want-Tokens themselves are tools, not media for exchanging goods or services.

Because tokens have different functions from fiat currencies, they also have their own advantages: tokens have certain practicality; tokens can be used to incentivize developers to contribute their code to the ecosystem; tokens can be combined between different use cases. (Cointelegraph)

Although there are various tokens, these tokens often play important roles in the blockchain: for example, decentralized exchanges and stablecoin protocols. Tokens can help users establish trust mechanisms to ensure that they receive rewards from network participants while protecting privacy. (AMBCrypto)

However, tokens are not perfect for most blockchain applications and are not scalable. Tokens can provide better liquidity and interoperability while enhancing smart contracts. Therefore, tokens may have two uses: first, it is a way to reward users on the network and create new products. Secondly, it helps users earn fees instead of buying more hardware wallets, etc. Finally, tokens provide a new profit model, allowing investors to rebate those who are willing to invest or even pay companies that want to invest funds in projects. Although these functions may not be truly innovative solutions, some potential tokens may be part of future business models, including financial market infrastructure.

With more and more tokens appearing and widely accepting this concept, they are beginning to play a role, such as mortgage loans, lending, and so on. Tokens are very useful for these types of businesses. If we regard tokens as assets, then they can be seen as a way of storing value. What impact does it have when you own a token? If you want to hold a certain token, you need to consider your risk tolerance. Once you sell a token, it will disappear until it returns to the starting point. If no one really buys it, the token will also depreciate.