The Key To Cryptocurrency Growth: The Circular Economy

Have you noticed how everyone compares cryptocurrency to fiat? When we discuss the merits of a cryptocurrency, it is often in the context of how much fiat it can buy?

At the same time, newer people often wonder what they can do with cryptocurrency. A lot of the talk centers around established organizations accepting cryptocurrency for payment.

I think this is the wrong mindset. We are establishing an alternate system. It is up to us to see the expansion of that. It start with understanding the circular nature of things.

Let is look at gaming since it provides a great example. Games have developed their own economies. For years, some of the most popular games have drawn in tremendous amounts of money. This was used for in-game assets that enhanced the user experience.

The economy, though, resembled a road to nowhere. This image represents that.

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Within the game, one could go anywhere he or she wanted. The flow of money went in a circular motion, changing form as the players decided they preferred it in a different form. Perhaps I receive a token for some type of achievement. To further my abilities, I use that token to acquire a form of power. The power, whatever represented that, had value within the game. I was willing to trade the token for the power.

This is a simple economic transaction. It is no different from me paying some USD for a particular collectible that I put on a shelf. Both parties decided to exchange the value.

The drawback to the gaming industry is the fact that, as the picture shows, it is a closed-loop. There is no exit point. One can keep the in-game currency going forever, yet it cannot leave. The second the game is shut off, the value acquired in the game, ceases to exist. Outside the game, it has no worth.

I realize there are exceptions where certain markets opened up which enables people to trade in-game assets for the most popular games. However, this is the minority as compared to the whole.

Now let us look at another representation.

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Here we see the same circular nature represented. The main difference we notice is an on and off ramp. One can get in while also being able to exit.

This represents what we see in blockchain gaming. All games that are tokenized on blockchain have the ability to instantly provide this to everyone. On Steem, a new game like HolyBread created a number of in-game currencies, one being Breadcrumbs that can be taken out of the game. The difference is these tokens have some value outside the game. There is an exchange to swap them on.

Here is where we see the challenge. HolyBread epitomizes what we are seeing in all of cryptocurrency.

There is no use for the Breadcrumb token. People have the option of hodling it for speculation purposes or trading it. This sums up most of the crypto world. What can you do with the tokens?

It is now up to the development team behind the HolyBread game to come up with a use case for it. At the same time, it is imperative that innovation and creativity keep being applied to the game. More use cases are needed as time goes by. This will provide an outlet for the token while enhancing the user experience.

I find this example really gives us insight into cryptocurrency and what is needed. We have the tools, now it is up to us to develop use cases for tokens. Instead of having people using the off-ramp, i.e. selling, we need to focus upon expanding the "user experience". Thus, we are looking at the gamification of the ecosystem.

The goal here is not to close the loop. It is, however, to reduce the amount that is sent out via the off-ramp. If we could keep 60%-80% of the currency in the circulation process, then you have a system that is ripe to thrive.

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When then get to the second part of the equation. It is imperative to keep making the circle bigger. This is what really enhances the experience for all those involved. This is done by having more "in-game" options along with increasing the number of users. Both operate simultaneously although it is vital to have something to offer. MVPs are great to get going yet there needs to be more features (applications) added.

To me, this is accomplished by focusing upon one's own side of the street. How often do you see games that are highly successful try and get people outside that ecosystem to accept the token? I do not believe that happens. Yet, somehow, these games keep going up in value, usually benefiting shareholders on Wall Street.

The answer lies in continually enhancing what is offered within the game. It is the same for a crypto-economic system. With continued development, the use cases for the token increase. Again, the main difference is that a portion of people's rewards can be shifted off and turned into something else. If the system is growing, however, most people will want to remain engaged as much as they can. This means staking most of what they have.

It is a way to further the experience the user has with that particular platform.

We can see some of this already taking place on Steem. There are projects that are working on implementing exactly what I describe here. The more options people have within a particular system, the greater the chance of growth. The gaming world has seen this for decades.

When they say "life is but a game", I think we can start to apply that to money.

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Posted via Steemleo