Article source: Mankun Blockchain
In the blockchain industry, many practitioners believe that blockchain projects without tokens lack soul. Here, 'tokens' usually refer to tokens issued on public chains, which users can withdraw to decentralized wallets and trade on-chain or on centralized exchanges. However, for the vast majority of blockchain projects, whether it is tokenomics design, exchange operations, or the integration of technology with public chains, they have not yet reached sufficient professionalism and maturity.
More importantly, the issuance and application of tokens face complex regulatory environments globally. Directly issuing tokens by startup teams not only brings enormous compliance pressure but may also lead to operational loss of control. Therefore, a more prudent choice is to first incentivize users through a points system and, after stabilizing the ecosystem, gradually convert points into tokens and migrate them to the blockchain for assetization.
The value of points: from incentives to transition
The advantage of the points system is that it provides projects with a low-cost tool to validate the market while avoiding legal risks during the early stages of token issuance. Through points, teams can offer rewards within the application to enhance user engagement and activity. As the points mechanism matures, it can be tokenized, granting more value and enabling on-chain circulation.
This model not only enhances the operational flexibility of the team but also builds user trust and an ecological foundation through points, laying the groundwork for future token economies. For example, a blockchain platform focused on community autonomy incentivizes users to vote and participate in governance tasks through point rewards and introduces on-chain tokens once the points system is stable, allowing users to more intuitively perceive the value and role of tokens.
Taking HashKey Group, which recently issued tokens, as an example. Founded in 2018, HashKey Group is a leader in the field of digital asset financial services in Asia. HashKey Group is known for its comprehensive Web3 ecosystem layout, covering multiple core areas such as trading, investment, tokenization services, and infrastructure. Its main businesses include HashKey Exchange and HashKey Global. HashKey Exchange is the first licensed virtual asset exchange in Hong Kong, offering compliant and secure trading services, while HashKey Global provides diversified digital asset trading services to global users and holds a Class F license from the Bermuda Monetary Authority.
HSK is the core token of the HashKey ecosystem, designed to support its vast business network and enhance user participation. The total supply is fixed at 1 billion tokens, and HSK was launched through a private distribution method, avoiding the legal and compliance risks that may arise from public sales. This distribution method directly links the token's value to the ecosystem's activity, making it more sustainable. In practical applications, HSK is endowed with multiple functions. Within exchanges, HSK can be used to pay platform fees and provide transaction fee discounts for holders, significantly reducing trading costs. Additionally, as a core tool for community incentives, HSK promotes user participation in ecosystem development through various reward programs, enhancing community engagement. Users holding HSK also gain priority access to new products and services launched by HashKey, further enhancing user experience. This diversified application design makes HSK not only a functional token but also a key driving force for the collaborative development of the ecosystem.
HASHKEY's token issuance model and application scenarios provide valuable reference experiences for startup teams. During the token issuance and promotion process of HASHKEY, they adopted the following strategies:
1. Ecosystem incentives and distribution
HASHKEY's tokens were not distributed through public sales but through internal ecosystem incentives. This model avoids the risk of violating securities regulations while effectively expanding the base of token holders through reward mechanisms.
2. Task-driven airdrops
Users earn token rewards by completing specific tasks. This approach not only enhances user participation in the ecosystem but also drives community engagement and brand awareness. For example, HASHKEY has rewarded tokens through ecosystem activities to incentivize users to share and promote ecosystem content.
3. The integration of business and technology
HASHKEY's tokens integrate multiple functions in practical applications, such as participating in governance, paying fees, and redeeming ecosystem services. This token economic design aligns with business logic while promoting the deep application of blockchain technology in the financial sector.
This progressive model of transitioning from points to tokens not only allows HASHKEY to avoid unnecessary compliance risks but also enhances user trust and engagement with the project.
A win-win path for compliance and business validation
The path from points to tokens is not only key to the legitimacy of the project but also a necessary step in business validation. As Web3 entrepreneurs, if token issuance is also on your future roadmap, starting from points may be a more suitable development path. We can analyze this from the following four aspects:
1. Market validation of user incentives
Whether it is traditional centralized points or decentralized project tokens aimed at the future, the core issue to resolve is user acceptance. The core value of early point systems lies in providing project parties with a low-cost tool for market testing. Through point reward mechanisms, teams can observe user acceptance and engagement with the project. For example, an application focused on decentralized knowledge sharing can design point reward rules: users earn points for uploading quality content, and additional points can be rewarded if the content is liked or saved. This approach not only attracts early user participation but also accumulates project data, providing a real basis for subsequent tokenized economic models. Moreover, point consumption data reflects user preferences for different payment services. This market validation not only enhances operational efficiency in the project's early stages but also points the direction for subsequent tokenization design.
2. Choosing the right timing for tokenization
Pragmatically speaking, tokenization is a natural extension of the points system's development, but the timing of this choice needs to consider user base, ecosystem construction, and technical readiness. Initially incentivizing users to participate in minting and trading through points, then gradually transitioning to tokenization once the points system matures, effectively avoids issues of token oversupply or user attrition due to 'unrefined technology and an unstable ecosystem.' For example, a certain NFT project achieved a daily trading volume of over one million dollars on the first day of its token launch after operating its points system for a year. Mastering the timing of tokenization provides valuable insights for startup projects.
3. Balancing compliance and financing
Many teams mistakenly believe that tokens are the only tool to attract investment. In reality, financing models can be more flexible. For the vast majority of blockchain startups, early-stage funding can be obtained through equity financing, and if there is a future need for token issuance, both parties can specify in the shareholder agreement that a certain proportion of tokens will be allocated to investors when the project reaches a specific stage. This approach meets the team's funding needs while avoiding compliance risks associated with direct token sales. Additionally, many startups establish overseas companies (such as in Hong Kong or Singapore) to attract qualified investors or investment funds while also enhancing user engagement through point reward mechanisms. This ensures compliance in financing while improving project valuation through the validation of user data and business scenarios. This approach meets funding needs while avoiding compliance risks in the early stages of token sales.
4. The linkage between technology and application validation
The linkage between technology and business scenarios is key to the successful tokenization of projects. For instance, a blockchain project focused on green energy trading initially incentivized households to upload electricity usage data and energy-saving measures through points, accumulating a large pool of energy data. In the technology validation phase, the platform exchanged points for environmental tokens, integrating off-chain energy data with on-chain smart contracts to complete the transition from points to tokens. The advantage of this model is that points are not only a user incentive tool but can also provide real scenario data during technical application testing, helping teams identify issues and adjust strategies. After multiple rounds of adjustments, tokens are formally used to establish a public risk pool, significantly reducing the risk of failure after launch.
Through the above strategies, teams can not only steadily promote the compliance of projects but also effectively validate their business value and user needs, laying a solid foundation for the future token economy.
Summary by Lawyer Mankun
The transition from points to tokens is not only a progression of business models but also a pathway that combines market validation with compliance innovation. In the context of an increasingly complex global regulatory environment, startup teams should abandon the fantasy of 'jumping straight to token issuance' and adopt a gradual strategy that begins with points, accumulates data through market validation, optimizes mechanisms, and eventually transforms successful experiences into assetized applications on the blockchain.
This 'progressive tokenization' model not only reduces legal risks in the early stages of projects but also makes the process of validating business value more natural and efficient. Blockchain entrepreneurs must continuously experiment and optimize within a compliant framework to find their breakthrough in the complex and ever-changing market environment. Internet entrepreneurship emphasizes small, rapid steps, but exploration in the blockchain field may require a more steady approach to truly be 'fast'.