Kids Get It
Let’s Call this Game Room Theory (yes, I just made that up :). If you’ve ever played pinball or other games in a game room arcade then you know what tokens are.
Kids know what tokens are. Just take them to a game room arcade. In the past all game rooms required you to use tokens to play games like Pac Man, Galaga and a multitude of racing, fighting and other games. You could not use coins. Many game rooms still use only tokens even though many now take fiat coins (quarters in USD). Take a 10-year-old to a game room and give him/her a dollar and he would take the dollar and put it into the Change Machine. The change machine will spit out 4 Tokens for one dollar.
Even a 10-year-old knows how to valuate Tokens. The kid put a dollar in the Change Machine and get 4 tokens. If you ask him how much each token is worth, he knows that it’s 25 cents. Brilliant!
Every kid knows how to buy tokens. Before there was an ICO or a Token Sale you just go to the Change Machine. Pay with cash, get Tokens in return. Time to have some fun. Yippee!
My 10-year-old knows how to spend tokens. She’s really smart. She knows that you can’t spend tokens outside to buy ice cream. You spend it in the game room to play games. So many choices, “Papa, can I have another dollar please?”
Executives Get It
If you’re over 40 you get game room theory, because you were probably killing it with Pac Man, Pinball or some other game some years ago. So tokens are not new to you, it’s just that no one has explained that it’s the same thing you’ve been doing since you were a kid.
Executives know what tokens are. Tokens are not Coins. Coins are the native currency of a blockchain. For example, bitcoin is the native currency of the bitcoin blockchain. Ether is the native currency of the Ethereum blockchain. So bitcoin and Ether are coins. Token are representations of coins normally created and managed by code called smart contracts on a blockchain. Coins are used to purchase tokens on a blockchain like dollars are used to purchase tokens in the game room arcade. For example, bitcoin and Ether are used to purchase tokens. So coins are like your dollar bill. They can be used to purchase tokens and other things on the blockchain as well as outside the blockchain. Today there are very few things that you could not purchase with bitcoin.
Executives know how to purchase tokens. Use your coins like bitcoin to purchase tokens at a Token Sale (also called an Initial Coin Offering / ICO). Think of the Token Sale as the Change Machine in the Game Room. Put in cash, get back tokens.
Executives know how to valuate tokens. Value is normally not fixed like in the game room. It’s dynamic and based on perceived value and some level of market manipulation like any other types of assets on an open market.
What is Blockchain?
This is a challenging question for everyone because we're still in Round 1 of the Blockchain Evolution. But in our Game Room Theory its pretty simple.
So let’s Fork the game room. I mean the entire arcade and everything in it. Fork just means that we can copy the existing game room code and create our own version of the arcade with our own rules to build on top of something that’s already working. No need to start from scratch. That's the power of open source.
The game room is really a blockchain if you are still catching up. You can think of the original game room as Bitcoin and our new game room as Ethereum. We’ll change the way the Change Machine work. It still takes USD but now each game can have its own unique ‘coin’, which are really tokens. The previous blockchain couldn’t do that. It only had one coin. So now we have Pac-coin, Galaga-coin, Pinball-coin, and our favorite Donkey-Kong-Coin.
To play the games you have to go to the Change Machine, put in USD and get separate coins for each game that you want to play. Each time there is a new game in the arcade you need a different set of coins to play it. You put the Donkey Kong coin in the Donkey Kong machine to play the Donkey Kong game. If the donkey kong game became very popular and you still have some donkey kong coins, the coin could become more valuable so you may want to hold on to them to cash out later. If you're lucky someone may pay you more for your coin than the price that you purchased it for. By buying and holding on to the coin, this now makes you an official investor in the Donkey Kong game.
There is a smart kid that always hang out in the arcade. We call him Shape Shifter. He also has some other pals hanging around. He allows you to exchange your Pac-Coin for some Donkey-Kong coins or other coins. This is an Exchange. To not lose your coin you can buy a little Wallet to put the coins into.
When we use the word ‘crypto’ in front of anything people get a little overwhelmed and their minds go blank. So next time someone ask you about tokens, ICOs, cryptocurrency just take them back to the physical world to the game room arcade, crush it with Pac Man, blow up some aliens, drive a racing car like a maniac, have some fun, and re-educate them on something that they probably already know.
Rohan Hall is an author, entrepreneur, technologist, blockchain enthusiast with 30 years experience in technology working with Global 500 organizations and startups. His experience includes successful founding/exiting startups, building tech teams and platforms, fintech, supply chain management and emerging technologies. Some companies he has worked with include HP, Oracle/PeopleSoft, Honda, Corning, NV Energy, Robert Half, TradeSocio and others.