By Eden Dhaliwal
The first phase of token creation should start with an understanding of the ecosystem itself. In the Discovery Phase, we propose a process for token teams to formulate and align on the problem they are actually trying to solve. The fundamental question of “Why a token?” seems like a simple one, but getting internal alignment on the answer is harder then it seems. The discovery phase is all about determining and aligning on the particular characteristics of your business model, and defining the requirements for your token design.
The start of any token design is enormously important and typically the most overlooked phase. Many of the issues that seem to emerge later on in the process are very often due to the lack of alignment on key issues that were initially overlooked early on. Teams working on launching a token need to spend significant time to understand and agree on what the precise problem is they are actually trying to solve, and what outcomes they are actually designing the token for.
Tokens are value creation and exchange mechanisms that allow network agents to participate in and/or manage the system. They play an important role in aligning the incentives of the ecosystem participants and can ensure that nodes operate effectively and market actors participate in a coordinated manner. These systems are highly complex and require a structured top-down thinking in order to clearly organize and prioritize an integrated set of challenges. It is critical to deconstruct these challenges into the singular primary problem that is to become the goal of the token economy and define the constraints of this problem.
Token teams need to have 360 vision on the problem they are trying to solve. This kind of problem-solving demands the ability to see a problem from multiple perspectives even though it may challenge initial assumptions. It is important to be able to navigate through complexity to find the essence of the problem and identify linkages to its sub-issues. The token model’s core problem should be structured by disassembling it into distinct issues in the form of a logic tree (as seen below). A good method of problem-solving for complex issues is the MECE approach, established by McKinsey & Co.
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Figure 1: MECE Approach (McKinsey & Company)
Understanding Roles and Value Flows
A critical component of planning the foundations of any new ecosystem is understanding the key stakeholders involved and how value flows between them. Where possible, it is useful to examine current or analogous markets to understand the relationships between their various layers while taking system safety requirements into account
During this stage, we pull together any existing research or data pertaining to user patterns, consumer behaviours, market data, pricing and other relevant business information. This may include items such as journey maps, customer segmentation, archetypes, business model canvases, pricing models, PEST analysis and other strategic tools. And, of course, any draft white papers or thinking around any potential token systems.
Stakeholder mapping is used to identify the actors involved in an economy and how they relate to one another. This exercise defines stakeholder roles and illustrates the relationship between them in the system. An in-depth analysis creates a clear illustration of the dynamics at work and this tool serves to frame these relationships in the context of the primary problem we are trying to solve and optimize subject to associated constraints. This increases the chances of finding a solution that will remove unneeded intermediaries and address as many important stakeholder needs as possible for a win-win outcome. This is critical when trying to retain the majority of participants to reduce the fragility of a system and the possibility of value leakage or worse a value-destroying fork.
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After Stakeholder Mapping, creating a value-exchange system among stakeholders will help us synthesize value formation and, importantly, reveals opportunities to generate revenue streams, cost savings and other incentives by finding the most effective and efficient ways to deliver it.
The Discovery phase is about focusing in and getting alignment on the baseline requirements for your network. How many projects have you seen where you have questioned the need for a token? Or seen a token design so intricate you can barely wrap your head around the whitepaper, let alone the underlying value of the token? By providing the problem with a structure and clearly outlining network requirements token teams can more effectively prioritise design elements, optimise the action space, and prune down their design down to a minimal viable token.
To learn more about the discovery phase of token ecosystem creation, please download the full report here.