We are in the age of a revolution, an increasingly digital world — where the virtual has become a reality. In this new era, electronic services have become scarce, in part from an artificial supply, the limit of the world’s limited computational, storage, and bandwidth resources, or some combination.

It’s hard to understand the change, this transition from the analog. Stuck in a frame of mind that may have been successful in the previous paradigm shift, some claim to have had their eureka moment when X. Other opportunists are just jumping onto the next trend in hopes it will convince their VC’s and unfortunately now, the public, to let them survive for next six to eighteen months while they figure it out.

Digital Commodities

Tokenization of these digital commodities, (i.e. computation, storage, and bandwidth) isn’t new. This has already been done by your ISP’s, Google, Amazon Web Services, Dropbox, etc. However, most, if not all, of these tokens weren’t abstracted, and they were denominated in store credits or dollar values for the ease of the customer. Noticeably though, the prices of all these digital commodities have steadily gone down as technology advances over time.

With the birth of bitcoin, things changed. For the first time, humanity had moved past digitized assets, and people began to use a decentralized and purely digital asset. Once the Colored Coins protocol was launched, metadata could be associated with bitcoins, and assets began to be digitized and traded on a decentralized ledger.

Examples of blockchain-based digital commodities:

computation — access to the global computer in Ethereum, Qtum, Dfinity, Golem, among others storage — access to decentralized storage in Maidsafe, Storj, Filecoin & Siacoin bandwidth — IPFS & WiFi tokens — works in progress

Definition of utility

— plural utilities

fitness for some purpose or worth to some end something useful or designed for use a service (such as light, power, or water) provided by a public utility equipment or a piece of equipment to provide such service or a comparable service

- a program or routine designed to perform or facilitate especially routine operations (such as copying files or editing text) on a computer

Utility Tokens

A utility is as defined above is “designed for use.” At Chuck E. Cheese’s, you can use tokens to play any of the vast arrays of games located inside but, you can’t use your Chuck E. Cheese’s tokens at Dave n’ Busters. And, as this should go without saying, your Chuck E. Cheese’s tokens don’t grant you any ownership in the entity itself.

Equity is “a right, claim, or interest existing or valid in equity.” And although the equity markets have a lot to gain from tokenized assets, your ownership of open-source protocol or utility tokens doesn’t grant you the right to dictate terms to a Foundation’s development roadmap, their board, or operations team. If a community doesn’t like the way things are going, they are free to fork off, as exampled by the DAO fork, bitcoin cash, and bitcoin gold.

Governments and large multinationals have been working towards creating blockchain-based securities because the transaction is also the settlement in the transferring of ownership rights. This frees up a tremendous amount of capital for Wall Street institutions, but that’s the topic of another discussion.

The same way you pay your gas, electric, and water utilities and get an expected service, is the same way things should operate in the digital world.

Defined Utility

The utility of a token should be clearly defined, i.e. how the token can and will be used rather than issuing tokens and then coming up with a use case for it later.

For Qtum, our token is used to execute code across a distributed network. This token usage is clearly defined and purposeful. Without Qtum, you cannot run your smart contract or decentralized application (dapp) in the Qtum network.

Since Qtum, like many other blockchain projects, is open source, and you are free to run your smart contracts or dapps on a private or on network fork, but the utility isn’t the same.

Open-source projects are intentionally labeled free for reuse, and can even be resold for commercial purposes. This encourages innovation, more scrutinous code reviews, and the community to build cooperatively. This is why banks are using private, enterprise versions of blockchain projects and have been other open-source protocols for decades.

Conclusion

There’s nothing new about digitizing assets, but there is something new with purely digital assets. However, these digital assets have become progressively more speculative than traditional because of their increased liquidity and their potential. That’s why it’s important to distinguish what type of utility or commodity you are buying and how usable it is by you?