Token Utility by Synchrony
Can a token be just as useful by any other name? Nope.
The language and terminology used in the cryptocurrency industry for arbitrary bits of data with transactional value – coins, “cryptos”, bags, and tokens, is often misleading and can be detrimental to retail investors, as well as for projects who mis-use these terms, and even the industry as a whole.
One of the most commonly interchanged names and definitions are between ‘token’ and ‘coin’.
And in most cases, getting the two confused wouldn’t be much of an issue; you can purchase them in similar places and many people have both in their portfolios, but they serve two very different and distinct purposes – a coin being the basic transactional unit on a blockchain e.g. SOL or ETH for Solana and Ethereum respectively and a token – a representation of data on a blockchain derived from a particular smart contract, also often transactional in nature, e.g. SPL and ERC-20 again, for Solana and Ethereum respectively.
However, the complexity ( or confusion?) doesn’t stop there – there are many different types of tokens an example being NFTs; non-fungible tokens, and tokens themselves can be broadly categorized, but for the sake of simplicity we will focus on only two of those categories:
Tokens that can be considered securities and utility tokens.
For the sake of brevity we will use the U.S. definition of a security – a tradable financial asset, where said financial asset is a non-physical asset, whose value is derived from a contractual claim.
Tokens are often considered securities when they exhibit such characteristics – a token that is considered a security’s value is often speculative and much of the time such tokens tend to function as a proxy for equity in the protocol.
A token being considered a security brings a litany of risks and regulations and so typically protocols will seek to have their tokens considered utility tokens to circumvent this — a common approach is to structure the protocol as a Decentralized Autonomous Organization, most commonly referred to as a DAO, where the beneficial owners of the protocol are the token holders themselves, and this grants said token holders the power to govern the protocol.
A utility token is more like an arcade token; purchase of these tokens do not equate to ownership in part of the business, but simply to grant access to play games, like whack-a-mole or skee-ball. The tokens hold value, but it is a different kind of value. The value is in the token’s use-ability, as a vehicle to enable enjoyment from hitting mechanical moles with a mallet, or in the collectable nature of their coins.
Some other notable token types – NFTs, stable coins, asset-backed tokens, and equity tokens – can all be categorized as utility or security tokens.
This article is not about the differences between utility tokens and security tokens, but about how utility token projects generally don’t have much utility at all!
Projects are often treating utility tokens as a means to raise capital, like the crowdfunding platform Kickstarter. And much like many of these Kickstarter projects, utility tokens launch with the promise of something grand, and leave the retail investor holding a bag of arcade tokens without a single ski-ball machine to play with, let alone a building to walk into.
This is not to say that there are no good token utility projects.
Chainlink, for instance, provides clear utility as compensation for node operators for data retrieval, data processing/computation, uptime guarantees, and turning data into blockchain readable formats.
What we wanted to do at Synchrony is provide a clearly beneficial use case for our token, designing utility that innovates and even gamifies some of utility features. While we will not have skee-ball, we’ll outline some of the utilities we are going to have with Synchrony’s utility token, SCY.
These are listed in no particular order:
Synchrony composed indices function similar to ETFs – authorised providers are able to create and deconstruct pool tokens allowing them to capitalize on the arbitrage opportunities that ETFs – or in our case exchanged traded index pools (ETIPs?) create when the price of the index pool token diverges from it’s Net Asset Value (the value of all the underlying assets in the pool divided by the number of outstanding tokens
Furthermore, authorised providers are able to rebalance the ETIPs manually by providing the underlying assets in the correct weights or swapping out the assets that need to be removed to attain the correct weight.
To become an authorised provider a user must stake a certain amount of SCY.
Staking Mechanics: staking SCY tokens for specific wallets on the leaderboard – adding another layer of validation for those seeking to follow a wallet.
Staking SCY like this entitles the stakee to a revenue share for the platform income a leader wallet generates.
Caveat: these staked tokens act as an insurance pool – and can be used to reimburse those following a wallet if the wallet’s trust factor falls below a certain threshold.
In order to deploy an index users will need to stake SCY, this is to create a small amount of friction so that someone doesn’t try to generate as many indices as possible to corner a market – the amount of SCY required to be staked scales linearly with the number of indices a user instantiates.
All of our paid subscription features for our advanced Copy-Trading and Analytics services can be paid for with SCY, or by staking it over a period of time.
Partnership promotions will require partners to stake SCY for the duration of the promotion.
Leaderboard wallets can stake SCY to be highlighted on the leaderboard.
The SCY token also grants protocol achievements – similar to what you would see on Steam – you may get an achievement for participating in the IDO whitelisting, for never selling SCY, or for the length of time and amount of SCY you stake. Achievements can take the form of “levelling up achievements” such as:
If you hold SCY your profile will be highlighted with a ranked animal (e.g. if you hold 1000 SCY you have a tadpole as your animal, but if you hold over 1 million you will have a whale next to your profile).
Holding SCY over the long term also grants users hand-strength accolades. For example, new SCY holders will have paper hands, but if you hold for 1 month you have cardboard hands and so on, all the way up to diamond hands.
One-shot achievements such as the aforementioned participation in the whitelist event.
Achievements can unlock further cosmetic benefits more similar to something like WoW’s anniversary allowing users the ability to customize their dashboard – different colored skins, dashboard layouts, and social tools a la Fortnite.
We are planning to build out this feature potentially for other protocol’s tokens! Will you achieve 100% SCY achievements? 😉
SCY grants users some governance features in the protocol, allowing the community to participate in the development of Synchrony.
SCY is also used as an access token to private channels, and community specific perks like priority response times and access to the Synchrony team.
We also have some interesting features that tie into NFTs and the metaverse, but we will save that for another article! 😉
As you can see we are working on building out useful, innovative, and even novel utilities for the community. We are striving to deliver the highest quality product and the greatest user experience possible through our utility token. We hope to see more projects follow suit as we start to enter into a brand new era of crypto where clearly defined utility will be imperative to survival.
The Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained in this article constitutes a solicitation, recommendation, endorsement, or offer by Synchrony or any third party service provider to buy or sell any securities or other financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdiction.
All Content in this article is information of a general nature and does not address the circumstances of any particular individual or entity. Nothing in this article constitutes professional and/or financial advice, nor does any information in this article constitute a comprehensive or complete statement of the matters discussed or the law relating thereto.
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