Blockchain and tokens are entering the mainstream discourse of the economy and society at an unprecedented speed. But in the eyes of many people, the token economy in the blockchain industry is still a "new body." How should a token economy be defined? How can blockchain tokens empower the real economy? If it can land in the physical industry, which industry is more suitable for landing? With these questions in mind, “Financial hospital 1” interviewed Dr. Zheng Lei, Chief Economist of Glory Sun Financial Group Limited, Deputy Dean and Digital Economy Research Center of HKINERI.

Financial Institute No. 1: "Token Economy" is a new concept born with the development of blockchain technology in recent years. There is currently no standardized definition of "Token Economy". Can you talk about your understanding of the token economy?

Zheng Lei: I believe that the token economy will be a major model in the future digital economy. With the increasing maturity of blockchain technology, the application in various industries will become more diverse and extensive. Tokens will play an important and key role in the alliance chain and some public blockchain architectures. Although Bitcoin is a form of token, tokens do not only appear in the form of encrypted digital currencies such as Bitcoin. To put it simply, as long as there is a need for "bookkeeping" or incentives in blockchain applications, whether it is in the form of currency or not, tokens may be used. The token will show a variety of innovative forms as the blockchain empowers the real economy.

Financial Institute No. 1: There is a phenomenon of bad currency expelling good currency in the market. Do you think that the blockchain token economy will also have this problem?

Zheng Lei: I don't think so. This is due to the characteristics of blockchain technology. The truthful record and information sharing of the blockchain will make counterfeiters or perpetrators outweigh the benefits. Because once found, the subject of this type of behavior will be disqualified from continuing to participate in economic activities. This loss has a sufficient deterrent force, making all participants afraid to do bad things, not to do bad things, or to do bad things. In this way, it will form a pattern of good coins expelling bad coins. This situation is beneficial to everyone.

Financial Institute No. 1: In your dissertation, you outlined the overall outline of the token economy from the perspectives of organization, process, incentives, governance, and ecology. Moreover, you used game theory, property rights system theory, and currency theory to analyze and explain the application of blockchain. So, when do you think there will be a kind of token economy in China?

Zheng Lei: The token economy needs a suitable growth environment. This involves changes in organizational culture and management structure. It will be a gradual process. In the process of forming an economic ecology suitable for the application of tokens,  various business scenarios and business models for applying tokens will naturally appear. Tokens can be used as an effective incentive tool to promote the active collaboration of all parties involved. The greater the participants' contribution to the economic project, the more tokens they will get. As the project matures and is more and more recognized by the market, the value of the token will also increase. In other words, if the blockchain token is combined with some more positive economic behavior, its socio-economic value will be greater and easier to be accepted, which will be more helpful to the goal of China's economy breaks from virtual development to physical development. .

Financial Institute No. 1: Facebook revised the Libra white paper on July 23 this year. Do you think Libra is a token? Do you think Libra will succeed?

Zheng Lei: Facebook's revision of Libra's white paper this time has not changed much. In a broad sense, Libra also belongs to the category of tokens. At the beginning, it will also exist in the structure of the alliance chain. Libra, as an online payment tool, is the core element of this application. However, Libra's biggest controversy is not the token itself, but the impact it may have on the international monetary system. It is more similar to the IMF's special drawing right SDR, which is a super-sovereign currency. In addition, when Libra expands from online payment to offline payment, it will undoubtedly also form a substitute for the local fiat currency, and these factors may affect the progress of its launch.

Financial Institute No. 1: Can you please describe in one sentence, how can the token empower the real economy?

Zheng Lei: The token not only undertakes the functions of digital asset carrier and internal settlement media, as a certificate to obtain consensus, allowing holders to form a community of interests and win-win cooperation, but also as a carrier of rewards and punishments, through rewards and deductions, Realize the measurement of participants' creditworthiness, so that the intrinsic value of the token continues to rise. By designing a reasonable incentive mechanism in real economic activities and mobilizing the enthusiasm of participants, a virtuous economic cycle can be formed.