Supply and demand are two fundamental components of any economy. Therefore, their relationship will determine a rise or fall on prices. So it's also important to mention that token economies are not the exception.
Leveraging Supply And Demand
As the demand for a token increases and the number of tokens in circulation decreases, the result is that the token has greater purchasing power in the general market. That's why it's so important for token economies to be based on the right supply and demand models.
For example, a particularly successful token economy can be achieved by using escrow deposits. A blockchain platform can provide this service through smart contracts that act as a decentralized trust for specific transactions. The platform then charges a much lower commission than a regular centralized version would. In this way, it attracts buyers and sellers who find it more convenient to trade through the platform.
Cases of good use abound in industries such as agriculture. Blockchain escrow services already exist that allow farmers to sell pre-harvest futures on their crops. This possibility benefits buyers who can buy at a discount and sellers who will have better cash flow.
Even more interesting is how the concept of tokenized escrow can create an organic demand. Since tokens are used to hold traded funds for a certain period of time, the number of tokens available on the market decreases while they are frozen. This organic reduction in supply creates greater demand and the price of the token is mathematically bound to produce profits.
A platform that works with this business model has a greater capacity to manage supply and demand.
Three tools are available for these purposes:
1) Burning Commission
If a tokenized escrow platform charges a commission in the form of its own token, then it can burn a small percentage of tokens paid. A particular service may charge a 1% fee, for example, when funds are transferred from a buyer to a seller. This 1% of the transaction is burned and the supply of tokens is reduced.
2) Incentives For Symbolic Tenure
When the buyer or seller participating in the platform decides to keep the tokens used for escrow, each party benefits from the token's price gains. This is already a reasonable case for them to keep their funds on hold. In addition, the platform can motivate participants by rewarding them if they choose to organize themselves. For example, token holders may receive 10% compensation for not switching to fiat. Again, this helps to limit the number of tokens in circulation and drives the price up.
3) Limits On Escrow Service
A platform may choose to assign limits to its escrow services. This also ensures that the tokens will be out of circulation for predetermined periods of time. One way to do this with low interference is to require non-approved vendors to keep their funds in tokens. If a seller has not been verified as reliable or trustworthy, his account would be limited to token-based trading. By doing so, each unverified account on the platform would contribute to reduce the supply of tokens.
Tokenized Escrow Platforms Conclusions
There are many different methods that can be applied as incentives or requirements to ensure that a healthy amount of coins are kept on an escrow service platform. All of which can be implemented to varying degrees. Each strategy catalyzes the creation of real demand and promises returns for investors.