What Is Detokenization

Issuing a token, also known as “tokenization,” has become a very popular practice in the past few years. The amount of blockchain platforms has been growing as well – or so it seems.

One firm, Latvian Startup Digipulse recently announced that it is planning on “de-tokenizing” itself.

In its posting, the platform stated,

“We definitely hear the outrage that our recent news has brought on. We expected nothing less from a community of dedicated crypto oriented individuals. That being said, our ultimate goal is still unchanged.”

As the platform’s CEO, Normund Kvilis continued,

“We need to create value, not token price speculation.”

Kvilis further added that,

“For all its advantages, Digipulse token value fluctuates based solely on speculation, a process that doesn’t support a sustainable business development. Out of the 320 service sign-ups we’ve had until July 25, only two people have actually allocated tokens to the service, meaning that only two people have actually used to DGPT token for it main purpose.”

Essentially, the platform intended for its tokens to be used on the platform. However, those holding the tokens used them as a speculative investment instead. In regard to this practice, Kvilis offered token holders the opportunity to receive a share of the company in exchange for their tokens. The platform plans on removing its DGPT tokens from cryptocurrency exchanges by December 15.

LL Bean, another prominent company, decided to distance itself from such technology as well. In March, the company cancelled its blockchain project. Further, Telegram ended its public ICO in May and Stripe canceled its bitcoin payment option in April. The question that now arises is why companies are making such moves in an industry that seems to be growing.

Speculation suggests that, at least in terms of using cryptocurrency as a payment option, can be challenging. For instance, according to Claire Hughes Johnson, Striple’s CEO, bitcoin and other blockchain payment options are slow, impractical, and overhyped. Traditional payment options such as credit or debit cards can be processed in a few seconds; however, bitcoin and blockchain transactions take a lot longer.

As for the cancellation of ICO projects, like Telegram did, such actions may be prompted by scrutiny fears. At this point, the Sec has not issued clear guidelines on ICO legislation and many ICOs have been cancelled or postponed due to the market uncertainty. There is also no indication as to when the SEC will decide a proper course of action, thereby making the ICO process very costly – too costly – for companies.

Malcolm Cauchi, Cryptogreek’s CEO, stated that,

“blockchain is an amazing technology, [but] not everything needs to be built on it.”

He further added,

“blockchain experimentation can be extremely expensive.”

Cauchi has a point – according to Financial News, blockchain development costs can cost $650,000 per year. Further, there are very few blockchain developers who are able to handle the projects and as a result, the cost of paying those who do know how to develop can be very high.

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