Token Economy

Transfers of ownership of assets (e.g., fiat money, company shares, or usage rights) between agents (here, individuals or organizations) is often mediated by trusted third parties (TTPs) such as banks or notaries to increase reliability of the transfer process. The involvement of TTPs often introduces drawbacks, like increased costs, longer processing time, and the presence of a single point of failures. These drawbacks motivate the automation and decentralization of several services offered by TTPs. Technological advances have enabled the digital representation and management of asset ownerships using tokens on decentralized digital platforms without the need for TTPs. A token is a sequence of characters that serves as an identifier for a specific asset (e.g., a personalized usage rights) or asset type (e.g., a cryptocurrency). The abilities to represent assets in form of digital tokens on a decentralized digital platform and to assign ownership of these assets to agents in a fraud-resistant way can help to reduce drawbacks related to TTPs (e.g., the presence of single points of failures) and enable a new type of economy: the token economy. In tackling drawbacks related to TTPs, the token economy holds a large transformative value (Benlian et al. 2018) that can strongly affect businesses (e.g., by enabling novel business models and increasing transparency of business processes) and our daily life (e.g., by being able to monetize our own personal data instead of just giving it away). This chapter discusses the key concept of decentralization, which the token economy is built on, from two fundamental perspectives (i.e., technical and political decentralization) and provides propositions to discuss decentralization. Moreover, this chapter explicates the need for interdisciplinary research (e.g., information systems research, computer science, management science, and social science) to embrace both perspectives. In the token economy, technical protocols take over several tasks that traditional TTPs previously handled. For example, technical protocols running decentralized digital platforms can check individual agents’ legitimate ownership of assets and create a tamper-resistant record of the A. Sunyaev (&) N. Kannengießer Karlsruhe Institute of Technology, Karlsruhe, Germany e-mail: sunyaev@kit.edu