The Models and Practices of

Token Economy
— White Paper for Implementing
Blockchain into Businesses
Version 0.1

The critical route of implementing blockchain to businesses is to establish Token

Economy, i.e., various token-applied business ecosystems. As value can be
represented and transferred via blockchain, the token can be applied as an
incentive or used for governance. It will encourage all users and partners to
establish a shared, win-win and autonomous business ecosystem.

The key form of implementing blockchain into businesses is to create new token
economy applications. They are the core application of every token economy. It
means these applications can be built in the newly-established blockchain
project, or tokenized from existing projects on the Internet, mobile internet and
industry internet. The application integrates the internet of information and
internet of value and comprehensively makes use of the Internet platform, online
and offline-community, blockchain, and token. Applications of Token economies
will put an end to the age of idle token, connecting user-end application and
token trade to form a complete value circulation.

The primary initiator of implementing blockchain into businesses is called

Decentralized Autonomous Company (DAC). DACs utilize blockchain technology
and economic instruments to create new token economy applications and
establish token-applied business ecosystems. Potential business areas to
implement blockchain technology are online community, digital content, sharing
economy, new retail, capital tokenization, etc.

The objective of this white paper is to discuss and summarize the tokenized model
of how to implement blockchain into businesses, and to provide a concise guide
for the design of token economy and business tokenization. The white paper will

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exert its value if it could arouse more discussion, thinking and practice in the
community.

Keywords: Implementation of blockchain in businesses, Token economy, new

token economy applications, tokenize, Decentralized Autonomous
Company(DAC), business ecosystem.

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Table of Content

1. Rationale behind Tokenization

2. Token Economy System Design: 5+1 Scenarios

3. Four Steps of Tokenization

July 2018

Initiator: BUMO

Publisher: Token Economy Practice Alliance

The first group of Initiators for the Practice Alliance: BUMO, QF Capital, CYzone,
BiShiJie.com, EnChain.Asia(Tokyo), KUAIZHI Lab, Astar Lab, Calypso Lab(Silicon
Valley), Crypto Valley, Wenzhou Bopu Big Data Institute.

Editorial Board: FANG Jun, JIANG Hai, GUO Qiang, ZHU Feng, GU Kai, LI Heng, WU
Lingwei, YANG Xiaqing

Academic Advisor: YU Jianing

Authors: FANG Jun, GUO Qiang, ZHU Feng

Co-Facilitators: BizKey, SLife, iVery.one, Saturn, Delink, BTXON, Utour, Bank of Hash
Power Cash, Quantum Matrix, YUNCHUANG Life(Cloud Innovation for Life), AiFC,
TAOTAO Games, MakeMountain, Wedive, HPPO, MI+, Flamefy, CodingFly, BitEDU,
etc.

Flagship cases will be added afterward.

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This White Paper is published as 0.1 Version by Token Economy Practice Alliance. It
is an open source publication licensed under a Creative Commons Attribution 4.0
International Licence.

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Figure: General model for the design of token economy incentive system

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1. Rationale Behind Tokenization
As a brand new technology of decentralization, blockchain transfers the Internet
of Information to the Internet of Value. Two functional characteristics brought by
blockchain to the Internet and digital world:

- Technical blockchain trust layer applies to the “value transfer” in the

digital world.

- A value-based token represents the amount of value in the digital world;

With the emergence of Bitcoin since the end of 2008, blockchain has evolved for
ten years and started to demonstrate a long-term potential in recent years. At
present, blockchain technology and its economic growth can be divided into
three phases1:

- Blockchain 1.0: Currency;

- Blockchain 2.0: Assets

- Blockchain 3.0: Applications

Nowadays, blockchain technologies, especially public chain make great strides,

and all industries extensively are exploring and trying to adopt blockchain
applications. Thus, implementing blockchain technologies into businesses, in the
real sense, becomes increasingly possible.

This White Paper aims to envision the route of how blockchain could be
implemented into business. To this respect, we believe:

- The critical course of implementing blockchain to business is to establish

Token Economies, i.e., various token-applied business ecosystems. As value
can be represented and transferred via blockchain, the token can be
applied as an incentive or to governance. It will encourage all users and
partners to establish shared, win-win and autonomous business ecosystems.

1
Melanie Swan, blockchain researcher defined that blockchain 1.0 is currency, blockchain 2.0 is smart contract, 3.0 is
applications. In 2014 Ethereum White Paper, Ethereum is committed to become next generation of smart contract
and application platforms. According to the updated information from 2017 to 2018, the major scenario in
blockchain 2.0, specially ethereum, is to represent online and offline token and achieve price discovery of digital
asset by trading, so we define Blockchain 2.0 to be Assets.

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 - The key form of implementing blockchain into businesses is to create new
token economy applications. They are the core application of every token
economy. It means these applications can be built in the newly-established
blockchain project, or tokenized from existing projects on the Internet,
mobile internet and industry internet. The application integrates the internet
of information and internet of value and comprehensively makes use of the
Internet platform, online-and offline-community, blockchain, and token.
Applications of Token economies will put an end to the age of idle token,
connecting user-end application and token trade to form a large value
circulation.

We will explore possible means to integrate the internet platform and token
economy to build new token economy applications from the very start, and
attempt to provide a model or framework for designing new token economy
applications which is open for discussion and updating.

Figure: Token Economy= Business Ecosystem

New Applications of Token Economy: Putting an end to the “idle token”

Implementing blockchain into business will boost the blockchain to evolve into
Blockchain 3.0, i.e., the phase of the application. In the Blockchain 1.0 (currency)
and Blockchain 2.0 (asset), Blockchain applications were operated in a financial-
like manner, "price discovery" appeared in market transactions. Token became a
digital asset to represent the real asset so that it can circulate, trade and subject
to being priced by the free market.
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However, several problems occurred in these phases, such as high speculation
and great fluctuation in its price. In addition to those, the major problem is that
token, as a representation of digital asset, remains idle in the digital currency
world. No any connections to the online users, let alone empower the real
economy.

Terminating the idleness is the crucial issue to solve regarding new applications of
the token economy. The current token transaction is dominated by investors and
speculators, while the dominator of its ecosystem is the token exchange. However,
the purpose of new applications of the token economy is to launch applications
for businesses. That is to say, a token will be utilized as the media to form a brand
new business ecosystem where token exchange, the functions of the platform
itself, industry function and user community are contained. Meanwhile,
community and governance will be incentivized by the same logic of token and
operated on blockchain technology. New applications connect the core
businesses of internet platform and token economy, establishing a closed
circulation. Thus, as a token is integrated into practical business procedures, there
is no idle token anymore.

Figure: Circulation of New Applications of Token Economy

Shown in the figure, "Projects" refer to DACs who initiate new applications to combine the
Internet of Information and the Internet of Value. There are three economic offerings: token,
platform, and the ecosystem. In contrast, Internet companies' priority is to establish and
operate a platform while the existing blockchain applications' priority is token.

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From internet platform to New
Applications of Token Economy
1. Internet Platforms’ Traffic-Driven Logic and Accurate Matching

Internet industry has evolved from desktop applications to mobile applications

and from O2O to sharing economy. In recent years, the Internet has integrated
into various industries as "Internet+". What remains unchanged is that the basic
logic of the Internet of Information is "traffic-driven logic" and its core function
"accurate matching".

Centralized internet platforms demonstrate traffic-driven logic. At the same time,

centralized internet platforms facilitate all parties to achieve accurate matching.
Platform-based internet companies, thus, earn profits accordingly. The
emergence of sharing-economy platform model brought the development of
internet platforms into a new summit. However, with the development of sharing
economy and the integration of online and offline, the deficiencies of this logic
becomes evident. For instance, the data online mismatches the offline situation;
interests equilibrium among business stakeholders cannot be achieved via
accurate matching. Besides, people become aware that centralized platforms
exert the enormous influence on industry ecosystem and acquire overwhelmingly
amount of interests in doing so.

When blockchain comes in, it provides technologies and economic instruments

accordingly to complement these deficiencies. Blockchain offers solutions to the
following two problems:

Value Representation and Transfer. The existing internet protocols lack the
functions of value representation and value transfer. Therefore, a Trusted Third
Party is needed, making the internet industry rely on various centralized platforms.
However, blockchain technology can fulfill these two functions based on basic
protocol, making decentralization possible or weakening platforms' centralized
role.

From traffic-driven logic to the value of industry ecosystem logic. With the
development of online-to-offline commerce and industrial internet, the impact of
traffic-driven logic is waning. A lot more stakeholders are involved in the process
of platform setup and industry ecosystem establishment. The economic facet of
blockchain, i.e., token and token economy, thus can be utilized as a new tool for
the establishment and governance of business ecosystems.
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Figure: From Traditional Corporates to Internet Platforms: Internet Platforms
Connecting Corporates and Users

2. Existing Blockchain Projects: Prototype of Token Economy

Through the Bitcoin to the token issued on top of Ethereum, from crypto exchange
to various public chains for general use, specific functions or industries, the
prototype of token economy gradually comes into being among trials.

Bitcoin is a single-layer token that only has a single token, i.e., Bitcoin itself2. Bitcoin
system is a bitcoin-centered closed circulatory economic system circulating from
competition, ledger to bonus. Ethereum is a typical double-layer token, of which,
the bottom layer is Ether (ETH), the system fuel. At the early stage, Ethers initiated
token crowdfunding. Later on, the distribution and incentivizing principles are
similar to those of bitcoins. The upper layer encompasses various tokens created
by various projects. They programmed smart contract following ERC20 Token
Standards and corresponded to token issued over other assets. In doing so, those
tokens represent the value of the digital assets.

For Bitcoin system, the blockchain communities, especially cryptocurrencies

exchange, completed "price discovery" in Bitcoin. While mining for Bitcoins
become more difficult and increasingly fierce in competition, the price and
incentives of bitcoins become attractive to miners. Thus, miners are willing to mine
for bitcoins.

2
In the White Paper, token refers to the value representation of blockchain. Therefore, cryptocurrencies such bitcoin are
specific categories of tokens.
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As more digital assets are represented by the token and these tokens have been
traded only in exchange, the contrast between the original cryptocurrencies such
as Bitcoin, Ethers, and tokens issued over smart contract has been revealed.
Regarding Ether and Bitcoins, the price discovery circulation and their businesses
are achieved in the same circle, whereas the token issued over smart contract
has a separate circulation for price discovery and token enabled applications.

Nowadays, for most of the tokens issued in the market, their token trading and
user-based vital functions are totally separated. That means that tokens and
applications are not connected to each other, or only in a weak connection.

Figure: Token Projects VS Bitcoin System

As tokens are used as the representation of value or medium of asset exchange at

BlockChain 2.0, the separation of tokens and applications should be acceptable.
However, when trying to implement blockchain into businesses, separation and
idleness of tokens are urgent issues to address.

3. New Applications of Token Economy: Re-integration of Core Business and Token

Trading

As blockchain has been the field experiment of its applications, the first large-
scale user prototype of new applications of token economy was actually formed
in the crypto exchange.

The existing crypto exchanges are typical centralized online applications. A

crypto exchange operates an internet platform that connects project side,
institutional investors and investors from secondary markets. Up to now, major
exchanges have attempted to issue their own tokens that only apply to

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constrained scenarios. Typically, exchanges did not incorporate the exchange-
based tokens into their core businesses, i.e., trades in secondary markets.
Therefore, the pricing for exchange-based tokens and the core business of
exchanges are operated separately.

Recently, an innovative exchange carried out a creative trial. The exchange

rewards daily trading commissions to owners of tokens issued by the exchange,
forming a circulation connecting coupling core business and token
economy(shown in the figure below). This practice attracted extensive attention
and inspired a series of new innovation trials.

Figure: A Circulation Integrating Platform-issued Tokens and Core Business by a

Crypto Exchange

As shown in the image below, two separate circulations now are combined into a
large circulation of user applications and token trading. This combined circulation
not only offers services for users via the Internet, but also achieves token pricing,
further fulfilling incentivization and governance on the community by token. This
circulation has been the best prototype ever since among various new
applications of the token economy. It is a large circle circulating from projects
and platform to users.

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 Figure: New Application of Token Economy: A New Circulation

The circulation to connect user applications and token trading might be the
direction of how the Internet of Information is transformed into the Internet of
Value. Through this transformation, the logic behind projects will witness a
fundamental change. That is to say, the priority will be shifted from platforms to
ecosystem building, from traffic-driven philosophy to business ecosystem's value
and from accurate matching between producers and consumers to the effective
incentive of each member. However, the Internet of Value may not be a whole
new system, and it has to find a way to integrate with current internet products.
And the approach is becoming more and more evident right now.

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 Figure: From Traffic-Driven Logic to Value Logic

Correspondingly, the core roles in the business ecosystem will also redefine
themselves: from the companies that provide products and services, to the
platforms at the Internet era, then to the builders of the ecosystem of new
applications – Decentralized Autonomous Company(DAC). Regarding business
functions, the internet platform is a connector, matchmaker and market
mechanism designer. While as an ecosystem builder, DACs will need to complete
three tasks at the same time: operating the platform; creating a token; managing
the community.

The primary challenge to advance the implementation of the blockchain into

business is the "token economy system design", which is the topic to be discussed
in the next section.

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2. Token Economy System Design: 5+1
Scenarios
A token is a unit of account that represents value on the blockchain. It is
decentralized, which makes it useful for ecosystem construction; it is priced to
makes it more incentive; it has liquidity and can be used for saving and is more
practical to use. From the perspective of the blockchain implementation, the
token is the core hub, and only the practical design of the token model can
simulate and manage a business ecosystem.

Figure: General model for the design of token economy incentive system

The design of token economy system usually includes three main aspects: 1)
scenario design; 2) token design; 3) circulation design. Here we will focus on the
scenario design. When it comes to "5+1" scenarios design, "1" refers to a scenario
of crypto exchanges, and "5" is the scenario of five typical blockchain
commercialization: internet community, digital content, sharing economy, new
retail and asset tokenization. Among them, the internet community does not
involve fiat transactions, whereas digital content involves partially. Sharing
economy is a typical fiat currency trading scenario, and new retail scenarios focus

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on the value of resources. Tokenization scenarios focus on smart applications of
the asset.

□ Reference of Tokenization Scenario: Crypto Exchange

Crypto Exchange / Case: FCoin / Reference: Stock Dividend

The crypto exchange can be regarded as a typical internet application. It is

closely related to the blockchain and up to now, various token scenarios have
been in operation, which provides a good reference for practical application of
the token economy.

FCoin is an innovative exchange that creatively combines platform currency

transactions with user applications (which are secondary market transactions) to
form a closed loop. Now it is in the stage of "transaction is mining", distributing its
own token FT in the form of sharing commissions with users.

The specific approaches are:

- Users will be rewarded by daily commission distribution if purchasing and

holding FT.
- As an exchange itself, and the price of the FT will be determined by
secondary market transactions.

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□ The First typical scenario of blockchain commercialization: an online
community that does not involve fiat currency transactions

Internet Content Community / Case: Steemit / Reference: Currency

The Steemit blog platform is one of the early blockchain projects. Its core function
performs what the popular internet content creation community has. The
difference is that it introduces its token to form an incentive mechanism,
encouraging content contributors.

The bottom layer of Steemit is a content-specific public chain Steem. The token
design of the Steem blockchain is complicated and includes three main tokens:
STEEM, SP (Steem Power), and SBD (Steem Blockchain Dollars). Also, it intends to
provide a standard SMT for issuing token. Among them, STEEM token can be
saved as SP, and SBD is a stable currency in which the price in the system is
anchored at one US dollar.

In the Steemit blog platform, the token distribution and redemption mechanisms
are:

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 - Content contributors (who write contents or like the content) can get a
token reward (half of SP and half of SBD).
- A pricing mechanism is set up on the blockchain, and the witnesses
determine the exchange rate of SBD and STEEM tokens, which determines
the price of STEEM.

When the Steem blockchain and the Steemit blog platform are in a completely
independent parallel world, their logic is self-consistent, and STEEM prices are
growing steadily while SBD is anchored at $1USD. However, when STEEM, SBD, and
the entire crypto world are linked, that is, when they are traded on the exchange,
both prices fluctuate significantly following the whole market, also with some
occasional price fluctuations.

□ The Second Typical Scenario of Commercialization: Digital Content Partially

Involved in Fiat Currency Trading

Digital Content / Case: Knowledge Paid Service / Reference: Rewarding Points

The digital content-related industry is highly digitalized, and all business processes
are operating in the digital world, so it is a typical field for the transformation with
tokenization. For digital content such as text, audio, video, etc.,
commercialization methods such as third-party paid advertisements and user-
paid content have been formed. For digital content such as games, virtual
currency and equipment are all common designs.

Taking the knowledge paid service as an example, the author will discuss the
possibility of transformation with tokenization. We can imagine a scenario in which
one circulation of the system starts from users who pay fiat currency and ends at
receiving the service; another circulation is that we use token to incentivize users'
behaviors in the product and community activities.

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Therefore, a knowledge paid service platform can be transformed by
tokenization. The practice can be added with points function in addition to the
purchase of fiat currency-- users can purchase, complete learning and make
other contributions to earn points. Users get points for their behaviors. Points can
be redeemed for products. It is partially similar to the writing bonus of the Steemit
blog platform. On the other hand, the knowledge paid service platform can
provide a better points consumption mechanism. At the same time, the points
can be traded on internal or external exchanges, thus to determine the price
correspondence between with the fiat currency and token issued within the
ecosystem.

□ The Third Typical Scenario of Commercialization: Sharing Economy of Fiat

Trade

Sharing Economy / Case: A Ride-hailing App / Reference: Huawei Virtual Equity

If there is a ride-hailing application, it creates a token that represents the equity to

incentivize drivers and shares the long-term benefits of the platform with the driver.
It can share the benefits of the platform, drivers will be attracted to join the ride-
hailing ecosystem. Thus, in return, the service supply has been assured in the
sharing economy platform. The hypothesis here is that ordinary users do not
participate in the cycle of this token, and still use the platform and ride-hailing
service in the form of fiat currency.

Imagine a scenario as follows:

- The project team and early investors retain 20% ownership, while 80% of the
shares are mapped into the token and are intended to be issued under
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 specific rules. (To make it straightforward, the team and early investors also
hold the token which is locked to be traded.)

- Example of a token-releasing rule for drivers:

o The total amount released on the same day will be distributed by

720 days to complete the average issuance;

o The amount of token obtained by a driver = total amount released

on the day * driver's ride-hailing income / total ride-hailing income of
the platform on the day.

Compared with UBER and Didi, the difference is to distribute the platform's equity
to the service suppliers--drivers. The benefit is that drivers enjoy the rights of
ecological development by joining such decentralized autonomous
organization/company, which has increased the platform's appeal to drivers and
increased vehicle supply, thereby increasing platform value. The case can be
compared to Huawei's virtual equity design, which is "Huawei's unilaterally
recognized employee equity, not a legal shares of the company owned by the
employee. It is virtual equity agreed by Huawei and employees through a
contract." 3

Also, assume that the sharing economy platform distributes revenue quarterly,
and all token holders will be allocated 100% of the net income proportionally.

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Therefore, the model can be established according to the net income forecast of
the ride-hailing business and the distribution mechanism of the token, and the
value corresponding to each token can be measured.

Regarding the sharing economy, the discussion above is a token that represents
the rights but not the functional token that ordinary ride-hailing users use.
Generally speaking, the sharing economy can also adopt the equity token and
functional token to form a dual token mechanism. However, it is worthy of
discussing that how utility token can work more powerful or develop new features,
as fiat works effectively in payment at present. Now, in the ride-hailing
application, there are already common tools such as topping up credit from the
user side. Also, there are various incentives such as "get extra 150 when you top up
100" and "inviting friends to get cash back".

3
http://www.sohu.com/a/142181273_618578

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□ The Forth Typical Scenario of Commercialization: New Retail Combining
Online and Offline Approaches

New Retail / Case: New Retail Service Provider / Reference: Shareholding of

Distributors

Suppose a scenario that a new retail technology service company provides a

software platform for retailers with the offline approach. In general, to convince
small businesses to join, arguments include convenience, low rates (even free),
customers traffic guide, import advertising (to gain sharing revenue). Technical
service companies receive income through value-added services. After the
introduction of the token, the small business can obtain the token according to
the transaction volume and share the long-term gain of the platform growth.

Imagine a scenario like this:

- The token corresponds to a 50% equity interest in the platform and can
participate in the allocation in the future exit.

- Issuing rules:

o The total amount of token is distributed averagely in 720 days.

o The number of tokens obtained by a small business = total amount

issued on the day * small business transaction number / total number
of transactions

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Similarly, the adoption of the token can reduce the acquisition cost of the small
business and form a good symbiotic state. Let small businesses obtain the long-
term benefits of platform development in the form of a token, which is equivalent
to the shareholding practice for distributors to share the growth income.

The assumption here is that the ecological benefits generated by the service
provider will ultimately be obtained by the service provider company and
reflected in its valuation and distributed among the holders of the token. The core
meaning of this approach is to collect the value that was initially scattered in the
business ecosystem, collect it and turn it into higher value with the token.

Also, another meaning is that it is easier to exchange valuable assets or resources

besides cash in the business ecosystem, and the transfer creates value. The design
of the general token economic scenario has not changed much from the design
of the previous platform, and the critical point is still value creation and value
distribution.

□ The Fifth Typical Scenario of Commercialization: Tokenization of Assets

Offline Asset on Blockchain / Case: Assuming Case of Smart Asset / Reference:

ABS

It is one of the typical blockchain application scenarios to chain offline assets, tag
them with a fungible token (FT) or non-fungible token (NFT), and then exchange
them on the blockchain.

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Tokenization of asset on the blockchain, we can learn much from ABS ideas and
form the philosophy of ABT (Asset-Backed Tokenization). Asset securitization usually
refers to the packaging of a specific portfolio of assets, with the cash flow
generated in the future as repayment support, issuing bonds to raise funds. When
applying the blockchain and the token to this field, the resulting ABT has some
new features:

- Empowering investors with greater control over property by digitizing assets

into smart properties that can be controlled by smart contracts;
- Holders and users of the underlying assets can also enter this cycle, as their
smart property is managed, and they can also participate directly in the
transaction;
- The distribution of income from asset can be handled directly by smart
contracts.

As shown in the figure, in the ABT scenario, the internet platform in the previous
four scenarios will be replaced by the smart property platform. Its role is to tokenize
assets and make assets smart.

More scenarios and cases will be further added. For the Best Practices for
blockchain commercial projects, in addition to the independent case analysis we
will add, any projects are welcome to submit and publish in the form of separate
case studies.

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3. Four Steps of Tokenization
The core promoter of tokenization is DAC, who plays a decentralized role in the
ecosystem, and promotes the transformation of the Internet platform, the
implementation of blockchain technology, the issuance management of the
token and set-up of the business ecosystem. It will be a new legal entity and
organizational entity, coordinating all parties to promote three core issues:

- Chain: implementation of blockchain technology;

- Token: the establishment, distribution, and management of the token;
- Community, user community, and investment community, etc. formed by a
consensus of values.

Figure: DAC: Core Advocate of Tokenization

We believe that a seven-layer architecture can be used to interpret the logic of

blockchain commercialization. This seven-layer framework can be divided into
three layers of infrastructure and four layers of application:

Blockchains are built on the internet, and they are the most basic two layers. We
believe that the existing essential public chain and alliance chain technology still
need to add a layer of commercial layer tool when it is used in commercial
applications.

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The commercialization of blockchain is based on the establishment of a token
economy by DAC. Here, the role of DAC is distributed in four layers: governance,
incentives, adjudication, and the DACs.

Figure: 7 Layers of the Blockchain’s Implementation in Businesses

For example, the BAO system (Blockchains As Organization), which is seen as the
tool layer and to serve the autonomous business, will realize the following eight
significant capabilities, which can be directly used in the BAO system without
additional technology development, so that significantly reduces the difficulty of
autonomous implementation and effectively controls the security risks during
development process:

Table：BAO：An illustration of Tools Layer

1. Accounts and Account creation and role management

Permissions An account system decoupled from the public chain that
supports OAuth support for more detailed role definitions
Design and define the token structure
2. Implementation Releasing smart contract
Support multi-currency architecture

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 Set rules of the crypto exchange
3.Distribution In addition to the regular transfer system, it also provides a
Management candy system for customers in need and provides APIs for
linking with community tools such as Telegram.
4.Second Offering Flexible definition of second offerings and dividend rules,
and Dividends with options for private placement and dividend
placement.
5.Options and Provide the ability to be locked, and realize the options to
Restricted coin "purchase at a certain price at a certain time."
6.Algorithm Pricing Algorithm-based pricing model prices the token
Model dynamically, according to the condition of issue and
circulation. The system provides a variety of variables for
the user to define the pricing algorithm without
programming.
7. Auction model The capability of bidding through collective purchase and
game theory, suitable for the project to pre-price the token
to maximize its value.
8. Decision making Decision making and voting capabilities are the core of the
and voting DAC, and BAO offers a variety of options to ensure
effective implementation of decision making capability,
which is a substitute for the shareholders' meeting (board)
in traditional business.

Source: ENChain.Asia BAO System

After tokenized, a project consists of four core parties:

- Investors, including external investors, new investors, teams, secondary

market investors, etc.
- Internet platform, the original applications on the internet of information.
- Communities and users, including institutions, community individuals,
institutional users, individual users, etc.
- The token managed by the project includes the recycled part, the part
retained by the project, and the part to be issued.

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 Figure: Four Parties in the Ecosystem After Tokenization

In general, the tokenization of a project involves four stages: project screening,

model design, launch implementation, and exchange trading. During the launch
implementation stage, the DAC will cold-launch for Proof of Concept and
validate the token value in the primary market.

Figure: Transformation Process of Business Tokenization

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Four Steps of Tokenization
Tokenization refers to a transformation where blockchain and token are utilized to
create new applications. In tokenization, the Internet of value focuses on
"incentive and governance", while the Internet of Information focuses on
"connecting and matching".

Figure: Framework of Blockchain’ s New Applications

1．Starting from a suitable internet project

1.A If the projects are ideal for tokenization?

Projects that apply to tokenization, in nature, should operate a business

ecosystem of various entities. Tokenization, hereby, means a better ecosystem by
adopting blockchain technologies and token economy.

In the past, internet companies established an ecosystem and then exploited the
profit as many as they can. For now, DACs can achieve the balance between the
benefits of ecosystems and profits.

In the past, internet companies earn enormous profits by providing the platforms.
For now, DACs, as the builders of industry ecosystems, could better establish,

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expand and govern ecosystem. Rewards thus come along.

1.B Readiness for Tokenization

As the initiators to build industry ecosystem, DACs will have three roles and will
have to answer following questions accordingly:

- Platform operation and creating connections. What is the business logic

behind the platform?

- Building token and community. What is the circulation reasoning behind

token?

- Operation and governance of the community. Whether the economy

token is applicable to ecosystem governance?

For internet companies to transform to DAC, the most challenging issue comes to:
Do you tolerate the existence of any other DAC? It is a touchstone of tokenization
to see if you are ready to build an industry ecosystem with an open, collaborative
and sharing approach.

2. Strategic Planning of Tokenization

2.A Scenarios

- Assets corresponded to tokens;

- Definitions of the role of major participants;

- Scenarios flowchart of token applications;

- Confirm the governance principle of token-based community.

2.B Token Design

- Types of tokens and what are them?

- Value design of all tokens;

- The number of all tokens, including the total number, distribution number,
and second offering number；
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 - Compliance of all tokens

2.C Blockchain and Token Technology Specification

- Blockchain and token technology specification

- Specification of the technologies to connect blockchain, token and

internet platforms

2.D internet platform Design(If Applicable4)

- The business framework of internet platforms;

- Technical framework of internet platforms

3. Fundraising and Legal

3.A Reforming and Introducing New Investors

- How do previous investors join?

- Introducing new investors from organizations or individuals;

- The percentage of teams and advisors;

- Introducing ecosystem members;

- Introducing users(targeting existing users)

3.B Stipulating the Token Plan and Legal Framework

- Determination of the final token distribution framework;

- Establishing a corresponding legal framework;

- Arranging relevant compliance

4
Tokenization is built on a sophisticated internet platform that has a certain amount of users. So, it is required to
develop a mature internet platform before tokenization.

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3.C Management Regulations on Digital Assets

- Management Regulations on project’s token;

- Management Regulations on other digital assets.

4. Project Launch and Trading

- R&D on the projects’ online products;

- R&D on blockchain applications to the projects, including development by

itself or adopting proper public chain or alliance chain;

- Promote business cooperation;

- Projects’ trial operation;

- Operation of users community;

- Operation of partners or commercial community;

- Investor relations and trades in Exchanges(if applicable)

The order of all items can be adjusted by priorities.

This White Paper is firstly published as 0.1 Version by Token Economy Practice
Alliance. It is an open source publication updated jointly by communities. Later on,
the white paper will be updated, and flagship cases will continuously be added.

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