Zeex and the Need for Proprietary Cryptocurrency

Companies often tout the capabilities of their proprietary cryptocurrency while launching an Initial Coin Offering (ICO). They speak about the contexts in which it can be used and the products that it can purchase. However, the real world utility of specialized crypto-tokens can vary significantly.

ERC20 and other smart contract based standards have become buzzwords or bullet points in ICO whitepapers. The inherent technological foundation of the cryptocurrency goes unused, and the token standard is chosen to check a box rather than to serve a function.

Tokens Currently Available on the Market

There are a myriad of tokens that serve no unique purpose beyond what could already be achieved by Bitcoin. Perhaps chief among these is the EOS token – the backbone of block.one’s EOS.IO project. The EOS team itself is very clear that the token serves only as a share in the success of the project. Therefore, it could be argued that the project has no need for its own inherent utility token, as Bitcoin could serve the funding purpose just as well.

The same is true of DigixDAO, another ERC20 token. DigixDAO is supposedly backed by real world gold value. They hold a certain amount of gold, and issue tokens against that. This process could be accomplished simply by leveraging gold to purchase Bitcoin or Ethereum.

On the other hand, there are projects like Enjin and Zeex that use the smart contract functionality to provide additional value. Enjin provides game integration through smart contract functionality. This system allows Enjin to be used in a variety of games as a type of universal currency for virtual items. Without smart contract functionality, there would be no way to directly integrate the token. Zeex uses the advantages of a proprietary token to reduce transaction friction (i.e. fees) to near zero – which would not be possible using legacy blockchains.

Digital Currency Versus Utility Token

Cryptocurrency began as a means of digitizing currency. The anonymous developer behind Bitcoin never intended for it to be directly integrated with decentralized applications at a coding level. The same is true of the entire Satoshi Nakamoto family of currencies – LiteCoin, Bitcoin Cash and a variety of subsets. They exist for use in payment, and nothing else.

In contrast, Ethereum introduced the idea of smart contract functionality and program integration. New currencies built on its standard could be used for a variety of different purposes – creating a class of crypto-tokens. These utility tokens are used to power blockchain systems at every level, allowing for many unique and useful applications.

The industry is facing an issue where utility tokens are becoming an expectation. A company considering whether to issue an ICO should evaluate its true needs and determine if it requires a coin or a token. Both have entirely valid use cases and serve different purposes, yet ICOs are gravitating almost universally towards tokens due to the hype that surrounds them.

Case Study: The Zeex Use Case

Israeli startup Zeex provides a great example of token usage in a transactional environment. Zeex is backed by the Zeek Group – a well-established company that has retail partnerships established with hundreds of major brands, including Amazon. Zeex aims to provide liquidity to crypto holders by allowing users to buy ZIX, the company’s proprietary token, through any exchange using traditional cryptocurrencies, which can then be used on the associated Zeex platform to trade ZIX for virtual gift cards.

The proprietary ZIX token serves several purposes, all of which require the use of an ERC20 token. The first is in avoidance of transactional friction. Using a custom token allows Zeex to reduce fees to near zero. This creates an environment for complete liquidity in which users lose nothing by transferring between corporate currencies, or even back into ZIX itself.

This solves an issue that has plagued Bitcoin since its inception – namely, the inability to use the legacy cryptocurrency to purchase goods across a wide variety of merchants. Rather than being simply another payment site that accepts Bitcoin or Ethereum, Zeex provides an actual retail ecosystem with real world applications through their use of a custom token.

Validating the Merit of an ICO for Real World Utility

Learning the use cases for various cryptocurrencies can help a savvy investor determine the best one to purchase. Without this knowledge, investors may fall prey to bloated and pointless ICOs that serve no actual purpose. There is an entire subset of available currencies that exist solely to capitalize on this fact.

The cryptocurrency market is still brand new and unregulated. While there are advantages to this, there are also disadvantages. The ability for new ICOs to completely fleece their investors is one of these drawbacks.

Cryptocurrency has the potential to disrupt the way in which transactions occur in the global economy. Proprietary cryptocurrencies issued in the form of ICOs can be valuable if they solve real world problems or provide more efficient solutions to what is currently available on the market. Companies that meet these criteria will be worth looking out for in the years to come, as the general public seeks new and disruptive applications in crypto’s evolution to mass adoption.

Leave a Reply

Your email address will not be published. Required fields are marked *

*