Economics of Blockchain Applications

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Cryptocurrencies are the first and most basic application of Blockchain technology. They use Blockchains to document and transfer digital tokens that may not represent anything. Nevertheless, they can be valuable if they are useful and scarce.

A second application level is smart property where tokens represent other goods. They may either work like electronic vouchers (so-called utility tokens) or securities (so-called security tokens). This allows to peg the value of such tokens to the underlying asset.

A third application level consists of smart contracts where tokens not only represent simple assets or rights. In addition, a Blockchain hosts the decentralized and automatic execution of computer applications and contracts.