Cryptocurrency Exchanges: a view from the BeefLedger project

With the ICO bubble of late 2017 a distant memory, we can now settle down and think a little more seriously about what functions exchanges serve for cryptocurrency communities. In this piece, I want to outline some preliminary thoughts about the importance of exchanges to the long run utility value of cryptocurrencies, and particularly that of BeefLedger's own BEEF token.

What purposes do exchanges serve?

The emergence of ecosystem-specific cryptocurrencies has enabled a data-backed barter economy to emerge at scale. However, the double coincidence of wants problem isn't averted; rather, it's magnified. To enable cryptocurrencies to fulfil a more generalised medium of exchange function (as opposed to simply being a mechanism for peer-to-peer enabled venture capital for specific projects), a vibrant capacity to create liquidity and to some extent, a form of crypto-fungibility, is needed.

Hence the importance of exchanges. (I will leave the discussion of centralised v. decentralised exchanges for another day.)

How do Medium of Exchange and Liquidity Matter?

Exchanges are the means by which different cryptocurrencies can be swapped with each other, and if properly functional, holders of different cryptocurrencies can benefit from reasonable levels of liquidity so as to fulfil the needs of cryptocurrencies as mediums of exchange. Liquidity is key here, because the ability to swap a given quantum of one cryptocurrency for another within a reasonably quick period of time without greatly affecting the relative price (exchange value) is what enables the emergence and flourishing of a cryptocurrency-based medium of exchange environment.

An absence of liquidity means there's a large trade-off between the speed at which an exchange can take place and the impact that exchange will have on the exchange value of the two tokens in question. Cross-ecosystem exchangeablity underpins liquidity, which in turns stabilises exchange value to enable crypto currencies to perform mundane medium of exchange functions.

What’s the BEEF Token?

The BEEF Token is the medium of value transfer within the BeefLedger ecosystem.

It is the means by which ecosystem members can transact with each other for goods and services (including data services) as well as a range of rights concerning assets.

It is also the means by which we are able to design crypto-economic mechanisms to incentivise desired behaviours.

Opportunities to use BEEF tokens for the transfer of value to support the exchange of goods and services within the beef supply chain will be progressively rolled out. These opportunities include purchasing beef and even restaurant meals, distribution rights, as well as associated data services eg., journey validation data.

Watch this space, or better still follow us on Twitter (@BeefLedger1) or on Telegram (https://t.me/beefledger1).

That said, not everyone will always need to have a vast store of BEEF tokens. Hoarding tokens can be counterproductive to ecosystem health, particularly as the ecosystem is being designed to serve the entire beef supply chain ... and that means enabling the low-cost and efficient delivery of beef to consumers and fair value to all those involved in the supply chain. Ecosystem health is achieved by a continual flow of data (including the transfer of value) as the counter to the flow of analogue product: cattle and beef move one way, data moves both ways.

Hoarding in effect constipates the system.

(Read Paul Krugman's classic baby sitting co-op story here, which explains the importance of liquidity for ecosystem function.)

We will over the next 24 months be working with leading mechanism design researchers at Queensland University of Technology, as part of our work within the Food Agility CRC umbrella, to consider a whole range of issues related to behavioural markets (mechanism design) and macro-system liquidity (in effect an old fashioned 'money supply' question).

Where can BEEF tokens be exchanged? Exchange Listed - SoarEX

For now, however, we have begun the processes of enabling the progressive use of BEEF tokens as a means of accessing data services, product distribution rights and in due course, final product itself (whether it be cattle or beef, or even meals on a plate). Which means, of course, that we need to enable token flow and exchangeability to ensure the cryptocurrency environment delivers as a medium of exchange.

We have done this in response to our user community's expressed desires to be able to 'come in and out' of the data / payments ecosystem when needed. So, the token is now listed on SoarEX, a full-service cryptocurrency exchange developed by the team at Soar Labs. The BEEF token is paired with BTC, ETH and SoarUSD. Discussions with other exchanges are ongoing. More pairs will be needed to grow the preconditions for increased liquidity.

Early data suggests that the community is still finding its feet in terms of what a marketplace will look like for an instrument like BEEF token.

The exchange platform itself has only recently been estsblished, which means registered user numbers are still in its infancy. As the BeefLedger project announces further initiatives involving the use opportunities of BEEF token, it would not be surprising if even more people get involved.

This is the beginning of a long-run journey, to create a credible value transfer ecosystem that delivers for participants up and down the supply chain. Consumers deserve to have confidence in what they are buying, and can also contribute to the overall value realised by suppliers (e.g. through mechanisms such as rewards, incentives as well as reputation scoring). Those in the supply chain who are committed to the pursuit of excellence need credible ways of (a) validating their performance and (b) on the back of this, receiving a share of the value created.

In doing so, however, inadvertently creating an environment that encourages token hoarding will starve the supply chain of the liquidity it needs to deliver for all stakeholders. As such, by enabling the exchange of the BEEF token for other cryptocurrencies, we hope to contribute to the creation of a P2P environment that does not suffer from the constraints of the double coincidence of wants problem, and which benefits from market-based liquidity and a relatively stable exchange value.

Responsible Token Ownership

We take seriously our responsibility to design an ecosystem that contributes to sustainable and fair value creation and data valorisation. For us, data valorisation is the manifestation of the pursuit of excellence. That means, we also take seriously our responsibility to encourage responsible conduct when it comes to markets for cryptocurrencies.

We have issued a set of Responsible Token Ownership Guidelines, which we hope contribute to people taking a longer term view towards our own ecosystem work, as well as the possibilities created by P2P value ledgers, instead of seeing cryptocurrencies as nothing more than objects of speculation.

We’ve some thoughts on how responsible token ownership may be encouraged (and dare I say, enforced) and will share these ideas in the future. Meanwhile, we welcome your ideas.

We look forward to working with the wider community to refine and continually improve our thinking and design approaches to implementing a blockchain-enabled technological solution that integrates with real world conditions, IOT and packaging innovation to achieve a more valuable, fairer and sustainable supply chain outcome.

(c) 2018 Warwick Powell