How to choose the right platform to create or issue a token?

Criteria for selecting the appropriate DLT technology platform for a token:

1. Security:

• The platform should have a strong consensus mechanism and a robust encryption system to protect users’ funds.
• Consensus mechanisms are protocols that distributed systems technology uses to achieve agreement between nodes on the state of the network.

• • Consensus mechanisms have a significant impact on computational capacity, which can have implications for network efficiency, scalability and operational costs. Each mechanism will have its own characteristics in terms of the amount of computational resources required to operate efficiently.
  • Some of the typologies of consensus mechanisms are: Proof of Work, Proof of Stake, Proof of Authority, Proof of Space.
• An encryption system is a set of techniques and algorithms used to convert information into an unreadable or encrypted format, which only authorised parties can understand. It is done by applying an encryption key or algorithm that transforms the original data. Ciphertext appears random and does not reveal useful information unless the correct key or decryption algorithm is accessed.
• It is important to consider the level of decentralisation of the platform, as this affects the risk of fraud and manipulation.
• The level of decentralisation of a platform refers to the distribution of control and decision-making among multiple participants in the network, as opposed to a centralised system where a single authority has absolute control.
• Assessing the degree of decentralisation on a platform involves both technical, economic and social aspects, e.g. node distribution, participation in validation, wealth distribution, censorship resistance, among others. The purpose of assessing the degree of decentralisation is to better understand the structure and functioning of a platform and its implications for security, fairness and censorship resistance. This helps users, developers and regulators to make informed decisions about their participation in the network.

2. Scalability:

• The platform must be able to support a high volume of transactions without experiencing congestion or delays.

• The ability of a platform to support a high volume of transactions depends on several key factors such as platform architecture, consensus protocol, database and storage technology, bandwidth and network capacity, software and code optimisations, among others.
• In order to determine a platform’s ability to handle a high volume of transactions, it is necessary to conduct extensive load and stress tests, simulate real-world scenarios and analyse its underlying architecture. Load and stress testing evaluates performance under extreme loads, while real-world scenario simulations examine how the platform behaves in everyday situations. It is crucial to review the platform architecture to identify potential bottlenecks or limitations. In addition, analysing use cases and benchmarks in high-traffic environments provides valuable information on capacity and performance.
• It is important to consider the platform’s ability to grow over time and adapt to the needs of the project.

3. Interoperability:

• Interoperability refers to the ability of different systems, devices or platforms to work together efficiently and seamlessly, sharing data and services with each other. It implies the ability to exchange information and use resources transparently, regardless of differences in underlying protocols, data formats or technologies.
• Interoperability is one of the major challenges on the road to effective decentralisation of platforms. As decentralised platforms continue to proliferate, there is a need for these platforms to be able to communicate with each other efficiently and seamlessly. Lack of interoperability can result in fragmentation of the ecosystem, where users and assets are trapped in closed silos, limiting their ability to realise the full potential of decentralisation.
• Interoperability issues are being addressed with specific protocols, common standards and the development of bridges and gateways. Dedicated platforms are also emerging, acting as interoperability hubs to connect different blockchains and decentralised systems, thus promoting wider adoption and usability of these technologies.
• The platform must be compatible with other DLT technology platforms to enable token transfer and interoperability between dApps.
• This can increase the usefulness of the token and facilitate its adoption by users.

4. Cost:

• Transaction fees on the platform should be reasonable and affordable for users.
• Common average cost standards include average cost per transaction (CPT), average cost per operation (CPO) and average cost per use (CPU), which assess the average cost of transactions, operations and overall platform usage.
• It is important to consider the total cost of developing and implementing the token on the platform.
• Segregating the cost of development from the cost of implementation on a platform is important for several reasons. First, it allows for greater transparency and clarity in accounting and financial management, making it easier to track and allocate resources. In addition, separating these costs helps to more accurately identify the return on investment (ROI) and assess the profitability of the platform over time. It also allows for more effective planning and informed decision-making on resource allocation and investment in future platform upgrades and enhancements. This can be crucial to ensure the long-term viability and continued success of the platform in a competitive environment.
• The development or implementation team is responsible for implementing the platform. Key milestones include planning and design, development and testing, initial deployment, training and coaching, and ongoing evaluation with adjustments as necessary to ensure a successful and functional implementation of the platform.

5. Community:

• The platform must have an active community of developers and users.
  • Developers play a key role in the growth and evolution of the platform, contributing new features, enhancements and solutions through the development of applications, tools and protocols. Developer compensation may vary depending on the platform’s business model. They may be compensated directly for their work, such as salaries or project fees, or indirectly, through incentives such as platform tokens, governance participation or performance-based rewards for their contributions.
  • To achieve an active community of developers and users, it is crucial to encourage participation, facilitate collaboration, provide incentives and rewards, promote transparency and communication, and create a culture of community. Providing effective tools, resources and reward programmes can motivate community contribution and engagement, which drives the platform’s continued growth and success.
• This can provide support and resources for project development and token adoption.

6. Variables to consider when choosing the platform:

• Token type: Different types of tokens (fungible, non-fungible, utility, security) may have different platform requirements.
• Target audience: The platform must appeal to the token’s target audience.
• Functionality: The platform must offer the necessary functionalities for the project.
  • Identifying project functionalities involves understanding the needs and objectives of the project, as well as the expectations of the users. Some ways of doing this are:
    • Requirements analysis: Conduct stakeholder interviews, study existing documentation and gather detailed information on the functional and non-functional requirements of the project.
    • Prototyping and mock-up: Creating prototypes or mock-ups of the platform to visualise and test different functionalities, which allows identifying which features are needed and how they should be implemented.
    • Market and competitive research: Analysing other similar platforms in the market and studying the functionalities they offer can provide insights into which features are relevant and valued by users.
    • User feedback: Getting direct feedback from users through surveys, usability testing and behavioural analysis on the platform can help identify which functionalities are most important and how to improve the user experience.
    • Prioritisation and planning: Once the functionalities have been identified, it is important to prioritise them and plan their implementation based on their impact on meeting project objectives and user needs.
• Tools and resources: The platform must provide tools and resources for the development and implementation of the token.
  • Platforms typically provide a variety of standard tools and resources to facilitate development, deployment and project management. These include SDKs that provide tools and libraries for developers, APIs that enable integration with other applications, detailed technical documentation and user guides, technical support and customer service to resolve issues, and analytics and monitoring tools to monitor performance and security. These resources are essential to facilitate the adoption and effective use of the platform by users and developers.

• Technical support: The platform must offer quality technical support for the project.

Si te ha interesado este artículo no dudes en leer:

20 Steps to Issue a Token: A Chronological Guide with Professionals

Popular DLT technology platforms:

Ethereum:

• Pros: It is the leading platform for smart contracts and decentralised applications (DApps), with a large community of developers and a solid infrastructure. It offers flexibility and programmability through its Turing complete programming language.
• Cons: Network congestion and high transaction fees are common problems. In addition, Ethereum is in the process of migrating to Ethereum 2.0 to address scalability and efficiency issues.

Binance Smart Chain (BSC):

• Pros: Offers fast and inexpensive transactions compared to Ethereum, thanks to its Proof of Stake (DPoS) delegated consensus architecture. Supports smart contracts and decentralised applications.
• Cons: BSC is less decentralised than Ethereum, as its network of validators is smaller and controlled by Binance. This can raise concerns about security and centralisation.

Cardano:

• Pros: Focuses on scalability, interoperability and environmental sustainability. It uses a PoS (Proof of Stake) approach to validate transactions, which reduces energy consumption. It also stands out for its scientific approach to development and its emphasis on governance.
• Cons: Although it has generated a lot of interest, it is still in the process of fully implementing its functionality, with some features yet to be released on its way to full decentralisation.

Polkadot:

• Pros: It provides interoperability between blockchains, enabling communication and transfer of assets between different chains. Its relay chain and parachains architecture offers flexibility and scalability, and its focus on community governance is remarkable.
• Cons: Although it promises great scalability, Polkadot is still under active development and some key features are experimental.

Solana:

• Pros: Offers fast transactions and low transaction costs thanks to its Proof-of-History (PoH) and Proof-of-Stake (PoS) consensus architecture. It is known for its high scalability and performance, being able to handle thousands of transactions per second.
• Cons: While promising, Solana is relatively new and is still in the process of building its ecosystem and adoption by developers and users.

If you liked this article, you may also find it interesting to read the following one:

Regulating Tokenisation: Current and Future Legal Framework