This week, we’re going to be talking about tokenomics and the fundamental concepts that sustain the vision of ESelfKey’s token economy. The role of KEY as the systems native utility token is pivotal in this discussion and is likely of great interest to you - our community.

The following sections address the fundamental concepts and principles that sustain the vision of ESelfKey token economy, and the purpose of KEY as the fuel that ignites and keeps the decentralized identity platform functional and robust through proper incentive mechanisms and economic interaction dynamics.

Some specific questions answered regarding the KEY token include:

• What is KEY used for? 
• How does the use of KEY tokens create incentive structures to help protect identity, leading to a better network overall?
• How does KEY increase or replace trust in the ESelfKey system?

What are Tokenomics?

Tokenomics (i.e. Token economics in the context of cryptocurrency) is the study of decentralized ecosystems from an economic perspective, in which crypto-assets play a fundamental role in providing token holders access to a set of services and features in the system, as well as incentive structures that support the community of participants in order to sustain the overall functioning and growth of the network.

ESelfKey is working on designing and implementing a token economy model where all the incentives are aligned to ensure a network that provides value to all involved parties along with the foundations for its growth and future evolution.

The KEY token works as the substance that connects, empowers and rewards all involved actors in a decentralized identity ecosystem, providing verifiable means for trust, while also protecting identity owners with the control of their data and granting relying parties and certifiers access to an open marketplace as a growing source of revenue.

What is the status of the KEY token?

The KEY token was created and initially distributed following the ‘public sale’ (which lasted just 11 minutes) in January 2018 generating $21.7 million USD in crypto. Since then it has been adopted by several leading cryptocurrency exchanges.

The main purpose of KEY token is to reward the community for sustaining and even improving the ESelfKey network, making it the first decentralized network to bring together all the necessary participants in self-sovereign identity: identity owners, certifiers and relying parties. 

ESelfKey may develop into an economy that is long-standing, self-sustaining, and adapts and grows unrestrictedly into the future. To this end, we are engaging in different areas of token engineering and mechanism design, by elaborating and testing different mathematical models as input in network simulations to assist in finding the optimal parameters that ensure the overall health and growth of the ESelfKey economy.

When Exchange?

KEY is currently listed on several major cryptocurrency exchanges including Binance, HitBTC, DCoin, IDEX, TDEX, RightBTC, Probit, Whiterabbit, P2PB2B, IDCM and others.

KEY is deployed as an ERC20 token running on top of the Ethereum network. We find Ethereum to suit our needs nicely as a smart contract platform, but remain open to alternatives including deploying our own blockchain - but only if the business case is suitable.

What are the use cases for KEY payments?

KEY is currently being used to complete payments for services in the ESelfKey Marketplace and members of the ESelfKey community currently maintain ownership of KEY utility tokens as a way to secure future access to the ESelfKey Identity Network and all the benefits participation in the network provides. The KEY token is essential in the ESelfKey network as many components could not function without its existence.  

Anyone who has a career in financial services, can tell you about the time and cost of KYC onboarding. On average, it takes 26 days to onboard a legal entity and costs between $15,000 and $50,000 USD, per client. Identity & KYC management is not restricted to individuals, and it is a more tedious process for relying parties to perform KYC on legal entities than individuals. 

The ESelfKey identity network still aims to solve many of these KYC inefficiencies and costs for individuals, but the corporate wallet is an important step into dealing with KYC from a more complex business perspective, and is arguably a much larger market than individual KYC. 

The ESelfKey corporate wallet is an important layer, providing identity management software to individuals, and also to companies and organizations.

What industry collaboration has been achieved?

There is now a blossoming open source community building technology for decentralized identity. Many other groups have started planning and building in earnest:

• Microsoft and their ION initiative
• The Decentralized Identity Foundation (DIF)
• W3C Community groups
• Hyperledger Identity groups
• Global Digital Finance (GDF) 
• KYC and Security Token groups
• Rebooting the Web of Trust (RWoT)
• Security Token Alliance

The development of DIDs is an effort led by the W3C Credentials Community Group and Decentralized Identity Working Group. Its aim is to define a standard on how decentralized identifiers should be handled by the different implementations. Therefore, one of its main goals is to achieve interoperability and portability of digital identity.

When it comes to things like DID specifications and self sovereign identity - more industry collaboration among companies building decentralized identity software is certainly a good thing. It is important to note that so called “competition” in this space ultimately should mean greater overall awareness of self sovereign identity, more users for companies which are actually self sovereign, low switching costs with no vendor lockin, and an ultimately a larger market share for all participants where we empower the individual, to finally own their identity. 

We believe decentralized identity management is not a zero sum game, but rather a massive opportunity for various participants to work together. The ESelfKey network is interoperable (via technology such as DIDs) with an industry. Phrased very simply: a rising tide lifts all boats!

What community & educational progress has ESelfKey made?

We communicate directly with the growing ESelfKey community, a large and dynamic group of people who, along with us, have an interest in solving the challenges of digital identity. The ESelfKey community is distributed, diverse, and vital to the overall success of the ESelfKey Project. Community members are responsible for providing user feedback, maintaining various forums, and provide invaluable insight into the UX of ESelfKey technologies. One concrete way anyone can provide feedback, or contribute to various ideas, is in the ESelfKey ideas portal. 

The project has benefited enormously from this global spirit of community and collaboration towards creating a future where we truly own our identities, free and clear, through the power of distributed ledger and encryption key technology. It might not be dramatic to say that the future of identity for human kind depends not on ESelfKey - but on the ESelfKey community, and the efforts of each person, acting on their own, individually.

A substantial benefit of utility tokens is the possibility for users to both utilize, as well as participate directly in the outcome of a project. This paper will now change focus from the technology (BUIDL) to how the network is being powered by the native utility token: KEY (HODL).