This post focuses on productive cryptoassets and their respective valuation frameworks. These assets can be modeled similarly to real estate, equity, and bonds. They are distinct from non-productive cryptoassets like medium of exchange tokens and candidates for store of value.

Productive cryptoassets in this context include discount tokens, native profit sharing tokens, work tokens, burn and mint tokens, and governance tokens.

Productive vs. Non-Productive Cryptoassets

Without the influence of broad speculation, token value in the aforementioned models should grow linearly with respect to cash flow generated atop the network. Generally, the goal in token design is to implement mechanisms that create financially productive digital…

Governance in distributed, open source networks is a frequent point of discussion in the cryptosphere. These networks allow developers to create and test intricate governance models in a rapid, iterative manner. As projects experiment with governance tokens, it’s useful to measure the value a token might capture for its governance functionality; how much is a user willing to pay to vote?

The TLDR; The maximum price a network participant (maybe a relayer) will pay for 51% of governance tokens is bound by the cost associated with a network fork. Cost is equal to the difference between the net present value…

A battle as old as time itself?

Stores of Value (SoV) such as Bitcoin should optimize for a level of predictability in the long-term. In the digital world, censorship resistance, scarcity, security, and self-sovereignty are crucial to achieving this outcome. In contrast, utility platforms such as Ethereum and EOS are experimenting with flexible programming, on-chain governance models, and new consensus algorithms. The winning projects will be those that are the most agile and innovative. These projects will gain significant traction in the highly competitive utility platform race. The agility and innovation required to gain traction as a utility platform, inherently conflict with the predictability and security of…

Thoughts on Token Mechanics

Public blockchains and their use of incentive-based models will be a driving force in reshaping the use of currency in the digital age. Part of this shift will be removing or diminishing the role of third part service providers. In removing these third parties, cryptographic networks will form far more efficient markets than we have today. There will be a lot less friction. The businesses of tomorrow will take advantage of strong incentive models that haven’t been possible until now.

Application-specific tokens should be fundamental in building, and maintaining decentralized autonomous organizations. In these organizations, users, service providers, and developers…

Phil J Bonello

Subscriber to the fat monies thesis. |

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