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The work token has emerged as a novel way of interacting and contributing to decentralized applications.

Before we can dive into current work token implementations, we have to take a step back and analyze early token economic models.

Current Problems:

Fundraising Tools: Many projects simply created tokens as fundraising tools rather than using fiat/ETH. Raising via a traditional equity round or an existing token was more difficult so projects simply released a new token. As a result, even if these projects attain their technological roadmap, they will still see a disconnect between their product and token.

Medium of Exchange (MoE) Models: “Utility” tokens do not automatically result in increased network value with increased token usage. Even after product launch, networks with proprietary payment systems offer little incentive for participants to hold their tokens. Both the supply and demand side can then buy in, use the service, and sell when completed. With inflation, selling pressure will push prices down even further. Vitalik Buterin (Ethereum) and Kyle Samani (Multicoin Capital) have both discussed the issues around token velocity…

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Not just another HODL article. The dangers of 24/7 prices and immediate liquidity for early stage crypto projects are more important to recognize now than ever before.

TL;DR: Unlike traditional startups, crypto projects have to begin worrying about their token price from day one. This creates a vicious cycle of FUD, dumping, and marketing holding back the space as a whole.

One of the biggest problems in the blockchain space right now: Crypto projects cannot always focus on long-term token value, utility, and development. …


Anjan Vinod

ParaFi Capital, Blockchain at Berkeley

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