Tokens vs. Equity: What is it That You Are Buying Exactly?

Over the past two years, I have had the honor of regularly fielding questions from intrigued friends, colleagues, and family members on all things blockchain. While I’ve played the role of expert or, at the very least, slightly more informed seeker, I have found that I have learned far more listening to and answering questions than my questioners have from my answers. Every conversation helps illuminate those aspects of blockchain that both are interesting and confusing enough to inspire probing questions from smart, intellectually curious people.

When I was mulling over possible topics for this post, it became clear that failing to address the question of what makes tokens valuable would not be the best use of this space. And frankly, the reason for this is glaringly obvious. In the six months from January to June of 2017, the aggregate market capitalization of blockchain-based digital assets rose roughly 1000%, appreciating from about $10B to $100B over the period.

Back in the prehistoric era, (pre-2017) questions were typically functional in nature: “How does Bitcoin work?”, “What is Ethereum?”, “What is the difference between Bitcoin and Ethereum?”. Today, it’s all about the money: “How high will Ethereum go?”, “What are the best tokens to invest in?” and of course, “Why do tokens have value?”.