3 things that make a token investable

Moises Cassab
Apr 29, 2019 · 2 min read

In my previous post, I asserted that API tokens, now called utility tokens are basically worthless gift cards that are not a great investment. But much has improved in the ecosystem in the past two years. So part 2, basics of equity.

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The Dutch East India or VOC company was the first company to issue public shares, in 1602. It had the basics of what we now know as equity.

Equity in company or stocks have 3 important rights that make owning such pieces of paper valuable

1- A share of income, the most valuable part of equity is that we can receive a piece of the profits. Mostly though dividends or the more tax efficient share buyback.

2- Governance Rights, stocks give us the right to vote member in or out of the director's board, fire CEOs and set the general direction of the company.

3- Ownership of Assets, a piece of the assets the company owns: it could be IP, the Brand, their treasury, land holdings, etc.

Crypto equivalents

In crypto, we have managed to somewhat reproduce 2.5 of the 3 aspects.

1- A share of income. burning tokens, in projects like MKR the fees are paid in MKR and the tokens are burned. This is the equivalent of a share buyback where we reduce the number of shares outstanding. Pushing the up the price due to the smaller supply.

2- Governance rights, although we still have some big gaping holes in this. Most tokens don’t give you any rights. Binance decided unilaterally to change the language of the whitepaper so that they no longer need to do buy-backs. Tezos and MKR token holders have the rights to vote on all protocol changes.

3- Ownership of Assets, It seems most crypto assets don’t really have many tangible assets besides the brand, which you get to keep in case of a fork. BTC/BCH/BCHSV.

Need not be just smart contracts

These things need not only apply to purely cryptographical or decentralized assets with on chain recourse like MKR or REP.

This framework can also work for centralized companies. If Brave shifted from selling their useless scam* token would sell a part of Brave, LLC in tokenized form and put in the bylaws that token holders have the same rights as equity holders, Id jump on it. If they then decide to break such rules token holders could take them to court in the US just like a regular shareholder.

TLDR: just give me equity, in a tokenized wrapper enforced by a smart contract or competent judges. Why must the crypto space re-invent the wheel?!?

*Its a scam because they are knowingly deceiving the people into thinking its an investable asset when its really a gift card.

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