Monetary reform and the token economy
Recenetly Pavel from Distributed Labs said:
“Every utility token:
— that is LIMITED in supply,
— but required to use the platform,
— that provides UNLIMITED amount of services
Is vulnerable to price manipulation and therefore is likely to turn out into a Ponzi scheme.”
Pavel didn’t say it out loud, but he hinted that he thinks that maybe the token supply shouldn’t be fixed but perhaps change as the underlying platform changes. This is currently a major taboo.
Many in the monetary reform movement advocate for 0% inflation currency. For us currency is nothing but a tool to measure value, the value of products and the total value or rather the belief of future total value of the underlying economy. If currency is created or destroyed without a reason it then incorrectly measures the value since the underlying product/service/economy did not change. On the other hand if the value of the underlying product/service/economy did change but currency was not created/destroyed accordingly there is a again a mismatch in how the currency measures the value.
I saw a quote by Navil Ravikand (if anyone knows the source please share in the comments):
“The most valuable type of economists are cryptoeconomists, as they can actually create, manage, and analyze economies.”
How would you analyze the economy if there’s a mismatch between the tokens’ value and the actual economy value? How would you manage it correctly?
As an example, lets assume a certain dapp has created a buzz in the news and many speculators/investors rush to buy the token. Although the consumers and service providers are still not flocking to the dapp. The actual economy of the dapp did not change while its token value is sky rocketing. A possible autonomous model might create more tokens, thus reducing the price of each token but then distributes the newly created token to consumers which in turn buy more products and services which in turn attracts more service providers and more consumers expecting future incentives. This process lowered the speculative value of the token while raising the real value of the underlying economy and so bringing both prices closer to each other.
To say it out loud: The supply of tokens should not be fixed.
The fixed amount token model is not sustainable or rather not as sustainable as other possible models.
Not only that but it creates an economy based on first come first served and I think and hope that the crypto community are looking for more inclusive types of economies and business models.
Perhaps in the future we will start to see token economies that their supply is managed by smart AI models or by self governance while keeping true to the core value of decentralization.
At DaBlock we are building the future of token economies.
If you are interested in better token economies please join us on our telegram channel or contact us
