How to fall in love with a Token
A 7-step guide by Christina Frankopan
This article was originally published in the print editon of Fractal’s ‘Around the Block’ magazine in 2018. The free digital edition of the magazine is available here
Stendhal’s book ‘De l’amour’ (On Love) published in 1822 was an attempt to study the operations of love dispassionately and objectively. He envisaged falling in love as a transition between 7 stages of state, leading to an ultimate “crystallization”.
Stendhal illustrated the crystallization of love in a visual analogy, where the city of Bologna signifies indifference and Rome stands for perfect love. The traveler begins in Bologna, indifferent, then moves through the stages of crystallization and arrives in Rome in love. As a long-term investor, this is the journey I want to be taken on by you and your token offering.
Generally, I’m in Bologna. I’m indifferent. Most token offerings which pass my desk are badly designed and are facile fund-raising toys which don’t need a token, or an ICO. But the journey to Rome can and does happen for me, where the quality signals of your token project pass these 7 stages.
So here is my light-hearted mapping of Stendhal’s stages of falling in love, applied to a long term investor and the potential object of her affection, a token. [Note: Just to be clear, mostly when I say ‘you’ below, I mean you as a token, not you as a human…]
1. Admiration (TEAM)
It’s a banality of VC shpiel to say it’s all about the team. But it kind of is. I admire your team from the start and their determination to stay the course. I recognise the depth and experience of their technical talent. I research teams, take references and try to spend a lot of time getting to know them. I want to see this as a long term partnership and know that they will also trust me to support the project — not only when you’re worth $1.5bn and your team is stressed about opsec, but also when times get tight in crypto autumn.
2. Acknowledgement (PRODUCT)
You exist and you are credible. The platinum standard is to demonstrate that your token mechanics and product design meet Mike Goldin’s Cryptosystems Manifesto of necessary and sufficient criteria for existing. If you succeed in this, you have a chance to actually capture network value, which most tokens are not well designed to do. You may or may not have plans to do an ICO in due course, but if you do, I want to see that your team has put some original thought into a balanced public auction design, you’ve perhaps explored ethical approaches, fair distribution, sensible liquidity of circulating supply, considered and learnt from past ICO examples, combined with a view to future funding needs.
3. Hope (IMPACT)
I need to see the vision and zeal of your mission, and that you are addressing a meaningful market that has potential to have impact. “Meaningful” to me does not just mean “large” (although that will probably excite me). Personally, “meaningful” means a project that potentially impacts the way we societally organise and transactionally engage. For me, if the token project has tangible, potential impact and is well designed, in the long-term it is by definition valuable.
4. Delight (COMMUNITY)
Hopefully, it’s not just me falling in love. I need to know that others have fallen in love with you too. This is not (just) about size of community. That can be a hollow metric, and we’ve seen many scam projects spin up telegram groups of 15,000 in 3 days. No. I want to see authentic signs of sustained community engagement and germs of genuine delight in what you are building. Even if you have not yet attained a product-market-fit, the objective once that is achieved should be for your token system to become a self-sustaining network that can and should eventually survive the absence of your team. This can only happen with an active community to sustain and maintain the project.
5. First Crystallization (INVESTMENT COMMITTEE)
I’m convinced it’s the real thing. I need to confirm this with trusted colleagues to know I’ve not lost the plot. I will share with them all the information I’ve gathered and adventures we’ve shared in stages 1–4, with as many data points as possible to validate my affection. We will consider various approaches to valuation (although I personally feel this is still an immature art) and whether you are raising the right amount. Too much can seem (and be) greedy and can create disincentives for discipline.
6. Doubt (DUE DILIGENCE)
Is this too good to be true? Let me check. There will be quite a lot of legal due diligence, and review of your SAFE / SAFTE if you have one. I need to confirm whether you are compliant (KYC, AML, security/no security token etc). I will take technical views on your codebase, development architecture and roadmap.
7. Second Crystallization (PARTICIPATE & #HODL)
It’s true love. I’m invested. We’re going to be together forever, perhaps I’ll be staking and running nodes, until the network doth us part.
Such a romantic view of token investing in crypto winter! But designing a good token that is actually needed, is really just a puzzle. Solve the puzzle, and then, just perhaps, all roads will lead to eternal bliss and crypto nirvana in Rome. Perhaps ;)
Disclosures: With credit to Jack du Rose for his ideas in the fireside chat at ETHBerlin “To Token or not to Token”. Opinions expressed are Christina’s own and any omissions, exaggerations and howlers entirely her own fault.
