On Tokenomics and ICO Valuations
There have been countless blog posts and podcasts all helping to unravel the technical breakthroughs and enigmas that make cryptographic tokens possible. As fascinating as it is to discuss the technology behind tokens, I want to go in a different direction.
What follows is a brief look at a primary way that tokens can function in decentralized organizations. As an investor, deeply understanding the function(s) a token has in its organization is the key to determining how the value of that token will appreciate in relation to the growth of that organization.
To be clear, “token”, in this context, refers to the scarce cryptographic tokens launched on an existing blockchain protocol (most commonly today according to the ERC20 token standard via Ethereum). These tokens, distributed during an ICO, (Initial Coin Offering) function as an (ideally) inherently- decentralized economic foundation for a DAO (Decentralized Autonomous Organization) or dApp (decentralized application). These tokens are custom built and massively versatile, they are also complex in fundamentally new ways. This presents a challenge for both developers and crypto-economists optimizing for specific behavioral outcomes and investors allocating capital to projects that deliver the most value in relation to price.
