Token Economy — Second Edition

Shermin Voshmgir
Token Kitchen
Published in
6 min readJun 7, 2020


New Book Chapters & Revised Content

TOKEN ECONOMY, Second Edition, Shermin Voshmgir, 2020

The first edition of Token Economy was released one year ago. The basic structure of the second edition of this book is the same as the first edition, with slightly updated content of existing chapters and four additional chapters: “User-Centric Identities,” “Privacy Tokens,” “Lending Tokens,” and How to Design a Token System.

The book is an attempt to summarize existing knowledge about blockchain networks and other distributed ledgers as the backbone of the Web3, and contextualize the socio-economic implications of the Web3 applications, from smart contracts, tokens, DAOs to the concepts of money, economics, governance and decentralized finance (DeFi).

For those who recently purchased the first edition of the book, all new chapters are — or will be soon — available for free online which means that you don’t have to spend money to buy the new book (see links below or posts that I will publishing over the next few weeks). However, please note that all the old chapters have also been updated — either slightly or more considerably — and not all of the old chapters will be available online. In this blog post, I will explain what content has been revised, why the content has been revised, and which chapters are new.

Why the new subtitle?

The subtitle of the first edition was “How Blockchains & Smart contracts revolutionize the Economy.” The new subtitle is “How the Web3 reinvents the Internet.” While the term “blockchain” is a buzzword, it only refers to one kind of distributed ledger. And distributed ledgers are the backbone of the Web3, which is more than just a collection of distributed ledgers. The Web3 is a set of collectively maintained distributed infrastructural components that together form this next generation Internet, often steered by purpose-driven tokens. Other components such as distributed file storage or user-centric identity solutions are further important building blocks for this tokenized Web3, which are all outlined in the first part of the book.

Revised Content

  • Standardizing terminology: All chapters have been revised an streamlined to a standardized terminology. As I was reading the old version of the book I realized that the ecosystem needs more refined terminologies when talking about blockchain networks and the Web3: The term “blockchain” should not be used as a stand alone term, unless one refers to the “ledger,” in which case I suggest to use the word “ledger” since not all distributed ledgers have a blockchain structure. Furthermore, the term blockchain is often used to describe a system that has different parts and users. The term, therefore, requires an adjective such as “blockchain network,” “blockchain protocol,” “blockchain token” or “blockchain node”. Alternatively “Bitcoin network,” “Bitcoin protocol,” “Bitcoin token” or “Bitcoin node” or “Ethereum network,” “Tezos protocol,” “Sia token” or “Monero node” etc. The whole text of the book has been adjusted accordingly.
  • Redundancies, Mistakes, Restructuring: Some redundancies in the text have been deleted. Content has been slightly restructured and mistakes have been corrected (although I am sure there are still enough typos and other mistakes, so if you find any please ping me directly). Here the link to the errata page, where you can give feedback to both the print book and the ebook.

Table of Contents

As mentioned above, all chapters have been revised. Only the chapters that have been considerably updated are marked as (REVISED) and new chapters are marked as (NEW):

  • PART 1: Web3 Basics
    - Tokenized Networks: Web3, the Stateful Web
    - Keeping Track of the Tokens: Bitcoin, — Blockchain, & Other Distributed Ledgers
    - Token Security: Cryptography
    - Who Controls the Tokens? User-Centric Identities (NEW)
  • PART 2: Web3 Applications
    - Smart Contracts
    - Institutional Economics of Web3 Networks & other DAOs (
    - Governance of Web3 Networks & Other DAOs (
    - Tokens (REVISED)
  • PART 3: Token Economics & Decentralized Finance (DeFi)
    - The Future of Money & Decentralized Finance (REVISED)
    - Stable Tokens
    - Privacy Tokens (NEW)
    - Trading Tokens, Atomic Swaps & DEX
    - Lending Tokens (NEW)
    - Token Sales
  • PART 4: Token Use Cases
    - Asset Tokens & Fractional Ownership
    - Purpose-Driven Tokens (
    - Steemit, Hive & Reddit: Tokenized Social Networks (REVISED)
    - Basic Attention Tokens — Advertising Reinvented
    - Token Curated Registries — The New Search?
    - How to Design a Token System (
  • Annex
    - Origins of Bitcoin & the Web3
    - Scalability Solutions (
    - Libra & Celo (

New Chapters

  • User-Centric Identities & Data Protection: Blockchain networks and similar distributed ledgers use public-key cryptography for the identification of all network actors. The current mechanisms, however, are insufficient for a thriving tokenized economy. Decentralized Identifiers (DIDs) in combination with distributed ledgers can provide “user-centric” identity solutions that are suitable for the Web3, and provide more privacy and control than “server-centric” solutions used in the Web2. The intention of this chapter is to give a general overview, and shed a light on the urgency and importance of adequate digital identity solutions as a pivotal building block for the Web3.
  • Privacy Tokens: Early blockchain networks provide a high level of transparency, which makes the history of a token visible to anyone. This compromises the privacy of token holders and also makes a token less fungible. Alternative token systems have, therefore, set out to create more privacy-preserving protocols. This chapter outlines different privacy token systems from a technical perspective, as well as the socio-economic questions related to the topic.
  • Lending Tokens: Decentralized lending services use smart contracts to create two-sided markets for a P2P credit and lending system. Any non-bankable asset such as commodities, securities, real estate, artworks, or SME shares could, in the future, be tokenized and collateralized, which could lead to a convergence of financial markets and the real economy. This chapters explains the dynamics or P2P lending, P2P borrowing, and deep dives into the topic of flash loans and possible flash attacks.
  • How to Design a Token System: If you would like to tokenize your business or community and make it Web3 ready, how do you need to approach your token design? Which questions do you have to ask yourself? What know-how do you need in your team to be able to properly “design” or “engineer” these tokens? The aim of this chapter is to understand what questions are relevant in the design and engineering process of a new token system, depending on what type of token you want to create.

About The Book

The book builds on the educational work that we started at BlockchainHub — an Info:Hub and Thinking:Hub based in Berlin — with the aim to make the Web3 accessible to a general audience. was the first website to systematically compile and disseminate blockchain and Web3 knowledge to a general audience and has been operational since 2015, first with a series of blog posts, which were later compiled and contextualized in the Blockchain Handbook, available for free. Token Economy builds on the legacy of the past activities and goes one step beyond: The focus is now on tokens as the atomic unit of the Web3.

Second Edition, June 2020

  • Paperback & Ebook currently available on all Amazon bookstores.
  • Other online bookstores will also be distributing the book by end of June 2020.

First Edition, June 2019

  • 2nd amended Printing, July 2019 (minor typo corrections and additional chapter in appendix on Libra)
  • 3rd amended Printing, Dec 2019 (minor corrections and updates of text)

If anyone would like to collaborate on translating the book into another language, please contact us.

A German Version: “Token Economy”, Shermin Voshmgir, O’Reilly. The expected publication date is FaLL 2020. You can preorder the german version of the book on O’Reilly or Amazon.

Thanks to all the people who gave input and feedback over the years: Peter Kaas, Valentin Kalinov, Alfred Taudes, Michael Zargham, Justyna Zubrycka, Caroline Helbing, Jakob Hackel, Kris Paruch, Susanne Guth, Guido Schäfer, Sofie Schock, Tom Fürstner, Robert Krimmer and all the advisors and collaborators of BlockchainHub, including my dear friends from Lunar Ventures in Berlin.

Table of Contents: Token Economy, Shermin Voshmgir
Table of Contents: Part 1 of Token Economy
Table of Contents: Token Economy, Shermin Voshmgir
Table of Contents: Part 2 & 3 of Token Economy
Table of Contents: Token Economy, Shermin Voshmgir
Table of Contents: Part 4 & Annex of Token Economy



Shermin Voshmgir
Token Kitchen

Author of ‘Token Economy’ Founder @tokenkitchen @blockchainhub & @crypto3conomics// Artist