1/ How much should token economics be designed to benefit investors versus support the utility of the cryptonetwork? Can it be both? This question has surged in importance as skepticism around utility token invisibility has grown, and came to a head this week around @0xProject
2/ @OxProject is highly respected. First, by building a DEX protocol, they’re addressing the strange quirk of an industry theoretically built on the principle of decentralization operating largely on centralized exchanges. Second, they ship like monsters.
3/ This week @louAboudHogben wrote about how the ZRX token could be architected at the protocol level to incentivize holding behavior & increase token value. Investor @SpencerNoon shared the proposal, suggesting the 0x community come together & evolve it.
4/ The question at hand is what @KyleSamani called the Velocity Problem. When people use a token to exchange but don’t have good incentives to hold, it is unable to accrue value in the form of inflation, and investors are unable to make a return. multicoin.capital/2017/12/08/und…
5/ @jlppfeffer went so far as to question the investment potential of utility tokens at all, in effect saying: if a token can’t accrue value, the blockchain needs to be secured through a fee w/ a non-native SoV currency, rendering the token irrelevant. medium.com/john-pfeffer/d…
6/ It didn’t take long for @OxProject leader @willwarren89 to respond in depth. His argument is that schemes to graft value onto a token just add friction to the user experience. For 0x’s part, their goal is to build real user value ‘worth governing.'
7/ For those interested, this piece by @CryptoBonsai goes more in depth on the issues associated with strategies for increasing token holding including token burn and staking. hackernoon.com/capturing-cryp…
8/ @willwarren89’s piece rocketed through the crypto market - particularly with the segment most inclined to the belief that BUIDL > HODL. @ricburton captured the sentiment:
9/ The VC community also came out in support for the sentiment. In particular, many in the emergent crypto investor community made it clear that they want projects to be thinking for the longterm not just obsessed with token price growth.
10/ After reflection @SpencerNoon also amended his position, reframing the question of the value of the ZRX token in the context of incentive to participate in the governance processes that can protect against malicious attack.
11/ The net-net of all of this strikes me as two things. First, we still have so much to figure out about token economy design - especially around incentive alignment and compromise.
12/ Second, we’re only going to figure our token economies by actually building them, seeing what works, and by disagreeing, debating, and treating each other with the respect to listen and change our opinions. This was the crypto community at its best.
