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Ryan Watkins Profile picture
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10 Feb, 8 tweets, 2 min read
What is the holy grail of token design?

To me it is when a protocol is designed from the ground up so that its token is an integral part of the protocol and involved in the value creation process, rather than just serving to extract rent.

1/
Over the past year in DeFi there’s been a renewed interest among the community in value accrual mechanisms for tokens.

messari.io/article/govern…
This is for a good reason.

Due to a combination of opportunism and naivete, the 2017 ICO era was flush with utility tokens that attempted to jam useless tokens into new projects.
As a result we've seen a correction in the opposite direction towards tokens with direct value capture mechanisms.

The problem with this is that in some cases tokens exist to purely extract rent, which is not only not sustainable, but also inhibits growth.
In exchange for ensuring a path to value capture at a surface level, protocols dismissed key features of building lasting technology organizations: sustainability and growth.
So what is an example of a well designed token that is designed from the ground up to be an integral part of the protocol and involved in the value creation process, rather than just serving to extract rent?
In our latest piece we provide a brief overview of @thorchain_org's token economics to drive home how tokens can be designed to balance growth, value capture, and sustainability.

messari.io/article/govern…
P.S we'll be doing a deeper dive on THORChain in the coming weeks.

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More from @RyanWatkins_

Ryan Watkins Profile picture
12 Feb
Messari Enterprise just launched.

What makes it so special?

It's all about automating information flows and the evolution of the crypto investor.

1/
Currently if you want updates on assets outside the top 10 you’re out of luck if you only follow crypto news publications and twitter.

The result is you have to follow all these projects manually.
The problem of course is that staying on top of all these projects is an extremely time consuming process that requires scouring a wide range of disparate and idiosyncratic sources for high signal information.
Read 8 tweets
Ryan Watkins Profile picture
26 Jan
To me this is the biggest invalidation of the thesis that fee capture today actually matters.

So long as DeFi protocols have 100x+ growth ahead of them:

Growth > Fee Capture.

1/
Along this line of thinking, even if a token does implement some kind of fee capture it’s much better to reinvest those earnings rather than distribute as dividends.

UNI implicitly does this by not extracting fees from LPs (fee switch off).
This industry’s obsession with dividends is a backlash to the useless utility tokens from 2017.

Yes it’s important for tokens to have the potential to accrue value.

But earnings potential is not the same as dividends.
Read 5 tweets
Ryan Watkins Profile picture
25 Jan
One of the more thought provoking essays I’ve read on Ethereum in a while.

In short Ethereum wins not by challenging nation states head-on for monetary supremacy like Bitcoin, but by growing its own digital economy until it surpasses that of the dominant sovereign powers.

1/
“History teaches us that there’s only one viable method for a challenger willing to replace the current monetary reserve: it has to grow its own economy till the point it matches, and eventually surpasses, that of the main global power of the moment — currently, the U.S.”
This is a mental model I’ve long agreed with as well.

Bitcoin - a digital challenger to gold

Ethereum - a digital challenger to sovereign jurisdictions

Bitcoin : Digital Gold :: Ethereum : Digital Economy
Read 5 tweets
Ryan Watkins Profile picture
25 Jan
Over the past year Helium has been the single most effective way to evangelize crypto to my friends.

The reason?

Financial use cases are hard to grasp and uninteresting to people without financial backgrounds.

1/
Bitcoin is hard to explain because reality is most people don’t even understand the purpose of gold outside it’s use in jewelry and electronics.

In many ways Bitcoin just seems like a pet rock.
DeFi while somewhat easier to explain because people use financial services, is still hard.

The second you start talking about market making, derivatives, synthetic assets, etc. you lose people.

It’s all very abstract.
Read 8 tweets
Ryan Watkins Profile picture
22 Jan
What’s most impressive about fair launched projects like $YFI and $SUSHI is that they were both able to create billion dollar enterprises in just months without a dime of upfront investment.

Blockchains fundamentally collapse the costs of launching and scaling networks to zero.
Decentralized computing infrastructure is powerful.

Blockchains are shared public infrastructure, and if you design the right set of rules and incentives on top of them, users and capital will self-organize to create novel institutions that are global, open, and permanent.
This is why so many people in DeFi are excited by $YFI.

It is the best example of how blockchains collapse the costs of launching networks to zero, and provide the foundation for truly grassroots, internet native, self-organized institutions.
Read 4 tweets
Ryan Watkins Profile picture
15 Jan
Recently I’ve been thinking a lot about how protocols can sustainably fund themselves - especially in the context of fair launches.

My thesis succinctly:

Pragmatism > Dogmatism.

Equity > Entitlement.

Live protocols > Dead Protocols.

Reality > Narrative.

1/
There was a moment over the summer when the community believed it could launch new protocols without venture backing.

This wave of “fair launches” provided the community with a number of DeFi’s most exciting projects.
However recently the community has also learned the challenges of launching without proper funding.

andrecronje.medium.com/building-in-de…
Read 6 tweets

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