Lots of people on the timeline questioning token incentives and whether they're net-beneficial or net-negative.
Some thoughts 🧵
Some thoughts 🧵
https://twitter.com/masonnystrom/status/1809687714599678080
When combined with new products, tokens – or the promise of tokens – have proven effective at alleviating the cold start problem.
But, networks that launch with a token from the jump, must find PMF in a shortened window amidst inorganic activity or otherwise these networks are just spending tokens for limited upside.
My friend and fellow investor, @howdai27 calls this the “hot start problem” where the presence of a token limits the window of time a startup has to find PMF and gain enough organic traction such that the startup can retain users/liquidity as token rewards diminish.
But, networks that launch with a token from the jump, must find PMF in a shortened window amidst inorganic activity or otherwise these networks are just spending tokens for limited upside.
My friend and fellow investor, @howdai27 calls this the “hot start problem” where the presence of a token limits the window of time a startup has to find PMF and gain enough organic traction such that the startup can retain users/liquidity as token rewards diminish.
The hot start problem – launching tokens early and dealing with finding PMF amidst inorganic activity – is favorable to the cold start problem in two scenarios:
1) Startups competing in red ocean markets (markets with a high degree of competition and known demand)
Examples: Second mover defi protocols, Blur vs OpenSea, LRTs, etc.
2) Products and networks with passive-supply side participation
Examples: passive jobs to be done – staking (L1s), providing liquidity, or set-it and forget-it hardware (e.g. DePIN).
masonnystrom.com/p/tokenized-ma…
1) Startups competing in red ocean markets (markets with a high degree of competition and known demand)
Examples: Second mover defi protocols, Blur vs OpenSea, LRTs, etc.
2) Products and networks with passive-supply side participation
Examples: passive jobs to be done – staking (L1s), providing liquidity, or set-it and forget-it hardware (e.g. DePIN).
masonnystrom.com/p/tokenized-ma…
Although tokens have also succeeded at jumpstarting active networks like Axie, Braintrust, Prime, YGG, and Stepn, the premature presence of tokens often obfuscates true product-market-fit.
Instead apps with token incentives for active jobs to be done – usage, gameplay, gig work, services, etc – must take extra steps to ensure that token rewards are going towards organic usage and driving metrics like retention.
For instance, data labeling network @SapienGamified gamifies the task of labeling and has users stake points in order to earn more points. In this instance, passively staking while performing some action has the potential to act as a loss-aversion mechanism, ensuring higher quality data labeling from participants.
Instead apps with token incentives for active jobs to be done – usage, gameplay, gig work, services, etc – must take extra steps to ensure that token rewards are going towards organic usage and driving metrics like retention.
For instance, data labeling network @SapienGamified gamifies the task of labeling and has users stake points in order to earn more points. In this instance, passively staking while performing some action has the potential to act as a loss-aversion mechanism, ensuring higher quality data labeling from participants.
Ultimately tokens are a tool that can be used poorly or judiciously.
Instead of tackling the cold start problem, startups that launch a token before gaining organic traction opt for the hot start problem, accepting the tradeoffs and benefits of tokens.
masonnystrom.com/p/the-hot-star…
Instead of tackling the cold start problem, startups that launch a token before gaining organic traction opt for the hot start problem, accepting the tradeoffs and benefits of tokens.
masonnystrom.com/p/the-hot-star…
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