Archetype Partner: Thoughts on Token Models

Author: Dmitriy Berenzon Source: X, @dberenzon Translation: Shan Ouba, Golden Finance

Here are some unsystematic and long-winded thoughts on good token design:

• A good token model is simple and it creates a wealth generation effect.

• Even if your token has few functions, it can still have huge value as long as it is delivered to the right people as soon as possible.

• The problem today is that Sybil attacks make it extremely difficult for projects to implement this, which is obviously one of the biggest problems our industry has not yet solved.

• In response, projects are increasingly using creative points schemes to incentivize the right long-term holders and maintain network distribution.

• Low circulation / high fully diluted valuation (FDV) is a real problem, as projects often cannot maintain enough buying pressure to offset token issuance, causing token prices to fall, which is bad for community and team morale.

• This problem can be alleviated if newly issued tokens are distributed to the right long-term holders, but few projects today are so data-driven.

• A simpler solution is to issue tokens at a lower fully diluted valuation and allow more people to participate fairly in the global secondary market.

• Again, token distribution and issuance are critical, unlike "token utility", you only have one chance to get it right.

• In terms of token utility, the current scalable use solutions are basically staking/locking and buyback/burning/redistribution (but the latter has regulatory risks, please consult professionals such as lawyers).

• Staking/locking can be reframed as stake (thanks @NTmoney for the suggestion - works for more than prediction markets!), which is a relatively powerful lever that incentivizes specific behaviors on both the supply and demand sides.

• Besides re-staking and lock-based issuance, there hasn’t been much new in the last few years.

• Also, utility tokens that facilitate digital resource allocation (liquidity and hardware) and risk transfer (insurance/penalties) are good consumption pools.

• Payment tokens still suck for end-user experience, so avoid them unless you’re a gaming project where users are already used to buying in-game currency.

• Overall, token utility works at larger scales and over longer timeframes, and it’s a living thing that should adapt over time (unless you’re Bitcoin).