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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.
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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.
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Over the past year in DeFi there’s been a renewed interest among the community in value accrual mechanisms for tokens. https://messari.io/article/governance-tokens-and-value-capture?utm_source=RyanWatkins&utm_medium=leadtweet&utm_campaign=holygrail
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.
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.
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. https://messari.io/article/governance-tokens-and-value-capture?utm_source=RyanWatkins&utm_medium=leadtweet&utm_campaign=holygrail
P.S we'll be doing a deeper dive on THORChain in the coming weeks.
