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On today’s episode of the Tokenomics DAO podcast, Lovis is having a conversation with Rockwell Shah from Starship Guild. In the crypto sphere, Rockwell is the co-founder of Starship Guild and Invisible College. He understands the NFT game better than most and is giving us deep insights into the “meta” of the NFT space.Only about 8% of NFT traders are profitable. How come? What is the game that is currently being played in the NFT markets? And more importantly, what are strategies that may work to make NFT projects sustainable and successful long-term?Please enjoy this conversation ranging from the Tokenomics of NFTs in general to Art NFTs, as well as, the dream of play-to-earn and the problems that currently plague most web3 gaming economies.Show Notes:Invisible College - https://www.invisiblecollege.xyz/Starship Guild - https://starshipguild.com/Tokenomics:is the study of token-based incentive designTokens create owners, not renters - at least that’s the dreamNFTs:What is the game that is played in the Art NFT world?Only if you understand the game, can you correctly identify the incentives driving the market.Club CPG - one of the “realest” NFT Art collections, punished by the marketThere are probably only 10k heavy NFT traders and maybe only 1-10M people who have ever owned an NFTBecause of this global game of Hot-Potato people ask for the meta, they care about the liquidity and are mad when it is wiped off the table.Royalties are not baked into the smart contract layer of NFT trading, it is baked into the exchanges. Some exchanges are not paying royalties anymore.Gaming economy:There are too many value extractors and not enough value creators in the gaming economy of Axie at the moment.Starship built its guild on top of Axie Infiniti and rode grew from 0 to 7M ARR within 6 monthsSustainable crypto games are Bitcoin Miner and Neopolis with NeolandThe key to a successful gaming economy are: 1) Players want to own the gaming assets 2) Players want to transact the gaming assets to enhance their experience.Watch this episode on YouTube:Disclaimer:Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research.None of this is legal advice. This podcast is strictly educational. Talk to your lawyer.Sound Logo Attribution - It Starts Here - https://www.fiftysounds.com Get full access to Tokenomics Newsletter at tokenomicsdao.substack.com/subscribe
We recently launched our first product! It is based on the experience we collected from completing Tokenomics consulting projects. We are productizing our specific knowledge to help others create DIY Tokenomics with lower risk.In this episode, the two creators of our Tokenomics Design Framework (TDF) walk us through the whole thing. We talk about why we created this framework, who it is for, and the bigger plan behind this new product.Get a free copy of the framework here: https://tokenomicsdao.xyz/tokenomicshub/Share direct feedback: https://docs.google.com/forms/d/e/1FAIpQLScG687AcUW0fO4Uz87D2Qb6vISrqwdUscYsg00YyyrYVUcy2Q/viewformJoin the conversation on Discord: https://discord.com/channels/915731508789141564/928221303649992744/1017422468174057514Watch this episode on YouTube:DisclaimerNot financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research.None of this is legal advice. This podcast is strictly educational. Talk to your lawyer.Sound Logo Attribution - It Starts Here - https://www.fiftysounds.com Get full access to Tokenomics Newsletter at tokenomicsdao.substack.com/subscribe
This conversation followed an invitation to join a Twitter Space (recording unfortunately no longer available) with The Product House. This time it was on TPH’s discord server and we managed to record it properly :) Tokenomics was the most requested topic by the TPH community and we were happy to give some answers and explanations. This is entry-level tokenomics and web3 know-how but the fundamentals are arguably probably the most important to be able to join general conversations in the web3 space. We think it is worth your time to take a listen. Thanks, and enjoy! Get full access to Tokenomics Newsletter at tokenomicsdao.substack.com/subscribe
On this episode Lucas and Nihar from Jump Crypto join the Tokenomics DAO podcast to discuss their recent article “Token Design for Serious People”.Read it here: https://jumpcrypto.com/token-design-for-serious-people/We cover the core aspects, producing common goods and rewarding value creation. We dive into identity, reputation, governance, sustainable Tokenomics and Tokenomics beyond the cold start problem.For more content from Jump and from Lucas and Nihar make sure to follow them on twitter:https://twitter.com/jump_https://twitter.com/theshah39https://twitter.com/SansGravitasWatch this episode on YouTube:DisclaimerNot financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research.None of this is legal advice. This podcast is strictly educational. Talk to your lawyer.Sound Logo Attribution - It Starts Here - https://www.fiftysounds.com Get full access to Tokenomics Newsletter at tokenomicsdao.substack.com/subscribe
On todays episode Icedcool from the Bankless DAOs Tokenomics Department joins us to talk about how the BANK token is evolving, what the team is doing to increase value accrual and improve liquidity.Bankless DAO:https://www.bankless.community/https://twitter.com/icedcool_ethShow notes:Value accrualCall option on the future of BANK - like UNI who hasn’t flipped the fee switch yet?InfrastructureUtilities / Engineering Functionality - composing BANK to have new functionalityAre you actively seeking out that utility?Value escrow BANKDistribution of valueAdd time to holding bankBottom Up vs. top down adoption within the DAORole of the Tokenomics GuildProposal / Draft for what to do with TokenomicsReputationMany are building up skills, yet bDAO only has BANK which can be traded.Any thoughts on non-tradable tokens paired with BANK?Problems with BANKWhat are the biggest issues the DAO sees with the token / how could the be addressed?Watch this episode on YouTube:DisclaimerNot financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research.None of this is legal advice. This podcast is strictly educational. Talk to your lawyer.Sound Logo Attribution - It Starts Here - https://www.fiftysounds.com Get full access to Tokenomics Newsletter at tokenomicsdao.substack.com/subscribe
Flo and Jason sit down with Aleksa Mil from WACEO to discuss a range of topics around DAOs and decentralisation. From getting more women into Web 3, to compliance and risk management issues associated with running DAOs in a traditional world. They discuss WACEO’s ‘shield up’ program, which aims to simplify access for DAOs looking to get traditional services such as legal advice, and how using WACEO token as a reserve currency might be a solution for DAOs in paying for such services. Aleksa also touches on the differences between jurisdictions for incorporation and the ever changing nature of the legal landscape for DAOs looking for a home.Show notes:WACEO - DAO Governance Regulation and Crypto ComplianceWACEO is a DAO focused non-profit that gives blockchain-based projects support to developing crypto compliance, Tokenomics, regulation and governance with litigation. DAO of DeFi Litigation & Compliance Professional.WACEO Token - A Legal Reserve Currency empowering DAOsWACEO is building a community-driven, asset-backed decentralised legal reserve currency. The utility of this asset-backed legal reserve currency is to become a means of payment & provision for your future legal or compliance needs of Web3Watch this episode on YouTube:Disclaimer:Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research. None of this is legal advice. This podcast is strictly educational. Talk to your lawyer.Sound Logo Attribution - It Starts Here - https://www.fiftysounds.com Get full access to Tokenomics Newsletter at tokenomicsdao.substack.com/subscribe
#21 - Shares vs. Tokens

#21 - Shares vs. Tokens

2022-07-2801:18:35

On this episode we explore the difference between shares and tokens. We look into how they are evaluated, the regulatory differences, the barrier of entry, how ownership works, why they each have value, the history and the future potential.Show notes: Shares are like tokens, but how do they differ?Amazon doesn’t pay a dividend yet trades at a high market cap.Tokens often do too but I feel people have more critic for a governance token e.g. it’s not attached to any value etc.Tokens are more advanced: programmability: burn, mint, lock up all automatedTokens often evaluated based on mechanism (governance) than on the businessStocks are evaluated based on cash flow, potential future cash flowWhat makes stocks valuable? Amazon vs. dividend corporationValue and growth stockHow to profit from stock - selling it holding Amazon for three years won’t give you anythingOwnership in a businessCan’t cash out any piece of itIMetrics of earning income eps, P/E ratioTokens are not evaluated on cash flow enoughWhat if we had two businesses with similar cash flows and other metrics. One would have a token one shares, what would be the difference?If in the traditional equity/share world a corporation doesn’t pay any dividend or reduce supply or increase demand that’s not a problem, but if the same is done in crypto, people would be careful to invest.But enough tokens shares to influence governanceWhat does ownership really meanWatch this episode on YouTube:DisclaimerNot financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research.None of this is legal advice. This podcast is strictly educational. Talk to your lawyer.Sound Logo Attribution - It Starts Here - https://www.fiftysounds.com Get full access to Tokenomics Newsletter at tokenomicsdao.substack.com/subscribe
In this episode, Jason and Flo enter the exciting world of gaming. All of us (nearly) were once mesmerised by in game worlds we lived in. Some still are. It was pretty common in multiplayer role playing games to come into contact with an in game currency of some sort that one used to barter/level up. I read this article and was impressed by how many parallels there are with the real world, and thought we could see what we could glean from the myriad of currencies that have come and gone, in the gaming world that is.Show notes:Keys to Economic Systems: https://gdkeys.com/keys-to-economic-systems/ benefits of an economic system were to ration power, support specialization (impossibility to buy everything), encourage interaction between players, provide players goals, and support role-playIn its simplest form, a currency could be defined as an agreed-upon tangible medium of exchange for goods or servicesResources have proper value, a value often given by their transposition in currencies, A resource is useful in itself, a currency isn’t.The number of sources and sinks a game will need for each currency will then be dictated by its systems and expected player experience. Is the game trying to promote freedom of choices and self-expression? Then having a multitude of ways to earn a currency will ensure that players can focus on the part of the game they prefer or are the best at (assuming the sources are balanced equally). Is the game instead wanting players to engage with a particular system or rewarding particular actions? In this case, having a currency dedicated to these will instantly create a strong incentive for players (or a tight bottleneck if the currency is part of the main flow). (JN: FREE MARKET vs CENTRALLY PLANNED!)define the number of sources and sinks of a currency by how much agency you want your players to have in playing, or progressing through your game systems.When sources are not generous enough, players drop due to lack of motivation (economic depression). When sources are too generous, it kills motivation too! (JN: high minimum wage/Dole = low productivity)JN: Trial phase = parents pay for your first home, university etc? Govts offer student loans?Having only one currency is dangerous. If players have too much gold at some point, they will remove every gating the game throw at them. Every system of the game tied to this currency will instantly lose any interest. Why go on an extremely long quest if the reward is again gold? Why sell items and engage with the trading systems when you are indecently rich? (JN: In real life, super rich use gold or currency to trade for other currencies such as reputation or status. Maybe even power)if we take the opposite then: hundreds of currencies, one for each and every micro-systems in the game, without any exchange of currency. On one side, this is extremely safe: every system is completely isolated, left with its own balance.the first one is the brutal reduction of the player agency: players must engage with every single system in the game in order to earn the currencies necessary to their progress.The other danger is that it makes a game feels… well, gamey. A real economy strives from its interactions, systems communicate to each other, currency trades for one another…(JN: In real life, this would be leaning towards centrally planned economies. Capital controls. Cuba: Exchange cigars or rum for sugar at a fixed rate, with 80% of crop belonging to the state)Be wary of currencies exchange: I’ve seen many systems failing because of situations like this: Gems can be exchanged for gears, that can be exchanged for gold, that can purchase tokens, that can… In the end, all these currencies communicate together and only form a single one, with all the dangers it brings. Be wary of these exchanges, or tax them accordingly. The Wretched Broker of Hades creates pathways to exchange currencies but at a very prohibitive cost.the value your currency has in the eye of your player, and how it evolves over time. Gold (USD IRL) vs Raid Tokens (Reputation/Status/Power IRL)Rebalance an economy by using extentions or patches. This allows new players to come in on a level playing field. (Currency reset, hello EURO vs Lira or Dmark. Hello Zimbabwean dollar/land reform when farms become commodity currencies ala stone of jordan. Hello berlin wall)Failsafes and Currency ProtectionRemove the multiplayer sharing component (or tax it) (Inheritance taxes. Licenses to trade. Licenses to practice. Sales and service taxes. No Barter)Multiply and specialize currencies: this is another extremely easy win. The more currencies a game contains, the smaller their impact will be: this will lead to better control and the certainty that a currency crashing won’t ripple through all your systems. Warning: this only works if these currencies aren’t connected in any way! If a currency can be exchanged for another one, they are virtually the same thing and will rise and drop together. (While every thing is backed by the dollar, not everyone uses the dollar in local economy. Also maybe why US citizen banking is so controlled, and is taxed on global income)Upkeep systems. Pay to use what he/she has. (Wealth tax. Property Tax. COE in Singapore for cars. Negative interest rates)Wallet limits (FDIC insurance is capped. Negative interest rates make you want to hold less currency. Wealth tax. Progressive income tax)Why not have a finite amount of money?players hoarding money combined with a lack of obligation to spend this money completely froze the economy and virtually removed it from the game world (Something to discuss. Is this true in real life? Are there ways around it?)Suggested schematic (What might real world analogs be over a person’s lifetime?)Iron (IRL: Food? Clothes)Gold (IRL: Fiat currency)Diamonds (IRL: Skills?)Hard Currency (IRL: Gold, BTC, Leicas, Rolexes, Beachfront Property, Trophy wife Hahah)Renown Tokens (IRL: Reputation. Status. Power. Network.)Some statements from the videoWhat if there were no currency sinks in the real world? What if everyone was printing money all the time? Currency would become worthless (LOL)Gaia online , currency became worthless, company donated $250USD to charity everytime a player threw away 15 trillion Gold (sink)Diablo 2 and Asheron’s Call, money gets replaced by other items that become currency (Stones of Jordan, Shards respectively)Without players getting ahead, they get discouraged if all they are doing is paying fees (Ahem real life) When sinks are too strongNew strategy from game designers (reserve currencies)Anchor for the local in game currencyAllow in game currency to buy real world items (similar to air miles) examples: Flex and Eve online (real world items serve as reserve)Allow in game currencies to be traded for real money.Silver pieces earned by killing monsters. These can be traded for diamonds (that cannot be used for trade). Diamonds can either be sold for USD or used to purchase items from the game store (Sink). Prevent Diamonds from becoming the currency. Diamonds bid for something that is not available locally.Game designers set max limit on how much a diamond can cost vs silver pieces since silver keeps getting printed.What are some of the real world reserve currencies? (Jason Theory)US Dollar by decree (smaller extent the SDR basket of JPY, GBP, EUR etc)BTC, Gold, Crypto currenciesReal Estate (foreign/local?)Watch this episode on YouTube:DisclaimerNot financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research.None of this is legal advice. This podcast is strictly educational. Talk to your lawyer.Sound Logo Attribution - It Starts Here - https://www.fiftysounds.com Get full access to Tokenomics Newsletter at tokenomicsdao.substack.com/subscribe
#19 - Intro to Tokenomics

#19 - Intro to Tokenomics

2022-07-0801:12:13

In this episode, Flo and Lovis go back to the basics. We work our way through a list of Tokenomics terms and try to explain all the relevant concepts from the ground up. We hope you enjoy this intro to Tokenomics. If you have questions remaining please reach out to us via discord!Show notes:What is Tokenomics & why is it relevant?more than just supply and demand. Also mechanisms, incentives, utilitytokens capture value like shares, but can do more (shares vs. tokens)TerminologyNFTsLayer 1 / Layer 2smart contractLiquiditystakingPrincipal - AgentSimple protocolsBitcoinEthereumUniswapTokenomics conceptsProtocol Owned Liquidityvoting-escrowsocial tokens & DAOsKey metrics in evaluatingDemandvalue of the project i.e. do customers want to use it?Uniswap has deep liquidity.utility of the token i.e. how can it be used (this is where tokens are different from shares) -token as voting,staking,api accessmechanism i.e. how does the protocol use the token? -3% off of tx fees are used to buy back the token and store it in the treasury.The token needs to be held at a rate of 1/3 based on the TVL,tokens are paid out to providers of the largest amount of liquiditySupplyQuanitativeHow much will be supplied? (needs to meet the demand)How much is circulating? (how much is or can be traded on markets)Market cap & Full diluted market cap (what is the capitalisation and how would that look like if all tokens are released?)inflation (How many new tokens does the protocol create / year?)emissions (how many new tokens are unlocked / year?)burn (are tokens burned / taken out of circulation?)distribution / allocationwho received allocation (team, airdrop to community?)At what prices? (vc and investors often get in much lower that what public can buy)How will they unlock over time? (vesting schedule)How we do this?Evaluation FrameworkTokenomics Design FrameworkTokenomics 101 articles per protocolConsulting to design tokenomicsWatch this episode on YouTube:Disclaimer:Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research.None of this is legal advice. This podcast is strictly educational. Talk to your lawyer.Sound Logo Attribution - It Starts Here - https://www.fiftysounds.com Get full access to Tokenomics Newsletter at tokenomicsdao.substack.com/subscribe
Triggered by a news article about Russia proposing a commodity (gold) backed stable coin, we are diving into a discussion of centralization vs. decentralization. What are the different ends on the scale of decentralization? What is the case in favor of a Bitcoin-backed alternative SWIFT System? What would that look like and how can be assured that any one nation-state (node) wouldn’t be able to take advantage of others? We’re discussing this and more in this episode.Show notes:“Russia May Allow Crypto Mining and Gold-Backed Stablecoins, Lawmaker Says” - https://news.bitcoin.com/russia-may-allow-crypto-mining-and-gold-backed-stablecoins-lawmaker-says/“To centralize or not to centralize?” - https://www.mckinsey.com/business-functions/people-and-organizational-performance/our-insights/to-centralize-or-not-to-centralize“Tokenomics 101: MakerDAO” -https://docs.google.com/document/d/1_w_ukptkQFukXcQdWd4-Y-9CyzJ8sNrH1JLoqMvCeGE/edit#heading=h.1pjxjw9dig61“Russia and China are brewing up a challenge to dollar dominance by creating a new reserve currency” - https://markets.businessinsider.com/news/currencies/dollar-dominance-russia-china-rouble-yuan-brics-reserve-currency-imf-2022-6Bank of Japan:Japanese Yen June 2022:You can watch this episode on YouTube:Disclaimer:Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research.None of this is legal advice. This podcast is strictly educational. Talk to your lawyer.Sound Logo Attribution - It Starts Here - https://www.fiftysounds.com Get full access to Tokenomics Newsletter at tokenomicsdao.substack.com/subscribe
#17 - Future of Work

#17 - Future of Work

2022-06-23--:--

In this episode, we jointly explore how Tokenomics DAO is trying to build the future of work. We discuss..How DAOs are coupling freelancers with ownershipDoes everyone want to be a principal?Transfer of risk from agent to principalIntrinsic motivation of members vs. employeesShow notes:Web3 healthcare: https://twitter.com/opolisConversation notes:Freelancers in a equity based corporationOutcome basedPlannable for corporationWork for multiple corporations (i.e. Uber guy)Freelancer with company backing themWhat if you don’t want to be a PrincipalTaleb: alcohol, tobacco and salaryRisk of not having a salary and your lifestyleRisk of losing your jobCould we have agent roles within the DAO that just complete tasksWhat does the path from agent to principal look like → reinvest their payoutGive ownership away to highest bidderWorking with intrinsically motivated peopleRisk taking of products to hire an agentPrincipals are the ones taking the risk from agentsYou can watch this episode on YouTube:Disclaimer:Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research.None of this is legal advice. This podcast is strictly educational. Talk to your lawyer.Sound Logo Attribution - It Starts Here - https://www.fiftysounds.com Get full access to Tokenomics Newsletter at tokenomicsdao.substack.com/subscribe
On this episode Rotorless, a crypto legal expert joins us to discuss legal aspects of DAOs and crypto in general. We talk about legal needs of DAOs, taxation, counter-parties and the legality in different jurisdictions. Rotorless walks us through what makes a token a security and how tokens can be best designed to not be classified as a security. Show notes: Connect with Rotorless: https://twitter.com/RotorlessBankless DAO Newsletter: https://banklessdao.substack.com/Forefront Newsletter: https://forefront.market/newsletter Disclaimer: Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research. None of this is legal advice. This podcast is strictly educational. Talk to your lawyer. You can watch this episode on YouTube:Sound Logo Attribution - It Starts Here - https://www.fiftysounds.com Get full access to Tokenomics Newsletter at tokenomicsdao.substack.com/subscribe
For the first time ever, the core initiators of the Tokenomics DAO met in person to record a Podcast episode. We put our heads together last week to think through some of the core challenges we are trying to solve to allow this DAO to grow quickly but sustainably. As you know by now, we are all about giving people ownership, to make the Principals instead of Agents (we talked about this about 4 times in other episodes). Today we are thinking though how to distribute some of the profits of our DAO back to the contributors. How does this balance with making sure our membership has skin in the game and takes ownership of problems that need solving in the day-to-day? Listen to find out! Get full access to Tokenomics Newsletter at tokenomicsdao.substack.com/subscribe
In our first-ever community talk, we are learning about the changes to the Tokenomics of Ethereum as it transitions from Proof-of-Work to Proof-of-Stake. Community member @rush0 (discord) does a great job breaking down many entry-level and advanced concepts that are impacted by the transition. The big question is: Will the value creation within the Ethereum network be affected?Join Discord: https://discord.gg/A6AtyJQage You can watch this episode on YouTube:Sound Logo Attribution - It Starts Here - https://www.fiftysounds.com Get full access to Tokenomics Newsletter at tokenomicsdao.substack.com/subscribe
In our last piece, we’ve shed light on the demand side of tokenomics. We’ve looked into the buying point, meta demand, and market analysis to see what influences a token’s demand, and hence influences its price. We want to take this a step further now by looking at tokenomics more comprehensively. Supply and demand are often analyzed separately. This tends to overlook the connection between supply and demand, leading to an incomplete picture. We call our more comprehensive approach token flow analysis.Apart from supply and demand, tokenomics can be seen as the design of the flow of tokens e.g. distribution determines how many tokens flow to whom. If too many tokens flow to investors, there might be selling pressure. Utility determines under which condition tokens flow from users to other parts of the ecosystem, which is key to keeping tokens within the ecosystem. Token Flow ModelGenerally, these flows can be represented as follows:The model consists of the following components:Flows: token inflow into the ecosystem, token outflow out of the ecosystem (to the secondary market), and the inside flow of the token within the ecosystem. If too many tokens flow out of the ecosystem, it will probably create selling pressure.Ecosystem is where the product, stakeholders, tokens and other components of a specific project interact with each other. Supply origin is the origin of the token and the start of the token flow. It includes the genesis release (how many tokens will flow at the beginning), periodical release and distribution (how many tokens flow to whom in a given period) etc.Incentivization is attaching a reward to a desired behavior. The reward is the tokens and might come from supply origin or reserve or treasury.Stakeholders include investors, advisors, users, holders and project team members. Different stakeholders tend to behave differently within the ecosystem. For example, investors are more inclined to sell tokens early rather than hold and use them, as ultimately, they need a return on their investment.Hold can be defined as when stakeholders will not sell tokens on the secondary market. This is a favorable action for the ecosystem so it’s classified as separate behavior within the ecosystem. People hold in anticipation of price appreciation, and hold is one of the two inside flows that are initiated by stakeholders.Utility of a token like staking, governance, payment etc. is one of the two inside flows that are initiated by stakeholders.Analysis of the modelWe will mainly use the play-to-earn game Axie Infinity’s SLP token to conduct the analysis, answering three main questions:How to prevent token outflow?How to generate token inflow?How to keep tokens flowing inside the ecosystem?Token OutflowToken outflow, not met by sufficient token inflow, increases selling pressure and might drop the price. The best way to prevent token outflow is to keep tokens flowing within the ecosystem.How to keep tokens flowing within the ecosystem? The diagram above shows that tokens have three possible destinations: outflow to the secondary market, utility and hold. For SLP, the utility of breeding in-game character Axies encourages the flow within the ecosystem.Token inside flow: Utility & HoldHow tokens flow from stakeholders to the utility can be translated to:Why will people use a token?To answer this question, we look at the essence of utility first: people use a product or service because it brings them value. For example, people use ketchup to make their dishes delicious. A token can help access and capture the value created by a product or service. The value of ketchup is to some degree captured in the share price of the Kraft Heinz Company. The value of the Ethereum network is to some degree captured in the ETH token.What value can people get using a token?Let’s look at the SLP token. The utility of SLP is to breed Axies, the in-game character that players play with. In this case, Axies create value as they help players earn income. The SLP token helps players capture value as, without SLP, players cannot breed new Axies. Value is about return on investment so if it takes a long time to profit from investing into SLP, it might be less valuable.A game also creates value for players if it delivers a good in-game experience. The experience of playing Axie Infinity does not seem to be that good and by that might discourage people from using the token. SLP prices fell 93% from all-time highsIf the product can create decent value, people would use the token to capture that value, that’s how tokens can flow from stakeholders to utility to keep token circulation inside the ecosystem.Token InflowKeeping tokens flowing in and preventing them from flowing out drives up the price, which influences the willingness to hold.What will drive token inflow?Demand for the token which comes from token utility and the product’s unique selling proposition (USP).In our demand analysis, we concluded that a product's competitive advantage is the main driver behind generating token demand.For SLP, the main utility is to breed Axies to compete in battles and earn an income in SLP. People do this to receive a return on their investment and for the fun of the in-game experience. While the SLP income each player receives in the battle mode is set, the ROI is determined by the price of SLP. The price is influenced by the not so great in-game experience, which fails to attract new players, causing the price to drop. While the price drops, it takes longer for people to start making a profit with Axies. In the long-term this could create a negative feedback loop: ROI not attractive -> fewer people buy -> price drops -> ROI decrease -> Fewer people buy…It seems that Axie Infinity does not have a very solid USP to create token inflow, and this will also adversely affect people’s willingness to hold. If there is no SLP token inflow, holding and utility are not keeping tokens inside the ecosystem and token outflow increases, the price plummets.IncentivizationWhile the product is the driving force of token’s demand, incentives play an important role in fulfilling the product’s USP. Incentives attach a reward to a desired behavior that could increase the product’s value.Sameer Singh describes, in his article, how properly designed incentives can increase a product's utility. The product can deliver its USP, increase its value, make it more attractive to new users, and ideally generate token inflow.Compound is a decentralized lending protocol whose competitive advantage is the ease for borrowers to access funds with little background checks. Lenders are incentivised by interest and COMP tokens to provide funds into a pool. With the incentive of COMP, more and more lenders provide funds, which increases the value of Compound, attracting yet more borrowers.However, if token incentives cannot align with increasing product utility, the product’s value might not increase. It would be hard for the product to attract new users if it can’t increase utility.In Axie Infinity, players are incentivized with SLP if they win battles in the game. This mechanism only incentivizes players to play the game, not necessarily incentivising them to add any value to the whole ecosystem i.e. increase its utility. The value of Axie Infinity does not increase and thus it is not attracting enough token inflow.Token flow initiation: Supply OriginThe most important thing about the supply origin is whether it can be met by a matching demand. If not, tokens will flow out of the ecosystem.How many tokens are distributed to whom?Distribution is not just about who gets tokens, it’s also about the allocation of value to those who might create value in the future.Let’s say a project distributes a large percentage (e.g., 35%) of tokens to investors. Investors’ interest is to gain profit as early as possible. They are more inclined to dump tokens earlier than others as they buy tokens at much lower, pre-IDO prices. This means a huge amount of tokens will flow out of the ecosystem if too many tokens are distributed to investors. If instead a lot of tokens are allocated to those who create value for the ecosystem, like Compound’s lenders, they are more incentivised to increase product value. As a result, more tokens will flow in. Vesting is another option. If investors need to hold on to tokens for years, they will have skin in the game and contribute to the project.For SLP, its distribution is quite simple: all SLPs are distributed to players via play-to-earn. If players play the game to profit rather than for the gaming experience itself, they will sell their tokens. This simple distribution inevitably causes tokens to flow out of the ecosystem. How many new tokens emit at what time Token emissions and vesting schedules influence token outflow. If in a given period, a lot of tokens emit and can’t be matched by demand for using and holding tokens, they will flow out of the ecosystem.SLP doesn’t have a predetermined emission schedule and no supply cap. It flows to players at a fixed amount whenever they win battles or trigger other tipping conditions. If there are not many new users joining and playing the game, the supply exceeds token demand. Eventually, the SLP flows out and causes the price to plummet.A better way for SLP would be to introduce a token-burn mechanism and control the emission rate. So the newly issued tokens can match the token demand. ConclusionWe’ve tried to analyse tokenomics comprehensively, using Axie Infinity’s SLP token as an example.Key takeaways are:Supply origin will heavily affect token outflow when not met by sufficient demand.Token inflow is mainly impacted by the competitive advantage of the product and incentive mechanisms.Utility and hold keep tokens within the ecosystem, and they are the direct drivers of token inflowIncentives influence a product’s value and therefore, token inflow and outflow  The above diagram is a generic framework with questions about the token flow model that people can use when evaluating tokenomics. Other components could influence token flow like market cap, which we might talk about in our next articles. Get full access to Tokenomics Newsletter at tokenomicsdao.substack.com/subscribe
While on vacation Lovis was thinking about what it would take to create a token ecosystem that enables the digital nomad life-style, or even just lets you stay in nice holiday locations for a reasonable price. Would it be possible to pool money from web3 investors to build a rental real estate business that pays yields to investors but also allows them to use the property every now and then? Flo and Lovis jumped on this brainstorming topic today to think throught several different aspect. We hope you enjoy this open conversation. CitaDAO Delivers Real Estate On Chain, DeFi Style:https://medium.com/bankless-dao/citadao-delivers-real-estate-on-chain-defi-style-d4a99fdcf8a Median US Home Prices and Median Family Income:https://thesoundingline.com/median-home-prices-work-vs-gold/You can watch this episode on YouTube:Sound Logo Attribution - It Starts Here - https://www.fiftysounds.com Get full access to Tokenomics Newsletter at tokenomicsdao.substack.com/subscribe
We are creating a question based framework that will help investors think through the tokenomics of any given project. Generally, evaluation frameworks are very powerful tools. We want to create the first tokenomics framework to help our DAO scale. We plan to use our own frameworks when consulting clients, but also hope to create it easy enough to use so that anyone who wants to evaluate the tokenomics of a project on their own can do so. Our development of this tool works in iterations and in this episode we are discussing our current state of thinking.Tokenomics of Ponzi schemes https://tokenomicsdao.substack.com/p/tokenomics-of-a-ponzi-schemePrototype https://forms.gle/Vz4hs7Bx792YHAv28"Have a hunch, bet a bunch" https://stockhead.com.au/experts/rich-like-rick-rule-seven-tips-to-make-you-a-better-investor/ Sound Logo Attribution - It Starts Here - https://www.fiftysounds.com Get full access to Tokenomics Newsletter at tokenomicsdao.substack.com/subscribe
How can we avoid that influence in our DAO can be bought?We are desiging the tokenomics of our DAO and when thinking through governance we came across this interessting problem. We want to reward active contributors who add value to the ecosystem with governance rights first and foremost. We also want to give simple investors a voice, for sure, but this should not outweight community members who work hard for it. This problem seems to be on the minds of many people in the space and so we got together to discuss our ideas and ideas we pick up and several interesting articles and podcasts along the way. We hope you enjoy our discussion and are looking forward to hear your ideas as well!Optimism Collective Announcement:https://optimism.mirror.xyz/gQWKlrDqHzdKPsB1iUnI-cVN3v0NvsWnazK7ajlt1fIBankless HQ Podcast on Optimism:A16Z piece on Reputation-Based Systems:https://future.a16z.com/reputation-based-systems/Self Sovereign Identity for on chain credentials:You can watch this episode on YouTube:Sound Logo Attribution - It Starts Here - https://www.fiftysounds.com Get full access to Tokenomics Newsletter at tokenomicsdao.substack.com/subscribe
ReviewTwitter / Content Ownership (Cryptobaba, Youngyoung)Team rank added: for taking ownership.Rolling cohort introduced ( 13 members) Evaluation Framework Prototype (5 members participated in trying it and we got good feedback)Two consulting engagements (web2 company NFT, web3 developer community)500 subscribers on substack, almost 800 twitter followers, …Education series planned with latecheckoutplzHivemind tool ideaNew Website under constructionPreviewEvaluation Framework MVPLaunch new websiteWorking out token ecosystem / our own tokenTrial the hive mind: Host more hive mind sessions Good pipeline of clients / frequent requests / ideally onboard more contributors into shadowing modeTwitter template for evaluation framework so we can create weekly evaluationsKickstart Medium content creationLike to get more interview onto the podcastIf there you find any of these interesting, reach out to us! Get full access to Tokenomics Newsletter at tokenomicsdao.substack.com/subscribe
First try of audio & text version of an article - would love to hear what you think!In a previous post, we talked about the flywheel built around our talent pools: DAO, education, content and consulting. In the short term consulting will be our main revenue source and content will be our main proof of work to potential clients. It is therefore important to incentivise for good content and for the necessary technical and knowledge infrastructure to be in place. Consulting itself shouldn’t need any additional incentives as consultants will be paid by clients. The incentives of the token would ensure we have activities within the DAO going in the right direction, rewarding contributions to the talent pools content, education and DAO with tokens that give holders a share of consultings revenue.The idea for a second token comes from the onboarding process into our talent pools. We want to ensure contributors have earned their way up into the DAO before we let them work with clients, publish articles or take up other responsibilities. The simple reason we can’t use the first token, is that we want the first token to be transferable, but status should not be transferable - we only want members to work for clients that have worked their way up, not that have bought their way in.We are not the first to notice this paradox and I highly recommend reading this a16z future piece (we’ve also summarised it here).   This presents a paradox: if a token can be transferred easily, then those without reputation can simply purchase it, which reduces the token’s ability to serve as a reputation signal. In this piece, I want to dive deeper into each of these tokens and discuss the pros and cons of this type of model. Reward token (proof of work)Paying out a token as reward for every contribution would incentivise contribution to a certain degree, but how would we measure contribution and what would give the token value?Our talent pools create fairly tangible stuff - articles, tweets, educational videos and the infrastructure of our DAO. Once published, a set number of tokens could be paid to the member (i.e. create twitter thread and receive 10 tokens).This would incentivise a few, but the token still wouldn’t have any real value. Making tokens valuable involves making them worth holding or using. Governance, distribution of yields or access to more earning potential are just some avenues to explore here. Distributing rewardsTo keep the flywheel going, it might be worth distributing a part of the consulting revenues to token holders. Content creation is what - in most cases - got the client to trust us and start a project with us. It seems fair for consultants to contribute to running the operations and improving our reputation. How much the share should be is something to be discussed. Here is how the value flow could look:GovernanceThe power to decide what the DAO does also makes a token worth holding. Members who have contributed and are willing to hold their tokens have skin in the game and are the people that hopefully decide in the best interest of the DAO. After all, their interests should be aligned with the DAOs as token holders are principals.More tokens = increased skin in the gameOur DAO structure has different roles. We want to ensure that when higher ranks get more responsibility, they also have more skin in the game. Ideally they would need to hold a certain number of tokens when being in a higher role. This mechanism would allow us to give members with more skin in the game access to better paying consulting engagements or exposure to our publishing channels, creating a gated community for holders.Potential issuesDiluting ownership: Rewarding every contribution means we either need to limit the number of total contributions or reduce the payout for contributions over time (like with the Bitcoin halving) to not have a completely uncapped token supply. Either way the model will dilute the voting power and revenue share of contributors over time, unless they keep contributing and by that favouring regular contributors.Favouring regular contributors: A stable inflation rate slowly dilutes token holdings of inactive members. It would however, not benefit early contributors. In the beginning, projects need a high time commitment and a token model whose supply inflates might not be seen as a strong incentive for early contributors.Incentivising early contributors: Staking tokens is often used as an inflation protection where the staking reward (more tokens) balances out the inflation. People willing to hold and stake their tokens can thus stay stable compared to the ones not staking. This might be an interesting counterbalance to ensure early contributors are incentivised even if we’d be abusing staking.Status tokenThe problem with the proof of work token is that in order for it to be a reward, it needs to be tradeable. A non-tradable token limits the potential benefits such as upside in a project. Trading however, is an issue when reflecting status. We want members who have earned their status to contribute but not the buyers of the tokens they sold to. For this reason, a second token to reflect the status within the DAO might be useful.Think of airline miles. Flying a lot gives you 1) points to spend on flights or upgrades and 2) status points which gets you access to the lounge. The status that gets you into the lounge can’t be spent and can’t be traded, it is linked to the individual. It also has the interesting property of expiring after a time of not flying. This is a strong incentive to keep flying with the airline you want to maintain status with and could be used to incentivise contributors as well.Earning status: Status tokens should be rewarded in a similar way to proof of work tokens. Every activity that advances the DAO by adding value to it could be paid with status tokens as well as proof of work tokens.Levels of status: The type of token is to be defined, but a status token could reflect a status-level akin to our internal member ranks, giving holders access to more revenue and publishing opportunities.IssuesComplication: Reward and status tokens are not linked to each other but are both paid out as reward for contribution. The reward token is tradable and the reputation token is not. Two tokens might unnecessarily complicate the system. Who knows, the problem might be solvable in a more elegant way.Compatibility: Status tokens get into the area of on-chain credentials - I’ve covered the topic here, here and here and it is not a trivial one to solve. It’s probably good to go ahead with something as simple as possible but compatibility with other external credential systems might be required later.Expiring status: It seems to be an important thing to consider not only because of the incentive function mentioned above but also as it would make inactive members transfer influence to active members over time. This might, however, favour regular contributors over early contributors again.Similar ProjectsOnce you open your eyes to the reputation token idea, you start seeing it everywhere.Jad Esber and Scott Kominers in “A Novel Framework for Reputation-Based Systems” propose a two token system in which the status token is non-transferable (called points). Holders of the status token receive a second, transferable token (called coins), based on their status holdings. “Effectively, points spin off dividends in coins that can be used as tradable currency.”I can see how people are incentivised to work for and collect points, but the article does not describe what gives coins any value. Why would someone hold or buy them? There needs to be an additional function built into the coin so that it becomes valuable and people want to buy it. Perhaps it could be made redeemable for a piece of treasury, pay a dividend or give access to a gated community.Another interesting thought is implementing a decline of status tokens over time relative to the engagement level of others. This might be doable with coordinape where tokens could be distributed peer to peer based on what the community thinks the contribution of an individual was.In a recent announcement Ethereum layer 2 Optimism introduced the Optimism Collective: A two token approach to governance in which the transferable OP token has certain rights and citizenships, which are non-transferable, have another set of rights and responsibilities.OP tokens are airdropped to users of the community and citizenships are awarded to contributors to Optimism and its ecosystem as a form of status. The two tokens are not directly linked but have an overlap in governance powers.The Citizens’ House will keep the network in check from plutocratic capture.An interesting concept of keeping a balance between internal and external interests and  power. Lastly, there is this DevxDAO Whitepaper, which we came across recently. The status token is an NFT rewarded for contributions and it allows holders to earn a salary in stablecoins. Only allowing status token holders to vote - as proposed in the whitepaper - might have benefits, but it could also limit the amount of interest from outside (i.e. investors) who might not want to be active but have great ideas on the future of the DAO. Paying a stablecoin salary instead of a token, whose value is determined by the market might not align incentives in the best way. If all profits are paid out pro rata to the number of status tokens one holds, this could quickly run into dilution of ownership thus again  benefitting regular contributors over early contributors. On top, the ultimate goal for every member here is to maximise profits as it impacts their salary but it might not bring the long term thinking aspect that a principal with equity would have.SummarySeeing all these different approaches pop up shows that this idea is ripe for a wider implementation and I hope to see more examples of reputation tokens out there.A few topics need further investigation though.Balancing regular and early contributions is tied to rewarding contributions, but since most status would come from contributions, it needs to be looked into how to balance between regular and early contributions. A decreasing reward pool might be a solution.Another open question to me is whether in such a two token model the reputation and reward token need to be linked. Optimism does not directly link them but the other models do link payouts to the number of status tokens held.Is the Tokenomics DAO going to implement two tokens? We don’t know yet and continue to analyse what best suits our needs. Get full access to Tokenomics Newsletter at tokenomicsdao.substack.com/subscribe
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