Author: @dberenzon
Translation: Blockchain in Vernacular
The Token model is a framework for designing and managing digital assets, aiming to generate long-term value through reasonable allocation and incentive mechanisms. Key elements include preventing Sybil attacks, designing effective incentive mechanisms (such as staking rewards, buyback and destruction), managing circulation and fully diluted valuation (FDV), and ensuring the practicality and flexibility of tokens. Data-driven decisions can optimize token allocation and maximize market value and user engagement.
Here are some thoughts from @dberenzon on good token design:
1) A good Token model is one that can generate wealth effect.
2) Even if your token has limited functionality, it can still have great value if it can be delivered to the right people as soon as possible.
3) The current problem is that Sybil attacks make projects very difficult, which is one of the biggest unsolved problems in our industry.
4) In response, projects are increasingly using creative points schemes to incentivize long-term holders and keep the network distributed.
5) Low circulation/high fully diluted valuation (FDV) is a real problem because projects are usually unable to maintain sufficient buying pressure to counter token issuance, which will cause token prices to fall and affect community and team morale.
6) This problem can be alleviated if token issuance can be allocated to suitable long-term holders, but currently few projects are so data-driven.
7) A simpler solution is to launch tokens at a lower fully diluted valuation and give more equal access to the global secondary market.
8) Once again, the allocation and issuance of tokens is very important. Unlike the “utility” of tokens, you only have one chance to get it right.
9) In terms of utility, the methods that work better in large-scale applications today are basically staking/locking and repurchase destruction/redistribution (the latter has regulatory risks and requires consulting a lawyer, etc.).
10) Staking/locking can be redefined as interest binding (thanks @NTmoney for this concept - not just for prediction markets!), which is a relatively powerful lever for both supply and demand sides to incentivize specific behaviors.
11) In the past few years, there has been nothing really new other than re-staking and lock-based allocations.
12) In addition, work tokens can facilitate digital resource provision (liquidity and hardware) and risk transfer (insurance/reduce), which is a good way to consume.
13) Paying with tokens still sucks for the end user experience, so avoid doing it unless you’re a gaming project where users are already used to buying in-game currency.
14) In general, token utility is in large-scale adoption and over long time frames; it is a living thing that should adjust over time (unless you are Bitcoin).
Someone pointed out that in response to point 2, “- If you can get it into the hands of the right people as soon as possible, your token can still have great value even if it has limited functions.”
And point 3 “The current problem is that Sybil attacks make projects very difficult, which is obviously one of the biggest unsolved problems in our industry”
Question: Assuming there is an identity + privacy solution that can solve the Sybil attack problem, what data attributes are needed to locate the "right person"?
The author responded: “I think the key is to identify those users who are frequent/active, and those who provide economic or other network-level utility to the protocol/platform, preferably long-term. These utilities can be participation, liquidity, transaction volume, content, hardware, economic security, etc.”
In summary, a successful Token model must not only be economically and technically feasible, but also focus on preventing Sybil attacks, designing effective incentive mechanisms, managing reasonable circulation and FDV, and ensuring the practicality and flexibility of Tokens. Data-driven decision-making can further optimize Token allocation strategies and maximize their market value and user participation.
