Economics of Tokenized Incentives 3: Token Value Won’t Align Stakeholders

In traditional firms, the incentives between users, employees, and owners are often not clearly aligned. When a token on a global blockchain is the business model, incentives are no longer muddled by legal entities, jurisdictions, and business models that conflict with the best interest of the users.

Nonetheless, liquidity for a project’s token plays a large role in opening up the project to the community. Native token liquidity is worth paying for because it can kick off a reflexive flywheel that brings more users and attention to the protocol.* However, it’s worth noting that liquidity for the native token doesn’t make or break an otherwise s... See more

In both cases though, you also need to care about the net income of all token holders in aggregate. That is the measure of the token’s overall value capture from generating income, and hence is a major component in its valuation. Imagine a network with high issuance and low staking participation. The income statement for stakers might look great. B... See more