So yeah thanks a lot for inviting me today Max um it's really great to see uh learning communities like these spring up I think they're really important in this field um where they're not that many of us and we're all spread out all over the world um a significant amount of progress thatI've made this year um has come down to learning communities uh like these and the conversations and connections that I'm making in these four so uh kudos to all of you for co-creating this all together um so offering you a little guidance about today's um presentation this is totally plannedAnd not improvised and I have a good deal of content to talk through so the delivery is going to be much more in the style of yes Sage on a stage which I know Max normally discourages but I really can't help myself here I love doing this and um as I said earlierWe will open up at the end for for questions and discussion um if you have questions for points of clarification during the presentation um raise them in the chat um maybe Max can can interrupt me or something but really just make those about points of clarification pleaseSave open-ended questions uh to the uh very end um and okay let's see what we've got yes I have to promote myself uh you can find me on LinkedIn I have a YouTube channel uh as well called token design you can follow me there as well and drumroll I have aTeaching course teaching tokonomics uh modeling for fundraising and new listings um it's uh it comes with professional grade spreadsheet tool and really happy to offer you a 30 off coupon that you can see there um it'll be valid for a month so okay that's me finished with my commercial plugsUm I could move on with a lecture but I think I should say a little bit more about myself um to explain the perspective and experience that informs the ideas I want to share with you today so um I only made it into blockchain in2020 I can't I'm not one of those people who says I was there in 2013 I was a skeptic um and I initially started work helping out blockchain projects to help raise capital and then increasingly to create some of their economic designs and strong utility narratives around theirTokens the skills that initially broke me into this field was um the understanding of finance that I developed in my earlier career and the advanced modeling skills that I had cultivated while working there now essentially what a financial model does is it creates a forecast for the activities of a business entity ofInterest and it expresses that forecast as a complete set of financial accounts for that entity that fully respect all the rules and definitions of accounting that are involved now you're taught counting as a finance professional because it's still deemed to be the best most comprehensive language that we have to analyzeBusiness activity in general um where I think this informs my approach to tokenomic analysis and some of the ideas that I'm going to share today is that I bring an accountant's skepticism to these problems I don't mean that I spend my time creating Financial accounts for blockchain systems so I meanIs that I'm skeptical about any vague or Fantastical claims about value and instead strive to Describe economic processes um uh breaking them down into a set of clear countable parts that have known relationships to each other and can be reconciled with each other um I do also have um earlier University training inEconomics which has found massive renewed value for me since I started going deep into tokenomics but I think it's probably the the accounting Instinct I just mentioned that has more to answer for in shaping the ideas uh for today's talk so that's me slides over this is where I'm coming from inTerms of my experience and um I think this also starts giving you a flavor of my teaching style but just in case we need to clarify anything um yes it's um going to be a theory lecture uh this is going to be very heavy on that and I have tuned into someOther sessions I know that some of you uh prefer um presentations to be more applied and concrete however in my defense um I do think that my approach to Theory tries to keep the theoretic the Practical consequences in view so maybe don't rush to turn this uh turn this offEven if you're a validly theory averse um but let me go beyond that actually and make a positive appeal for the importance of theory in the current state of our industry lots of money was raised during the pandemic boom and many of those businesses including ones that wereWell-intentioned and not just fronts for fraud are no longer operating now we can blame uh the enormous collapses triggered by Terror Celsius and FTX or maybe we could look inside and ask ourselves whether we actually have any clue what we're up to um in that space of uh deeper reflectionTheory becomes a Guiding Light because um having a more substantively developed Theory can uh give us a means of thinking critically about you know the latest fads in our sector rather than just aping in and hoping in uh hoping for the best each uh and and every time anyway that's my philosophicalPre-ramble over let's talk demand utility and demand cited mechanisms and let's start with an important question why is demand so hard for blockchain yeah the fact that we're having a lecture on demand in the first place is kind of weird normally when we design new products the utility and the demand of thatProduct is self-evident if you watch a show in the style of shark tank or Dragon's Den you never hear the investor say great product now how are you going to find demand for it no they just say great product if the founder has a good idea and they've pitched it well the usefulnessIs there for everybody to see so much so that we can create mass-market entertainment from this so why is it difficult for blockchain and you know it's like we're questing after demand as for this legendary stuff out there why is it so difficult for us well I think it's down to the financialLiquidity of the tokens that are the interactive centerpieces of our systems the incredible promise and appeal of being able to exchange anything for anything at low cost automatically is at once both a defining strong point and the Achilles heel of our blockchain efforts because the same features also enable Financial speculation nowSpeculation is tricky that fine but for this presentation let's call it a play to buy the token simply to be able to sell it on to someone else at a profit who in turn has exactly the same motivation to sell it on to someone else because and so on rightUm there's always a greater fool as they say but speculation is is just one kind of behavior that people can vend it can engage in Swan motivation for buying and selling tokens um and people could have all kinds of motivations but thing is um digital markets uh digital assetMarkets are open unregulated and deeply permissionless so anybody can come in and do whatever they want and because transform transformational riches are such a visible part of the crypto story speculation has proven itself to be the main attraction and the main force in these markets so what's the problem well speculationHas been damaging it's been terribly destructed destructive years of savings are wiped out whoops uh companies go bankrupt sorry I'm uh flicking the wheel there and um and of course lots of other companies get caught in that Fallout and this isn't a video game or a piece ofSoftware that I can patch up and everybody gets back to using it playing as if nothing happened the damage is real and Lasting um so in my view the fact um that genuine utility and damaging speculation are so deeply connected at the core of um by these blockchain features andUm together with the fact that smart contracts can entangle these two things in even more complicated ways now motivates an analytical approach that um treats speculation and utility um as if they were too distinct and completely separable things we need to be ruthless in saying whether some things eitherSpecula you know used for speculation or intended for speculation or whether it's intended to be used for utility um okay right I think I got my notes mixed up so this is an so sorry I think I messed up my notes here um we have this entangled mess they areDeeply connected so in order to create a good analysis strong analysis I suggest to you that we begin we start out that as if these two things were completely cleanly separable um and uh you know what how do we Define these well speculation we could say isBuying to sell to the greater full as I said earlier um and utility can be everything else um I'm only half joking there uh we'll dig deeper into what utility is in a minute but I want to show you that a definition for speculation by itself can already beUseful okay if you would look at a project and all of its features and merits are only of speculative benefit and that could be enough to say case closed and this is this is a purely speculative project and uh if you're interested in utility you can move on umI think the original version of safe moon is a good example here this token was launched and Promises were made to do something with it someday or the funds raised or something but the heavily marketed features of the token was that anytime somebody would sell itA share of that sale a portion of that sale would be burned and another portion would be locked up in the decks and then a smaller portion would be um recycled back to the people who didn't sell so what happens over time Supply circulating Supply goes down price goesUp and Presto it's a safe moon or so they said um so that's the here's uh this is what actually happened now putting a bunch of other red flags about this project to one side if we look at the features in the way that I just suggested being super strict aboutSaying is this utility or is the speculation there's absolutely nothing nothing in this um uh project um other than a mechanism uh to create in an instrument for speculation we're still the mechanism serves to attract and amplify speculation so if you want to get involved on that basis fine butDon't let the existence of anything else here fool you into thinking um that we're dealing with any other kind of utility okay so um let's uh suppose we're looking at a different project now and we found some utility it's there um uh uh so that's great now you mightThink that our next task is to go and look uh deeper at this utility and understand it but actually I say hold on wait a minute we're actually not done with speculation yet because speculation isn't something that goes away um and we now have some more complicated uh questions to addressAs long as blockchain economies are connected to open free markets uh speculation is always going to be a thing and that means that just saying that there is utility or some non-speculative case for demand isn't enough we we also need to now look at how resilient that utility is in theFace of specular speculative pressure what what are some touch points for risk analysis here well um you know what share of demand is focused on speculation and extraction versus utility how might that change over time um how would changes in token price um affect the underlying economicActivity that's uh that's uh aimed at supporting utility um are there any feedback loops uh that would amplify these speculative effects um taking the system past dangerous bounds um are there any mechanisms created to mitigate any of this how effective are they um an example where an analysis betweenThe interplay of fundamental and speculative demand um would have been helpful is axi infinity our ostensibly axi had a game that you could play and it's very colorful look at those squishy things and um uh that obviously is is a case for sustainable non-speculative uh utilityUm uh well is it sustainable a lot of us thought that the fact that it had a game was enough and uh just taped in but by doing that we missed out on an examination of how the games uh reward mechanics would play out in the hands of extraction motivated actors or similarTo speculators and how that would uh affect the experiences and incentives for players who are less aggressively focused on its extraction so this wasn't sustainable it wasn't enough just to have utility we have to look at the interplay of of these two forces as wellUm okay so let's let's pause for a week recap um what have we got so far in this uh quest to analyze demand well we checked for nonsense see if there's any non-speculative utility um and then we check if it's uh resilient if it would stand um speculation and and other MarketShocks I think and um The Next Step then is to understand the economy that creates this utility if we don't understand it well enough we'll fail to understand the way this project is catering to some kind of demand now I'm laying these out step by step um to kind of distinguish betweenDifferent tasks but in practice what you find is that all of these are going to sort of cross over and inform each other and you're going to have to sort of address the problem in a holistic way um our understanding of the economy will help us understand whether it'sResilient to Market speculation but you know just for this uh presentation I'm just separating it out and and making a bit of a story um as we go so for step three we're now gonna examine the underlying uh uh uh process that that generates utility forOur economy and that confronts us with a fascinating question what is utility um so this could be a long conversation to enjoy uh with some wine or some magic mushrooms but where we don't have time for that I tend to remind people of uh saying that environmentalists say uh you can't eat moneyOh well guess what hey you can't eat tokens either I think this saying has a very important insight for us that tokens are never and it can never be intrinsically valuable valuable as long as we're human and we don't get some kind of like pleasure fix from uhReading a wallet address or something um tokens are not valuable they they're not in themselves what users are actually valuing is something that the tokens are deriving their value from and you can find this idea um implied by another statement that people that you often hear people sayWhen they are introducing newbies to crypto and that's the one that says that tokens are representations of value but okay we've just pushed the can down the road if if tokens are not intrinsically valuable um then what gives them value what imparts value to them or put another wayUm what value do tokens represent well as far as I can make out we're generally talking about one or two situations right tokens either grant us a claim on some other asset or they get some access to to some kind of Market Let's uh let's unpack this starting with theClaims uh case first now maybe I should clarify that I'm not talking about claims in a strict legal sense but a claim in a sense that's just economically effective um I have this claim on this and and I'll be able to uh redeem and fulfill that claim um arguably it is that effectiveEconomic outcome that the legal concept was invented to protect and secure now the most common example of this um claim-based value is a claim on other digital assets um that's common and easy because we can design and enforce them at low cost with a smart contract technology technologyWe could also have claim to gameplay content and experience access to governance rights with the rise of real world assets um we may be talking about claims on physical assets like tokenized whiskey um we um males have tokens that offer claims on intangible assets like social status Prestige which underpinned the valueCase of a lot of nfts um the standing of these value claims are not all created equal um some things to look out uh here are how many assets do our token skip claim to one or many how correlated are the value of those assets to each other andWith a broader crypto Market you know uh tariff fell because it's value support was entirely correlated with itself um and um there was a play to learn project called Steppin which offered people in-game nfts with their tokens um which were you know valuable when the project was doing well but no longerValuable when the project was was not doing well so um the asset was highly correlated and um and and and so you know it ended up being valueless anyway once the market went South um what's the process that generates or supplies the the these underlying assetsThat are being claimed uh how does that scale how resilient is that and uh uh how reliable is the Redemption process as well where you know this is similar to like you know you going to the bank handing in your IU and are you actually getting gold back is if theySort of say oh sorry we run out of gold today you know how is that gonna what's that gonna do are there any frictions there that we need to understand um let's start looking let's look at the second one access to a market um now you know I could have folded thisInto the the claims um idea and that that we were just looking at but I I think doing that doesn't really give us any advantages so let's just think of it as as access to a market tokens allowing us access to a market in some cases um or giving us privileges maybeDiscounted use of that market um uh um what what are the kinds of markets we could get access to well uh smart contracts allow us to enter into new kinds of economic agreements right in principles So like um and that is sort of opening up another Market suddenlyTwo people who couldn't do business with each other in in some sense now can so that that's very similar to a market um we um can also create new market rules new ways you know these are now secured cryptographically and it's really interesting if because we thinkStrategically if a rule can't be broken and we know that rules can't be broken that in some certain situations changes the way that people behave in a market and can be an important um contribution to that market um uh delivering better economic outcomes for everybodyUm we might be able to open up markets um to previously an accessible investment classes like Rare whiskey um and they get you know uh um New Capital markets open to them for for by um uh investors who you know have smaller amounts of capital to investUm of course we also have exchanges and if T marketplaces in-game market so um that you know take place in these Virtual Worlds Social Clubs um and um markets for computational capacity or activity of some kind um these are all utilities right we you know let's we don't need to to go deepInto the the hard philosophy of utility to to know what things that are useful um but how we determine the amount of value that we have in these markets can be really complicated to analyze okay we still I think we still need to take into account the production economics ofThe assets that are being brought to these markets like we were doing when we were looking at the claims bit um but um we also have to consider that the value accessible in these markets depends on who else shows up and that's and and who else shows upUm from your side and from the other side and any other sites that are taking part in this market um certain Market situations may also need game theoretic analysis to understand possible conflicts of interest and strategic behaviors that may worsen outcomes in that market and in addition to all this complexity it'sAlso just really tricky um uh to it's it's not possible really to generalize what the positive factors are because that will depend on specifics of a market the things that are going to make a dating Market really good are not the same things that are going to make a distributed storageMarket successful okay there there these things are really specific and there's there's a fascinating literature which is um interesting to read because it's it's all about the under you know success in these businesses is all about understanding your market and and all these specific uh factors well we canSay at a high level is that these markets are made better when they enable higher quality matching that's reliable fast just fair and safe okay another interesting question um to to keep in our minds as we do all of this is to ask ourselves does blockchain make any difference here okayDoes it contribute to the underlying utility in some way does it have some advantage or is it essential um uh for these products in some kind of way or is it just a gimmick incidental um blockchain can add value through the openness composability and interoperability of this shared economic platformUm or it may secure Innovative smart contract design so our Market rules that truly can't be broken by anybody um so maybe playing a role at a deep level here now if blockchain is um supporting your product or utility in these deeper ways I think that really does strengthen your demand case inImportant ways it makes it likelier that people are going to put up with all the bad inconveniences of interacting with blockchain networks um and that your product is going to be less likely to be threatened by off-chain competitors but at the same time actually I I don'tThink that this is a deal breaker if you're not using blockchain in these uh in in these stronger ways um especially as we see more and more economic activity move on chain and ux gets better at making blockchain disappear into the back end and and youKnow the depths of the future we won't even know where we're doing things on blockchain um the mistake to watch out for in this area though is is just um you know avoid being tricked into thinking that just because a project happens on a blockchain that that's going to make upFor what's otherwise uh a crappy idea um okay so what have we got so all this that discussion got kicked off by step three which is about identifying the underlying utility being offered and understanding the economic process that stands behind it um and the way I've been talking about that sort of emphasizesUm suggests that we should be able to end up with a structural analysis of this economy right and um that should allow us to create flow charts and system Maps um like the ones you see coming up and now um these are often critical diagrams in Project white papers and not easy thingsTo put together um either I might add but some of you might still object that this doesn't go far enough because in order for us to be able to analyze demand in a way that is specific and and truly practical we need to have things that we can measure andTrack well I agree and that's why step four is all about doing that um identifying key activity and performance metrics for our economic process but if the goal of that is also to understand um or the economics of our utility why don't we just all do it in one step inStep three well I think it's really valuable to think about the structure of the economy as a separate step because if we don't have a clear view of that structure of the processes at work how they interrelate I don't think we'll have a clear idea of what it's worth our while to measureOr what it's even possible to measure in the first place um the range of economic applications and processes that are going to be handled on on chain are just too diverse for there to be one set of measures that you can reapply every single time but atThe same time I don't think we'll be Reinventing the wheel um every single time here um you know some a lot of things we do on blockchains are going to resemble things that we already do or just be sort of extensions of them and then you know ifThat's the case we can use lots of established metrics that are already you know developed for have been used for decades to to give insight and to help us manage um conventional businesses um get up I consider these metrics that are commonly used for software as a service startups customer acquisitionCost how much you pay to acquire a new customer lifetime value how much value does a new customer bring in over the lifetime monthly recurring Revenue um average revenue per user churn the percent of the user base that's leaving yeah are these from another planet no they're entirely sensible metrics thatWe could probably apply to helping us understand um a lot of blockchain projects better um from in a in a fundament at a fundamental level um an important caveat to add to that though is um what to do when we need to track intangible value uh things like whenWe're talking about projects that tokenize intangible social assets like Prestige and Status um I argue that in these situations we need that to do the best we can and find proxy metrics um whether that's indicators of so the socioeconomic status of our community or some measure of their engagement levelsUm I don't really know um again I'm it probably won't generalize um between different projects but if we give up on trying to track anything at all I think that will leave us worse off on the whole okay so I've now said a lot about underlying value uh how we mightUm understand it structure it measure it but if you think about it what happened to token utility okay we started out this journey assuming uh with the Assumption a helpful assumption taking tokens and underlying value to be completely separate things and from there we've just been focused on theUnderlying value we haven't said anything clearly about tokens yet okay so let's bring in step five um creating mechanics um for our token utility to get to token utility proper we need to create mechanisms that link the underlying economic processes to the tokens directly it's that role or connection of theTokens to the economic process which imparts some kind of fundamental um role or value or utility to them and I would argue that doing that well again requires us to have this rich and detailed picture of the economy um of the underlying economy that we've been going through so much effort to developUm so it's really quite simple you just you just find a place where it plugs in one in one of the many linkages one of the many flows it just has to play a role there um and it has to be a necessary and in dispensable partUm of that economy in order for for agents to benefit from it and in the majority of cases um actually though uh the the actual mechanisms that allow us to do this are really limited because in in the most basic case they're just two things that you can do with withUser tokens users can either just choose to hold them or transfer them okay um these These are the only two actions that we can ethically plan for okay because the tokens are now in the user's hands they have to choose what to do with them we can't design self-explodingTokens because I mean we can we can I'm sure that will happen in some games um but that remember Bitcoin got invented because people wanted to have control over their assets not have strange or random things happen to them so it's it's quite striking that you know fundamentally these are the theOnly two things that that we can plan to happen with tokens obviously we don't leave the power to Mint tokens in the hands of users because uh uh you know it's bad enough when it's in the hands of uh Developers so um if we limit ourselves to these youKnow two basic uh voluntary actions uh that we can ethically use well what are the things we can do with these things so I this set of options isn't that varied either although depending on how much complex logic is is tucked into smart contracts and networks of smart contracts I I suppose theActions could end up becoming quite rich or sophisticated but for the time being generally we can either you know the transfer tokens either are transferred permanently in exchange with an independent agent or with a system aligned agent that can be human or a protocol that is acts in aWay that aims to further the goals of the system uh whether that's refunding the treasury whether that's keeping levels balanced in some way we got staking where the exchange is one where uh the user puts their tokens away so that they can't be used for anything else immediatelyUm typically we see locks being applied to that and the unlock may be contingent on it's usually time contingent it might be event contingent and then we've got burning um so these are things we can do with it with the transfers and the key questionsWe should be asking is um you know what fundamental economic action does this link to in our system who ends up with the tokens afterwards what are their interests and what can they do um with these tokens uh how does circulating Supply change now or laterUm and how does it that change in in relation to to the value you know so step in what Steppin will do is is when you if you go use their tokens to buy a real world concert ticket um the tokens are burned and that makes sense because in some senseUm uh uh the ticket is one thing that that was in the network and then it's being taken out by a user so it can no longer be used by another Network um you know basic monetary principles suggest that you know the values being destroyed so tokens represent value theToken should be destroyed and be destroyed as well um you know if you have a treasury that's uh trustworthy taking the it's kind of giving them back to the treasury is kind of like destroying them because they're no longer in circulation and then the treasury then has theDiscretion to to to conduct monetary policy um at a later time so there are all these things to think about right um um yeah so how does the token Supply relate not just to the stock of value but the rate at which values accessed um in your economic processJust reading of my notes yeah okay and um you know again safe Moon um uh easy target here but those mechanisms which were changing Supply had no relation to any fundamental value here um in that system either so um that's an example of of um you know Supply changing mechanics that don'tDon't link with any fundamental drivers at all um I want to wrap up we're getting to the end we are um with um comments on on two utility choices um that are common but I think are problematic um one is generic AP wine staking rewards nowThis will create a rewards uh this will create attract demand in the short term because oh my gosh I want apy everyone comes in but you know if if these users aren't contributing to the growth of fundamental value in your system your economy you and your economy and yourCommunity are all going to pay for that um what's unfortunate is that everyone's kind of forced into a race into the bottom because if this Project's offering 5 million apy and you're offering you know 20 well people don't seem to be smart enough to work out that you know um if something'sToo good to be true well it is um that look maybe maybe with everything that happened with Tara And um Lipa style people people a little bit more skeptical but um you know sometimes It's Tricky not not to to have to compete um for over generous inflationary bonusesUm you know rewards are fine you just budget them you know when you when you get a new product limited discount one month um 20 off or something yes we're giving tokens away for free but there's a strict budget we're not committing to this being a never-ending program unlessWe have some kind of real way of making sure that the people who receive these tokens are genuinely creating value think back to this metrics I was talking about cost of a client acquisition lifetime value if you know those things well then you can budget a Rewards program better um the other oneIs using tokens as a medium of exchange and this can be really risky if the economic activity in in is price sensitive to the token and there's no sort of flexibility in in the way that activity conducts itself to compensate for that or if you know you're using tokens as aRevenue mechanism and that Revenue mechanism is then paying for your business operations because um yeah people hate to to remember this but we still live in a fiat-dominated economy and your your business isn't paying its bills and your new shiny new token it's paying its bills in FiatSo you know if your revenues are if you have decided that you want to create utility by making your token a medium of exchange and that feeds your Revenue generation process then um you're stuck when the market goes out because you nobody wants nobody will want your shiny new tokens and and youStill have all these bills to pay um and that's why I recommend my projects to to generate revenues through stable coins and and then uh then that means that your the users in your economy have to handle stable coins and not not your token so that looks like it's diminishing the theUm demand case for your token but in my opinion uh the benefits outweigh the risk uh outweigh the risks here and and I know that some investors have not been happy with uh uh designs of mine that have proposed that and some people have other opinions but uh but you know thisIs why we're having an open conversation here um if if you have a revenue process in stablecoin you can use that to drive a buy and burn um that acts on um your your native token reducing Supply and tying because revenues tied to a fundamental um uh um process in your economy thenThe scarcity of your tokens also tied to a fundamental process anyway those are the two warnings I have and that brings us to the end and the five steps are there oops a plug slipped in at the end and um that is the end of the presentationAnd really happy to talk about anything and everything with you guys so uh over to you Max awesome thanks a lot and um yeah I mean you know like I I I always love when I you know see a different perspective and I I think oneReally cool thing and like art Leon had that question is like how can I find out what share of demand is focused on speculation um so obviously I think what you showed really nicely is that you can mask utility you can kind of claim you have the utility and you can install ShadyMechanisms so that some form of utility might be might be there so it's so and I kind of like that framework now that we are looking at this um and we we say Okay um look at look at is this pure speculation if not do they use mechanisms that kind of likeLike safe Moon that kind of try to Shadow or like try to claim utility where is none and then go into like something like the market design you know we often in this course talked about coordination games and um and basically coordination problems public goods so what's what's the realValue of the economy how's the value created and that your token is basically in excess to that you know to that economy and market and I think that's a really cool like small three-step framework we can we can also apply or everyone can apply now yeah I mean it's very high levelUm you know the way this would play out in practice is you already have some kind of modeling tool or capability um and uh you would you would bring these questions to guide uh your choices about how you um you know how you create your models andThen what metrics you you pull out of your models um so it's like I said this is the point of having a theoretical um lens and and idea about how to approach this um that hopefully might help us uh structure our analysis and um uh get more helpful things from itSo more stuff in the chat what's the what is the token with the highest value from your point of view probably tied to real utility I have an opinion let's say where is that highest highest value um I I think uh I think ethereum is um is itI just think ethereums that um they're they're it's they've got fantastic Network effects um a really strong user Community they're retrofitting they're doing all sorts of really cool stuff um but but that's it you you you're kind of saying um you know what's the value of Linux what's the value of an OSIt's a whole it's a whole platform I mean there's there's an interesting question and and um yeah no they are capturing ethereum has a value a cruel mechanism that um that will benefit from everything that's built on top of it because in order to um you know execute a transaction on aTheory you need to you need to pay an ether um so it does have uh you know Linux had no way of um capturing the value of all the things that we're going to be built on top of it whereas ethereum has it and it's it's uh its Core Design um so that'sAnd then um yeah I think I think that's where I'll go at the moment um as a simple answer um I don't think I'm not to say that you know ethereum's gonna the rule the roost um there there are other people coming up with new blockchains Goldman SachsMicrosoft Deloitte have teamed up on on Cantor and it's really interesting they're Pro their their the white paper for their blockchain is um sort of privacy Elevate prioritizes privacy features instead of you know having all of this funky uh um ZK Tech stack bolted on to a public blockchain they'reThey're building a blockchain that has privacy control you know much closer to the course so now we will end up with multiple blockchains but fundamentally anything that's sort of like an open computer platform that has tokenomics that capture value from all computations is is is going to be hugeYeah absolutely so would you add before we go to the next question would you add value accrual to as an essential Dimension you know under under utility because I I always would yeah go ahead this is interesting right what's what's the economic function of value accrualWhat are you trying to do what are you trying to achieve with value accrual now if you want to have an asset that has a free Price or there's some sort of pricing mechanism that allows it that makes sense because then that allows it to adjust in relation to other assetsBut if you want to engineer something to build value over time what are you trying to do with that are you trying to get investors on board are you trying to create some sort of reward mechanism or incentive that gets a use early early users onward or does value accrualActually play a role in the economy what are you trying to do and the answer is it's most the time it's it's it's um trying to buy Community interest and investor interest and um and I think um one of the things I've spent a lot of some time thinking about is thatThis this idea of of using making the token do everything sometimes can be very problematic because if if you're folding in a fundrait the neat fundraise and and and bring in you know private investors with a token that is otherwise designed to play have a utility role in anEconomy that can that can Warp the way it functions right and uh you know here are you have this utility token that users are meant to use in a special way and all these investors who got in to make a financial return are selling it on the market creatingSelling pressure and that disrupts your fledgling economy why do we have these two things together well the cynical answer is that if we make it an investment-only instrument it looks like a security and the regulatory overhead goes up and the compliance overhead goes up um so to some EXT and and and alsoActually it's it's not always that cynical as well um you know the the we started out with ether being a utility token with fun you know the utility token was sort of like the normal way to fundraise but as you know the regulatory landscape becomes a bit more standardized and and there's lessOpportunity for regulatory Arbitrage I think I think we should look at unbundling these features and say and and think okay and do we do we want this token to be a utility token and bundle in it's it's its function as as a means of raising capital and as a wayOnboarding an early Community um in with the features that are we're designing to make it function as a utility token in this economy cool still let's I think we could we both could have a endless discussion here let's look at some I think there's a there's a there's an interestingUm uh question I also asked myself um are you familiar with with the Solana ecosystem um so like Patrick asked what do you think of Solana in terms of its mechanism for Value flow throughout the network no you you'll have to you'll have to coach me if it's a if it's Innovative orDifferent I'm I I don't I haven't heard yes I was I'm also I I'm not sure if I get the question so it's about something there is there is something there so there are some chains that are doing something slightly different so this is um the fat I don't know some people callIt the fat protocols thesis so what some people are doing what I was saying earlier is that you know in the case of ethereum the first layer once all transactions all transaction activity there's a mechanism that Roots some value from all the transaction activity occurs down down to the holders of eth umBut why but actually the dapps are creating value in the ecosystem as well so why why should um you know block Rewards or um you know these these base layer rewards only be paid out to validators and miners um so what some new layer one designsAre doing is is creating some of the routing some of the um base layer rewards and using them to reward the the best performing projects um at the at the application layer and and that sort of says hey we are all we're all sharing in the wealth here youGuys are doing everybody a service by by creating um utility um and then you know you could also design rewards for the most networked apps so uh that recognizes um uh adapts that have sort of like more interconnectivity or structural importance in some kind of way um that's that's the only that's theOnly sort of shift in in value sharing that I am that I'm aware of in layer one designs that's uh that's kind of interesting to think about yeah and also add probably like Kanto and Radix which are trying to you know like um reward the core developers directlyIn the transaction in our fees generated so um ethereum for example relies on their protocol guilds to keep the to keep core developers active and engaged and making it financially valuable so new some new designs are looking like how can we integrate everyone that contributes like directly to like uh IMean duh yeah you have to pay everybody everybody has to has to has to participate people create value that's uh that's a reasonable and sustainable claim but you know this is this is a challenging question when we're tokenizing up front is uh you know how much value people areCreating and how do we how do we get that Grant of tokens right um at least sort of like spread it out far enough so that um you know Valley has a chance to catch up with with all the tokens that have been emitted yes that there was an interesting discussion going onUm so basically Adrian asked how can I find out what share of demand is focused on speculation and then Jacob basically like he's a tokenomist as well they're basically they're basically using Minsky to model these sessions uh okay now to model the economy so what's what's your take on thisOkay well two questions there how do you how do you look at the okay no I see I see why they're related um so my response first is to say well if you understand the structure of your economy that gives you an understanding of what the fundamental drivers are andWhere to look to create a metric that can guide you to Define um you know maybe imperfectly but start getting some kind of handle on user activity that is characterized um by um utility interests versus those that are characterized by speculation interests um now regarding the use of Minsky I hadTo be coached on this I I was really lucky to speak to another um token Economist crazy background like MIT Harvard I don't know yet I think the only thing he was missing was NASA NBA National Bureau of economic research and he was modeling with Minsky as wellUm and you know Steve the originator of the model um you know is uh divides opinion in in the field of Economics um but but looking from what I can make out this is sort of like um it's like machinations so you have these flow charts but whereas machinationsUm begins with an ontology or basic set of elements um that are sort of very informed or leaned towards um um game economics and you know faucets and sinks I gather that Minsky has some slightly well actually I think it's much more flexible and open-ended and uh um IMean yeah or does it yeah I'm watching you not nod or shake your head yeah um yakub does it have um does it have elements that are sort of um you know strongly informed by by economic Concepts yeah I completely agree with you and it's very similar to machinations andDsdp uh can be dividing and uh normally it's quite difficult to use Minsky and it's not very stable uh so we build uh we programmed some add-ons modules uh so that can be used in micro because it's more designed for the macroeconomic perspective and modeling of macroeconomics whileMarket Nations is more or the user journey and the individual perspectives and user personas so we had to amend Minsky a little bit at the Monte Carlo modeling modules and some analytic tools to it but now it works pretty smoothly and it's quite versatile what I like about it is the uhThe district accounting structure with the goblin tables uh there it prevents a lot of mistakes that imagine are modeling because it's a complex thing and everybody makes I saw that it it has it has some sort of like accounting Concepts in in there that youCan use and and you know going back to my my own background is financial modeler like accounting is great it's um I think I I think it's a helpful instrument I I I'm this is actually something that's in my intree for for the remainder half of this year is to startPlaying around with CAD CAD um and these simulation based models most of my all my modeling to date has been in an Excel environment in that Financial modeling Style um so I'm not speaking from experience I'm speaking just from my my you know reflection and and thinking at thisPoint I think that all these um simulator um flow type systems are a great but um I would personally I would personally choose not to include simulate include the market process in the loop because um what I see what I see a lot of tokenomics professionals incredibly gifted talented mathematical programmersDo is is they put the decks inside the loop of the whole economy and sort of like run these Monte Carlo simulations that include um long-term price forecasts for the economy and and you know um then come to some sort of view of saying okay you know we have a certainDegree of confidence that our system isn't going to blow up and um I just think that's really really risky I would um I would feel comfortable sort of creating a model of the the internal economy the utility economy and then running exogenous price scenarios through that model saying okayWell let's look back let's see you know what um you know the 99th percentile of of drops in market cap Market Falls were and let's run let's run that event through our model of the economy or if if you're going to include a decks and and and and more automated markets inThe loop maybe do that in a very short term again scenario driven basis okay so um let's see that the system stable when we hit it with this price and and see how that goes let's put it at that price that's that's how I just my intuitionsTell me and and you know the reading and setting that I've done that trying to fold all of the markets into the loop um to create a long-term forecast and to extract inferences that you're gonna you know take comfort from I think is incredibly risky so I would I would useThem in in um in in the manner I described well yeah what I'm trying to search for is some stability about instability so when we do the multiple modeling it helps us to identify uh the risk scenarios or the collapses of the system the instabilities and then uhWell we can predict the collapse before it happens which we can use for shorting some tokens like like we did with XC Infinity as you mentioned or Terra Luna um using this modeling in Minsky and uh when we do tokenomics for a client uh it never can be completely stable andThere's still a lot of uncertainty but you can identify some vectors of attack or some um situation so in which the system Spirals and then find a solution to see it coming and find a solution before it happens yeah that sounds great um I think I I took an engineer tokenEngineering Academy reposted a tweet sort of saying you know on this sort of topic of modeling style and modeling debate that that models are not for price prediction they're for risk analysis and and what you described there is a risk analysis application butI see I see a lot of I see a lot of um again people who are really respectable really clever creating these these documents with price forecasts for the economy very price centered and um and and I don't think that's appropriate in the in in the client given theUncertainty of the system given the importance of that metric and given the fact that we are as consultants we are in a position of um understanding the client's not going to have the statistics to to create context and and understand all the caveats where the measure soUm you know personally yeah I I wouldn't avoid doing that but you know have opinions of themselves they're all about like I said very respectable decent people so uh you know this is why we're having conversation in the open so many people so amazing was that was it was it that incomprehensible notI think maybe it was the opposite you know like um you know I I mean Nate was sometimes so abstract that people had a lot of questions maybe you nailed it so well that nobody has questions okay all right essentially thank you thank you for helping me rest easier laughsUm also I mean this is now like I think the tips uh tokenomics lecture so I think people should start you know getting a framework out of all of this so I would say any any more questions um is there anything else in the chat so yeah we talked about the modelingSolana is a typical one okay one uh okay so there's one more question about a bad example or but a bad example for a token or bad token utility add value no value let's say yeah or like like a hidden maybe uh let's say the the utility it seems to beA utility but it was kind of there was no utility kind of promising but uh there was not a real utility how do you do you see the red flags Um yeah I mean I tried to give I and there's I've been so deep in in all of this work that I actually haven't been going out there reading um all the project papers to to have a list of um a bigger list of of examples um but really justWhat I try and do what I did for those videos that that backs uh initially saw about you know the tokenomics that got me to invited to give this conversation is is to just draw these these flow charts and think about the user Journey why is this person buying what are theyDoing okay they get this apy where where's the apy come from and and if you you know Olympus Dao is is another example I have but that was so complicated I'm not sure I can wheel it off at the top of my head but that was you know when people were explainingThis to me the first time I was there scratching my head and I was like I don't understand what's going on here they say it's worth one dollar but it's people pay more for it but they have enough value in the treasury to make it one dollar and then it's paying this apyAnd I certainly didn't get it just by looking at it it wasn't as obvious the thing as a safe Moon which you know admittedly I I would have still had to work out um when I first looked at it um but it's just this this persistence in not not just taking everything'sGoing to be sold to you I think it's going to be salty what is it um gosh what's what's that there's there's a decentralized exchange now that has some kind of um that everybody's in on because they they get a cut of the the house rewards and you know they'reThey're the Fanfare is that they're um their reward scheme is non-inflationary oh okay let's check and if you know I went through the steps and I said well they've contained that ordinary kind of inflation but they've hidden it into something that may still come to inflateLater on and it's it's just having this this sort of like like I said this um um skeptical um and persistent mindset of of really tracing all the steps and and being unforgiving being unforgiving about saying well no people are only gonna this is only gonna have value if if people demandedIn the market and people are only going to demand it and Market when other people demanded in the market that's just hype um so I I don't um yeah it's it's sort of an open book um uh but it starts it starts I think precisely because it can be confused itStarts with this um uh commitment um what how does this work it's it's better to get um a full snow than a false yes in this in this situation um I think that's that's the way we want to calibrate our um our analysis thank youOkay let's let's wait let's see no no no more questions all right awesome thank you thank you everybody um yeah pleasure to take part and um awesome efforts um to you Max um look how many weeks you've been doing it and you've still got a full houseHere so uh uh it's uh obviously going great congratulations we got one the thoughts on brc20 I I haven't been following that whole thing too closely but I liked the purity of Bitcoin I like the purity of the original case of Bitcoin we've got ethereum to do everything else if we startThrowing noise into into into the Bitcoin we we lose the Purity that that creates its clearest value case in my opinion I just think it's I sorry I do think it's a bit dumb and and to be you know just reproducing all the stupid mistakes that that we already went through again uhFor the lulls um it I I find a little irritating to be honest it it doesn't make us look good in my opinion um us you know it's a distributed decentralized Community what are we going to do um do you think Bitcoin will one day beOh here they come in thick and fast now um um sorry Patrick Patrick I this I I I I don't know like um that was my knee-jerk reaction my attention on other things there may be cool things that are happening but personally um it's uh yeah I really enjoyed thePurity of Bitcoin and and what advantage does the Bitcoin Network have as a Computing platform if that all this efforts already going into ethereum um but that's that's me and like I said I haven't been going into the detail of every uh project um do I think Bitcoin will one day beRendered outdated who knows um for the moment in that in that sort of like pure state where proof of work um secures provides sort of like some ultimate guarantee of uh digital scarcity um and everyone is rallied behind it you know it's they're they're all these first mover advantages and networkEffects get in its favor um so you know something else could happen of course but uh I I don't I don't know that it's an I don't have a view that it's inevitable that it will be superseded by something else unless you know we're talking about you knowThe distant future where we're all uh you know satellite so orbiting Stars having a a simulation hallucination for an experience or something you know um yeah no no strong views either way so anything that makes any any development that makes Bitcoin more transactable is a go um I was understanding the brc20 tokenFad as uh as some you know you know trying to create all these meme coins out of a an artifact in in in the Bitcoin source code that wasn't intended to be used that way um that was that was my understanding and my reaction to theUm uh to the thing if they're if they're building things that genuinely improve the the liquidity in lower transaction fees um that aligns um with with with bitcoin's core um identity as as I see it also not a fan why I think foreign but it's I think that's ourIndustry just whenever we run out of innovative ideas we just you know we just think like okay meme coins is not a thing or just you know ordinals or whatever well yeah yeah there's um I I think you could still find it online ey did a great uh conference in in LondonAbout two months ago and they were revealing all the blockchain products that they've been uh working on um geared to sort of like tokenizing carbon trike and carbon tracking Supply chains having multiple unrelated parties collaborate this stuff is absolutely was absolutely fascinating to me and and really reassuring that you know uhCompanies are gradually on boarding uh this is probably going to be a decade long change um in terms of seeing but you know uh when it's adopted uh you you there might not be any street cred for you because nobody's gonna know that it runs on blockchain so people are just going toThink that you got lost in some fad 10 years ago that that died when it runs ends up running the world economy I don't know the tokenomics idiots rent the one day and then you know where hopefully we're doing all right by ourselves by that point uh but yeah it's all fascinatingAwesome I would say looking at the time create end statement you know like we have the tools to build something amazing let's do it and let's not get lost in some you know Meme coin facts and uh you know Pepe is not going to save the world pretty sure about thatSorry thank you so much everybody and thank you Max for this uh great initiative and uh look forward to see um Yahoo continues to evolve in bear fruit sweet cheers everyone bye-bye bye

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We Need to Understand the Importance of Vesting in Token Sales In the world of token sales, it is crucial to understand the role of vesting and its impact on investors. While the primary goal of investors is to generate a financial return, this can only be achieved by selling the tokens in exchange for […]