Webinar
Chapter 3: Cryptoeconomic Patterns & Application domains
by Vasily Sumanov
Some words about the author
Before crypto background: Ph.D. in Chemistry devoted to lithium intercalation in complex 3D inorganic structures, 5 scientific articles and two patents.
Crypto journey & achievements
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Tokens: models & economic decomposition
It’s all started with personal interest devoted to understanding economic sense of tokens.
My personal observations through entire crypto life:�
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This chapter is my attempt for classification of value capturing mechanisms, implementation patterns, and application domains in cryptoeconomic systems based on token-centric approach.
It’s experimental stuff and I appreciate critics & feedback from the community
Decentralized networks as value networks
1985, Michael Porter - value creation chain for a firm
1998, Stabell and Fjeldstad - value creation shops & value networks [2], [3]
Now - value networks are decentralized networks & protocols
Value in decentralized network: different value for different agents involved in its operation.
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Intuition: value of protocol token should somehow be linked to protocol performance and size.
Jack Barker: Pied Piper's product is its stock (Silicon Valley series) // just a controversial statement
Mindmap: structuring network value
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Value network
Properties:
Mechanism design/policies
solving issues + achieving network goals
Policies and mechanism design defining token functions are predictors for the origins of its value
Value Capturing Mechanism [VCM] + VDM (distribution)
Value Creation Patterns [VCPs]�// set of implementations
Particular token model
Definitions for VCM, VCP, VDM
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Initial system -> Policies and mechanism design for a token -> Origins of value -> Value capturing mechanism -> Value creation patterns (set of implementations) -> Combination of composable VCPs as a particular token model
Value Capturing Mechanism: how token accrues value (describes interrelation of origins of value)
Value Distribution Mechanism: how value created in the network is distributed // often mixed with VCM
Value Creation Pattern: implementation of VCM
Origins of chemical properties for an element: core [neutrons, protons] + shell [electrons] -> Chemical properties and reactivity -> Set of implementations [various valence states for an element, for example Fe+2, Fe+3] -> Chemical compound = Combination of elements in particular chemical states
Chemical analogy
Periodic table of VCMs
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# | VCM name | Origins of value | VCPs | Asset examples |
1 | Value transfer� //often it is defined by more common word such as “coin”, “currency”, “community inclusion currency” | Involvement in trades/settlements. Math: Fisher’s equation MV=PQ | see exmpls | BTC, BAT, LINK(v1.0), CICs |
2 | Work token (“staking”) //a token allowing to receive cashflow only in case of being used as a “risky deposit” - skin in the game in certain service or network | Cashflow based on the work provided to the network | FIL stk syst LPT stk syst | FIL, LPT, CVP |
3 | Network consensus token // the main purpose is securing decentralized network. Service to the end-user isn’t provided directly | Cashflow based on participation in consensys�Demand based on necessity of paying fees/holding native token to use resources of the network | BFT consensus, DPoS,�ETH 2.0, dec. bridges | XTZ, ATOM, ETH2.0, STAKE; dec. bridges often charge in transferred assets |
Periodic table of VCMs
# | VCM name | Origins of value | VCPs | Asset examples |
4 | Dividends //a token allowing to receive cashflow without doing any work/carrying risks | Future cashflows�Token value tied to fees generated by protocol and expectations regarding these fees | xSUSHI 1INCH governance | SUSHI, WHITE, HEGIC, LOOKS, veCRV, MKR |
5 | Backing by another asset // off-chain vs on-chain backing | Value is equal to what value you can receive redeeming it | DAI�AMM LP�USDC | DAI, AMM LP tokens, USDC, Synths, |
6 | Discount tokens // dividends paid only for active users of protocols, and they are proportional to this usage | If you save on something, you can account it as your income. If you save on service that you use often, discount is your profit. | discount on trading fees | Tokens of CEXes: BNB, GT, Huobi, FTT, CRO |
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Periodic table of VCMs
# | VCM name | Origins of value | VCPs | Asset examples |
7 | Internal product governance // it allows managing limited resources of the protocol: such as future development, liquidity mining policy, usage of DAO treasury holdings, etc | (1) actual amount of protocol resources to be managed (2) size of token holders stake | COMP gov MKR gov AAVE gov | UNI, COMP, AAVE, MKR |
8 | Meta-governance (meta-pattern) // proxy token, allowing to vote in several protocols (for example using assets locked in the protocol) | Value of such a token is the cumulative value of all voting power, locked in the protocol that offered such a function for a token. | Convex PowerPool�INDEX�� | CVX, CVP, INDEX |
9 | Hedonic Value/Memetic Value // Value depending on context, personal and community opinion Social agreement | The right of ownership of unique/desired/legitimate object.�Context, marketing, community popularity | NFTs, UniSOCKS�CNN NFTs Metaverse items | NTFs, UniSOCKS, CNN historical NFTs�Satoshi’s BTCs (partly fungible?)-> theory of fungibility! |
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Examples: decomposition of tokens into VCMs
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Tokens that could be described using one VCM: COMP(7), BAT(1), REN(3), NMR(2), ETH1.0(1), ETH2.0(3), LPT(2), LINK1.0(1), cDAI(5), YLA(5), DPI(5)
Tokens that are designed as a combination of two VCMs: MKR(4)(7), 1INCH(4)(7), SUSHI(4)(7), SNX(1)(7), FIL(1)(2), DAI(1)(5), BNB(3)(6), SOCKS(5)(9)*, OXT(1)(2)�*formally, the famous UniSocks token can be described by these two VCMs
Three-VCM tokens are quite rare since there aren’t many combinations of VCMs that can complement each other. The main examples of such tokens are in the Defi sector, combining internal product governance(7), dividends(4) in different forms, and work token(2) or meta-governance(8).