a16z protocol expert: what should the future token economic model design look like?

Typically, token models include a single-purpose token design, i.e. a governance token that transmits voting power.

Will this change?

Future token designs may choose to blend economics, governance, and utility rights, opening up a new design space. How is this done?

a16z protocol expert: what should the future token economic model design look like?

For many tokens, specific economic rights are embedded at the outset. But not all tokens have this feature (including many NFTs). Going forward, token holders may wish to receive their share of economic benefits directly.

There are different ways to do this. One is to create a secondary insurance pool that supports the protocol behind the primary insurance pool denominated in stablecoins.

The primary insurance pool is based on stable coins, and the secondary insurance pool is based on native tokens.

a16z protocol expert: what should the future token economic model design look like?

Users can stake their tokens into secondary pools and receive stablecoin earnings in return. In the event of any shortfall, these tokens will be used to recapitalize the protocol beyond the reach of the main insurance pool.

a16z protocol expert: what should the future token economic model design look like?

You can also add protocol-specific utility functions. There are potentially infinite ways of expressing things here, the only practical limit being the creativity of the community and the usefulness of the use case.

An example of DeFi might be the use of native tokens in debt auctions to adjust incentives, with participants holding native tokens receiving a discount on their winning bid price.

The second example involves integrating aspects of NFT rights into traditional fungible tokens: prioritizing access to new community initiatives, providing better economic incentives for certain actions, etc.

The NFT community is already doing the opposite. Take the @BoredApeYC APE airdrop, which gives NFT holders new rights. Can’t this also happen the other way around? NFT Airdrop -> Token Holders.

A different design approach is to have vesting pools for active voters and delegates. We often forget that ordinary token holders and representatives are two new types of stakeholders who should be financially incentivized to contribute just like other contributors.

a16z protocol expert: what should the future token economic model design look like?

Additionally, token holders may expect dynamic governance rights to also give them financial rewards. In addition to voting on each proposal through a referendum, token holders can delegate and receive vested tokens based on the agreement’s 24-month financial performance.

This incentivizes empowerment. Tokens can be awarded based on voting activity, protocol-specific metrics that track performance, and more. In order to promote long-term participation, tokens cannot be claimed within a certain period, and users must continue to vote within the vesting period.

In short, tokens provide a blank canvas to combine economic, governance, and utility functions, and that will change positively in the coming months. We are in the initial stages of discovering what can be embedded to create new functionality.

Special thanks to @milesjennings and @sriramk for their help with this thread. So, do you have a new token design idea?

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/a16z-protocol-expert-what-should-the-future-token-economic-model-design-look-like/
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