The role of tokens have evolved through the cycles of exuberance, disillusionment and iterative progress.
The ICO Era:. ICOs demonstrated the potential of tokens as an innovative capital raising tool for start ups, despite some challenges in incentivization and regulatory compliance.
DeFi Summer: This era saw an experimentation in token utility and distribution as a means to answer the question of stakeholder alignment and building sustained demand for the token. By the end of it, tokens are now recognized as a bootstrapping tool, and governance is introduced as some form of token utility.
Beyond DeFi: Innovation in crypto went beyond just DeFi and into new categories like Gaming and DePIN. Tokens continued to be used for bootstrapping, but new token models are being experimented. Multi-token models were implemented to separate speculation from the local economy, but the lack of real utility meant that focus ended up on a single token eventually.
Influx of Private Funding: The growth in private funding meant that investors were heavily influencing tokenomics decisions for them to make a return in the public markets. This period of time saw greater focus towards valuations rather than experimentation on the role of tokens.
The Token Landscape Today:
We are seeing a shift away from low float, high FDV, with projects launching with higher floats and lower FDVs.
Rather than figuring out token utility, there appears to be an increasing trend of token buybacks to induce artificial scarcity, with some degree of success in achieving token appreciation.
There is also a reversion towards fair launches akin to the ICO era, in the form of Internet Capital Markets.
Despite the evolution in the role of tokens over the years, the question regarding token utility remains unsolved.
With equity acquisitions for crypto projects now viable, the need for token financing could be less apparent for private investors.
Eventually, the viability of token utility could come in the form of regulation, when tokens are being treated more like equity that can confer ownership rights, thereby opening them up to traditional valuation models.
Please feel free to share with us any feedback or suggestions you may have via this form