(2017-05-27) Srinivasan Thoughts On Tokens

BalajiSrinivasan give Thoughts on Tokens

Here we discuss many concepts related to tokens, beginning with the basics for folks new to the space and then moving to advanced ideas.

The most important takehome is that tokens are not equity, but are more similar to paid API keys

let’s start with the basics first. Why now?

1. Tokens are possible because of four years of digital currency (DigiCash) infrastructure

2. Tokens vary in their underlying BlockChains and codebases

One key concept is that a token’s codebase is different from its blockchain database.

The success of Bitcoin inspired several different kinds of tokens

In general, it is technically challenging to launch wholly new tokens on new codebases, but much easier to launch new tokens through Bitcoin forks or Ethereum-based ERC20 tokens

Ethereum makes it so simple to issue these tokens that they are the first example in the Ethereum tutorial! Nevertheless, the ease with which Ethereum-based tokens can be created does not mean they are inherently useless. Often these tokens are a sort of public IOU intended for redemption in a future new chain, or some other digital good.

3. Token buyers are buying private keys

4. Tokens are analogous to paid API keys

tokens are inherently useful. And tokens are tradeable

5. Tokens are a new model for technology, not just startups

they can be issued and sold en masse at the inception of a new protocol to fund its development, similar to the way startups have used Kickstarter to fund product development

read these three posts and consult a good lawyer before embarking on a token launch!

6. Tokens are a non-dilutive alternative to traditional financing

7. Tokens can be bought by any American (>30X increase in buyers)

equities can only be sold in the US to so-called “accredited investors”

issuer might want to make token holders entitled to corporate dividends, voting rights, and the company’s total ownership stock may be denominated in these in tokens. In these cases, we really are talking about tokenized equity (namely securities issuance), which is very different than the appcoin examples we’ve discussed. Don’t issue tokenized equity unless you want to be limited to accredited investors

8. Tokens can be sold internationally over the internet (~20–25X increase in buyers)

9. Tokens have a liquidity premium (>1000X improvement in time-to-liquidity)

10. Tokens will decentralize the process of funding technology

11. Tokens enable a new business model: better-than-free

12. Token buyers will be to investors what bloggers/tweeters are to journalists

13. Tokens further increase the primacy of the technologist over the traditional executive

14. Tokens mean instant custody without intermediaries

15. Tokens may be generalizable to every tech company through paid logins

To deal with the coming profusion of tokens we will need review sites like Coinlist, portfolio management tools like Prism, exchanges like GDAX, and many other pieces of supporting technical and legal infrastructure.