Nice writeup but ultimately futile due to failure to address core principles:
1) Tokens as companies are irrelevant because there is no legal framework underlying the "token corporation". No legal framework means no objective, or at least consistent, means to address active malfeasance or remedy accidental harm or to accomplish any other goal outside of rug pulls/self enrichment by founders.
2) Tokens as countries is even worse. Countries by definition have sovereign power. If corporation tokens lack an entire governance structure, then it is infinitely worse for tokens as countries.
How many divisions does any given "token as a country" have?
And tokens have nowhere remotely the number of believers as the Pope...
I also wonder at the failure to at least address CBDCs: if the CBDC is the sovereign equivalent of cryptocurrency, it seems likely that the moat expected of non-cryptocurrency tokens - whether corporate or sovereign - is similarly nonexistent.
This in turn brings up the question if there is any point to any tokens of significant, long term value whatsoever. No token is ever going to be able to compete with even a moderately sized sovereign nation and its legislative, law enforcement, financial and military power.
In fairness, I think your criticism is assuming that current legal structures and governing structures are, or rather should be considered, "core principles".
The article compares tokens, with differing functions within an ecosystem, whether governance, value accrual, or otherwise, to current the current share/ board structure that we have. You are correct that legal framework will have to be adopted to allow final adoption of these iterations on design, but how are we to reach that legal guidance without delving into these theoreticals?
WRT your criticism to tokens as countries. Enabling token voting, with verifiable KYC and anti tampering proofs with the use of ZKs (one of many examples), offers a much more democratic solution. Countries as tokens shouldn't necessarily mean that every decision is made by each token holder in aggregate every time. Delegated voting is very useful and I hope to see it implemented further in DAO based decision making in the future. On chain representatives if you will.
CBDCs are literally just payment rails as they're tied to the Central Bank of the issuer. Remittance. Instant settling. Whatever. What would be more abt would be to look into the role of stablecoins in this ecosystem, and what would they represent?
Legal systems are where the rubber meets the road: where the the rights of one person's fist are restricted from impacting another person's nose and vice versa.
In contrast, any given "system" within a corporation is a behavioral layer, with its own enforcement and judiciary setup, within the legal framework.
The "iteration by design" is nonsense because there is no "ideal", nor are the tokens following any legal systems to start with, much less the legislative processes (fair or otherwise) through which said legal systems arose from. There seems to be an implicit assumption that legal systems will conform to token systems when in reality, it is token systems which must conform to legal systems.
Token voting: solution in search of a problem. There are already voting systems - why are token voting systems needed? It is already well documented that any cryptotoken setup is heavily biased towards specific age and sex demographics to start with, plus an additional socio-economic cost (i.e. smartphones and wireless data service costs). Most importantly: it is abundantly clear that cryptotoken systems are inherently biased by founders and maintainers - they are nothing more than attempts to subvert legal and political systems via software.
Lastly, it is clear you have not examined the implications of CBDCs. Unlike stablecoins - which are universally either not stable or underwritten by questionable assets/failed algorithms plus are used almost exclusively for speculative purposes, CBDCs actually are legal tender but with the extra capability for extraordinary financial surveillance along with extraordinary efficiency.
Among the likely outcomes: an actual capability for disintermediation of banks to the point where US banks are pushing against an e-dollar; a theoretical capability to institute "geo-fencing" of money as in domestic capital controls in China but freely convertible e-yuan internationally; truly seamless and fee-less international transactions; dystopian government disintermediation of individuals and organizations from the financial system etc.
The actual "democratization" of cryptoX is going to be demonstrated with CBDCs, and I would recommend reading up (and following) the progress of the e-yuan.
I've been staying highly up to date with the e-yuan and am published in CBDCs.
The implementation in China is nothing short of total authoritarian control of citizen financial privacy and control. To require the use of e-yuan I would argue is a slap in the face of individualism and privacy. CBDCs should be issued by the central bank for sure, but there needs to be ample privacy measures put in place to ensure that tax burdens and money movements can be efficiently tracked, without compromising the citizens privacy. Again, I think the answer here lies in Zero Knowledge proofs and other cryptographic functions.
I would recommend reading up (and following) the progress of Zero-Knowledge proofs.
I think you are too ideologically wedded to the notion that blockchain and privacy are synonymous.
The reverse is true. A permanent record is the literal opposite of privacy.
Nor am I very impressed with "Zero knowledge" proofs: the real world requires knowledge whether it is combating money laundering, combating cyber crime, reversing errors, or any of the multitude of issues which real world money movement and management entails.
It has been a long, long time since blockchain came out: the sad reality is still that there are no widespread use cases for it.
The real world has been using zero-knowledge proofs and secret sharing cryptography for long before blockchain was around. The fact is that this specific technology allows an onlooker to verify credentials such as AML, KYC, and whether or not you received your high school diploma (I have my theories), without revealing that information.
The first "email" was sent in 1965, but the world wide web wasn't created until well into the 1980's. We are dealing with a new technological primitive which is essentially structured around passing messages. To be so rooted in coins and tokens only is missing the point. We are less than 14 years into the development of this technological paradigm shift and I can today pay AT&T in Bitcoin.
The tokens are instances and sometimes vessels for that message passing. That technological leap has far more embedded value than the coins that you are so concerned with.
Have a look at starknet's L2 explorer (voyageur) and try and then tell me that privacy wasn't kept whilst passing messages without an intermediary.
China's CBDC is an abomination, and a gross misuse of the power of this technology.
It is not clear that you have real world experience with how KYC and AML actually work in banks; the sad reality is that the e-yuan is the logical extension of existing KYC/AML practice.
Nor am I terribly impressed with the notion that "only" 14 years of technological paradigm shift are merely a footnote to inevitable progress.
But what I (or you) think doesn't matter.
All I can say is that reality has underperformed my low expectations for blockchain technology.
Nearly every single example of supposed "next generation" DeFi or whatever has been marked with not progress, but comedic but multi-million cost rehashes of screwups even where outright theft and fraud did not occur.
Law hasn't made significant progress for literally centuries - somehow code plus law is supposed to change everything.
I think protocol are defining rulesets / logic blocks where things could be built on top of. It an interface. It can be governed by a company (DAO), but it is not inherently a company. The Internet is a protocol, but it is not a company. Companies are built on top of protocols.
Tokens are too flexible of a product to be put into any product. It can be a voting instrument (DAO), a currency (stablecoin), etc. It's simply too broad and the use case of the token matters (utility, store of value, etc.)
Loved this given most people bought tokens over the few years not knowing why they were supposed to go up in value besides "I'm speculating early on a thing more people will speculate later on". This should help people evaluate ecosystems and tokens more intelligently. I wonder:
Will people need to know/truly care about Tokenomics when they join? Or will it be like software Terms of Service which nobody reads and nobody cares about unless they are directly, visibly, and negatively impacted? Perhaps this manifests more in the user's day to day than in them pre-reading the actual whitepaper - "wait a minute, why can't I do xyz? I'm out of here."
Growing pains vs. irrefutable proof of failure is a good reminder. Terra launched in April of 2019. Failed in May of 2022. Things are just moving quicker and with much more scrutiny than ever. Also means quicker build-succeed-fail cycle will lead to sustainability (if possible) more quickly.
The fact that we're talking about things with monetary value does change the gravity of negative outcomes. What do I lose if people leave my Instagram economy/ecosystem and it fails? The big influencers need to find a new platform to make money, but the 95% that don't make money are fine. They lost a whole lot less than the 95% lost in Terra. Money is arguably the asset that is hardest to rebuild if something fails and you lose all of it, vs reputation that you can hopefully port over. Does that mean you need to constantly be hedging your exposure to your main digital economy?
Nice writeup but ultimately futile due to failure to address core principles:
1) Tokens as companies are irrelevant because there is no legal framework underlying the "token corporation". No legal framework means no objective, or at least consistent, means to address active malfeasance or remedy accidental harm or to accomplish any other goal outside of rug pulls/self enrichment by founders.
2) Tokens as countries is even worse. Countries by definition have sovereign power. If corporation tokens lack an entire governance structure, then it is infinitely worse for tokens as countries.
How many divisions does any given "token as a country" have?
And tokens have nowhere remotely the number of believers as the Pope...
I also wonder at the failure to at least address CBDCs: if the CBDC is the sovereign equivalent of cryptocurrency, it seems likely that the moat expected of non-cryptocurrency tokens - whether corporate or sovereign - is similarly nonexistent.
This in turn brings up the question if there is any point to any tokens of significant, long term value whatsoever. No token is ever going to be able to compete with even a moderately sized sovereign nation and its legislative, law enforcement, financial and military power.
In fairness, I think your criticism is assuming that current legal structures and governing structures are, or rather should be considered, "core principles".
The article compares tokens, with differing functions within an ecosystem, whether governance, value accrual, or otherwise, to current the current share/ board structure that we have. You are correct that legal framework will have to be adopted to allow final adoption of these iterations on design, but how are we to reach that legal guidance without delving into these theoreticals?
WRT your criticism to tokens as countries. Enabling token voting, with verifiable KYC and anti tampering proofs with the use of ZKs (one of many examples), offers a much more democratic solution. Countries as tokens shouldn't necessarily mean that every decision is made by each token holder in aggregate every time. Delegated voting is very useful and I hope to see it implemented further in DAO based decision making in the future. On chain representatives if you will.
CBDCs are literally just payment rails as they're tied to the Central Bank of the issuer. Remittance. Instant settling. Whatever. What would be more abt would be to look into the role of stablecoins in this ecosystem, and what would they represent?
That would at least continue the conversation
Legal systems are where the rubber meets the road: where the the rights of one person's fist are restricted from impacting another person's nose and vice versa.
In contrast, any given "system" within a corporation is a behavioral layer, with its own enforcement and judiciary setup, within the legal framework.
The "iteration by design" is nonsense because there is no "ideal", nor are the tokens following any legal systems to start with, much less the legislative processes (fair or otherwise) through which said legal systems arose from. There seems to be an implicit assumption that legal systems will conform to token systems when in reality, it is token systems which must conform to legal systems.
Token voting: solution in search of a problem. There are already voting systems - why are token voting systems needed? It is already well documented that any cryptotoken setup is heavily biased towards specific age and sex demographics to start with, plus an additional socio-economic cost (i.e. smartphones and wireless data service costs). Most importantly: it is abundantly clear that cryptotoken systems are inherently biased by founders and maintainers - they are nothing more than attempts to subvert legal and political systems via software.
Lastly, it is clear you have not examined the implications of CBDCs. Unlike stablecoins - which are universally either not stable or underwritten by questionable assets/failed algorithms plus are used almost exclusively for speculative purposes, CBDCs actually are legal tender but with the extra capability for extraordinary financial surveillance along with extraordinary efficiency.
Among the likely outcomes: an actual capability for disintermediation of banks to the point where US banks are pushing against an e-dollar; a theoretical capability to institute "geo-fencing" of money as in domestic capital controls in China but freely convertible e-yuan internationally; truly seamless and fee-less international transactions; dystopian government disintermediation of individuals and organizations from the financial system etc.
The actual "democratization" of cryptoX is going to be demonstrated with CBDCs, and I would recommend reading up (and following) the progress of the e-yuan.
I've been staying highly up to date with the e-yuan and am published in CBDCs.
The implementation in China is nothing short of total authoritarian control of citizen financial privacy and control. To require the use of e-yuan I would argue is a slap in the face of individualism and privacy. CBDCs should be issued by the central bank for sure, but there needs to be ample privacy measures put in place to ensure that tax burdens and money movements can be efficiently tracked, without compromising the citizens privacy. Again, I think the answer here lies in Zero Knowledge proofs and other cryptographic functions.
I would recommend reading up (and following) the progress of Zero-Knowledge proofs.
I think you are too ideologically wedded to the notion that blockchain and privacy are synonymous.
The reverse is true. A permanent record is the literal opposite of privacy.
Nor am I very impressed with "Zero knowledge" proofs: the real world requires knowledge whether it is combating money laundering, combating cyber crime, reversing errors, or any of the multitude of issues which real world money movement and management entails.
It has been a long, long time since blockchain came out: the sad reality is still that there are no widespread use cases for it.
China's CBDC may be the first.
The real world has been using zero-knowledge proofs and secret sharing cryptography for long before blockchain was around. The fact is that this specific technology allows an onlooker to verify credentials such as AML, KYC, and whether or not you received your high school diploma (I have my theories), without revealing that information.
The first "email" was sent in 1965, but the world wide web wasn't created until well into the 1980's. We are dealing with a new technological primitive which is essentially structured around passing messages. To be so rooted in coins and tokens only is missing the point. We are less than 14 years into the development of this technological paradigm shift and I can today pay AT&T in Bitcoin.
The tokens are instances and sometimes vessels for that message passing. That technological leap has far more embedded value than the coins that you are so concerned with.
Have a look at starknet's L2 explorer (voyageur) and try and then tell me that privacy wasn't kept whilst passing messages without an intermediary.
China's CBDC is an abomination, and a gross misuse of the power of this technology.
It is not clear that you have real world experience with how KYC and AML actually work in banks; the sad reality is that the e-yuan is the logical extension of existing KYC/AML practice.
Nor am I terribly impressed with the notion that "only" 14 years of technological paradigm shift are merely a footnote to inevitable progress.
But what I (or you) think doesn't matter.
All I can say is that reality has underperformed my low expectations for blockchain technology.
Nearly every single example of supposed "next generation" DeFi or whatever has been marked with not progress, but comedic but multi-million cost rehashes of screwups even where outright theft and fraud did not occur.
Law hasn't made significant progress for literally centuries - somehow code plus law is supposed to change everything.
I disagree with protocol as companies.
I think protocol are defining rulesets / logic blocks where things could be built on top of. It an interface. It can be governed by a company (DAO), but it is not inherently a company. The Internet is a protocol, but it is not a company. Companies are built on top of protocols.
Tokens are too flexible of a product to be put into any product. It can be a voting instrument (DAO), a currency (stablecoin), etc. It's simply too broad and the use case of the token matters (utility, store of value, etc.)
Thanks 🙏🏻 very comprehensive. A pleasure to read!
Loved this given most people bought tokens over the few years not knowing why they were supposed to go up in value besides "I'm speculating early on a thing more people will speculate later on". This should help people evaluate ecosystems and tokens more intelligently. I wonder:
Will people need to know/truly care about Tokenomics when they join? Or will it be like software Terms of Service which nobody reads and nobody cares about unless they are directly, visibly, and negatively impacted? Perhaps this manifests more in the user's day to day than in them pre-reading the actual whitepaper - "wait a minute, why can't I do xyz? I'm out of here."
Growing pains vs. irrefutable proof of failure is a good reminder. Terra launched in April of 2019. Failed in May of 2022. Things are just moving quicker and with much more scrutiny than ever. Also means quicker build-succeed-fail cycle will lead to sustainability (if possible) more quickly.
The fact that we're talking about things with monetary value does change the gravity of negative outcomes. What do I lose if people leave my Instagram economy/ecosystem and it fails? The big influencers need to find a new platform to make money, but the 95% that don't make money are fine. They lost a whole lot less than the 95% lost in Terra. Money is arguably the asset that is hardest to rebuild if something fails and you lose all of it, vs reputation that you can hopefully port over. Does that mean you need to constantly be hedging your exposure to your main digital economy?