Capturing Value

Under development

Token Value

Token Utility

Intrinsic Value

Intrinsic value is the value that the token gains from the credibility and utility of its project.

Economic value differs according to the different Schools of Economic Thought. This is relevant because, when we design a token, we can adhere to the Economic School of our choice. Below there is simplified list of economic values:

All these theories of economic value can be classified in 2: objective and subjective value theories. The objective, or intrinsic, theories of value hold that the value of an object, or a good, or service, is intrinsic, meaning that it can be estimated using objective measures. Most such theories look to the process of producing an item, and the costs involved in that process, as a measure of the item's intrinsic value. The subjective theory of value, instead, states that prices of goods and services in a market are determined by the subjective preferences of consumers.

According to the nature of the value and the way that the value is captured, we have different types of cryptocurrencies:

Once the value is captured, we need to provide additional utilities to the token to retain and, maybe, grow, this value to maintain velocity of circulation under controlled margins.

Speculative Value

Speculative value is the value that the token gains from speculations traders make on a token's price.

Monetary Policies

Supply Definition Policies

On determining the token supply we can decide between 6 scenarios:

On the basic Gold Standard scenario (1), the supply is fixed. No value of price is captured and the token is hyperdeflationary. this is the paradise or investors because they will see the token price growing.

If we match the Total Supply to the Number Collateral Units, the total value of the token will be captured, no matter if this value is created by primary utility (3), which makes the token redeemable, or by aggregated utility, which will create a Unit of Account (4). In the case that we want to capture the fiat price of the collateral, we must manipulate the balance of the pair in the liquidity pools, which is the case of stablecoins (2).

Finally, to capture the natural value of the collateral, as a natural Unit of Account (5), we need to match the traded supply to the number of collateral units. The problem for this case is that the token wont be reedemable.

Depending on the goal of every project, a supply definition strategy must be decided. A combination of strategies is also a valid option. The next sections will identify possible combinations of supply definition, collateral nature and capture goals.

No Capture Tokens

Utility Tokens

Utility backed tokens are backed by some utility or service, but they do not follow a monetary policy to capture the underlying value or price of this service.

Price Capture Tokens

Stablecoins

Stablecoins peg their price to the price of an underlying asset. This underlying asset can be a commodity, a fiat currency, a financial product or another cryptocurrency. They can be collateralized by the same asset (stablecoins), by another asset or basket of assets (synths) or by an algorithm (algorithmic stablecoins).

Security Tokens

Security tokens are digital assets that represent ownership or other rights to transfer value from an asset or asset class to a token. A security token is essentially a digital form of traditional securities. Tokenised securities, better known as security tokens, are regulated and compliant investment assets in the form of a cryptocurrency token.

Value Capture Tokens

Units of Account

Value Capture Tokens capture the underlying value by matching their supply with number of units captured and leaving the price floating free. Tokens capturing value are considered Unit of Account or Commodity backed Money.

Tokenization Maturity Model

A Tokenization Maturity Model could be established as a ranking of the purity in capturing the properties of the underlying asset. This model would not evaluate the value of the asset, or its utilities within the token model, but the ability of the capture process. The main criteria for this maturity model would be:

• Decentralization in the network consensus. Existing great work by a16z for protocols decentralization should be referenced here
• Decentralization in the smart contract
• Independence from other currencies

In that way, 2 tokenization protocols capturing gold as underlying asset, could be at different level of maturity depending on the goods of the designed protocol.

The picture below represents a initial structure of the maturity model. It only considers the goal of the capture process. Sub-levels could be established to accommodate different degrees of issuer intervention.

Commodity Money would be at the highest level of the maturity Model as its value matches the value of the underlying asset. However, attention should be paid on the decentralization guaranteed by the processes of the issuer.