Economics of Tokenized Incentives 3: Token Value Won’t Align Stakeholders

However, even if token value was perfectly aligned with network value — the way that a company’s stock price is aligned with shareholder value — token value still fails the second criterion for a good performance metric. Blockchain platforms should not rely on token value alone to generate participant incentives for the same reason that employers d... See more

First, the value of a token is not well aligned with the long-run value of the underlying platform. There are many types of tokens, and the value of each depends on the underlying rights that the token provides

token price is a poor performance metric for incentivizing the types of behaviors that blockchain platforms want — and need — their participants to engage in.

I often hear people in the blockchain space assert some form of the following argument: if a platform creates a native token, such as a utility token that can be used to purchase services provided on the platform, the creation of the token by itself will align the incentives of users to act in the best interests of the platform. For example, someon... See more