But, if you read the previous section, you know that there’s a catch: while the value of a protocol’s token is meant to reflect the success of the protocol, it’s very difficult to design a token that actually captures the full breadth and nuance of the protocol’s goals. And the price incentive built into tokens leaves them especially vulnerable to... See more

At a high level, the only way to address this problem is to link token incentives to network utility, i.e. ensure that users can only receive token incentives if they add value to the network. In other words, rewards need to be restricted to specific, desirable actions, not just adoption. 

One of the reasons that there is so much confusion around token design, and value accrual specifically, is that tokens, and the DAOs and protocols that issue them, are so multifaceted. Sometimes, the issuers want them to behave like shares in a corporation. Others issue “governance” rights to skirt regulations while insiders pump the tokens in the... See more