Research Summary
The report discusses the creation of token value in the crypto world, comparing it to traditional equity value. It explores the role of market makers, the utility of tokens, and the concept of “Pay to Hold”. The report also delves into how tokens can serve as a financing tool, mimicking equity and debt instruments.
Key Takeaways
Token Value Creation
- Token Value Drivers: The report identifies key drivers of token value, including customer and revenue growth, operational efficiency, capital use, defensibility, attention, and governance. These factors are similar to those that drive traditional equity value.
- Token Utility: Tokens can serve as essential components of a crypto application, providing value to protocols. For instance, Ethereum users need ETH to pay for gas, and stakers need ETH to secure the network.
- Pay to Hold Strategy: The report highlights the “Pay to Hold” strategy, where tokens are given to holders for their loyalty. This strategy includes airdrops, token farming, and staking, which can enhance the demand for the token and influence its valuation.
- Role of Market Makers: Market makers provide liquidity and price markets efficiently. They maintain bid and offer prices, allowing other participants to trade. Projects hire market makers to improve their odds of listing on a CEX, make their token more attractive to investors, and provide expertise and consulting.
- Token as a Financing Tool: Tokens can represent various agreements on value exchange, not just equity. They can be used for value exchanges ranging from borrowing/lending to paying team salaries and vendors, creating value for the underlying protocol and the token.
Actionable Insights
- Understanding Token Value: Stakeholders should understand the drivers of token value and how they compare to traditional equity value drivers. This understanding can inform investment and operational decisions.
- Exploring Token Utility: Crypto projects should explore how tokens can serve as essential components of their applications, providing value to their protocols.
- Implementing Pay to Hold Strategy: Crypto projects can consider implementing a “Pay to Hold” strategy to enhance the demand for their tokens and influence their valuation.
- Engaging Market Makers: Crypto projects should consider engaging market makers to improve their odds of listing on a CEX, make their token more attractive to investors, and provide expertise and consulting.
- Using Tokens as a Financing Tool: Crypto projects can explore how tokens can be used as a financing tool, representing various agreements on value exchange and creating value for the underlying protocol and the token.
