Tokenomics: Staking and Burning
- Functions Tracer Tokens (TCR)
- Pricing in Tokens
- Stock Price Indication
- Redistributing The Pie
- Token Burning Mechanism
- Modern Market Theory
- Determine Future Value of Crypto
Call Recording: Here
- On the 9th episode of the Tracer Drop series, the Mycelium and RMIT discuss the subject of tokenomics and how tokens are affected by staking and burning.
- The team highlights how corporate finance can help us understand best practices for tokenomics.
- The TVL on Perpetual pools is about USDC 17 million (Time of recording).
Functions of Tracer Tokens (TCR)
- Potentially having further functions or benefits such as staking TCR for TCR
- Right now only for voting rights on proposals
- Pool positions - Users are able to purchase pool tokens (S/L - BTC/USD and ETH/USD) to get more tracer
Pricing in Tokens
- Prices are allocation signals and mechanisms from distributed actions.
- Market perspective: Prices are information to facilitate coordination enabling other actors to guide their actions.
- Pricing of an asset is able to hold information for people to determine what can happen next
Stock Price Indication
- Bond price Indicator: Bond price indicates the discounted cash flow that you expect to receive over the period of the life of a particular bond.
- Share price: Share price today represents the discounted value of the expected dividends you expect to receive.
- Shares can also give you voting rights within an organization
- The conventional way of asset pricing: A notion of a pricing formula being based upon fundamental cash flow and additional rights into the asset.
- TradFi Agreeable on what the value is but disagree on what the inputs are
Redistributing The Pie
- Holding a token you get ‘capital gain’
- Staking puts tokens at risk because you are using them to secure or certifying them for something else and earn the return and economic value for what you are doing.
- If you stake and earning additional tokens, essentially it is a wealth transfer from the treasury to the token stakers.
- Treasury becomes poorer and holders richer. There is a value added here.
Token Burning Mechanism
- Why do people pay dividends? Traditionally it means the company is burning money.
- If you are burning tokens to send a signal, this is valuable. But not valuable to reduce supply.
- Differentiate the price of tokens and the value of business endeavors.
- Value of Business endeavor = No. of tokens * price per token
- Value of endeavor should go up
- The foundational theorems in traditional finance: The first theorem: The value of your operation is determined by the economic value created in the organization.
- Focus on business models not finance models.
- Second theorem: It doesn’t matter how you disperse cash from operations you can’t make it any more or less valuable.
- Pizza example: 10-inch pizza is the value, If cut into 8 slices, the value remains the same.
Modern Market Theory
- The idea of markets are information-processing mechanisms and prices are information signals.
- Insiders and outsiders in companies and financial organizations can allow people to have pieces of information
- The way a firm conducts its operations tells you a bit about what they know.
- No trade theorem: Says Perfect knowledge and information. “If you’re offering to sell it to me, I don’t want it”
Trial and Error
- A good story for what you are doing. Underlying systems will need to be operational in order for people’s invested tokens to go up in price as well.
- Generate flywheel effects and create value within an ecosystem.
- Difficult way of doing things: Building a business model around a token.
Determine Future Value of Crypto
- Calculate the future value of crypto: First, think of the utility value of the token, second think of the value of participation or community Value the underlying business activity itself.
- At the moment there is no conceptual understanding of valuation models in crypto.
- Balancer liquidity pools are LIVE!
- Uniswap V3 for TCR tokens