Tracer Drop Episode #09: Tokenomics: Staking and Burning

ozier.mycelium · October 20, 2021, 4:41am

Tokenomics: Staking and Burning

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).

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

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

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

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.

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.

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”

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.

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.