Tracer Drop Episode #09: Tokenomics: Staking and Burning

Tokenomics: Staking and Burning

Agenda

  • Introduction
  • Functions Tracer Tokens (TCR)
  • Pricing in Tokens
  • Stock Price Indication
  • Redistributing The Pie
  • Token Burning Mechanism
  • Modern Market Theory
  • Determine Future Value of Crypto
  • Announcements

Call Recording: Here

Call Notes

Introduction

  • 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.

Announcements

  • Balancer liquidity pools are LIVE!
  • Uniswap V3 for TCR tokens