The nature and attributes of crypto tokens

Source: Daoshuo Blockchain

In yesterday's article, I shared Buffett's view that "buying stocks is buying companies."

In addition to the investment logic shared in yesterday's article, this view must be established in addition to a more fundamental legal guarantee, that is, stocks truly represent the interests of the company.

When an investor buys all the stocks of a company, he is legally equivalent to owning the company completely. He can decide the board of directors and management, and can deal with the company's profits at will.

Without this legal guarantee, buying stocks will not make so much sense, and the attractiveness to investors will be greatly reduced.

Using this point to measure the tokens in the crypto ecosystem, we will find some essential differences.

I generally divide the tokens in the crypto ecosystem into two categories:

One is the native token, such as Bitcoin, Ethereum, etc.

The other is the non-native token.

The so-called native token is written directly in the source code of the project. This kind of token directly participates in the operation of the code and the operation of the project. This type of token is very similar to commodities we see in real life, such as oil.

Native tokens play a vital role in the project. Without them, the project cannot operate at all. Without their native tokens, Bitcoin and Ethereum's blockchains cannot maintain operations.

Non-native tokens are different. They are not written in the project source code at the beginning. Most of them are issued by the project party for various reasons later. In fact, even without these tokens, the project can continue to operate.

Uniswap has been running for a while without tokens; BASE's second-layer expansion has no tokens until now, but this does not affect its brilliance in the Ethereum second-layer expansion ecosystem.

In the current crypto ecosystem, this type of non-native tokens are the most numerous and the most controversial.

For this type of non-native tokens, some project parties simply position them as governance tokens with very limited practical significance and let them go; while other project parties will use the project's profit income to repurchase and destroy them in order to gather the community.

This repurchase and destruction action can easily make people associate this type of token with stocks, so much so that over time, we will slowly subconsciously associate this type of project token with stocks, and even use the valuation logic of stocks to measure the intrinsic value of this type of token.

"What should the valuation of this project be, so what should the price of this project token be?" This kind of speech is the most typical reflection of this subconscious.

But if we calm down and look at these tokens with the legal protection of stocks mentioned earlier in the article, in fact, they do not have this value at all or their value is very limited.

If an investor buys all BNB, can he decide the board of directors of Xan? Can he decide the management of Xan? Can he decide how to spend Xan's annual income or just take it away?

Definitely not.

A while ago, there were rumors that a large exchange was preparing to trade with the family of the current US president to sell part of the exchange's equity.

Let’s not discuss whether the transaction described in this message is true, but we can definitely see from this rumor what the real valuable thing of this exchange is.

Of course, it is not the tokens it issued, but its equity.

In this sense, the intrinsic value of BNB is not as good as COINBASE’s stock.

If I have money, I buy all the COINBASE stocks, I can delist the exchange, destroy the stocks, and then the rich net income of the entire exchange every year in the future will be completely mine, and I will get a fat cash cow.

If these non-native tokens do not have the same rights as stocks, then what are they?

In my opinion, it is a kind of on-chain souvenir issued by the project party to the community in order to unite the community. Whether it is in the form of narrative or repurchase, the purpose is the same: to give this souvenir imagination space and make it "appreciate".

But this approach may only attract retail investors. It is too naive to expect big capital from the outside to buy these tokens with real money.

If these tokens only maintain this status in the future, their valuations will continue to collapse. If you want these tokens to truly become valuable assets and truly go beyond the circle, I can only see two ways now:

One is to become an asset with real rights like stocks;

The other is to become a "commodity" that must have practical uses in the project like the native token, participate in the operation and management of the project, so that the project cannot survive without this token.