What is the REAL value of crypto tokens with Vasily Sumanov
How in the world is anyone meant to derive the "real" value of a crypto token? Especially in THIS market?? I spoke to Vasily Sumanov, founder of Valueverse and inventor of the Token Value Capture Mechanism Framework to share how he sees it. Valueverse is a utility-centric token tracker that helps you understand the demand-side pressures for token value. Part of the neoliberal ideological turn which has also continued into crypto token releases is an over-focus on supply side economics (...
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Transcript
Ether can do more things in Bitcoin, and Bitcoin is worth a whole lot more. So Ether surely could at least cap you know, gain on Bitcoin at some point. If it was simple, everyone would do a good token strategy, good, you know, kind of mechanics and when you capture and stuff, do you ever need a token?
There's I mean, Right. You need a token if you have some problem with the product that you need to solve with the token. Right? If you go in some abstract things that nobody cares about the build of such kind of governance with zero. It's, like, not a good idea to charge your community one token then convert it to Ethereum, which we know, I mean, cost selling pressure. Right? Nobody will use chain. That can be double spent in savings. If supply Bitcoin was not limited, we'll never achieve such price. So finally, you will get value from Bitcoin when you do a value transfer. Not another way. If you just hold it on your wallet, you will never get value derived because you just nobody will trade an asset. This is all supposed to come in one price. If it is not in a technical, it's like stable corded. Where where the value comes from, you know, $1 all the time.
One way to not have a a, like, shitty volatile airdrop is to have utility, number one. How in the world do we value tokens? We see, you know, whenever I look at the price charts of various crypto tokens, I am always very confused. Why in the world does one token make a whole lot more or increase in price a whole lot more than other ones that I feel, maybe would, in a rational world, be worth a lot more than, say, some sort of meme coin. I feel like, there's either two ways to kinda look at it. You kind of, do the was it tech technical analysis where you put a bunch of lines on a chart and you say that the price is going to go up because it touched this line at that cross, or you kind of, just you just make stuff up as you go. Well, I'm here with my friend Vasily Soumenov, who is the founder of Valueverse and the inventor of the token value capture mechanism framework, which is, I think, a really an actual legitimate way of trying to understand how tokens are valued and why based on, like, an understanding of real value. So, yeah, I'm here with, my friend. And, yeah, Vasili, if you want to maybe give a quick introduction of who you are, and what brought you to, to making this value capture, mechanism.
Yeah. Yeah. Thank you, Josh. Thank you for inviting me. I really appreciate, you know, being, like, very smart podcaster on the, you know, on on the podcast. It's it's it's super cool. So and not all people, you know, understand the value of, you know, understanding fundamentals for tokens, not just pure hype, but, you know, more economics there. So I'm really happy to share some insights on that. So, yeah, just some small introduction about me. So I'm I've seen them, in crypto for a really long time. I started in 2013, some mining, trading, and, you know, moved to the, you know, some ICOs, projects and maybe 2017, 2018, I no. So a lot of token launches, a lot of tokens, like, just just food in the market. I always ask, what I can do with this token? What's the value behind it? What's the utility? So, I mean, literally, I have one token, what my actions as a holder, how can I get some value from the project, and they said you can sell it on a higher price and nothing else? Or you can, you know, buy something. And, I mean, the the understanding of token engineering and token token design was really on a very low level. I, you know, also tried to educate myself and, you know, just sneak in the into this topic and start to develop it and have a lot of projects, with, you know, with designs, understanding, advising on some, you know, decision making and token design, I can say, this way. And, like, building these current projects, see how all this works, I found that a lot of tokens, totally different tokens have the same, you know, patterns, have the same, you know, some kind of, you know, utility or some functions. For example, you can have, you know, token in the gaming and token in DeFi, and they both have governance. And it means that the source of value is governing some limited amount of resources in the community, which is, you know, economically is the same, but the project is totally different. Tokens are totally different. And they, you know, they they got more and more tokens, and understood that you need to have a kind of a framework or, you know, some classification methodology to to be able to understand, every new token coming to the market really fast because if you are just, you know, making it, like, there's some whole explanation, blah blah blah. It's a report for 20 pages without any real conclusions. So we need to be sharp. You can do this, this, and this, and you get this, this, and this type of value, and you you need to understand how to value the value. Finally, what is how it depends on and depends on what. So, yeah, this is why it's up to building it and and build the framework, which, you know, is mainly focusing on origins of value on the source of value for a token based on utility functions. And, yeah, I published paper recently. I was long time prepared, but now, like, academia is really, like, a long pathway for publication, but finally, it's published. And, in 2024, I got a token engineering prize, like, a year also, the best contribution to token genic, over the year in token genic community. So and I got an award there, a kind of a grant for building something, and I thought, wow. But maybe I can start just doing this on a scale and and build, some kind of, you know, analytical platform that will help people to understand where you're behind tokens based on my methodology, on the value capture mechanisms, and, you know, just just build it and ship it and just give it to you. So this is how all of this started.
Yeah. I I remember, you know, whenever I first bought Ether, years ago. And at the time, the only reason I kinda bought it was, like or the kind of thinking at the time was, like, Ether can do more things than Bitcoin, and Bitcoin is worth a whole lot more. So Ether surely could at least cap, you know, gain on Bitcoin at some point, and therefore, it was, like, a good investment. I didn't really have, like, particularly, good understanding of why it would be good. I mean, I knew it would be useful on the Ethereum network that was supposedly going to have smart contracts. Supposedly, DAOs would become a thing. It was all very theoretical. But what is I think we've gotten kind of to the point where enough tokens have been made, where at least you've been able to create a very, like, systematic, framework for understanding why is it that some tokens, like, generate more value kind of abstractly than other ones and how that could interpret into price. I think it's also interesting, you know, one thing maybe you forgot to mention is your background in chemistry
and how
how much the, the if you look at the framework, we'll we'll hopefully we'll get a visual at least on the video, to show it. But it it you refer to it even as, like, a periodic table, which is like, it's very it's very nice if you're someone who likes to categorize things in a systematic way. It's really it's really nice. And it also, like the periodic table, leaves leaves room open for potentially, like, new combinations of, I think what you call, like, origins of value. But maybe before we get that, I think maybe just for the people who are, like, totally, maybe unaware about this space broadly, could you kinda define what token engineering is for for those people?
Yep. Yep. Of course, it's, it's very broad topic and, you know, if it was simple, everyone will do a good token strategy, which are good, you know, kind of, you know, mechanics and when you capture and stuff. But for me, in a simple way, it's, building, you know, some building some kind of economic system on top of the project or intellectually the project that will maximize one kind of metrics and minimize another kind of metrics. Because, for example, in cons in consensus, what we want? We want more if you don't be staked. Right? And, we and because I just pay some rewards for that to encourage people's staking. At the same time, we want, like, no attacks, no no no problems in consensus, no double spending. So which has some slashing mechanism to, you know, to be sure that we are protected from that. That if someone will do anything bad in Ethereum consensus, the stake will be penalized. Right? And this discourage you to do, you know, any kind of attacks or or dishonest behavior. So in my view, any kind of good, you know, token desire, like, increases good metrics for our projects and, decreases bad metrics or and, like, matters that we, don't want to see that, that we have we we want to avoid. Finally, so the token is a coordination tool. At the same time, the token is a and the token is a tool to, you know, to protect the system. So this is how I see it. So one metrics we need to increase, another metric we need to decrease. And I think this is the most simplest definition of of the Right. Good results in token generic and what token generic is finally.
Right. So I think this is this may sound abstract, but I think maybe, like, if you're thinking about it through the lens of, like, you know, you and your you have an idea for a project that requires a token, you probably need to keep in mind what are the things that you want to promote from that system or what are the things that you want to, keep at bay in that system. And that being the basis of them being able to choose, or having, kind of, like, guardrails in how you design the system through that token being something that would, help facilitate coordination within that system ideally in the way that you kind of, like
whatever is, like, the purpose of that system. Yep. Yeah. But, I think there is a question number zero. Do you ever need a token? Because I mean, Right. You need a token if you have some problem with the project you need to solve with the token, right, to solve it efficiently. For example, we want to enable the trust governance, and it's it's almost impossible to do it without tokens. Of course, you can say you can you know, if you have different protocol and someone will deposit liquidity, let's make, you know, governance counting words on top of, you know, your TV and so use 75 k, use the into the protocol, one k words at some one seventy one million, used in the protocol, it has 1,000,000 of volts. Right? But, I mean, it's easily gam like, you can easily gamble to get submit a lot of liquidity for a very short term, bring the vault, and withdraw it back. So and when you have limited token supply distributed in a summation of way to, you know, to long term support it to the projects, all of the projects is having our OTPT providers. So because for token, you have limited supply and you have, like, some distribution mechanics. And if it is not, you know, screwed up, it should work much better than, you know, do doing something like just counting liquidity because, this liquidity type of governance is very open to our text. It's you anywhere, a lot of you that you can attack it. Just submit for one block and more than you'll join the same in the in the next block or something. So, I mean, if you have some problems in a project that you can solve with a token, probably you need a token. As I will say, in this way. Right. You cannot do the consensus without a, like, proof of the consensus without taking tokens that act as, you know, skin in the game and can be slashed. And the whole Lincoln Labs project is built on the idea of, you know, this crypto security mechanisms, right, on the worldwide scale. So Right. Right. And I think, like,
the the kind of creation of this field of token engineering, in part, I think, comes from the, extensive history in crypto of making bad tokens or, like, tokens that people are critical of and having this desire for something that is, different or something that is better because, yeah, at the at its most simplest kind of way of happening with, like, you know, you make a protocol, you make a token, that token is used for voting, but in a very, like, abstract way, then, it's very, very capturable by someone who has a lot of capital, generally. And that's what we see in plenty of these, DeFi DAOs.
And the the the question for the governance is always what you govern and what's the value of the thing that you govern. So if you govern some abstract things that then nobody cares about, the value of such kind of governance is zero. If you don't have a feedback loops, for example, you vote and the good outcome of the voting that it grows, the vertical improves, increases the token price, or at least rise, you know, some additional value, like, maybe some vertical fees or something that is acting as a feedback loop. Prior to do a good decision, you get, you know, some you get some reward or get, you know, some positive, you know, thing after that. Yeah. So the problem of governance is that in the majority of projects, there is nothing to govern, really. I mean, it's some but examples of that. Right. Is that what you think is, like, kind of the
the biggest trap that a lot of these projects fall into when doing token design?
No. I think that the biggest trap is counting token distribution mechanics as token functions. I think this is the biggest trap, the biggest misunderstanding in token engineering on the worldwide scale. Because you ask what is, you know, the the utilities of your project? What I can do with the product? You're talking. We use our token for rewards. This is the utility. Okay? So you just provide them, like, a free money, like, printing from thin air. Person gets this token and you can cannot do nothing with that with this token or maybe use it for the governance. This is not not available at all. So, I mean, the, value capturing mechanic or the GTG function is something that token holder can actually do with the token in the protocol and get some value from it. At least, maybe some social value. Of course, not all value is tangible. But, I mean, if you're airdropping tokens to someone, it's not a function of the token. And this is the first biggest trap and biggest misunderstanding. So so rewards is distribution again. Right? It's not a, utility. And the second is, using token for payments. Of course, there are rare cases where in which, you know, this type of thing is really good. For example, we cannot, you know, make, like, in, guess, you know, the price index to the block space in the funeral without a funeral. But at the same time, we see the diagnosis and the ex diets. Right? So on the small scale, you even can use you even can use other token for, you know, practical examples. Of course, in the theorem is much more complicated while they did it, there was no xi, and the, you know, the gas solution should have some relation to the value of, you know, of the Ethereum or the consensus or or it's much more broader topic. But, I mean, the the the, some cases where you need to pay actually paying the token are very rare, coming down mainly for level ones. Even if you see the roll ups, they collect fees in Ethereum. Right? So if you use arbitrary paying Ethereum, there are some rare roll ups that using non Ethereum tokens like MENT, right, as a native token for paying the gas at the but it anyway, if you have a roll up, you you you need to put, like, to pause the state on the main, chain of the field. Right? You're paying the field. It's, like, not a good idea to charge your community one token then convert it to the field, which we know, I mean, constant selling pressure. Right? The top of the day, paid for the gas to convert it to Ethereum to pay Ethereum for the, you know, putting some state of updates to the blobs. So even or even roll ups don't do this. Big roll ups. So Right. Right. Right. Which effectively means they I mean, they all
pay rent, I guess, in a way to the Ethereum blockchain.
Yep.
Yeah. So that's really interesting. I mean, definitely yeah. Classic kind of, like, we've made a thing. We're gonna make a token, and you're going to get an airdrop of that token. What does that token do? Don't worry about it. You'll make some money. Everyone just kinda dumps the token when they receive it, and then the token has no value, and then people are like, this was a scam. But, you know, in large part, I think it's this, like, need for potentially maybe founders in the beginning being like, we need money, we need capital. Tokens are a great way to, like, attract capital in in in some way and then to, like, have this big release at a certain point, where they kind of maybe they need to make they don't but it makes this incentive where they don't necessarily need to make the product. They just need to, like, release the token, as a way to continue the existence of its organization. And the product that it makes, it's, you know, up and down. It's kind of a guessing game of whether or not they actually, finish that product sometimes.
Yeah. And you saw a very big movement of doing talking about doing a product on in a legit, you know, way it's meme coin. So Yeah. And since there is a lot of demand from was a lot of demand from meme coins, is it the I know that absurd community wants to play this game to this casino? So they pay for this project traders, you know, benefiting from that. This is something that, you know, is more sustainable, you know, but I mean, sustainable in a way that there is some money in flow because nobody will buy imports, nobody will create it. Right? So Right. Right.
So maybe now it'd be good if we can take a high level at your framework. I don't know. Maybe how how best if you want to to kind of take a step by step high level of kind of what that is. I know you're I think you should be able to share your screen
so that these people with the video could Yeah. Yeah. I will I will try to do it really fast because, of course, if you understand that this could be, you know, it it could be a lot of information. So, yeah, first of all, I want to, like, distinguish supply and demand side and token design. So the supply side is rewards, incentives, how to distribute a team advisory, all of these allocations is supplies and how token goes to the holders. Right? To the holders community. And the demand side is why I need to, you know, to own the stock and what is value for me of from owning the stock and why I'm motivated to still, you know, own it and etcetera. So, like, the governance, cash flows, access to something, etcetera. So and and classification is focused on your demand side. I'm not classified supply side at all. Right. So I just my area of work is this. You know? Yeah. Like a green candle, not a red. Yeah. Sorry? I think that's super yeah. Like, buy pressure and sell pressure, I think it's super interesting because also, you know, a big part of, you know, side notes, a big part of neoliberalism
was, like, this hyper focus on supply side economics, rather than the demand side. And so, yeah, I think it's interesting in a place like crypto where there's a lot of, you know, libertarianism. There's a lot of, like, interest in neoliberal economic thoughts that, like, here we're saying, like, actually, we're rejecting a little bit of kind of neoliberal dogma of focusing on on supply side stuff because that's actually what's been the problem in crypto. And we focus on the demand because demand is what actually drives things. But, yeah, just a just a sign. Yeah. Yeah. We we try to understand how to create value or not how to sell it right away. So
Exactly. Yeah. So I started from in the conditional value. It looks a little bit complicated because a lot of, you know, academic works mentioned here about the value creation chain in the forum and, you know, value shops and value networks. But in a nutshell, if we have some kind of project, this project produces some kind of value. Right? If somebody uses it, at least, you know, user receives some value. That means that, this value in majority of cases created by quotation of agents. For example, if you have Uniswap, somebody makes swaps, putting some fees right after the swap, somebody supplies liquidity, somebody degree spools, the Uniswap. And it means that even Uniswap is not, you know, the it's just an app. Right? A depth before the Uniswap. If you're talking about the Uniswap as a DEX. Even this system is a system of network effect, and the value inside Uniswap is created by, you know, all the security providers and traders and pool creators activities. Right? So this is some, you know, cardinal value, which is great. So and my approach tries to know to highlight how, how token can cap can capture the share of this coordination of value inside. So we're starting from the point that, in some kind of system, we have a coordination of value and this connection of value is created by the agents, which are participating in the system as users. Maybe sometimes they're also developers, but, I mean, different agents. Right? So they create some kind of value, and we need to understand how to extract this value in a sustainable way to attack. And so, but the next, like, concept that we need to discuss is a value function. It also looks weird. I will discuss it very simply. So, any kind of asset, also noncrypt assets, can be considered here. The value of any asset is a some positive value minus some negative value. For example, you own an apartment. You can rent it out to make some money or you can leave it inside this apartment, get value from living there, actually. But at the same time, you need to pay taxes. You need to pay, you know, some electricity, water expenses. You need to clean it. So you need to do a lot of activity and spend some money to, you know, to to maintain this apartment. Right? So and for tokens, it's the same. So any kind of, like, a token has utility function. Utility function is all the positive gains for the holder. For example, you're owning some amount of tokens, you're staking them, you're getting some cash flow, you're getting some governance rights, everything. Right? This is definitely positive for you because of some the cash flow is most tangible way that you can account on governance. It's less tangible, but it's also a value, at least. But at the same time, for example, we need to run a note. You need to pay a cost for the note. You need to, you know, have a risk of this being slashed in case of misbehavior. And this misbehavior can appear even and out of your control, for example, where RPCs failed and their node is crashed, and this, like, slasher because there is no required uptime. So the utility of and usage function for talking is positive part minus negative part. And this is very important because the negative part in the majority of cases is some cost that you need to, you know, spend to get the utility. For example, you cannot get, you know, rewards in Ethereum consensus if you're not stake token either not. It's all staking. Of course, you can say, you can put, you know, to lie there, you can put rocket pool. But this special project built on top of Ethereum that abstracting this type of cost and this type of activity for you and taking the fees from that. Right? In original Ethereum design, there was only source taking notes. You know, you know, you're at your home, you stake Ethereum, you get, you know, some rewards. At the same time, you have a cost and risk of being slashed and cost of the node. Right? And, also, there can be some some other risks of slashing as I mentioned because it's a critical economic security requirement that is needed for successful coordination. If nobody will be slashing the signal, there will be no coordination of, you know, good actors or anything. Right? Nobody will use chain that can be double suspended. It's it's evident. So, yeah, we started from this. And, now we need to recognize the separate value origins, how token can derive value from this combination of value inside any kind of system that we discussed. So and the main, definition is original value. So what is original value? So it's a in fact, it's a, like, elementary economic pattern, which based on the system policy, system policy means what you can do and how it works. For example, you use up one token, one vote, you can vote. If you'll have a balance of tokens before the block of proposal creation, for example. And this reflects coordination of value and and it allows token to to accrue value. So it means that, if you vote in Uniswap, you can influence the decision. Right? It's a very big protocol, like, which building protocol could be community. So and some decisions can be really, important. Right? And you can influence the decision making and if you're getting the desired outcome, you get from the desired outcome. For example, you're from, B and B chain community and you want you just have to be deployed from B and B. So you work for this, and it's finally deployed to B and B. So you start to know doing some polls and some, you know, trading there. You get somebody from, you know, this subsequent activity. So or for example, in curve, worse, you work for for some pool, you get some bribe and this matter reward for your wall that you cast it. Right? So this way this is a very direct monetization to governance. Money monetary representation. So your influence management of limited resources, which are amount of rewards per the app off, and you get grabbed for that. And you get your money for that. So and this is so finally, you've got a share of governance value in terms of braai in this regard. Right. So this is, yeah, the fundamental concept. So and, I will open that, next other document, make it more faster. So so finally, we have, we have six positive and two negative orders of value and all additional eight eight elements eight economic keys can describe any kind of token as is in the word that I saw before, and, I don't know what to add here. I mean so we have Yeah. Positive way to transfer, but the value is captured from involved settlements like in Bitcoin. Right? Even if you store Bitcoin as a store of value and you hold it, you okay. The Bitcoin will worth much more because it's very limited supply. You need to understand that sort of value. That type of thing comes from the limited supply, which is a supply side economics. Right? If supply Bitcoin was not limited, it will never achieve such price. So and when if you want to get value from Bitcoin, you need to move this Bitcoin. You need to send it to exchange and sell it, or you need to exchange Bitcoin for some, you know, other asset, I mean, money, house, anything you want. So finally, you will get ready for Bitcoin when you do a valid transfer. Not another way. If you just hold it on your wallet, you'll never get value driven because you just owe it. So future cash flow when you can direct some cash flow, governance when the value is captured from unique, option to manage, limited resources. It can be rewards. It can be, you know, some developer's time. It can be deployments. It can be anything. Right? Something more available, something less valuable. Access when you get to know access to some unique resource, like, you get with someone like, NFT can get to the private chat in the community and get, you know, a lot of value from, you know, discussing something with whales or with some, like, like minded people. For example, representation of the values gained by another and by, represent community of other asset, like, is it is it representation of US dollar via off chain banking or the LP token is a position of the position in the pool of, for example, two tokens in the player. Right? So he direct value or scarcities when the value is captured due to social contract prepared or context. For example, some NFTs more of a burden. And another NFT cost that this community is bigger, it is more respected. Or even in, at Fungible Asset, you can see the part a partial fungibility likes, Satoshi, Bitcoin from the old world is much more valuable than Bitcoin from new wallet. Right? That just was mined recently. So this also there even Bitcoin, can have a hidden value. So this is and you have two negative risk exposure and conditional actions. So risk exposure when you have a risk or losses, like, being slashed in the node and conditional action, you need to perform some actions like run a node. Or, I mean, for example, you have governance rights only if you have a token and at the same time deposit liquidity in the for example, this is also the case. So and from this eight or just a value before by mechanisms because, or just a value is just building blocks and the mechanism is the real thing, how tokens really work. So mechanism is when compose, some economic structure from several interacting or is available shows some very simple examples. And very capturing implementation pattern is called implementation for the mechanism because you can have, for example, one mechanism, like, what is called economics. Right? You can like, in Torch, you can have a VIP implementation. You could have, for example, some other project made a solution implementation. Some third project made the same, but they changed some parameters of the system, for example, but the in general, it was the same. So the implementation can vary. So abstract implementations from the economics to simplify understanding. Yeah. So it's like three year actual classification, finally. So we understand the roots of the variable, understand how these, you know, roots connected with each other and produce value together, and finally understand how this is augmented in code, how it really works. And, for example, who fought full, who who changed something in in the code, but this we we wouldn't touch today. Right. So
Well, I think there's something maybe something interesting to say about about that one because it's, basically, I think for people to kinda understand and visualize in case they're just listening. Origins of value are kind of like the building blocks, the
primitive building blocks. It's an elementary economic units. And Yeah. Basically, the real economics is far from this units. Yes. Yeah. Yeah. The elements of our periodic table in which,
maybe, you know, we will discover new elements as we as we go on. Combining those things for making value capture mechanisms, together. But also, then on top of that, added level of complexities where value capture mechanisms can be combined together into a single, like, token system.
Exactly. Yeah. So there can be a token, with several mechanisms involved and or there can be a token with one big mechanism. It depends on the, are they sort of just willing to logically and economically interconnected or not? So I'll just show you examples. Sometimes they're connected, sometimes they have not. So we have clear rules for the mechanism's creation and understanding. Yeah. Yeah. Yeah. That was really nice. But here's a here's a good example of it. Yeah. Yeah. I just want to mention an example, very simple one, for the general, you know, ODIN. So some, token taxonomies in Tadabond classifications, they, say, okay. The discount tokens is at, like, different class of tokens, blah blah blah. But I'm not I think it's not correct because the discount token can be distinguished to the future cash flow and conditional actions. So how it works? For example, you own a BNB token and you can get some fees discount on Binance exchange. Right? So if you use BNB for paying the exchange the trading fees. So but if if you let's imagine that you have a daily trading volume at 100 Bitcoins, and the fee is 0.2%. I mean, this number is indicative just for the podcast. So but if you pay BNB, you have, 0.1% fee. So two times less 50% discounts. Right? So if you trade 100 Bitcoins without paying fees in BNB, you spend 0.2 Bitcoins 0.2 Bitcoins over the day for paying Binance as fees for trading. If you'll use BNB for paying those fees, you'll spend only 0.1 Bitcoin. So it means a 0.1 you saved. Right? So we can say that 0.1 Bitcoin that you saved is your future cash flow because it's zero cash that you see. It's 0.1 that you saved and, let's measure that you will inevitably trade this 100 Bitcoins. So it means that even if you don't have discount, you need to do that. So you send 0.1 Bitcoin, and we see that, the amount of your discount, depends on the amount of your trade. So it means that the so that if you own MeetMe, but you never trade, you can never get discounts. Right? Because you never use the product. So but if you use the product, you trade. The conditional actions amount of your trading volume, and, it directly, you know, triggers the amount of cash flow that you will receive. So find out a discount tokens is a conditional action and future cash flow. The conditional action is the act like, activity of Pershingen's goods and products with a discount in some system or project, and future cash flow is the amount of your savings on the discount. Very simple.
Right. Right. So this is this is a pretty common, like, centralized exchange token,
essentially. Like I mean, you go, for example, to to carry food. Right? To the just a grocery store, and you have a card. This card offers a 5% discount. You'll percentage €100 per week for food for your home. And if you're coming with the card, just the card, you'll get a €5 discount. It means in a month, you save €20. So this is your future cash flow from owning this NFT card because it has unique numbers.
I mean, it would be interesting actually to see to apply this framework in kind of more broad, examples of tokens in the world that are not necessarily crypto.
But, yeah, for a for a just suggestion thrown out there. Plant seeds. Yeah. Yeah. My goal is to my goal is to go on the broader level than than digital assets because Yeah. I understand. So what we're talking about, we are talking about, the exotic assets. So not, like, securities, like, you know, the security has, you know, some cash flow and, you know, like, some stocks stocks in the, on the market. Right? We are talking about assets that have a lot of different functions interconnected in some creative way. This depends on that. And, I mean, this is very exotic assets for the traditional fund managers if you will show them 1 inch token or village drop token. I will show later on the very first user. It's crazy. It's great. It's it's it's a good one. Exotic assets, something we don't understand or we need to make a research on that. So Right. My framework, it tries to explain exotic assets. Yeah.
I think and what that's super useful and interesting because I think it can help explain what exactly tokens are kind of doing as far as expanding the design space. It's definitely, like, maybe, like, a little bit of a financial framework or for thinking about it because, because of just what it is. But, like, if you look at stocks in a company as and define what that kind of value capture mechanism is or the kind of, like, maybe couple of value capture mechanisms that kind of, you expect out of a stock or whatever else. And within this framework, you can then see that, like, there's all these other different ways that, like, value can be produced, in in in a broad sense, that only kind of tokens on blockchains are really able to capture at the moment, it seems like, unless we're looking at but then we can look at, you know I think you have the example, like, the taxi medallion and things like that as tokens that also have their own forms of of value capture. But I think it's a hu super helpful reference out.
Yeah. But in the, you know, digitalized projects and digital assets, we can build a non channel analytics and see all the things that are going there, which is very useful. How use user use the token, what amount of utility they get, what is the cash flow, what's Hopperspace governance, and how the consistence I mean, you can build a lot of metrics, and this is totally free. The, you know, the blockchain is open for everyone. I mean, you never can do it in traditional companies. So they file a report, like, to, you know, to some regulatory authority or to some exchange authority. They just filed the report maybe at the end of the year or the quartile, and they put the I mean, it's not just off chain world. Right? In in on chain world, we have so much transparency understanding economics. So this is, I think, is the biggest, you know, form of me because I understand that, you know, you can dig into any kind of projects and see a lot of things there if it is, on chain, you know, economy.
Mhmm. Mhmm. So the mCures So you showed us, like, a pretty, a simple, example. Are there any I'm I'm curious if you have any, stories to share of, like, the most interesting types of tokens that you've that you've seen. Of course. Of course. Yeah. Innovative.
Of course. Yeah. So I think that, over the last year or so, one of the biggest innovation in in token design was, of course, curves, what is the scroll model. Because at least, I mean, you how you could judge, successfulness of token design? Was it, you know, hacked? No? Did it capture value? Yes. And how much many force we have for this. Right? And we have v two economics became one of the most popular approach to build economics for DEXs and use aggregators and, you know, even fracs used what's called economics. Right? So a lot of projects using what what's called economics, and I think it's one of the, you know, biggest inventions in token design in in the past cycle. Now we've seen a layer of abstraction of, you know, critical memory security mechanisms, which is also very interesting. And that token xenophobia is interesting, but, I mean, this, intangible faults question is, you know, like, debatable, I can say. So, also, I think one of the biggest updates in Technomics was Ethereum proof of stake, final implementation because it's also very, very it's of course, the idea of proof of stake is very simple, but the implementation of proof of stake was such large scale was very complicated. It was really unique invention. And and, you know, with the the noises, for example, using the Ethereum POS also. So and some other projects sometimes using Ethereum POS. So, I mean, this is also one of the biggest invention of the scale, I I can say. But, I mean, at this moment, what I see, I see, that we are entering a big area of AI tokens, and the majority of AI tokens are just memes. And, not not many of them has have some real utility besides, for example, Venus AI that I made. It's not endorsement, of course. It's there. I'm just a researcher. So I did a talking page yesterday and, delivered it. So but maybe we can, go through where it goes. It will show something on the practical and just discuss and ultimately can, you know, have some Yeah. Sure. More brainstorming on that. So yeah. So so so first of all, what I want to, say a couple of words about value creation one more time. So, yeah, as a token engineer, I understood that we don't know anything about tokens because we have all the token trackers, Messari, CoinGecko, CryptoRank, CoinMarketCap. But what you have, market metrics, price, what could cap liquidity and related metrics. We don't know how token works, what are utility watches, you know, some utility metrics. So you can know only how to buy and sell and where to buy and where to sell, and you don't know anything else. And I was and how I visualize this problem, I understand that this is, you know, like, a big iceberg. Right? So, MarketMetrics is only the upper, you know, water piece and underwater, we have a lot of, you know, information that we miss at this moment. It's utility centric, non market metrics. How it works? What is the utility towards the metrics of utility? What's the trends? I mean, will this cash flow grow in or, you know, do this governance and growing? I I mean, you can calculate all of this. But to do this, you need to understand Basically. Yeah. The the demand side. Yeah. Yeah. Finally, the demand side is missing Use value. As a you know? Yep. So we need to understand where the value is originating and, get on chain metrics and build the metrics finally. So what is, like, good that I already build the methodologies, you know. So, yeah, this is, for example, the curve, how the curve looks like. Now methodology. So you lock a token, you can get a governance value, you can get protocol fees, and you can get some additional future cash flow if you provide some liquidity to the boosted pools. Very simple model, but very efficient. It works. I mean, some critics on the curve model there, of course, is securities, but need to also understand that, there was a lot of ill degradators that constantly dump tokens and the amount of stablecoin exchange. I mean, the volumes of stablecoin exchanges also, not so big as expected. So the model itself from the economic point of view is very low. But, you know, the we also need to understand the market conditions and I want to find that, you know, third third party, problems, applied to the price. It's not only the utility. Right? So Mhmm. Yeah. So I decided to build something that, can show us, you know, you token utility metrics and real real understanding on the deep level. So being with price, token generic. We got some optimism grant and support from, you know, token engineering and Nice. Optimism and open source observer. And, you know, we start building this. And now I will show what we built so far. So so, yeah, this is the, like, first, the contract we focused on video capturing and economic design. So we have some tokens now. You see that you have video capturing mechanism. Even instead of market cap, of course, maybe we need to add market cap. But, I mean, this is like alpha MVP fully open for critics at this moment. So and we can, for example, see how the, I don't know, the 1 inch token looks like because it's very complicated. So but let's try to explain the one inch. One inch is big is big project, but not many not many people know how token works. So it's looks really strange, like like a chemical formula.
Yeah. It it it looks like a molecule.
Yeah. It it is because, you know, like I applied some chemical background, as you know. Yep. Yep. Yep. So, yeah. The the thing is that you you it's a vortex code economics. Right? The similar to curve in the large scale. So you lock your token. The number one, you lock your tokens. You get you get risk exposure because you cannot enter your token. You eliminate your ownership price in exchange for utility for a while. So what you get for locking your token for, you know, one year, you're getting a future cash flow for the protocol fees, you're getting, governance value if you will vote. If you do the condition actually, if you cast your vote, you will get governance value. Also, if you, get 5% of stake in whole contract, you can get an extra run at Fusion or Solver node. Of course, you don't need to own these tokens yourself. Somebody can delegate it. So, if you get an access to run then to run the node. So before you get this access, you cannot run the node. They it wouldn't be registered. So if you have 5% of, walls inside the contract, you have a chance access, like, opportunity to run a node. If you're making additional actions, you run an order and maintain it, you do a you receive a cash flow for fusion orders, filling in one inch. If you don't want to run an order, then you have small amount of targets, you can delegate. You can use selection of delegation, get future cash flow from delegation.
Yeah. So for maybe this is for listeners to maybe for listeners who don't know much about one inch and maybe we we may also need to correct me if I've to make sure I fully understand that one inch is a decentralized exchange, that does, that aggregates, from various different other decentralized exchanges for finding, like, the best price.
Yep. It's a DEX aggregator, having more than 50% of total market share at this moment, number one, in the world. And, they also have the off chain settling system with limit orders and like, this whole fusion order. So, you can trade off chain without paying gas, even with with the military protection. And, some resolvers required to do a job. And this economics also, like, have a, like, regulating access to this resolvers market on the top of governance, on the top of vertical fees. So and for the every original value, you can see, you know, what it depends on what the like, for example, your risk is depending on lock up period to the mark lock to the price lock. For example, what, how where the future cash flow comes from. So governance rewards, swap fees, price pack fees. So everything is Mhmm. In detail so I can understand everything. And if you're deaf, if you're a early nerdy guy, you can go and understand how this is built. Of course, this is, you know, some abstract, but we've rebuilding a kind of a mind map of the context, how the context are interconnected, what is where. And this is definitely better than the one inch documentation. I think on order, to be honest. With all respect to one inch, it's really better. So if you don't go to some documentation. Okay. Not documentation as a service. We just try to, you know, to to build our data platform. But, yeah, they I discussed with, the founder. They, of course, are very, you know, interested. They will support, us. For example, Optimism, which is well known project, is much more easier because it's only at this moment, only governance and conditional action. It's only government that you have there. So it's quite simple one. And we have some implementation details also. And here we have now we have some market metrics as an example, but we will have some, you know, metrics from build from on chain. I think maybe one, two weeks we'll have them already. Yeah. We are working on it. And if you have some, tokens that are not listed fully, we have some, I guess, on the token short. So all the new tokens are listed all the time. So you can see how to use this token three bullet points. Right. For the Monterrey, it's on the hype. It's where or the PI network. Maybe not the PI network. So and even this small amount of information, like, sharp bullet points you cannot find anywhere. It's, like, distilled information what to do in the token. Mhmm. Mhmm. And, of course, in the future, we will, add the full token page for each of them, but, I mean, we need some time for that. So at this moment, it's only TLDR, but we are feeling it. Yeah. And with now we also use the AI to make it for for us and just seeing how it works. And, yeah, in those periodic tables, yeah, it's fully interactive. So if you want to understand, so how it works. For example, for this content, you can see which tokens I are using, this kind of, you know, mechanisms. Mhmm. And you can see a lot of gray squares, so it means that mechanism is missing. Maybe maybe more of them.
Right. Right. What what do the numbers on the left mean? The one to nine?
From from one to nine so the logic of the table is on the top let's start from the top. It's a dominant origin of values. So origin of values get to boost, the more value to the makers, the biggest share I mean, under our opinion. So Mhmm. Where the chance of which cash flow governance access is just a generic value because, you know, negative for just value, they're negative. They're not contributing anything down there. It decreasing. Right? And the, these roles means the amount of the number of or just put inside the making. So the number one is trivial making with only one with only one original value inside. Because the making with only one original value is also, you know, it's also the makers, but it's like a trigger mechanism. So you can see that a lot of tokens have a very chance. Right? Have a lot of them. For example, access on the b and b because it's access to large part. So you can see, everything here. For example, the meme tokens. We also have a meme tokens. We we didn't list a single one, but, of course, we will. But at this moment, we just not focus on that. So the meme token is, when you have a hedonic value, like, you know, the value of meme. I mean, it's trying to focus on meme coins, which I really have some meme value. Right? Not just the market making value. So we have some hedonic value. We have some very transfer. Like, for Dogecoin, there is a meme value and, like, popularity value, but also, meme Dogecoin has a like, some significant amount of transactions that somebody uses it for transferability between exchanges or arbitrage. So means that let me talk in a serial equivalent transfer in our opinion.
Mhmm. Mhmm. Nice. And,
for example, for for for curve, what's called governance is much more complicated. Right. Right. And you can see that PANDOL and VL also have what's called governance. So this, allows you to understand the similarities between tokens. And in the future, there will be comparison of tokens of the if they're the same mechanism, the comparison of the all the metrics. Right? Like, you compare to cars, speed, you know, the everything. So Mhmm.
Mhmm. Yeah. Nice. I'm I'm excited to see bread in the,
in the token that's It's well, it's a deal. It's a deal. We need to we we need to to to get bread. So we will do bread. We will do, first of all, like, a token short just, you know, to have it short and then we will we need to do time, like, one week in our in our pipeline to build the docking page so I will be happy to Yeah. Yeah. Turn down and see so and deliver it to to your community. I mean, we're happy to do this. So, yeah, for example, this is a Velo drum. So, yeah, we we we will do the same kind of thing. So let's let's kick off it.
Right. Nice. No. Super cool. I'm super impressed by the, by what you guys have been able to make so far. And, yeah, I think it is a really nice evolution to see more, yeah, like, demand side economics in the crypto space, where we actually get to the root of, you know, the heart of the thing that supposedly we're all supposed to be doing, which is creating value for the things that we're building. And, yeah. So it's nice to see. And it's definitely, like I I think what's interesting about this is that this is definitely it requires more work. It's qualitative. So it's things you can't necessarily solely get off of on chain analytics. It's something that you need you need you need a a a smart guy to think about, you know, what exactly, how these tokens work. So very, very impressed by what you guys have been able to do. But all of this can be automated in the future. So,
you know, I understand that to analyze 1,000,000 of talking pages, analyze 1,000,000 of tokens in the future, we need we don't need to analyze 1,000,000 of tokens manually. We need to analyze 1,000,000 of tokens and build an AI. So because we quantify everything by mechanism. So it means that if the token is the same, because we know how to describe it, we know how it works, and we know how to build the metrics. Once we build the metric for for the makers, we can do repetitively, right, for other different implementation, but it will be similar. So it's also scalable. It's much more complicated than, of course, build the coin gecko type of thing where you just, you know, asking the exchange API, is this token listed or not, and what's the liquidity. Right? It's fully automated. It doesn't require any significant research, at least on the, you know, some research side, just a technical implementation for API. Mhmm. Our product is much more complicated. But I think, you know, their price is much more higher in terms of, you know, recognition of the word scale because I think, you know, building a platform that anyone can learn about any token, including new tokens that you'll be, you know, just decompose it, analyze by AI on the fly. It's really no even bigger than just checking the price. So I think it's it's a it's a good goal to to deliver it. So and it's very useful, I think. Because you have market prices on every, on every, you know, token tracker and utility designer don't have anywhere at this moment.
So I have some maybe a question for those who are maybe listening who are thinking about creating something that may involve a token, but maybe they're, like, very, they're very worried about kind of speculation or volatility on that token, that that's not kind of, like, the thing that they're interested in. What do you think what are some, like, pointers for them or, like, words of advice for people who want to make a token, but they don't want, like, the type of volatility that so much of crypto is is,
like, prone to. Mhmm. I think it's not possible to do totally not volatile token because I mean, not not nonvolatile token is stable quite fine. Right? Alright. So if token is a representation of something, it means that, trading below this value is available for arbitration. So if you're finding a good stable point at 0.9 and you really believe that this stable point is on debt, you will definitely buy it because you know that if you individually, it will go back to $1 and nobody will buy a stablecoin for 1.1 except some some technical issues when, you know, for that we need to cover the debt and there is very limited capability to pay that in all in these tokens. Okay? There are some examples where this stablecoin can go up for a short time. But in general, tokens are volatile. Any kind of assets are volatile. If you don't see the NVIDIA chart or the Tesla chart over the last ten years, it looks like in Bitcoin. Right. Definitely. I mean, just going up. So, like, parabolic or something. So volatility is a is it but, I mean, if you want to have some nonvolatile tokens, maybe they're actually locked or non transferable. So but if you have a developed market, it will be volatile because any kind of market requires volatility. Nobody will trade an asset, which is also possible in one price. If it is not, like, technical, it's like a stable corded. But but the value comes from, you know, $1 all the time. So you you don't need to provide a bigger job. So I think that the problem was, some price for their job, but they're just printing free money. So the sales job is not backed by any fees by any, you know, way that user brings to their system. So they provide a lot of fair job people, sell the job, go out, right, take out TVL, and it's totally wrecked. So
So maybe the question is more so, how how to not have a bad airdrop? Or, like, an airdrop that's, like, only kind of, like, supply focused?
I think that, first of all, if you have some utilities, with the token, you can provide your token in value created form, which means, for example, you have some token stake, you can provide stake tokens to go unlock, like, gradually over six months or something. So you you said, okay. You'll use for the product. You got the token. You will be able to sell. Really, user, you'll be able to sell. Not not worry. You will get free money, but let's do it a little bit later. So you'll see how it works. We'll derive some utility maybe. So if you give this testimony, right, oops, or maybe I don't need to sell it right away, maybe, you know, I will get some rewards, maybe I'll get some cash flows, and then we'll see it in governance. So at least they will try to use the token in the way that it's designed for. They wouldn't oh, I got a token sale. I even don't want to read how it works. So this is one of, I think, easiest approaches if you have some kind of, you know, token function that requires lockup or staking, you can try to take it for some lockup here. It's very easy. Mhmm. Or you can provide some gradually unlocks. Or, so I think that the amount of talkers that you provide also very is very important, and I think it should depend on not the subformal method that you user brings up to you or user brings some referrals. Right? But there are what actual way to bring the user to the system and referrals. Right? Maybe they traded, they, you know, spend some fees. So finally, I think that the airdrop is a, is approach to sell the tokens to users in indirect form. So for example, somebody comes to the protocol, somebody trades on this new deck, peer decks, spend, you know, one one k of fees and get, you know, airdrop for maybe $800 or 1 k. I mean, just, you know, it I mean, economically is I bought tokens paying my fees. Right? Mhmm. Okay. This this type of way.
Right. That's what you're saying. Yeah. That I mean, that's in in summary, one way to not have a a a, like, shitty volatile airdrop is to have utility, number one. Number two, I think what an interesting idea that maybe I'm getting out of what you're saying is, like, have the airdrop be sending the tokens first into the place where tokens have utility is maybe, like, one idea. Like, if you're making some sort of new protocol, like, you get an airdrop, but that money is only going into your ability to use the actual product for some sort of lock up period. So that then you you basically force people who are, like, maybe they wanna make money, but, like, now you force them to actually use it. I think that is a that's an interesting interesting, proposal that I and I'm not sure if I've seen before.
I think that there was some, you know, some examples, but of course not often. So the pin good talking, for example, was, you know, just a new point without any utility and it dropped Crazy. Right. Because, I mean, the question is, okay, you you you provided tokens for for your users. What they can do with these tokens? In other words, because they can do nothing. So, of course, they will sell because they don't understand what to do with them.
Right. Right. Right. Nice. Great. Very wise words of advice. Yeah. Was there any, like, anything you wanted to touch on, while we before we get to the end here? Any any last words?
Yeah. Yeah. Yeah. I just want to say that first of all, I advise any, you know, founder or, you know, researcher or person who tries to Sanskrit it deep into the, like, fundamental of targets. Of course, the market value can be different to you. So what's mean? Because it pumped a lot without any fundamentals. Of course, we understand that market is very speculative and there are a lot of factors. So the price is accumulative, metric of a lot of fact factors is fundamental value and, you know, all the spare capturing is only the share of lead. But, you know, the, more bearish the market, the more fundamentals we take into account. Right? Because now we don't want to go to new calls, we go to something more tangible that rises on cash flows or at least something. So this is the first, so never forget the economics. And the second, it's I will make a small minute of, you know, promotional contribution offer. I mean, if the you are building a project or you built a project with a token and you want some token page, just come to me. I've I will make it for free, of course. Just need some mention it's in Twitter. So at this moment, I, I'm I'm I'm very happy, you know, to build some good educational materials for, tokens that are already on the market to, you know, to educate your community. So I can build a token page for you. And all I need, in the return is, you know, you need to highlight this in Twitter that was really worth building something for you. So totally free. Of course. Bread chain will be taking up that offer for sure. Of course. Bread chain is number one in this list to to deliver that. I will start working on weekends. So
Well, thanks so much, Vasiliy. I appreciate you coming on and sharing and sharing the framework and, the wisdom. I love having people who understand finance and DeFi stuff more than I do. I think I learn a lot, even if it's not the usual thing that Socialists like to talk about and learn more about. I think it's super useful and super necessary, to have these kind of basic fundamental pieces of knowledge to know, so that they can interact with the system in a, like, smart way, basically.
So really appreciate that you've Yeah. Enlightened us. Thank you for thank you for inviting me. And I think that, probably we can we can more, we can have more smart exotic assets on even, you know, off chain world on, you know, government governance or, you know, any kind of level where average person can participate, average person is involved because all these loyalty cards, points, I mean, a lot of different types of assets that we even don't recognize as assets. Right? You never recognize your card for the discount in the shop as a asset, but, you know, probably, we will see much more of them. It's it's it will be very interesting. Yeah. Yeah. We are in future. So We're in for for an interesting future. That's for sure. Alright. Thanks, guys. Thank you a lot. Appreciate it. See you.