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Author: Sunny, TechFlow
Robert Koschig is a token economics researcher at crypto venture capital 1k(x).At this year’s decentralized application summit held by Gnosis in Berlin, KoschigSummedI am designing my own tokens for decentralized hardware networks.For example, he believes that Filecoin’s KPI index-based token issuance plan is more scientific than time-based token issuance plan.At the same time, Koschig also pointed out that the current token rewards in the Depin network are unpredictable, challenging the predictability and stability of the Bitcoin model.
What does token design mean in general outside of decentralized hardware networks?As the industry gradually moves from the barbaric “Wild West” to today’s Ethereum ETF issuance is imminent, reasonable and scientific token design has become an indispensable part of most decentralized protocol products.OrThe current token designer will be the next generation of Internet product managers.
So is there a routine token design?Is there a constant token design model in the industry to facilitate project imitation?Koschig pointed out the main thinking directions of supply side token issuance, governance, demand side subsidies, and venture capital.During the conversation, we also compared two classic token models in the industry from the perspective of unchanging and ever-changing: Bitcoin and Ethereum, and how the project can extract appropriate design models from them according to local conditions.
Token design should focus on continuous improvement rather than being limited to the concept of “Tokenomics” because it carries the baggage of past practices.
A protocol does not necessarily require to have tokens, but it is a very powerful tool if used effectively.
Unlike traditional coupons or rewards, tokens are permanently yours.
Token design has common features in coordination, value capture and value transfer.
Centralized payment channels contradict the purpose of decentralized infrastructure.
Having your own tokens can bring additional benefits, such as controlling the issuance—how much you mint and to whom you distribute.
Governance tokens allow this transition if you want wider community engagement.
In terms of governance, tokens decide on proposals and votes, but there are different entities responsible for executing decisions.This separation helps to manage economies, pledge mechanisms and governance more effectively.
Tokenomics hasn’t changed much: the project designs it, starts it, and continues to run at a fixed rate of inflation.
When you see the Ethereum method,You will find that there is a situation where they can think through code, adjust, and introduce unlimited possibilities in economic terms.
Tokenomic Design is a new product design in Web3
TechFlow: Can you share why you choose to focus on research on token economics?
Robert:
Tokenomics is still in the research stage.Oftentimes, developers have great expertise in technology, but when it comes to economic design, the field is full of opportunities.
This field is very consistent with my background.You need to master mathematics, game theory, and economics, as well as understand data science, such as simulation and data analysis.Combining these two parts creates an emerging field full of potential, which is exactly in line with my main strengths.
TechFlow: Can you explain what Tokenomics is?
Robert:
Of course, if someone asks me, “What is Tokenomics?”
I would describe it as a preliminary attempt to explain how the protocol works in the economic aspects of its design.
You always have technical problems, such as: “What is this product?”
But once people understand the technical level, they recognize the strength of these economic coordination mechanisms.They will focus on studying the powerful potential of tokens and what they can unleash, such as when you make a sudden airdrop.
We’ve seen what happens when the project doesn’t initially issue tokens and then introduces them later.Tokenomics is the first term used to describe this process.
However, the term “Tokenomics” often carries the burden of pie charts and attribution schedules.
True economic design is about the coordination dynamics of your product.It’s not just what you do before the token is released or included in your white paper; it’s a constant effort, just like technology development.You start with a minimally viable product and gradually build and improve the technology – developers test on the testnet and the mainnet.Economic design should also adopt the same iteration process.
Token design should focus on continuous improvement rather than being limited to the concept of “Tokenomics” because it carries the baggage of past practices.
We should think more about economic design and how it evolves over time.
Does every Web3 project need its own Tokenomics?
TechFlow: Does every Web3 project need its own Tokenomics?
Robert:
I don’t think it’s necessary.If you don’t need to rely on incentives, then it’s naturally the best!
Even so, for projects that do not rely on motivation, it may still be beneficial to try some experiments.Traditional economy uses methods such as cashback or Starbucks coupons, butTokens offer some new possibilities due to their immutability.For example, if I give you my token because you have completed a specific task, I can’t get it back.不同于传统的优惠券或奖励，代币一旦拥有即永久属于你。
这种不变性使得代币成为了协议中的一种强大工具。它们可以提供重要的激励，且不必担心撤销的风险，不像某些可能附带条件的里程或优惠券。
The protocol does not have to own tokens, but if used properly, the token is indeed a very powerful tool.
TechFlow: Why do some protocols require token design, while others do not?
Robert:
It all depends on what you want to achieve as a protocol.
Are you a consumer-oriented app or a DeFi app?
generally,The common application scenarios of tokens involve coordination, value capture and value transfer.In these areas, tokens can be very effective tools.But the key is always Tokenomics and token design – the way it is implemented depends on yourself.
You may have the goal of launching specific tokens through your agreement.But if the operation is not done properly, the results may completely deviate from expectations.This decision should be solid and ensure that adding tokens to your protocol can really enhance your product.Once this decision is made, it is necessary to invest enough attention to it, because while tokens can bring economic and dynamic benefits, they can also cause harm if handled improperly.
TechFlow：您能详细说明在去中心化基础设施中使用数字代币与传统法币相比的优势和理由吗？
Robert:
certainly.There are multiple levels of needing digital tokens, and even different hardware can be experimented with.The typical argument for tokens is to incentivize supply chains.
Someone needs to buy these tokens and provide storage services.Technically, you can completely allow users to pay in USDC or other fiat currencies and operate outside the crypto world, and even on decentralized crypto infrastructure, you can use a centralized payment method.
However, this is often illogical,Because centralized payment methods are contrary to the original intention of decentralized infrastructure.
This is why it is best to stick to decentralized payment methods, such as using stablecoins.This doesn’t necessarily mean you have to use your own tokens; there are other excellent payment tokens on the market.However,Owning your own tokens can bring additional benefits, such as controlling the issuance – how many tokens you mint and to whom you distribute.
The beauty of token design is that it provides many degrees of freedom.You can make any decisions, and you can even change them over time.This is a powerful tool to grow your community and engagement.A simple mechanism is to govern tokens.Initially, it might be the team that drives the business, but as they grow,You will want a wider community to be involved.Governance tokens allow this transition.Of course, you can also build more advanced features on this basis.
Modular Tokenomics Design
TechFlow: Can a project adopt a modular approach when designing its Tokenomics?
Robert:
Yes, ideally, you can achieve modularity.This is the ideal goal.You can set, “Okay, the incentive on the supply side is a module, the incentive on the demand side is a module, and the investment speculation part is also a module.”
Ultimately, you have only one token and then you need to figure out how all of these relate to each other.That’s why governance in DeFi has become very interesting.For example, in the early stages, governance decisions may need to be made to cover the actual cost.Investors want to know that if they invest in your agreement, they will get better returns from a rational point of view.
This means you need to assign them a significant share of your network.However, when this is combined with governance, rewards become dependencies.For example, if you allocate a certain amount to the supplier and leave the rest determined by governance, those operators that do not sell their tokens will accumulate more voting rights over time.This can lead to internal problems as they may decide their own rewards at their own discretion, while game theory predicts this can lead to power struggles.
You also need to consider aspects of governance, because managing different interest groups is crucial.Relying on token-based governance alone may not be enough.That’s why many well-known agreements like MakerDAO set up independent governance committees.Tokens are used to determine proposals and votes, but there are different entities responsible for executing decisions.This separation helps to manage economies, pledge mechanisms and governance more effectively.
Tokenomics comparing Bitcoin and Ethereum: Change and Unchanging
TechFlow: Have you observed the evolution of Tokenomics?How did different projects adjust their Tokenomics model and what changes were made?
Robert:
Token rewards always make sense, right?
Early projects like Bitcoin demonstrated their powerful power as network effects and economic incentives.Fixed issuance plan for BitcoinInspired many platforms to adopt similar strategies.themFrequently stressed on fixed issuance plansThe importance of
However, some realize that this approach may be too limiting.Therefore, they add a second layer of more dynamic logic, albeit still fixed.From this perspective, Tokenomics hasn’t changed much: the project designs it, starts it, and continues to run at a fixed rate of inflation.
But there have been adjustments.For example, The Graph has improved its design over time.Initially, it sets up a curation function for data indexes through a link curve.Over time, they discovered inefficiency issues and adjusted the model.
This suggests that while the initial design may be fixed, learning and adjustment are necessary.Complex token economies like DeFi require iterative learning and modification.
It is important to allow experimentation and learning, rather than rigidly sticking to the initial design.While this approach seems more flexible than traditional crypto narratives, it avoids the dilemma of falling into inefficient models.This industry is developing rapidly and new technologies continue to emerge.Utilizing simulation, data science and continuous adjustments helps to design the token correctly.
TechFlow: What basic components of Tokenomics design remain unchanged over time?
Robert:
I think what remains unchanged is that the basic economic principles have been consistent since the development of the field of economics.Your tokens and their issuance incentive contributions are similar to the way Bitcoin inspires miners in the early days.This method is more efficient than starting from scratch.The early Bitcoin issuance volume is much higher than it is now.
The basic concept is still that if you have a well-run supply system, your protocol works as expected and provides a good user experience, the revenue will naturally come.Then these revenues can support the system.This principle is fundamental and always relevant.
You can cover certain rewards by issuing additional incentives or adjusting revenue streams to ensure that the overall reward is sustainable even if the rewards are not reduced.
TechFlow: Other cryptocurrencies besides Bitcoin seem more complicated in some ways.Do you think the Tokenomics or Web3 protocols will become as comboable as smart contracts, considering the complexity involved?Is there a way to simplify these theories?
Robert:
It is true, it is difficult, but it is also the beauty of Bitcoin.It uses a simple mechanism.On the other hand, when you see the Ethereum method, you will findThere is a situation where they can think through code, adjust, and introduce unlimited possibilities in economic terms.
If a mistake is made, offline discussions will come into play.People understand new dynamics, and different committees emerge, leading to proposals for separation or cooperation.It’s a challenging process, but it allows for adaptation and optimization.
Complexity is a huge challenge, and even the smartest minds in the industry are solving these problems instead of seeing every dynamic.Predicting behavior is extremely difficult.
Long story short, yes, it’s complicated and may never be easier.The simplest and most efficient model already exists and can be copied.Today, new projects tend to be more complex and adjustable than static and rigid.This is usually how technology evolves.
Think of bicycles: They have been around for a long time and were the fastest means of transportation.Basic concepts remain the same, but they are no longer the best choice for all modern needs.People keep adding new features, creating new problems and solving them.This evolution makes Tokenomics more complex but also more reliable.
The goal is to reach a stage where people can understand what is happening.If understanding is lost, trust can also be lost.Balancing the need for invariance with adaptability is key to ensure that most owners can vote for the changes necessary while remaining stable.
Common pitfalls to be aware of in Tokenomics design
TechFlow: What common pitfalls in Tokenomics designs have you observed that could hurt a project?Is Tokenomics design helping or hindering project growth?
Robert:
It is easy for people to fall into the trap of treating tokens as candy.When you use the token pool, it’s like getting a reward.People get addicted to it without realizing that the more they do, the more projects focus on tokens.这就是我们现在面临如误Causes of problems such as conductivity indicators, high total lock-in value (TVL) and low market value.
我们忽视了代币的根本目的。代币不只是奖励；它们是强大的Tools to coordinate, grow and accelerate the development of your projects.However, tokens should not cover up core products.At the end of the day, you still need to build a solid product.The token will eventually become part of your product, but it shouldn’t be the only focus.
At first, you may feel like you have a certain budget and standard, but ultimately you will find that without real income, use or commercialization, you have already spent all your incentives on short-term appeal and hype.This often leads to a rapid collapse when the market environment changes.
That’s why I spend a lot of time doing simple simulations, analyzing the basic mechanisms of supply and sales pressures, ignoring any narrative.I would ask the question like this: “Do you think these participants will hold or sell tokens?” How will this affect the market when the token is unlocked?Understanding these dynamics is crucial to avoid the pitfalls of short-term incentives and to build a sustainable project.
Case Study: Safe’s Tokenomics Design
TechFlow: I want to talk about Safe’s Tokenomics design.Do you have any insights on the design and evolution of Safe?(Note: Safe is a company invested by 1KX)
Robert:
Safe launched their token two years ago, which started as a pure governance token that is not transferable.I really appreciate its community nature.At the time, I hadn’t joined 1KX yet, so I didn’t pay much attention.Because the governance is running smoothly, I don’t have much to do.
They have established a good governance structure and another team member has helped in this regard.They developed a clear communication plan that detailed the steps required to make the token transferable.One of the key steps involved the practicality of the tokens, which they were recognized by the government.Now, this token is available for trading.
This demonstrates a good governance token design.Initially, it was non-transferable and played a good role.They distributed the tokens to the target population and kept it that way.However, the community ultimately decided to make it transferable.
It will be interesting to see how this will unfold.Safe is very motivating, with a clear vision for value capture and potential collaboration.They recently talked about plans to monetize successfully and build an economic model around it.Safe is an excellent product and we invest for a reason.
They have one nowPoints Program, I think this is a trend, and more similar plans will appear in the future.For example, I heard that there are similar initiatives in the DeFi field.These plansTransforming from pure mining activities, focusing more on real product engagement.Users provide feedback because they really like the product, not just to earn rewards.
