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Mental models for understanding tokens

Nick Tomaino, Chris Dixon
Andreessen Horowitz
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There are two types of coins in crypto:

  1. Usage Tokens: ownership is required to use a digital service
    1. Similar to IP addresses and domains; currently most cryptos fall in this category
  2. Work Tokens: ownership gives token holders the right to contribute work to a decentralized organization

What gives tokens long term value

Look at products that will drive real usage. - What are the products that people are going to use in the next couple of years - Can the product successfully be executed to solve the initial problem

The role of stablecoins

  • Stablecoin: a coin that has volatility characteristics similar to the dollar, combined with decentralization similar to Bitcoin or Ethereum There are two categories of stablecoins:
  • Coins that try to peg a physical asset to a digital asset
  • Crypto native coins with a game theoretic mechanism

Four characteristics of attractive crypto investments

  1. Team - A team with a deep technical understanding of crypto
  2. Product - Good timing of the product release
  3. Community - A strong, committed developer community
  4. Token mechanics - Long term value and a fair price

The future of tokens

What does crypto have left to prove to its consumer base? - Proof of stake - are electricity costs sustainable/worth it - Scaling issue solutions - Sharding: allowing miners to run their own unique code - Horizontal solutions such as Cosmos

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