on product tokens, risk discounts and access premiums

Tokens go in and out of vogue every market cycle. 

In a bear, tokens are seen as a category error. 
In a bull, tokens are popular again, usually with a new flavor.

I see some progress in the fact that outside of L1s and the  non-BTC boomer-coin complex, this cycle's most

Jesse Walden

on product tokens, risk discounts and access premiums https://x.com/jessewldn/status/1947493831491912079

Tokens go in and out of vogue every market cycle. 

In a bear, tokens are seen as a category error. 
In a bull, tokens are popular again, usually with a new flavor.

I see some progress in the fact that outside of L1s and the  non-BTC boomer-coin complex, this cycle's most in-vogue tokens are associated with products people use. 

Because people use the products and love them, they  have cash flow, and token-holders are seeing the benefit of that.

I don't think its a coincidence that many of these tokens are built, and in some cases operated by unabashedly centralized core teams, or otherwise very lightly decentralized ones.

Its because its really hard to build a product people want, and near impossible to do it by committee. 

In crypto the phenomena of 'product tokens' started with exchange tokens and is still in early innings of getting iterated on. They likely won't get to final form this cycle, and while they're definitely not without problems, more of their economic activity is happening transparently onchain and thats a step in the right direction. 

So as a directional thought experiment, I find it useful to assume these types of tokens may stick around, because the market values them. Through that lens, is I find it useful to view the popularity of product-tokens as the product and beneficiary of two secular trends:

secular trend #1:
the democratization of investing: 

more and more people want to invest—not just in crypto, but in stocks, levered ETFs, 0day options, prediction markets, treasury vehicles, perps, etc. 

this is because capital markets are where the average person can access asymmetric economic upside while economic growth is increasingly concentrated in smaller and smaller technology companies. 

people especially want to invest in products and services they love or have communities they love because they want to win-and-help-win. 

secular trend #2:
'live player' founder worship 

investors, especially retail, want to get behind people and ideas who are engaging, and who put numbers on the board. 

this trend really started in Silicon Valley, where founders of in-demand startups, like Zuck, were able to attract investment while retaining corporate control. 

where there's higher trust (e.g. high integrity founders, or more economic activity that is transparent onchain) investors can/could get comfortable with more limited rights. in these scenarios, ownership is more to do with economic alignment vs. more classical shareholder governance models.

so coming back to product tokens, i find it helpful to view them as instruments that principally offer that kind of economic alignment with product growth. users know the product, and they want to own a piece of it. 

yes there are policy implications to this train of thought, but setting that aside and looking purely at the commercial side of it, this is a new asset class that the market wants—and if we assume markets can reason about risk, then mr. market should be able to price risk of more limited rights/protections. 

on the one hand, maybe these tokens should trade at a discount to equities because the risks are greater and protections lesser, but what we see in practice is the market assigning an ACCESS premium, because never before have retail investors had access to the kind of asymmetric early-stage economic alignment that product tokens offer. at scale, which will win out is a tougher question to answer.

on policy, i would say it simply needs to adapt to this new in-demand asset class, because its not going away. i think its positive that forthcoming rule-making allows the presence of a core team to play a continous role without necessarily making the asset a security, so long as tokenholders have ultimate transparency and control--e.g. cash flows onchain, open source, and can remove that team.

so in addition to decentralized infrastructure and core primitives, i think its directionally positive (though not without risk) the the market is leaning into a new flavor of tokens: product tokens with live players at the helm.

Stay Curious // iixii // Head of Crypto at https://www.lazertechnologies.com/  // Prev: CoinDesk, Roc Nation // based @basedevo

FTFH https://farcaster.xyz/bleu.eth/0xe12993a6