Demand Side Token Design Rules[1]

1: Marp via Obsidian

Demand vs Supply

Which matters more to the success of a company?

Demand or Supply?

What has greater impact on value of stock?

Market expects greater demand or greater supply?

If this is the case, why do most token-based protocols build out supply?

Build it and they will come fallacy

What Generates Demand?

This is the Number 1 question for companies, not just protocols. So many approaches, but it's the secret to very successful companies (if you know, please see me privately to let me know)

• Solve a huge, unsolved or poorly-solved problem
• Disrupt a large industry with lower-cost and/or "just good enough" to get non-consumers/overshot consumers
• Deliver a new level of entertainment/distraction/convenience
• Serve needs of an emerging class of buyers
• Deliver superior UX in a very large market with bad incumbents
• Address a latent "status" need

But these are true for regular companies, not just protocols. Protocols need to leverage inherent advantages.

Why a blockchain-based protocol?

What characteristics of the service are only possible with blockchains?

New Product Features (e.g. Quality of Service)

Token-driven network services like IoT (Helium) or XNET enabled a product that solves network access as scale. Solves for end-users and, in some cases, network operators.

Token-driven supply addresses topology and CapEx constraints.

Immutability of Data or Quantity

The service needs a form of immutability of associated data or quantity around an asset.

Trust Minimization

The product or service delivers a service or product which doesn't introduce counter-party risk because of trust minimization.

The solution draws from traditional Product Management + blockchain characteristics

Can Token Design Incentivize Demand?

This becomes a very interesting design space!

Note: incentives are always secondary to product market fit

Incentives Design Space

• "Belonging" or "Identity" Benefits Through Membership/Exclusivity/Meaning
• Financial Reward for Time Preferences (New Layer of Segmentation and Personas)
• Composable Access To Benefits and Features of Different Products or Services
• Status or Social Capital
• Dopamine Hits

Understanding Personas Matters

Cautionary Tales

• Mistake supply for demand
• Speculative
• Insufficient revenue/value capture from demand
• Poor product
• Poor time preference concentration

Summary