Tokenomics is hard but we've seen some clear winners emerge over the relatively short history of blockchains and cryptocurrencies.
Proof Of Stake
The POS (Proof Of Stake) validator model works. It's seen many, many thousands of small to large infrastructure providers enter the blockchain/cryptocurrency space. It's why many blockchains use it today as their security model. There's many opportunities for individuals to participate directly even. It is arguably at the core of decentralisation.
Proof Of Work
Similarly POW (Proof Of Work) also had been proven to have been a successful model in the past achieving large growth in a very nascent blockchain/crypto industry. In recent times it's come under criticism for it's energy usage and it's ability to scale to meet the high throughput and low cost demands of today's popular dapps. Proponents would argue that what POW lacks in those two aspects it makes up for in decentralisation and security. Whilst nowhere near as prevalent as before we've continued to still see innovations in the space (Render Network, Livepeer, Helium etc..) which are vital to pushing decentralisation forward across a wide range of industries.
Liquidity Pools
The liquidity pool model has been broadly successful in incentivising the large amounts of capital we've seen flow into popular defi applications. Over time there's been a wealth of different designs to optimise for certain liquidity characteristics (Curve's ve token, Balancer's 80-20 pools, the GMX-GLP two token design etc..).
However outside of these models we've not yet seen another successful tokenomics model emerge as a new design. Especially not one that wasn't defi.
That doesn't mean there aren't a bunch of people trying though and some of what they're currently throwing at the wall might stick. These are, in my opinion, the models which currently have the best chance of being a new viable tokenomics model in web3.
Move To Earn
Move to earn is a type of crypto gaming that rewards users for exercising, such as walking, jogging or running. There's a few established players in this space.
Stepn: THAT crypto runner you've heard about
Stepn is a move to earn app that lets users earn GST tokens by using a smartphone app and an NFT sneaker that tracks their movement via GPS. The NFT sneakers have different attributes that affect the amount of GST earned per session, and can be upgraded or traded on secondary markets.
Stepn has been successful in attracting over 2.3 million monthly active users and over 500,000 daily active users, raising $5 million in seed funding, and achieving high trading volumes and prices for its GMT and GST tokens.
Some of the successes Stepn has achieved include being invited to CryptoBahamas, a leading industry event, partnering with Animoca Brands, a leading gaming company, and creating a positive impact on the health and fitness of its users.
Stepn public beta phase V, the current version of the Stepn app (launched in September 2021), introduced several new features and improvements, such as:
However the project faces significant challenges. This article from Coindesk does an excellent job of laying out the challenges ahead for the project:
Stepn Was a Runaway Success During COVID but Can It Keep Moving Forward?
Sweatcoin: Building The Sweat Economy
The Sweat Economy - official website
Sweatcoin’s revenue comes from two sources: advertising and transaction fees. The company earns money by displaying ads to users through the Google ads platform, and by charging a fee for transactions on its wallet app, such as fiat on-ramp, off-ramp, crypto-crypto exchange, NFT purchases, and more.
Some of the successes Sweatcoin has achieved include reaching over 10 million users in its first two years, becoming the number one app on the US App Store in 2018, and raising $5.7 million in seed funding in 2018.
However, Sweatcoin has also faced some criticism and challenges, such as questions about the accuracy of its step-counting algorithm, the limited availability of its rewards and marketplace, the difficulty of earning enough sweatcoins to redeem high-value items, and the competition from other fitness and crypto apps
The Central NFT Project Economy
This is the idea that an NFT project is so powerful, in both revenues and IP, it can act as the base of an entire economy.
ApeCoin: The NFT driven creator ecosystem
The token has already been used as an in-game currency in Benji Bananas, a game by Animoca Brands, and will be used for a play-to-earn game that BAYC and nWay are developing. Interestingly though you didn't have to use ApeCoin for Dookie Dash. Though that was a game tied tightly to the NFT collections themselves.
The token has seen some notable successes, such as raising over $100 million in its initial sale and reaching a market cap of over $500 million.
However, the token distribution model has also attracted some criticism, as some argue that it favors the BAYC team and founders, who hold around 23% of the total supply, and that it could create selling pressure ahead of a major token unlock in September 2023.
But what about Doodles, Moonbirds, DeGods etc..?
It's the business model that literally built web2. Is there someone who can built it the web3 way?
The Attention Economy (read: internet advertising)
It's the business model that literally built web2. Is there someone who can built it the web3 way?
BAT (Basic Attention Token): Monetising your eyeballs...
...but not in a creepy AF WorldCoin way.
BAT is used as currency on the Brave browser, where users can watch privacy-preserving ads and receive BAT rewards for doing so. BAT can also be used to tip content creators, access premium content, or exchange for other cryptocurrencies or fiat currencies.
BAT was created by Brendan Eich, the co-founder of Mozilla and Firefox, in 2017.
Some of the successes BAT has achieved include reaching over 40 million monthly active users and over 1.5 million verified creators on Brave, becoming one of the most widely used ERC-20 tokens on Ethereum, and partnering with various brands, publishers, and platforms such as Binance, Wikipedia, The Guardian, and Reddit.
Some of the Basic Attention Token project's recent achievements have been:
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Launched the Brave Wallet that unified Brave Rewards, custodial accounts, and non-custodial accounts, and offered various features such as DeFi and NFT support, fiat on-ramp and off-ramp, crypto-crypto exchange, and more.
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Expanding BAT utility beyond Brave Rewards, such as enabling users to pay for content subscriptions, access premium features, or donate to causes with BAT.
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Developed a decentralized advertising platform that allows users to opt-in to view ads from verified advertisers and publishers, and receive BAT rewards for their attention.
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Creating Brave Search engine that offers users a private and transparent alternative to Google Search, and allows them to earn BAT for using it.
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Integrated BAT with other blockchain platforms and protocols, such as Solana, Polygon, and Binance Smart Chain.
Some of the criticisms & challenges Basic Attention Token has faced include:
There are many, many more different tokenomics designs being tried. Nearly all you've never heard of because they were DOA (Dead On Arrival). Sooner or later one of them will break out just as the tokenomics models above have.
Breakout success does not mean long term success. All the above projects are yet to be declared long term successes. They all face significant challenges ahead of them making their brand of tokenomics work outside of the broader crypto boom bust cycle.
Attracting users who stay for the intrinsic value a tokenomics model produces (and not the extrinsic value of a pumping token price) is the end goal every one of them is working towards.
But will any of these succeed?
Here's my hot takes on each the projects as goes what it will take for them to succeed long term.
Most Likely To Succeed Because: It gets broad adoption
- Stepn & SweatCoin
Fitness apps and tracker are widely used, popular and easy to understand. Even the Move to Earn concept isn't new to crypto. There's been successful fitness rewards programs in everything from workplaces to health funds for years. If any web3 app is going to onboard large numbers of non web3 users it's likely going to be an app that looks identical to the web2 apps those users use, and love, already.
Most Likely To Succeed Because: It 's the Shopify for online ad revenue
- Basic Attention Token
You know the best thing about Shopify? It's millions of daily users never know they're using it. By being the infrastructure for businesses and entrepreneurs to build on Shopify exploded in growth in a market many thought was nearing saturation. If the BAT project is able to let builders obfuscate the token from users that could usher in a whole new sector of self funding apps. No middle men needed.
Most Likely To Succeed Because: It's BAYC
- ApeCoin
Now hear me out. No one could've predicted the success BAYC have had. "They're just JPEGs of MONKEYS!" screamed a thousand YouTube videos, blog posts, and news articles.
Yet, billions of dollars later, the BAYC freight train continues to gather steam, almost oblivious to the crashing crypto markets around them. They don't seem to be able to put a foot wrong and it's hard/risky to bet against luck. I'm certainly not, that's why I'm staking $APE at ApeStake.io.
"I'd rather be lucky than good." - Lefty Gomez
But what about Write To Earn!?
Yes yes yes: I hear you. I'm posting this on an arguably yet another tokenomics model: Write to Earn.
This space, I think, is just too early to have had a breakout hit. Steemit (and it's hard fork Hive) arguably started the concept of Write To Earn and the resulting tokenomics designs around that. BULB borrows a lot from both of those platforms.
There's some interesting experiments happening with Solcial (user owned value) and Showtime (an NFT launch/social media) and others.
It feels like the space is waiting on Lens Protocol to be fully opened up and for the dapps in that ecosystem to get proper user counts. From that we should see a lot of experimentation as those projects start to gain momentum.
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BULB https://www.bulbapp.io?referral_code=mrhx9o
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