Tokenomics is an emerging field in the crypto space, with teams experimenting to find optimal designs for distribution, utility, governance, and more. Over time, several token models have emerged as standards:
- Governance Tokens (e.g., UNI, COMP)
- Productive/Staking Tokens (e.g., MKR, SNX)
- Vote-Escrowed Tokens (veTokens) (e.g., CRV, BAL)
This article explores these models, their performance, and which might offer the best value for investors.
Types of Token Models
1. 🏁 Governance Tokens
Examples: UNI, COMP, ENS
- Function: Grant voting rights for protocol decisions.
- Criticism: No inherent cash flow rights; often labeled "valueless."
- Case Study: Uniswap’s $9B valuation suggests governance influence holds value. Proposals like fee switches (e.g., Uniswap’s treasury plan) may future-proof these tokens.
2. 💵 Productive/Staking Tokens
Examples: MKR, SNX, SUSHI
- Function: Generate revenue via protocol fees (e.g., MakerDAO burns MKR with Dai interest).
- Key Trait: Requires staking to earn yields (e.g., SNX distributes sUSD weekly).
- Caveat: Avoid conflating inflationary rewards (e.g., AAVE staking) with genuine cash flow.
3. 🗳️ Vote-Escrowed Tokens (veTokens)
Examples: CRV, BAL, FXS
- Function: Lock tokens to gain boosted rewards (e.g., Curve’s veCRV directs liquidity mining).
- Advantages: Combines governance, cash flow (e.g., trading fees/bribes), and incentive alignment.
- Adoption: Gaining traction but faces high inflation (e.g., Curve’s 100%+ annual emissions).
Historical Performance Analysis
2022 YTD Price Performance (Avg. Weighted Index):
| Model | Tokens | YTD Performance |
|---------------------|----------------|-----------------|
| Governance | UNI, COMP, ENS | -58% |
| Productive | MKR, SNX, SUSHI| -59% |
| veTokens | CRV, BAL, FXS | -72% |
Key Takeaways:
- veTokens underperformed despite their "meta" status, likely due to high inflation (e.g., CRV’s 100%+ supply growth).
- Productive tokens led by SNX (-35%) but dragged down by SUSHI (-87%).
- Governance tokens mirrored market downturns but showed resilience (e.g., Uniswap’s fee-switch potential).
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FAQs
Q: Are governance tokens worthless?
A: Not inherently—their value lies in governance power (e.g., Uniswap’s fee-switch vote).
Q: Why do veTokens have high inflation?
A: Incentivizing liquidity (e.g., Curve’s CRV emissions) can dilute short-term value.
Q: Which model is best for long-term holding?
A: Productive tokens with sustainable cash flow (e.g., MKR) often outperform.
Conclusion
While token models influence value, fundamentals and narratives drive price action. veTokens offer compelling mechanics but face inflation risks, while productive tokens like SNX demonstrate resilience. Governance tokens remain relevant if they evolve cash-flow rights.
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Final Note: Always assess protocol-specific catalysts beyond token design.