Token Economics / Token Craft - Reservoir
I've written on token economics a few times. Sometimes it's in reference to tribes on hive-engine/tribaldex. Other times it's in reference to Splinterlands.
Token economics basics
At the most fundamental level of creating tokens you have to worry about 3 things: faucets, sinks, and use cases.
- A faucet is where the tokens come from. There's typically a smart contract that's minting them for some reason.
- A sink is typically considered a burn case for the token. When you burn that token and it's permanently gone what thing does it provide you?
- A use case is what can you trade the token for or how you can use it. Some of this is just basic trading and using a token as a store of value. In other ways it can get you goods and/or services. In other ways it can help you earn.
That's old news; Today I'm adding another basic thing to consider "Reservoirs"
You should already know what this word means. it's a big body of water that towns and cities rely on to get fresh drinking water.
In this context I'm considering it a benevolent place where a crap ton of tokens can be stored for a long period of time.
You could argue that the Hive DAO is a reservoir (if you believe that the projects it funds are generally for the benefit of everyone and a useful deployment of funds). I'm not personally convinced the spending is appropriate, but at least you can get the sense of something that might be reservoir like.
Another example is the Splinterlands Corporation for the SPS token. Splinterlands takes a variety of tokens as payment and actually uses those tokens in different ways. Sometimes splinterlands takes tokens as income when it sells card packs. Sometimes it burns tokens. Sometimes the tokens go to the DAO. Overall though, splinterlands accepts SPS as a payment token. By doing this it's built up a large holding of SPS tokens. The company does not just randomly dump them back on the community but it also doesn't burn them. So, it continues to build what I'm calling a Reservoir of tokens.
What do you do with this information?
Ok, I see 2 use cases. You're thinking of apeing into some coin. I would encourage you to think through what are the faucets, sinks, use cases, and reservoirs that exist for that token before diving into it.
Also, I see this information may help you as you design token economics in your project. Why will you mint it? What will it do? Can you burn it for something cool? Is there a benevolent body that will be a large holder or buyer of last resort.
These are just concepts for you to think about as you make or buy tokens.