Supply and demand. Most token ideas have the first part down. Distributing tokens is the easier thing to come up with.

But why should they be worth anything?

Last time we touched on tying redemptions to something that 'obviously' has value (the upvote, or dividends, say).

Steem Value Proposition

Funnily enough, it does all point back to why steem should have value. There are many explanations already, but I would like to summarize it as

"Enough idiots have bought into the idea of Steem as a value distribution system"

I am one of those idiots. I suspect there are many others. But it is only as efficient as its SP stakers want it to be. From an abstract point of view, what we can fund with our collective vote "justifies" the funds that are used to buy in. Everything else is just dumb dilution of currency.

We could be using what current power we have to fund things we already find valuable today. And to be fair, there are valuable things funded. A functional social network where we roam, various platforms where we interact, incentivizing tasks with bounties, various games, and now steem engine. And let's also not forget funding of creative works or efforts to keep people engaged.

It's so indirect, and it's not clear how long it takes for the price to reflect the belief about Steem's future.

Anyway the point is that we have a belief in its utility, and it's not really clear what the value of that system is, and the price is a sort of judgement for it.

Utility

For a token, we can think of similar notions of utility. And a good thing about a token is that it can be used for independent valuation of any particular idea.

Before I was dead set on the redemption aspect of a token, or things that directly justify the value of the token. That is the simplest. But what about things that could be "like Steem" or "like Bitcoin"?

As a simple example, if a token properly incentivized people to clean up Steem, and there were funds backing the token so that the token in turn actually drove behavior that actually made it a better place for everyone, would that work?

It's not really clear. Are buyers of such a token the ones picking the tab up and benefitting indirectly through a hopefully measurable effect on Steem? The token itself doesn't seem to have an upside to it. If it measurably affected the steem price, and some of that translated into funding the token in some way, then maybe...

It just doesn't seem like things like this could be sustainable without other ways to tie into token value. (Or continual, effectively donation-like support)

And let's also call out a specific popular plan. Delegation plans and distributing tokens to delegators is not the way to create value. This still counts as a faucet. Ultimately if nothing productive is done with the delegation / input funds, the whole thing disappears. Still, a fair way to get initial backing.

So what then?

Making the Token Work

A token needs to represent something useful, fun, or valuable. I suppose that one also needs to be careful to avoid classification as a security unless you have done the due diligence in terms of complying with local laws. At least steem engine has an offering for doing that groundwork. But I want to think of something that would not be classified as such. Or at least try...

Another fun issue to think about is that in many cases, we want to ask whether a token is even necessary. If we are offering things in exchange for a token, why couldn't steem/SBD work just as well? This is pretty tricky to get around...

As I've been pondering, I've noted that for this we need to build a system that is fundamentally powered by the token, and allow the system as a whole to be priced by the market.

For example, let's say we want to measure the value of flags as a whole. Set up a system that essentially records how many rshares you've used for flagging and tokenize it. If the community values it, perhaps it will price the token accordingly. This again seems to come down to "donation based funding..." Maybe one can turn around and purchase these tokens to incentivize bonus flags? It's all pretty murky to me...

Want to see how much influence your community has? Maybe offer to pitch projects in exchange for some fixed amount of the token (or bid). Whoops I guess that could be done with steem/SBD.

But maybe when we stitch together multiple functionalities we can come up with an interesting system.

Anyway, I think I'll leave it at this for now, I've been brainstorming on this draft for a while and no new ideas are coming to me so I'm just going to leave it at that. This is clearly not an easy thing to get right.... Let me know what you all think. Cheers!

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