Demand - Value Engineering
(Under development. Please, come back later. Just published to share the progress)
1. Introduction
The nature, behaviour and price of a cryptocurrency is determined by the interaction between a demand and a supply coordinated by a monetary policy. Depending on the policy we will have different types of tokens.
In this post we will examine the demand and leave supply and monetary policy for other posts.
2. Tokenizable Assets
In order to allow value capture, we must focus in fungible assets. From the table of assets, only natural resources and commodities have the fungiblity feature.
| type | item | fungibility |
|---|---|---|
| Natural Resources | Water | yes |
| Natural Resources | Energy | yes |
| Physical Assets | Commodities | yes |
| Physical Assets | Real Estate | no |
| Physical Assets | Art | no |
| Physical Assets | Industrial Assets | no |
| Physical Assets | Collectibles | no |
| Digital Assets | Digital Art | no |
| Digital Assets | Digital Collectibles | no |
| Digital Assets | Music | no |
| Digital Assets | Gaming | no |
| Digital Assets | Corporate Branding | no |
| Financial Assets | Currencies | no |
| Financial Assets | Bonds | no |
| Financial Assets | Equities | no |
| Financial Assets | Investment Funds | no |
| Financial Assets | Loans | no |
| Certifications | Entry Tickets | no |
| Certifications | Proof of Participation | no |
| Certifications | Diplomas and Certificates | no |
| Certifications | Web Domains | no |
| Certifications | Proof of Maintenance | no |
| Certifications | Vouchers | no |
| Certifications | Loyalty Points | no |
| Certifications | Awards | no |
3. Token Utility
3.1. Token Ecosystem
3.2. Token Utilities
| Actor | Utility |
|---|---|
| Investors | Swap CYGAS |
| Exchanges | Swap CYGAS |
| Filling Plants | Pay for raw LPG |
| Retailers | Pay for LPG cylinders |
| Independent Retailers | Pay for LPG cylinders |
| Consumers | Pay for LPG orders |
| Institutional Consumers | Pay for LPG orders |
4. Token Extended Utility
4.1. Token Extended Ecosystem
4.2. Typical Token Utilities
| type | name |
|---|---|
| Identification | Access |
| Identification | Governance |
| Financial Services | Liquidity Provision |
| Financial Services | Profit-Sharing |
| Financial Services | Mining |
| Financial Services | Staking |
| Financial Services | Launchpad |
| Currency Functions | Medium of Exchange |
| Currency Functions | Unit of Account |
| Currency Functions | Reserve of Value |
| Currency Services | Payments |
| Currency Services | Discounts |
| Currency Services | Cards |
| Currency Services | Transfers |
| Currency Services | Lending |
5. Token Intrinsic Value
5.1. Definition of Value
Economic value differs according to the different Schools of Economic Thought. This is relevant because, when we design a token, we can adhere to the Economic School of our choice. Below there is simplified list of economic values:
| theory | author | type | fundamentals |
|---|---|---|---|
| Land Theory of Value | Physiocrats | Objective | |
| Objective/Intrinsic Theory of Value | Adam Smith | Objective | Value that something has “in itself” |
| Labor Theory of Value | Ricardo | Objective | Correlation between the value of a good and the labor required to produce the good |
| Use Value / Exchange Value Theory | Marx | Objective | Exchange-value is the quantitative aspect of value, as opposed to “use-value” which is the qualitative aspect of value, and constitutes the substratum of the price of a commodity. |
| Commodity’s costs of production | John Stuart Mill | Objective | |
| Subjective Theory of Value | Menger | Subjective | The subjective theory of value believes that a good's value depends on the consumers wants and needs |
| Marginal Utility Theory of Value | Jevons | Subjective | Marginal utility |
| Monetary theory of value | Keynes | Objective | Monetary theory posits that a change in money supply is a key driver of economic activity. MV = PQ. |
| Power Theory of Value | Jonathan Nitzan Shimshon Bichler | Objective | The power theory of value approaches the question of valuation from the top down, by which the dominant owners of the bulk of societal wealth, determine the value of their assets. |
All these theories of economic value can be classified in 2:
-
objective value theories. The objective, or intrinsic, theories of value hold that the value of an object, or a good, or service, is intrinsic, meaning that it can be estimated using objective measures. Most such theories look to the process of producing an item, and the costs involved in that process, as a measure of the item's intrinsic value.
-
subjective value theories. The subjective theory of value, instead, states that prices of goods and services in a market are determined by the subjective preferences of consumers.
5.2. Tokens by Value Definition
According to the nature of the value and the way that the value is captured, we have different types of cryptocurrencies:
| type | value | consensus | interaction | distribution | sample |
|---|---|---|---|---|---|
| Unbacked Tokens | |||||
| Asset Backed Tokens | Subjective | PoO | >>> Captured >>> | No Minted | tokens |
| Utility Coin | Any | Any | ≠≠≠ Independent ≠≠≠ | PoS / PoW | coins |
| Objective Utility Token | Objective | PoPW / XToEarn | <<< Created <<< | Minted On Supply | tokens |
| Subjective Utility Tokens | Subjective | PoO | >>> Captured >>> | Minted On Demand | tokens |
Once the value is captured, we need to provide additional utilities to the token to retain and, maybe, grow, this value to maintain velocity of circulation under controlled margins.
5.3. Subjective Token Value
Intrinsic value is the value that the token gains from the credibility and utility of its project.
6. Token Speculative Value
Speculative value is the value that the token gains from speculations traders make on a token's price.
7. Estimating the Demand
The demand for your token will be motivated because your users apreciate one or more of the utilities of the asset, or assets, that are bound to the token. The demand is related to the physical world on how good is your business offer. If your offer is good, your users will be eager to acquire, or enjoy, the utilities that you are offering and the demand of your token will increase.
In the next sections we will expose how to undertand the demand of your token, what can the bound assets and utilities be and how can it be quantified.
uantying the demand will help later on to estimate the supply