Synthetic Moneyness: Creating Utility Through Token-Pegged Pricing

A novel tokenomics to engender perpetual cycles of hoarding, price support, and mania, for businesses. The key is to learn the lesson from gift cards.

What are the possible ways to engender token utility?

• Stake for yield / hold for dividends

• Stake for voting rights

• Stake to enable privileges

• Be used as collateral for borrowing and trading

Is there anything else? Why is the promise of programmable money so disappointing? With the power of permissionless monetary policy, can’t we invent something beyond what exists in traditional markets for the love of God? Are there any other architectures that can expand the space in which market makers can manipulate the token for MAX EXTRACT?

It’s interesting that very rarely do we see protocols experiment with the option of selling their services for their own token. But why is that?

Well, the reason why is simply because ALL tokens are shitcoins. They have no moneyness. They have no commodityness in the sense they’re a commodity of uselessness. They’re as much as a commodity as your feces are a commodity. Hence the very apt name “shitcoin”. And the protocols providing services know that their token is a shitcoin. Why on earth would any protocol charge a shitcoin for its real, tangible, and valuable services? Why would one charge a shitcoin, one’s own shitcoin notwithstanding, for one’s actual services, which carries cost? If pumpdotfun had a token, why would it ever consider allowing folks to initiate pools with its own token, when it is already making stupid money charging SOL?

Suppose we do charge it, what happens then? To pay for the costs of business, one would have to exchange the shitcoin for actual hard assets. That will require liquidity, and so one has to find it, or provide it. In all likelihood, it will be the team itself spending money and energy to providing that liquidity. So essentially, the protocol will be paying money for its own income stream. You’re literally using yourself as exit liquidity.

There’s a good chance that this picture misses something. Because many businesses, from starbucks to mom and pop shops, in one way or another, manage their own private monetary policy, in the form of coupons.

Consider the case of starbucks gift cards. The customer buys the gift cards, which is then exchangeable for coffee. Note that the value of goods exchangeable are fixed in dollar terms. You are never offered coffee buyable at x amount of gift cards. You are always offered coffee purchasable at x dollars worth of gift cards.

And obviously, purchased but unspent gift cards are free money for the company.

Now consider this. Suppose you’re offering a service, or selling a product. You accept ETH as payment, but you’re now also consider if you can accept your own shitcoin as the means of payment. Suppose the price of each unit of product sold is 1 ETH, and without loss of generality, suppose you’re now also selling the product for the price of 1 SHITCOIN. The choice of payment with whichever is up to the customer. What’s going to happen? How is it going to make sense? Let us be allowed the assumption there is demand for the product.

Given the SHITCOIN can now be used for payment, as mentioned before, any sensible person would flock to use the SHITCOIN to buy the much coveted product or service. Note that given the product is sold for 1 ETH or 1 SHITCOIN, it would make sense that the price of SHITCOIN would rise to at least the price of ETH. So people flock to buy SHITCOIN, spend it for the product, and as a result, the circulating supply of SHITCOIN dwindles.

If you do not allow any SHITCOIN to go back into circulation, you can argue that eventually the price of SHITCOIIN will reach pure speculative territory, where market participants will be holding purely for the sake of speculation. Frenzy and mania would be very helpful emotions now. At this point, no one will be using the token to buy the product, but will horde it for speculation. This is Greater Fool zone, Tulip Mania, South Sea, Newton’s Wail. And with that climate, it could be possible to sell the tokens back to the market with a good number of buyers gradually, without jeopardizing your ETH income.

Now of course, there’s a need to adjust your token supply and your ETH-SHITCOIN ratio. Presumably, setting the ETH-SHITCOIN as 1 to1 is questionable. To reflect their relative moneyness and inherent utility, it would be reasonable to fix the ratio at something more like 1 ETH = 10,000 SHITCOIN.

Given our set up, if the price of SHITCOIN plummets, people will flock to buy the token, especially when the price of the token is below the designated ETH-SHITCOIN ratio. They will buy the token, and proceed to exchange it for the product. Irrational speculative frenzy will be very helpful in ensuring buy pressure even when the price of a SHITCOIN has NOT breached below its ETH-SHITCOIN peg ratio.

On the other hand, if the price of SHITCOIN goes irrationally parabolic, people will be incentivized to pay in ETH, and horde the tokens. Just like how nobody ever pays anything in bitcoin.

This is the point of tokens. It is to beget mania. It is to summon the madness of people. Schelling points and whatnot. Its entire purpose is to enable private monetary policy. It is to let people role play the Fed.

Obviously, this is commodity money, just like how cigarettes act as money in prisons and salt in Han dynasty China and tobacco in early Virginia. The token tokenizes a commodity or service. Starbuck credits commoditizes starbuck coffees, Amazon gift cards commoditizes amazon goods, Spotify cards for spotify credits, and so on. But this also explains why nobody uses the above set up. For the above set up to work, the company must be providing a service - something people want to use. The obvious reason why nobody in crypto employs the above set up, is because they aren’t providing a service that people want.

Everything needs a token

Nothing needs a token

Everything needs a token

Nothing needs a token

Everything needs a token

Nothing needs a token

Everything needs a token

Nothing needs a token

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As Cobie argued in a now famous essay,

Staking used to mean something. I think it was Peercoin that first launched a proof of stake protocol, so probably about ten years ago now. Since then, POS has become increasingly popular for new blockchains, with all the newer trendy ecosystems sitting on POS-ish chains.

For Peercoin and the POS networks that followed, staking had a purpose. Owners would offer their coins as collateral for the chance to validate blocks, and they would be rewarded for doing so. Staking, therefore, rewarded users risking collateral and doing work: participating in functions necessary to the continued operation of the network or protocol.

Somehow, over time, the word ‘staking’ has been repurposed and redefined. Instead of receiving rewards for contributing to chain security with collateral at stake, modern “staking” just seems to mean idk we give you more coins as a reward if you don’t sell your current coins lol.