Defi Token Design

Follow me on Twitter @ordcryptoguyBesides being the medium of fundraising for the company in a less regulated matter, a token’s purpose is the underlying driver for determining its true value. Tokens require functionality to maintain and accrue value. There need to be incentives for investors to hold onto their tokens besides the promise that when the invested project is successful in the future, they will be rewarded, otherwise a great portion of the token price being left to pure speculation.The rise of Defi has pushed forward the importance of token design, and its different nature to many previous crypto projects has also made it easier for Defi tokens to justify their value. Most Defi tokens are designed with the focus that holders benefit proportionally to network usage and growth of the protocol. It’s no surprise that some of the functionality of Defi tokens is modeled after equity, where investors value their stake based on the revenue provided by the underlying asset and have the right to influence the direction of the organisation. I aim to cover some important features of Defi tokens and explain how they contribute to retaining a token’s value.StakingStaking is when investors deposit their tokens into a protocol, locking it for a period of time and reducing the circulating supply of the token. Staking is a real functionality feature for the token since staking in a network protocol’s PoS consensus helps guarantee the underlying security of the network (like MATIC tokens on the Polygon Network). Staking can also occur in a protocol without a PoS reason like many exchange protocols (QuickSwap, SushiSwap, PancakeSwap) where depositing funds simply means the investor believes in the long term interests of the protocol since with all things equal, staking raising the price of the token. In both cases, the staking is…