Hi John,

thank you for the deep analysis. But 26 full pages to say buy Bitcoin? :) All jokes aside, how you get to this conclusion is, of course, what matters.

I’d like to understand your view on utility tokens a bit better with a different example: I agree that in a closed crypto economy where the token is used as the unit of exchange at high velocity, its price will most likely converge down to the network usage value.

However, I differentiate utility tokens which bear the above characteristic from the ones which compete with real world services. Easiest (and currently available) examples are file storage and computing. You have a market price for these services which is the result of the competition between AWS, Google, Dropbox etc. If the crypto alternatives like Storj, Sia or Filecoin manage to gain customers on both sides of the marketplace, then the prices that emerge will compete with the centralized companies where the prices include profit margins. The users who act as suppliers will, at the end of the day, decide whether they would accept X or Y USD for someone to use their spare storage space or processing power. Assuming a limited amount of tokens in the system, the resulting market price may indeed be decoupled from the inherent processing cost for the protocol.

My point/question is, do you not separate utility tokens which are simply technologically used in a protocol as enablers of the service where the users reap the benefits versus the ones where there is/will be a market price based on a competition with existing centralized services and where the market and user incentives will establish the equilibrium price and not the processing cost?

Looking forward to your response.

Kind Regards