The nature and attributes of cryptocurrency tokens

In yesterday's article, I shared Buffett's view that "buying stocks is buying companies."

For this view to hold, in addition to the investment logic shared in yesterday's article, there is a more fundamental legal guarantee, which is that stocks genuinely represent the rights of the company.

When an investor buys all the shares of a company, legally, they essentially fully own that company. They can decide on the board of directors, the management team, and can freely handle the company's profits.

Without this legal guarantee, buying stocks would not be as meaningful, and the attractiveness to investors would be greatly reduced.

Using this point to evaluate tokens in the crypto ecosystem, we can discover some essential differences.

I generally categorize tokens in the crypto ecosystem into two types:

One type is native tokens, such as Bitcoin and Ethereum.

The other type is non-native tokens.

Native tokens are those directly written into the project's source code; these tokens directly participate in the operation of the code and the project. These tokens are very similar to commodities we see in real life, such as oil.

Native tokens play a crucial role in the project; without them, the project cannot operate at all. Bitcoin and Ethereum would not be able to maintain their blockchain operations without their native tokens.

Non-native tokens, on the other hand, are different. They were not originally written into the project's source code; the vast majority were issued later for various reasons by the project team. In fact, even without these tokens, the project could continue to operate.

Uniswap operated for a while without a token; BASE has not had a token even now, but this does not affect its brilliance in the Ethereum Layer 2 expansion ecosystem.

In the current crypto ecosystem, the most numerous and varied are these non-native tokens, and they are also the most controversial.

For these non-native tokens, some project teams simply position them as governance tokens with very limited practical significance, allowing them to run freely; while other project teams, in order to unite the community, use the project's profits for buybacks and destruction.

This buyback and destruction action easily leads people to associate these tokens with stocks, and over time, we may subconsciously lean towards evaluating these project tokens using stock valuation logic.

"This project's valuation should be this much, so the price of this project token should be this much," such statements are the most typical reflection of this subconscious tendency.

However, if we calm down and look at these tokens through the legal guarantee of stocks mentioned earlier, we find that they do not possess such value, or their value is very limited.

If an investor buys all the BNB, can they decide on the board of directors of X? Can they decide on the management team of X? Can they decide how to spend or simply take away X's annual profits?

Definitely not.

Recently, there have been rumors that a major exchange is preparing to trade part of its equity with the family of the current U.S. president.

Regardless of whether the transaction described in this news is true, we can certainly see what is truly valuable about this exchange from this rumor.

It is certainly not the tokens it issues, but its equity.

In this sense, the intrinsic value of BNB is not comparable to the stock of COINBASE.

If I had money and bought all the COINBASE stocks, I could delist the exchange, destroy the stocks, and then the substantial net profits of the exchange every year would completely belong to me, turning me into a cash cow.

If these non-native tokens do not possess the rights like stocks, then what are they?

In my view, they are a kind of on-chain souvenir issued by the project team to unite the community, whether through narrative or buyback methods, the purpose is the same: to give this souvenir imaginative space, allowing it to "appreciate."

But this approach may only attract retail investors; it would be too naive to expect large external capital to buy these tokens with real money.

If these tokens only maintain this status in the future, their valuation will continue to collapse. If we want these tokens to truly become valuable assets and break out of their current situation, I currently see only two pathways:

One is to become assets that genuinely possess rights like stocks;

The other is to become "commodities" with actual utility in the project like native tokens, participating in the operation and functioning of the project, making it impossible for the project to survive without this token.