author：Nate | eatsleepcrypto.eth

Been thinking a lot about token design lately Made a tier list similar to @yeak__'s and will challenge another token economist to make one at the end of this thread These are not financial recommendations - good tokenomics are necessary but not sufficient for long-term gains

A high rank also doesn't guarantee the economic security of these protocols

I've looked at them and nothing stands out, but even protocols in the A tier have moderate economic security vulnerabilities - these are profitable for particular actors to exploit, but not everyone

Now that I've disclaimed those two things, for some context, here is @yeak__'s tweet I've included some of the same protocols, but changed the rankings and included different ones to keep this interesting  

I've excluded all tokens from S tier because...

1) I'll never call a 10

2) I feel conflicted even giving A's

3) I'm not familiar with the grade of "S" but I also didn't pay attention in school

Maybe it's just me.

Criteria for ratings in this thread are:

30% based on each of protocol utility, value capture, and economic security - these are the demand-side factors; for more on these, read the article below

The remaining 10% is based on supply-side factors

I'd give @CurveFinance an A-

$CRV has supply issues, some poorly, yet cleverly patched with veTokenomics, but I'm more focused on demand than supply because demand is what matters long-term Demand for $CRV is proportional to the liquid value of bribes paid to $veCRV holders

@CurveFinance's fundamental innovation wasn't veTokenomics, it was the bribing system Before Curve, @Binance was a kingmaker So $CRV's top rank is also not a comment on veTokenomics - if you're looking for that, check out @ajeykb's recent article  

@LiquityProtocol is also A tier

Liquity takes an overcollateralized amount of $ETH to mint $LUSD, not to be confused with @LinearFinance's token by the same name...  

@LiquityProtocol's $LUSD is a secure, decentralized stablecoin which keeps its peg $LUSD is not without its risks, but it's as close as anyone's gotten to solving the stablecoin trilemma Furthermore, Liquity rewards $LQTY holders with real yield.

Maya is a @THORChain clone with a two token system, $CACAO for liquidity pairs and bonding, and $MAYA which captures the fees of the system For a more in-depth look, check out @TheDesertLynx's thread:  

@nymproject has A tier

demand-side tokenomics; supply side is another story, but once they stop giving away $NYM tokens to 4th world yield farmers, the chart will pick up I would suggest Nym give those rewards to community managers who onboard real users in online workshops  

@synthetix_io gets a C+

$SNX captures a ton of value, but it's limited in utility because it's not private and has a doxxed founder It would all fall apart if its DAO stopped manipulating monetary policy More on this below  

Synthetix operates like @mirror_protocol on @terra_money did, but with less diversification of assets Since $SNX's founder is doxxed, @synthetix_io can't issue synthetic representations of commodities, or traditional assets like $TSLA, $GOOG, etc  

The resulting lack of diversification also makes $SNX more fragile and subject to economic security exploits like the one Terra suffered from @anchor_protocol However, @synthetix_io covers this up through a) inflation and b) manipulating its c-ratio  

I went back and forth on a few to either side of the B tier,

and decided to put @SushiSwap in C Sushi got lucky in its vampire attack against Uni, and it really hasn't innovated since then Real yield is nice, and $SUSHI beats $UNI, but that bar is set very low  

Furthermore, real yield is not only the easiest way to capture value, it's one of the worst, since it leaves you without much of an economic moat

I wrote about this in The Hierarchy of Value Capture:https://eatsleepcrypto.com/value-capture-hierarchy/

@AaveAave gets a C

It deserves credit for getting some things right so early on, but the frequency at which it incurs bad debt and a governance board full of degens are really not doing it any favors  

Particularly after the recent @GHOAave launch, with $GHO trading at $0.97 GHO's central banking strategy reminds me of several funds' $JPY carry trade before the BOJ announced its intent to raise rates Interested to see how this plays out when @AaveAave raises theirs

@Uniswap gets a D

I've written about Uniswap's failures often, but my strongest criticism of $UNI is in Building Valuable Hyperstructures Unfortunately but unsurprisingly, v4 did not fix UNI's glaring lack of value capture And then there's IL...  

@thalesmarket was high up on @yeak__'s list for real yield and governance rights Governance rights are not inherently valuable, but $THALES has a moderate buyback and burn But it's time-intensive, and inherits economic security from @synthetix_io's $sUSD and @chainlink

@Rocket_Pool gets an F

I was going to give it a D, but it's a really bad flywheel, particularly in the presence of competitors $RPL is inserted as an arbitrary requirement to stake and doesn't even pay out in $ETH, but rather itself, inflating holders  

Optimism also gets an F

$OP has nothing driving price except speculation, and @optimismFND has no excuse I would call it "blind optimism," but it's willful naivete at best  

Optimism has the hope of capturing value with the sequencer, if they choose to do so - I would bet against it Ultimately, $OP relies on continued speculation for its price, like a memecoin But unlike $DOGE, OP isn't even used in a circular economy