The Economics of Crypto-Tokens Compared to Traditional Stocks

Autonomous Research has modelled the flow of resources in traditional stock investing and the increasingly popular Crypto-token investing.  In both cases, the four primary players are: (1) the operating organisation, (2) the founders, (3) outside investors, and (4) products and services.  In traditional stock investing (left model), outside investors trade cash for an ownership stake in the operating organisation. Meanwhile, the organisation generates economic activity in the form of products and services in return for an economic reward from the external fiat money supply. Fiat money, as opposed to crypto-currency, refers to inconvertible paper money declared by a government to be legal tender. Further, we note that a company’s utilities, such as money transfer technology between bank departments, are not monetized.

Our right model represents the flow of resources in crypto-token investing. In this case, outside investors are required to trade cash for an ownership stake in the functional utilities or proprietary money supply, which is owned and issued by the operating organisation. This money supply is usually a liquid digital crypto-currency known as a token and is unique to the operating organisation. Depending on the company, token holders could have a right to investment features, such as equity interest, but also to functional features, such as using the system and its outputs.