BAT, MKR, DGD, RDN and countless of other tokens claim to have utility, but some are now saying they’re futility tokens.
Take BAT, which has been forked. The token pretty much plays no role in Brave Browser. It is not necessarily used by advertisers as they can pay in fiat although backend conversion to BAT is promised, but no one can verify such backend conversion.
Almost nothing happens on-chain for Brave and little seems to be automated. The current design instead seems to be a very centralized set-up with a for profit company managing the advertising of the internet.
BAT here is very much an afterthought with its role more social. It can create a community around it, it provided the initial funding for the development of Brave ads, and has some sort of a rewarding aspect.
That rewarding aspect can of course be in eth. BAT runs on top of ethereum, so any blockchain capacity concerns would apply to both. That rewarding aspect can also be in bitcoin, or USDT, or even plain fiat because the blockchain part here almost has nothing to do with the system.
Forking off MKR might be a bit more difficult, but as they continue racking up fees to now 16.5% because they are currently effectively a monopoly, the incentives to fork are increasing.
Devs are perhaps waiting for multi-collateral dai and the launch of the savings rate, so then they can fork a pretty much finished product, but does MKR play a role that makes it unforkable?
The token was also mainly to develop the funding of the product, with social aspects like a community, and here the stated function is to act as effectively the banker of last resort if the peg goes south.
Such extreme situation however would effectively have this as a failed project. Nor is it clear that involving MKR in this situation would be any better than letting the peg go off and then hopefully recover.
Plus, there are far more efficient ways of creating a central bank of sorts. You just take some of the fees and put them in this back-up fund. In the process so creating a truly decentralized stable coin unlike current DAI which is controlled by a handful of people that act a bit like the fiat Fed.
DAI itself is an example of an actual utility token. DAI is the product. It’s not for decoration and it’s not justified by arguments that can also apply if xToken is replaced with eth.
There are many other tokens that are effectively products. USStocks is one other example. DGD, however, is just decoration. Arguably OMG too and many other tokens that are basically a stock.
Capital formation, shared ownership, dividends, are all good things, but Apple doesn’t put its stock in the middle of the iOS operating system like RDN arguably does.
Plus the lack of equity ownership in tokens can potentially create perverse incentives where VCs get actual equity ownership in the dev company behind the token and then direct the project towards monopolization tendencies.
They’d do it to benefit the token’s price, you can say, so it’s all fine, but eth does kind of compete with such tokens so forking them and replacing them with eth would arguably benefit eth’s price.
There are some tokens you can’t quite fork, like BNB, but most current tokens can be replaced with eth and perhaps will be replaced with eth.
Like Augur. Now this is a more complicated case because REP can split if there is a dispute as to what is truth. During such dispute you stake REP, which just as easily can probably be eth too, but eventually this creates two different universes, REP A and REP B.
However, one universe takes all the eth that has been bet, while the other universe has no eth. So arguably you can remove the token completely.
There is no point going further through the list because arguably you can remove any token and replace it with eth unless the token itself is the whole point.
The benefit of doing so would be eth’s increase in utility, but the token does play an important role in incentivizing the creation of such utility to begin with.
Without MKR, there might have been no DAI and a project that keeps improving. Without REP, there might have been no Augur. If a dev team replaces them both with eth, then it isn’t clear what the incentive is for them to continue developing the project.
Arguably it isn’t clear what MKR’s or REP’s incentive is either presuming the team already made a lot of money. Since there is no actual ownership by token holders who can fire lead devs, replace personnel, exercise fiduciary rights in court and so on, it isn’t clear where accountability, responsibility, and drive is meant to come from.
In the current design there is usually an executive team or a managerial class that doesn’t quite have to answer to anyone. The idea of course was to use smart contracts to release funds only if targets are met and so on, but one DAO bug was enough to transform that into just handing over millions with the team then free to do whatever it wishes.
So really the only accountability method is forking and any project that doesn’t have much use for the token or uses it inappropriately might find itself in the same position as a paid product competing with a free version.
There can of course still be such competition, but there would have to be some very good reason for individuals to use the fee charging version when there are far cheaper or even free alternatives that perhaps do the very same thing.
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