Transparency

An interesting crypto Q&A session in a RiskHedge Venture note (which is behind a paywall).

We will highlight one question and the answer given by RiskHedge Venture:

Q: I see the potential of many of these crypto businesses, but how do we square this with token value accrual? Take Lido, which is an active, successful business. The Lido token accrues only community rights, not profit sharing. How do you see value accruing to tokens such as Lido? It’s the same for dYdX, the profitable and successful derivative exchange. Lido is a DAO whereas dYdX is owned by venture capitalists. Is there a difference?

As a RiskHedge Venture member, you know tokenomics is a key part of our analysis. Tokenomics is one of, if not the most, important drivers of a crypto’s price. A key pillar of tokenomics is measuring how the token accrues value from the underlying business.

Many of our cryptos like Dopex, Maple, Ethereum, and Solana use “staking” to pay a slice of revenues to token holders. Others like Helium and FTX reward token holders through a “burn” mechanism, which works similarly to share buybacks.

Today, the LDO token doesn’t directly accrue value from Lido’s business. Lido makes money by taking roughly a 10% cut of the “dividends” earned by stakers on its platform. These funds go into Lido’s Treasury. LDO holders can vote on how those funds are used.

My views on value accrual have shifted a bit recently. I don’t think every crypto must, or even should, pay a slice of revenues to token holders. Let me explain.

Virtually every crypto business, including Ethereum, is like an early-stage tech startup. It’s inventing new technologies. It’s pushing the boundaries of what is possible. It’s trying to grow as fast as possible and attract users.
What should a fast-growing startup do with the profits it generates? Plough most of them back into the business to create new products and pay developers. This is what Amazon, Google, Microsoft, Tesla, and every other great tech company did over the past few decades.
Apple only started directly rewarding shareholders with a dividend in 2012, after it was already one of the world’s most successful companies. Amazon, Google, and Tesla still don’t pay a dividend.
A stock that doesn’t pay a dividend is practically the same as a well-designed token which doesn’t have direct value accrual. They both represent ownership in an underlying business. If those businesses become valuable, prices should rise over the long term.
This will likely be the case for LDO, which represents ownership of the Lido protocol. And don’t forget, LDO holders can vote on proposals regarding profit sharing. I bet we’ll see Lido “switch on” fee sharing in the future.

Your second question gets at an extremely important point. It’s critical to know who owns the tokens you’re invested in, and at what price they acquired them for.

You want to generally steer clear of tokens that are majority owned by venture capitalists or big funds. The reason being these investors often buy blocks of tokens at huge discounts. When these tokens “unlock” and are sold, it can drive prices down. This is something we explored in depth in February’s RiskHedge Venture."

NB - FIX00 project has ZERO VC or big fund ownership - it was and remains a conscious decision to stay that way.
Just as we lay out the price and returns for the token, rather than get a Market Maker to ramp the stock and sucker ppl in before letting the price crash.
We are fully TRANSPARENT - our assets and structure are all verifiable and we are deliberately selling our assets (initially) at an incredible discount.
We have our own money and assets at risk, and we understand despite that, that we need to seed this market and our community to grow a bigger and inclusive market to challenge the cartel, auction-based luxury markets that remain only the playground of the elite.

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