David Pakman, managing partner at crypto venture capital firm CoinFund, stated Tuesday during an appearance on The Block's The Starting Block podcast that the crypto industry has not solved a core tokenomics challenge: creating native tokens whose value correlates with the long-term success of underlying networks or products. Pakman explained that many crypto tokens trade primarily on online narratives rather than the economic performance of their networks, creating uncertainty for contributors choosing between immediate stablecoin compensation and long-term exposure to native tokens. This debate addresses how crypto networks should incentivize early contributors amid tensions between short-term payment preferences and long-term value capture through native tokens.
Pakman Proposes Stablecoin Payments for Network Contributors
Pakman suggested projects could pay contributors in stablecoins instead of native tokens, allowing nascent networks to attract participants less willing to bet on long-term token value. "It's this battle between economic incentive in the task you're doing to help build out a network and short-termism versus long-termism view on when you want that return paid to you," Pakman said during the podcast. "If you're taking a longer-term perspective and you're helping build a network, and you think the future value of the network will be very high relative to today's current price, well then you'd love to be paid in some native token." Pakman added, "We're in this world where younger people really want their bets to resolve much more quickly and take their winnings or losses and then move on. Then maybe you should just get paid in a stablecoin."
Pakman reflected on his experience mining Ethereum, saying he benefited from being paid in ether because he held the tokens as their value appreciated. He acknowledged most projects have failed to produce similar long-term returns, leaving contributors with tokens that lost much of their value. "So many are so wrecked for so long ... do they have some updraft that's going to power their long-term returns, or are they just these sort of short-term market perturbations that are based on narrative or Twitter activity?" Pakman asked. "And boy, if it's that, then they're not interesting as products. But if they really can resort back to some tie-in to [the] fundamental value of the network or whatever product they're building, well, then I think it could be interesting."
CoinFund Cites Ether.fi as Protocol with Successful Product Model
Pakman pointed to Ether.fi as an example of a protocol with a successful product, arguing that investors want its governance token to reflect value created by the underlying network. CoinFund is an investor in Ether.fi. "There's a native token that governs Ether.fi. If you follow this company, you would probably like to hold some piece of their future value, but you gotta believe that there's a relationship between that token and their business," Pakman said. "We've been prevented by the SEC, aggressive government action, from linking those two things, but that's what hopefully this forthcoming bill solves."
Pakman References Clarity Act as Potential Regulatory Solution
The legislation Pakman referenced is the Clarity Act, the crypto market structure bill currently before Congress. Pakman serves as CoinFund's Head of Venture Investing. CoinFund was started in 2015, and the firm's investments include World, Superstate, and Ondo.
FAQ
What tokenomics challenge did David Pakman identify in crypto?
David Pakman stated that the crypto industry has not solved the challenge of creating native tokens whose value is closely tied to the long-term success of underlying networks or products. He explained that many tokens trade primarily on online narratives rather than the economic performance of their networks.
Why did Pakman suggest paying contributors in stablecoins instead of native tokens?
Pakman proposed stablecoin payments to allow nascent networks to attract participants less willing to bet on the long-term value of native tokens. He noted that younger contributors want their bets to resolve more quickly, making stablecoins a more appealing form of immediate compensation compared to native tokens with uncertain future value.
