Opionion: Why OpenSea and Arbitrum Should Not Issue Token and What’s the Function of Token

5 min readMar 15


Author: HSL

Original link: https://mp.weixin.qq.com/s/g9czyr8y3eK1INft_S8tYQ

Token issuance is politically correct in the blockchain industry.

With the successful issuance of BLUR, the NFT trading track, Opensea has urgently changed its policies, including 0 fee for a limited time and major changes such as reducing its consistent implementation of the royalty system for protecting creators.

The masses in the industry cheered, further strengthening the belief that issuing tokens is politically correct while various remarks urging Opensea are also very popular.

The same thing happened two weeks ago, when Arbitrum tweeted mysteriously that “Monday.” Then the melon-eating masses judged that Arbitrum would issue tokens on Monday.

In L2-Rollup, OP successfully issued tokens, and the opinions in the industry have been urging Arbitrum to do so.

It’s time to ask: Is it really necessary to issue tokens to do projects?

I used to support the political correctness of issuing tokens, but now that I reflect on it, it is time to abandon this political correctness.

From the perspective of the degree of association between tokens and business, the status of tokens in the project can be roughly divided into three types:

1. Tokens that have little to do with business, in other words, that are governance tokens.

Typical examples are uniswap and compound. In fact, tokens and product business have nothing to do with each other, and all kinds of governance are forcibly enforced.

2. To bind tokens and project revenue to a certain extent, but in essence, tokens have nothing to do with the project business itself. This type of token is often a traditional financial stock that is more complicated than stocks.

The typical one is Curve, which created the ve-token model that engaging in various lock positions, nesting dolls, and airdrops and has been learned by many new progets.

3. The token itself is the core of the product, and all the business of the product revolves around the token.

The most typical is Bitcoin, BTC is the currency, and all things must revolve around the currency of BTC. But taking BTC as an example is a bit out of the scope of this article. This article focuses more on the necessity of issuing tokens for products, services or protocols on the chain, rather than the chain itself.

A better example is a collateralized stablecoin, such as Dai, which is undoubtedly the core of MakerDao. However, this type of stable currency often issues another currency representing the equity of the project, such as MKR. Algorithmic stablecoins, such as frax-stablecoin and fxs-equitycoin, are also the core of the product where the token itself is. Meme coins, such as doge and shib, are the core of the meme community.

For users in the crypto circle, in fact, they love tokens as products. For token holders, what they want to see most is that everything about products or projects revolves around tokens.

Typical roles played by tokens in projects

1. Financing, which is too easy to explain.

2. Motivate users to make users are token shareholders that forms the core method by which most agreements hold to survive. The typical one is xx mining.

For example, the mining income of the lending agreement, such as compound borrowing can be used to mine comp, and it may even lead to borrowing money and earning extra money.

3. Governance.

Token holders give suggestions to products.

4. National treasury, that is, project reserve funds.

The financing of crypto projects often cannot cover the development costs. Most projects will set up a treasury, and first transfer a bunch of tokens of their own projects to the treasury, which will be used as money for future development and operation.

5. Necessary for the operation of the product or protocol.

The most typical is the public chain. For example, if there is no ETH on Ethereum, the chain cannot be used. For on-chain products, the most typical ones are algorithmic stablecoins, such as frax and fxs. There is no way to issue frax Without fxs.

6. Make the project decentralized.

After token issuance, the project is nominally controlled by the token holders instead of the project party, which is decentralized to a certain extent. If one day the project party doesn’t want to take care of it, the token holders can reorganize the game.

The most typical case is sushi. Sushiswap was initiated by an anonymous team, but they didn’t want to do it afterwards. Generally, when the founding team didn’t want to do it, most of the projects would die. But the (now notorious) SBF, as a major sushi player, successfully gained the support of the community and became the real-name developer and operator of sushiswap. Later, SBF promoted the decentralization of sushiswap.

What are the disadvantages of issuing coins?

1. Leek is not easy to mess with. Happy when the price of the token goes up, but scold your whole family when it goes down. How can the currency not fall, Apple stock has a chance to blow you up.

2. Legality is a big issue. Law enforcement agencies are not easy to mess with, SEC is too powerful, don’t mess with them if you have nothing to do.

The decentralization of Ethereum has a long way to go. Decentralization is not just consensus mechanisms such as PoW and PoS. Ethereum ecological projects, especially major infrastructure, are central points, and attacking them is also attacking Ethereum.

Last week, BUSD was investigated by the SEC, and Kraken’s staking business was ordered to stop by the government. These are all cases of decentralization failing.

Now many people are pushing uni to capture the handling fees of the uniswap protocol, and the uniswap team is too lazy to care about uni’s hodlers time and time again. In fact, think about it, what are the benefits of UNI issuance? Isn’t uniswap without UNI very easy to use? When sushi stole lptoken, a uni coin was issued. Now Curve keeps clamoring to uniswap, and uniswap finally no longer compromises to empower uni. But I think this saves uniswap from being investigated by law enforcement forces, which are all worthwhile.

Think about how many potentially catastrophic censorships there are in the Ethereum ecosystem, makerdao, compound, lido, optimism. . .

Let’s sum it up:

The relationship between tokens and projects:

1. Pure governance tokens, in most cases, are approximately equal to nothing.

2. Equity tokens, tokens enjoy various benefits in the project.

3. The token is the product itself.

The role of the currency on the project:

1. Financing.

2. Motivate users.

3. Governance.

4. The national treasury, which becomes development and operating funds.

5. Necessary for the operation of the project or agreement.

6. Decentralization.

Disadvantages of tokens pair projects:

1. Leeks are not easy to mess with, and market value management is a big liability.

2. Legitimacy is a big issue. Once the tokens are issued, they are waiting to be beaten by SEC.

Whatare the benefits of issuing tokens for projects like Arbitrum and Opensea? There is no shortage of money and users, they have good business while the business and products themselves do not need to issue tokens. Don’t cause trouble, live well, and do meaningful things, which is pretty good.

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Colin Wu, Chinese journalist, won 2013 China News Award