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In both crypto tokens and startup equity, you are literally gambling that there will be a liquid market for your asset. Tokens _are_ worthless if no one wants

In both crypto tokens and startup equity, you are literally gambling that there will be a liquid market for your asset. Tokens _are_ worthless if no one wants to buy them, and pretending that is somehow different than startup equity is ignorant at best and downright predatory in the worst cases. Crypto growth overall does not mean _your_ token is going to gain value anymore than the general growth of the economy means that startup equity is going to grow in value.

dvt 5y ago
> Tokens _are_ worthless if no one wants to buy them, and pretending that is somehow different than startup equity is ignorant at best and downright predatory in the worst cases. Fundamentally not true. Unlike traditional markets, crypto exchanges work by leveraging AMM liquidity pools. Obviously, a token can go up/down based on supply and demand, but if there's liquidity you can literally always sell. Confusing early-stage startup equity is by far more predatory than giving someone some shitcoin with a vesting schedule. Any argument to the contrary is either disingenuous or misinformed. With traditional equity offerings, you need to worry about: what class of stock did you get, what's the vesting preference, will you get diluted, what if you get fired, etc. I'm hardly a crypto bro, but imo startup equity is one of the biggest scams around that often takes advantage of young and inexperienced engineers that don't quite understand its financial underpinnings.
- NovemberWhiskey 5y ago
  The definition of liquidity is something like "the ease with which buyers and sellers can transact at transparent, stable prices". If no-one wants to buy a thing at any price, it is - by definition - illiquid. The notion that something for which there is no demand can be liquid is strange.
  - dvt 5y ago
    Actually, AMMs (automated market makers) work by ensuring that there's always a buyer (hence, "automated") as long as there's liquidity -- by automatically adjusting prices based on supply/demand.
    - NovemberWhiskey 5y ago
      Help me out here. I'm going to issue a hundred trillion MostExtraordinaryShitCoin (MESC). What's the bid for MESC from these AMM pools?
      - dvt 5y ago
        (Sorry for late reply, HN time-limits nested comment replies.) Basically, if you were to issue N tokens into an AMM, you would also need to provide the counter-party liquidity. So let's say you're sending 100 MESC to a pool, and the initial price is 0.01 USD (to keep it simple), you would also have to seed the pool with 1 USD. Once that's done, people start trading -- some other people might even provide liquidity (and buy LP -- liquidity pool -- tokens) which they can earn interest on.
        NovemberWhiskey 5y ago
        This whole discussion starts from your response to a comment that "[t]okens _are_ worthless if no one wants to buy them", asserting that this was "[f]undamentally not true". But it seems very much that it is true. Did you mean to make a different point?
        dvt 5y ago
        I'm not sure if we disagree, my point was a technical one: traditional markets are "order book" markets where for every buyer, there's a seller. Crypto exchanges use AMMs, where there does not need to be a buyer for every seller, as the AMM handles that automatically. If your point is that tokens without liquidity are worthless, then that's true (that's why initial decentralized exchange offerings always involve seeding liquidity pools, as mentioned). If your point is that tokens can get arbitrarily close to zero if everyone sells, that's also true. But if you get a token that's being actively traded on exchanges and has healthy liquidity pools and a healthy market cap, that certainly is a better deal than some percentage "equity" an early-stage startup dangles in front of you.
Karrot_Kream 5y ago
Indeed. It's the old quip about monopoly money. Personally, I would not be willing to accept tokens as a large part of my compensation full stop. I haven't dug into crypto offers though so I'm not sure how true that is. That said, unlike options, tokens almost always have liquidity immediately, so an engineer could (probably) trade their tokens for fiat value if needed where an individual with options would be tied down through the exercise process.
vmception 5y ago
there are some very important differences that we can focus on, while you can stick with the similarities: 1 - token vesting contracts are often much quicker than startup grants, and public company RSUs. A few months to a year, compared to 4 years. 2 - tokens achieve liquidity much faster and more reliably, in comparison to startup companies of a similar age. this allows new organizations to compete in hiring against FAANGs, where employees also are receiving liquid things to sell. 3 - token grants can be alongside startup equity. so its an additional part of the compensation package. As such there is no compromise to rant about. and just to acknowledge the “issue” you care about, correct a market may never occur or form for the tokens, no different than the equity, there you go, a tiny disclaimer on page 34. I agree that every employee should be objective about that, this is the same standard with every kind of organization aiming to compensate partially in non-cash, which puts us right back at square one: pick the one thats both interesting and compensates well.

dvt 5y ago

> Tokens _are_ worthless if no one wants to buy them, and pretending that is somehow different than startup equity is ignorant at best and downright predatory in the worst cases. Fundamentally not true. Unlike traditional markets, crypto exchanges work by leveraging AMM liquidity pools. Obviously, a token can go up/down based on supply and demand, but if there's liquidity you can literally always sell. Confusing early-stage startup equity is by far more predatory than giving someone some shitcoin with a vesting schedule. Any argument to the contrary is either disingenuous or misinformed. With traditional equity offerings, you need to worry about: what class of stock did you get, what's the vesting preference, will you get diluted, what if you get fired, etc. I'm hardly a crypto bro, but imo startup equity is one of the biggest scams around that often takes advantage of young and inexperienced engineers that don't quite understand its financial underpinnings.

NovemberWhiskey 5y ago
The definition of liquidity is something like "the ease with which buyers and sellers can transact at transparent, stable prices". If no-one wants to buy a thing at any price, it is - by definition - illiquid. The notion that something for which there is no demand can be liquid is strange.
- dvt 5y ago
  Actually, AMMs (automated market makers) work by ensuring that there's always a buyer (hence, "automated") as long as there's liquidity -- by automatically adjusting prices based on supply/demand.
  - NovemberWhiskey 5y ago
    Help me out here. I'm going to issue a hundred trillion MostExtraordinaryShitCoin (MESC). What's the bid for MESC from these AMM pools?
    - dvt 5y ago
      (Sorry for late reply, HN time-limits nested comment replies.) Basically, if you were to issue N tokens into an AMM, you would also need to provide the counter-party liquidity. So let's say you're sending 100 MESC to a pool, and the initial price is 0.01 USD (to keep it simple), you would also have to seed the pool with 1 USD. Once that's done, people start trading -- some other people might even provide liquidity (and buy LP -- liquidity pool -- tokens) which they can earn interest on.
      - NovemberWhiskey 5y ago
        This whole discussion starts from your response to a comment that "[t]okens _are_ worthless if no one wants to buy them", asserting that this was "[f]undamentally not true". But it seems very much that it is true. Did you mean to make a different point?
        dvt 5y ago
        I'm not sure if we disagree, my point was a technical one: traditional markets are "order book" markets where for every buyer, there's a seller. Crypto exchanges use AMMs, where there does not need to be a buyer for every seller, as the AMM handles that automatically. If your point is that tokens without liquidity are worthless, then that's true (that's why initial decentralized exchange offerings always involve seeding liquidity pools, as mentioned). If your point is that tokens can get arbitrarily close to zero if everyone sells, that's also true. But if you get a token that's being actively traded on exchanges and has healthy liquidity pools and a healthy market cap, that certainly is a better deal than some percentage "equity" an early-stage startup dangles in front of you.

Karrot_Kream 5y ago

Indeed. It's the old quip about monopoly money. Personally, I would not be willing to accept tokens as a large part of my compensation full stop. I haven't dug into crypto offers though so I'm not sure how true that is. That said, unlike options, tokens almost always have liquidity immediately, so an engineer could (probably) trade their tokens for fiat value if needed where an individual with options would be tied down through the exercise process.

vmception 5y ago

there are some very important differences that we can focus on, while you can stick with the similarities: 1 - token vesting contracts are often much quicker than startup grants, and public company RSUs. A few months to a year, compared to 4 years. 2 - tokens achieve liquidity much faster and more reliably, in comparison to startup companies of a similar age. this allows new organizations to compete in hiring against FAANGs, where employees also are receiving liquid things to sell. 3 - token grants can be alongside startup equity. so its an additional part of the compensation package. As such there is no compromise to rant about. and just to acknowledge the “issue” you care about, correct a market may never occur or form for the tokens, no different than the equity, there you go, a tiny disclaimer on page 34. I agree that every employee should be objective about that, this is the same standard with every kind of organization aiming to compensate partially in non-cash, which puts us right back at square one: pick the one thats both interesting and compensates well.