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> 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 i
by 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 agoThe 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 agoActually, 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 agoHelp 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 agoThis 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 agoI'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.