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What farming actually is is companies using their equity directly as marketing incentives. In principle, there is nothing really wrong with this, although usual
by darawk 4y ago
What farming actually is is companies using their equity directly as marketing incentives. In principle, there is nothing really wrong with this, although usually companies don't find that to be the most efficient way to use their equity.
The problem with farming was that, in many, but not all, cases, the equity in question had no value. It isn't true that they were all ponzi schemes, though. Many of the tokens did generate and continue to generate quite significant revenue for their holders, e.g. Compound. You can argue that the entire space is a ponzi, but within that space, Compound (among several others) is a legitimate service provider to the casino, and earns real income for doing so.
Farming is really no different from startups paying early employees in options. Its just that the companies were a lot dumber, and it was a lot easier to participate.
- mywaifuismeta 4y agoWhile the analogy is correct, a key difference is that startups are illiquid by definition. Founders can't just cash out and are thus incentivized by build something of value. With protocols, there is no incentive to build something of value. Instead, the incentive is to building something that looks valuable on the surface to generate liquidity and cash out at the best point.
- Jommi 4y ago"What are secondaries?"
- mywaifuismeta 4y agoNot for super early stage. Crypto projects cash out after a few months or so. That's pre-seed/seed startups.
- Jommi 4y agoBut you used a binary term "illiquid" rather than opting for something more open like "most illiquid". Just wanted to make a clarificaiton for other readers. Are you aware that most crypto projects also opt into vesting patterns - and this is an increasing trend overall? Another thing that might be interesting to you is that in most countries we have close to no public information if founders sell on secondaries. Your C-Suite might have maximized their secondaries in mutliple rounds and you wouldn't even know that incentives have changed. In Crypto this is fully transparent and there are people bringing these to light on a consistent basis. Some stuff to think about!
- api 4y agoSecondaries are rare until series A or later.