#Ep. 51: Assessing token models: Why tokens are a unit of trust?

About this Episode

In this episode, Ahmed sits with Pranav Sharma, Founding Partner of Woodstock Fund.

Woodstock Fund is a new and emerging crypto fund based out of India and Pranav delves into how their fund operates, in particular, their 3 core focuses, which include:
Public decentralised ledger technology
Decentralised finance
Web 3.0

Pranav shares his experience of co-creating creative solutions in sales and distribution and how his learnings through creating this led him to create the fund he is running today.

Ahmed sets the theme for the episode which focuses on the right investment vehicles behind cryptocurrencies and assessing the optimal token models that make sense.

Starting off with public chains, Pranav explains their thesis behind the investments they made in Holochain, Casper Labs and Elrond. From a decentralised finance perspective, Pranav shares why this emerging sector is not just important for the new value it can bring but how it’s solving problems that currently exist in traditional finance. Web 3.0, according to Pranav, is all about being more human and unbundling of the human potential wherever you are in the world.

Pranav expresses that the right economics has to come into play before any consideration of investment. Ahmed is intrigued about what is the right vehicle when investing in these projects as the investor can invest in equity, tokens and convertible notes. In the past two years, countless projects used tokens as a way to raise money without necessarily thinking about how token economics will play and pan out in the future.

How do you define the right instrument when building out a project? Pranav argues the business model should drive this decision and currently, in this cycle of the crypto market we are seeing more projects using the right instruments during fundraising.
But the question still arises, should investors go for equity (which has legal recourse) or go for tokens which are still largely unregulated with not so much legal recourse.

Running a pro token investment fund, Pranav gives many suggestions to the above, from a dual equity-token structure, or raising through an STO which can then be converted to a utility, or the project themselves having to bootstrap the project until they find minimum viable utility where a token is the right instrument in this case.

Tokens as a unit of trust
Ahmed and Pranav then discuss the different ways to assess token models and how an investor can discern whether a token model makes sense or not. Pranav shares his experience with the 6 investments they have made and that a token model should be looked at from two important aspects: Ecosystem and adoption.

Someone can create the best technology ever, but if the ecosystem is small and there is zero to little adoption, then what is the point? Pranav also shares a technical-economic response between demand and supply and how the right economics should facilitate more adoption in a perpetual enforcing cycle.

All of the above and more will be on this week’s episode of Encrypted!

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