{"type": "project", "title": "Token Design Project Case Study - Step-by-Step Guide with Outputs", "website": "https://tecommons.org", "createdAt": 1681908188031, "credentials": {"twitter": {"type": ["VerifiableCredential"], "proof": {"jws": "eyJhbGciOiJFZERTQSIsImNyaXQiOlsiYjY0Il0sImI2NCI6ZmFsc2V9..mf2aIum7roK_N8sF2DCrRhms-_X9bRwwav9j9jD81ajO7VnzSxqozLimbTOHqugL91tbb-r_2TmkJlrbFxSVDg", "type": "Ed25519Signature2018", "created": "2023-04-19T12:45:55.956Z", "proofPurpose": "assertionMethod", "verificationMethod": "did:key:z6MkghvGHLobLEdj1bgRLhS4LPGJAvbMA1tn2zcRyqmYU5LC#z6MkghvGHLobLEdj1bgRLhS4LPGJAvbMA1tn2zcRyqmYU5LC"}, "issuer": "did:key:z6MkghvGHLobLEdj1bgRLhS4LPGJAvbMA1tn2zcRyqmYU5LC", "@context": ["https://www.w3.org/2018/credentials/v1"], "issuanceDate": "2023-04-19T12:45:55.955Z", "expirationDate": "2023-07-18T12:45:55.955Z", "credentialSubject": {"id": "did:pkh:eip155:1:0x28DDb1F987F1d433eb82EEF644b006741977f456", "hash": "v0.0.0:lu7prxwAVvVm9bADk9xyjJ1doVd/bdtitAk/uTC4qLI=", "@context": [{"hash": "https://schema.org/Text", "provider": "https://schema.org/Text"}], "provider": "ClearTextTwitter#OmnistratMatt"}}}, "description": "**Team:** @OmnistratMatt (Wildfire), @0xMarcus (Bankless Consulting), @0xBlockBoy, and @DeFi Beats (Bankless Consulting). We are all token engineering consultants in the web3 space and have worked on many token engineering projects. Two of the members do token engineering work through Bankless Consulting, one through Wildfire DAO and as an independent consultant, and the other as an independent consultant. We met through TE Academy\u2019s online study groups while going through the Token Engineering Fundamentals course (we all passed ;-). After passing the course, we decided to keep meeting weekly as we had a shared passion for advancing the TE profession.\n\n\n**Instigation:** As stated above, the team met while going through the Token Engineering Fundamentals course. Through that work, we met Angela Kreitenweis (TEA Founder) and started discussions about ways to extend the Foundations course and learning services TEA could support. Among other ideas, we discussed the need for a comprehensive token engineering project plan and output and to make it publicly available to counteract the lack of awareness of the discipline of token engineering. This grant request is an outcome of those discussions, although, this is being done as an independent project and not under TEA.\n\n\n**Project Alignment with TEC Values:** The discipline of token engineering is so new that there is little publicly available information about what\u2019s involved in a token engineering project. To our knowledge, few token engineering practitioners/TE consulting firms have made their processes and deliverables publicly available. You certainly can\u2019t point to standard deliverables or best practices yet.\n\nIt is not surprising then that in this vacuum we have noticed a significant lack of awareness most token-based project teams have in the discipline of token design and economics. Token engineering practitioners lament every time they read about a project\u2019s \u201ctokenomics\u201d only to see a token distribution pie chart, lock-up periods, and a minting schedule. More troubling, for those who have some idea about the discipline, there are voices who question the value of token modeling efforts given their perceived costs and belief the outputs are suspect.\n\nRegarding those costs, @OmnistratMatt did some market research on the TE consulting space last year. He was told by one firm they charge a fixed price of $75K for a Machinations model. Though not confirmed, another source said a large player in the space charged projects $500K for a full token engineering effort, this at the height of the market bubble early last year.\n\nMore recently @OmnistraMatt and @akrtws have been on a customer discovery call with an aspiring token engineer who described being asked to do a full token engineering consulting project a week before the token was set to launch. We also heard a story of a project team offering a token engineer $2,000 for a full token engineering effort. These are clear indicators that the market does not appreciate what\u2019s involved in a token engineering project and when they are undertaken project scopes differ widely. \n\nWe want to change that. The reality is a project's token economics is equivalent in importance to the project\u2019s solution itself. In fact, they are intertwined and inseparable. Therefore it is imperative that we demystify this critical part of building a token-based web3 project. We are doing this for the benefit of the TE profession, project founders, and the curious alike.\n\nProject Description: We will release an open-source case study in narrative and graphic form that will show, step-by-step, the process and tools used for engineering an actual token and the outputs at each stage of the project. The token will be based on an actual example project, not a hypothetical one, so that we can dig into actual deliberations and make the results more relatable for readers. The project will be a dApp where discussions of user value and token utility are ripe and deliberations will focus on how best to marry dapp value to token utility.\n\nThe structure of the project plan makes the process understandable for non-engineers. The plan shows the logical progression that builds from simple deliverables and layers to more complicated ones as the project goes along. The narrative will be written for non-engineers and include the actual deliberations and choices that were made along the way. The graphics will show the deliverables and outputs that the work produces in each phase (see below). This includes token modeling outputs from two tools, the Quauntatative Token Model (QTM) just released from Outlier Ventures and a simulator, either Machinations or cadCAD.\n\n\n**Deliverables:** The following are the project plan and deliverables. These elements will be presented in a narrative form explaining each step in detail including the work and discussions that transpire for the example project. There will be many graphics and images of the deliverables. The case study will be published in a permanent public forum, either Gitdocs or Mirror, likey both.\n\nThe token engineering project plan:\n\n**Phase 1: Ecosystem Objectives** \u2014 What is this token economy trying to achieve?\n\nComments: This involves understanding the main elements of the project itself. For the objectives of the economy, this is not just a point to reach but a condition to maintain over time. Three elements must be considered - business value (i.e. achieving the economic objectives), automation (i.e. minimizes governance surface area and technical support so that it\u2019s not too costly to operate), and decentralization (i.e. the project can grow unfettered so that it\u2019s not too costly to scale).\n\nDeliverables:\n- Description of the ecosystem objectives\n- Description of the major functions of the project\n- A statement of the business goal of the economy\n- All to be described in a few short sentences\n\n\n**Phase 2: Stakeholder Mapping** \u2014 Who is going to be part of this token economy?\n\nComments: We will be looking to answer the following questions: What is it that the example project economy needs to function according to the goals of the economy? Which stakeholders can provide that asset or service, and what will these stakeholders get in exchange that is enticing enough to convince them to participate in the example project economy?\n\nWhat are the opportunity costs for each stakeholder and the reasons for these individuals to participate?\n\nDeliverables:\n- First draft names the stakeholder types and a description of their opportunity costs and what they desire (good or bad for the project).\n- Next is a stakeholder map to visually show the interactions between the stakeholders at a high level.\n\n\n**Phase 3: Market Design** \u2014 How do you get people to transact in this economy?\n\nComments: We will be looking to answer the following questions for each stakeholder: What is the preferred environment for them to transact? What specifically is happening for each stakeholder in each transaction? How might stakeholders exploit the system? Within this environment, there are three qualities that we will pay special attention to - what economics call thickness, reducing congestion, and safety, but are better described as scale, efficiency, and risk management.\n\nDeliverables:\n- Stakeholder Journeys (steps in process and interaction points)\n- Token System Schematic (design of the token flow for service)\n\n\n**Phase 4: Incentive (Mechanism) Design** \u2014 How are the token users compelled to behave?\n\nComments: Create the design of economic incentives to keep the economy on the path to achieving and then maintaining its goals. We will be looking to answer the following questions for each stakeholder: What are the positive and negative incentives for each stakeholder and what is the value transfer network created between stakeholders?\n\nDeliverables:\n- Visualization of the value transfer flows showing the positive and negative incentives and specific items, fees, or percentages of the transfers.\n\n\n**Phase 5: Algorithm Design, Mechanism Design** \u2014 How can the incentives be embedded in code?\n\nComments: In this phase, we translate the human language mechanisms to math and see how they can be turned into \u201csmart contracts\u201d - policies that are enforced by code on the blockchain. We also check if we can re-use and customize existing algorithms, that are battle-tested and even safer to implement. Last but not least we define performance indicators to compare and select the best variant.\n\nDeliverables:\n- agent actions, algorithms, variables\n- performance indicators\n\n\n**Phase 6: Verification and Optimization** \u2014 Are our hypotheses confirmed?\n\nComments: In this phase, we model systems, personas, and scenarios. We construct experiments to verify our assumptions of the system behavior. We also use the experiments to optimize for the best operating results, i.e. growth vs. sustainability vs. security. The goal is to detect edge cases and attack vectors early on and avoid a system failure after launch.\n\nDeliverables:\n- Model the system\n- Run simulations and refine the design to arrive at an acceptable and optimized tokenomic design\n\n\n**Phase 7: Monetary Policies** \u2014 What will be the genesis event for creating tokens and how will they be distributed, managed, and possibly burnt by the project?\n\nComments: This would deal with the following: emissions (minting) schedule, allocation, vesting, distribution, and potentially burning of tokens.\n\nDeliverables:\n- Token release schedule/mechanics, inflationary events\n- Token burning, deflationary events\n- Token allocation by stakeholder category and locks or vesting schedule\n\n\n**Optional Deliverables:** If the funding request is exceeded.\n\nMilestone 8: Governance \u2014 Who makes the decisions in this economy?\n\nComments: How will you \u201cexit to the community\u201d, establish a DAO and governance structure, and allow the community to vote?\n\nDeliverables:\n- Explanation of the governance model in relation to the token\n- Graphics that visualize the governance structure of the DAO and how the token is used in governance.\n\n\n**Project Duration:** This project will take from 6 to 8 weeks to complete and publish the case study.\n\n**Funding Requested:** A client would easily be charged $25,000 USD for a project of this scope. As a grant for a public good, we would like to raise $15,000 USD. If the grant request is exceeded we will add Phase 8 - Governance.", "projectTwitter": "omnistratmatt"}
Token Design Project Case Study - Step-by-Step Guide with Outputs
**Team:** @OmnistratMatt (Wildfire), @0xMarcus (Bankless Consulting), @0xBlockBoy, and @DeFi Beats (Bankless Consulting). We are all token engineering consultants in the web3 space and have worked on many token engineering projects. Two of the members do token engineering work through Bankless Consulting, one through Wildfire DAO and as an independent consultant, and the other as an independent consultant. We met through TE Academy’s online study groups while going through the Token Engineering Fundamentals course (we all passed ;-). After passing the course, we decided to keep meeting weekly as we had a shared passion for advancing the TE profession.


**Instigation:** As stated above, the team met while going through the Token Engineering Fundamentals course. Through that work, we met Angela Kreitenweis (TEA Founder) and started discussions about ways to extend the Foundations course and learning services TEA could support. Among other ideas, we discussed the need for a comprehensive token engineering project plan and output and to make it publicly available to counteract the lack of awareness of the discipline of token engineering. This grant request is an outcome of those discussions, although, this is being done as an independent project and not under TEA.


**Project Alignment with TEC Values:** The discipline of token engineering is so new that there is little publicly available information about what’s involved in a token engineering project. To our knowledge, few token engineering practitioners/TE consulting firms have made their processes and deliverables publicly available. You certainly can’t point to standard deliverables or best practices yet.

It is not surprising then that in this vacuum we have noticed a significant lack of awareness most token-based project teams have in the discipline of token design and economics. Token engineering practitioners lament every time they read about a project’s “tokenomics” only to see a token distribution pie chart, lock-up periods, and a minting schedule. More troubling, for those who have some idea about the discipline, there are voices who question the value of token modeling efforts given their perceived costs and belief the outputs are suspect.

Regarding those costs, @OmnistratMatt did some market research on the TE consulting space last year. He was told by one firm they charge a fixed price of $75K for a Machinations model. Though not confirmed, another source said a large player in the space charged projects $500K for a full token engineering effort, this at the height of the market bubble early last year.

More recently @OmnistraMatt and @akrtws have been on a customer discovery call with an aspiring token engineer who described being asked to do a full token engineering consulting project a week before the token was set to launch. We also heard a story of a project team offering a token engineer $2,000 for a full token engineering effort. These are clear indicators that the market does not appreciate what’s involved in a token engineering project and when they are undertaken project scopes differ widely. 

We want to change that. The reality is a project's token economics is equivalent in importance to the project’s solution itself. In fact, they are intertwined and inseparable. Therefore it is imperative that we demystify this critical part of building a token-based web3 project. We are doing this for the benefit of the TE profession, project founders, and the curious alike.

Project Description: We will release an open-source case study in narrative and graphic form that will show, step-by-step, the process and tools used for engineering an actual token and the outputs at each stage of the project. The token will be based on an actual example project, not a hypothetical one, so that we can dig into actual deliberations and make the results more relatable for readers. The project will be a dApp where discussions of user value and token utility are ripe and deliberations will focus on how best to marry dapp value to token utility.

The structure of the project plan makes the process understandable for non-engineers. The plan shows the logical progression that builds from simple deliverables and layers to more complicated ones as the project goes along. The narrative will be written for non-engineers and include the actual deliberations and choices that were made along the way. The graphics will show the deliverables and outputs that the work produces in each phase (see below). This includes token modeling outputs from two tools, the Quauntatative Token Model (QTM) just released from Outlier Ventures and a simulator, either Machinations or cadCAD.


**Deliverables:** The following are the project plan and deliverables. These elements will be presented in a narrative form explaining each step in detail including the work and discussions that transpire for the example project. There will be many graphics and images of the deliverables. The case study will be published in a permanent public forum, either Gitdocs or Mirror, likey both.

The token engineering project plan:

**Phase 1: Ecosystem Objectives** — What is this token economy trying to achieve?

Comments: This involves understanding the main elements of the project itself. For the objectives of the economy, this is not just a point to reach but a condition to maintain over time. Three elements must be considered - business value (i.e. achieving the economic objectives), automation (i.e. minimizes governance surface area and technical support so that it’s not too costly to operate), and decentralization (i.e. the project can grow unfettered so that it’s not too costly to scale).

Deliverables:
- Description of the ecosystem objectives
- Description of the major functions of the project
- A statement of the business goal of the economy
- All to be described in a few short sentences


**Phase 2: Stakeholder Mapping** — Who is going to be part of this token economy?

Comments: We will be looking to answer the following questions: What is it that the example project economy needs to function according to the goals of the economy? Which stakeholders can provide that asset or service, and what will these stakeholders get in exchange that is enticing enough to convince them to participate in the example project economy?

What are the opportunity costs for each stakeholder and the reasons for these individuals to participate?

Deliverables:
- First draft names the stakeholder types and a description of their opportunity costs and what they desire (good or bad for the project).
- Next is a stakeholder map to visually show the interactions between the stakeholders at a high level.


**Phase 3: Market Design** — How do you get people to transact in this economy?

Comments: We will be looking to answer the following questions for each stakeholder: What is the preferred environment for them to transact? What specifically is happening for each stakeholder in each transaction? How might stakeholders exploit the system? Within this environment, there are three qualities that we will pay special attention to - what economics call thickness, reducing congestion, and safety, but are better described as scale, efficiency, and risk management.

Deliverables:
- Stakeholder Journeys (steps in process and interaction points)
- Token System Schematic (design of the token flow for service)


**Phase 4: Incentive (Mechanism) Design** — How are the token users compelled to behave?

Comments: Create the design of economic incentives to keep the economy on the path to achieving and then maintaining its goals. We will be looking to answer the following questions for each stakeholder: What are the positive and negative incentives for each stakeholder and what is the value transfer network created between stakeholders?

Deliverables:
- Visualization of the value transfer flows showing the positive and negative incentives and specific items, fees, or percentages of the transfers.


**Phase 5: Algorithm Design, Mechanism Design** — How can the incentives be embedded in code?

Comments: In this phase, we translate the human language mechanisms to math and see how they can be turned into “smart contracts” - policies that are enforced by code on the blockchain. We also check if we can re-use and customize existing algorithms, that are battle-tested and even safer to implement. Last but not least we define performance indicators to compare and select the best variant.

Deliverables:
- agent actions, algorithms, variables
- performance indicators


**Phase 6: Verification and Optimization** — Are our hypotheses confirmed?

Comments: In this phase, we model systems, personas, and scenarios. We construct experiments to verify our assumptions of the system behavior. We also use the experiments to optimize for the best operating results, i.e. growth vs. sustainability vs. security. The goal is to detect edge cases and attack vectors early on and avoid a system failure after launch.

Deliverables:
- Model the system
- Run simulations and refine the design to arrive at an acceptable and optimized tokenomic design


**Phase 7: Monetary Policies** — What will be the genesis event for creating tokens and how will they be distributed, managed, and possibly burnt by the project?

Comments: This would deal with the following: emissions (minting) schedule, allocation, vesting, distribution, and potentially burning of tokens.

Deliverables:
- Token release schedule/mechanics, inflationary events
- Token burning, deflationary events
- Token allocation by stakeholder category and locks or vesting schedule


**Optional Deliverables:** If the funding request is exceeded.

Milestone 8: Governance — Who makes the decisions in this economy?

Comments: How will you “exit to the community”, establish a DAO and governance structure, and allow the community to vote?

Deliverables:
- Explanation of the governance model in relation to the token
- Graphics that visualize the governance structure of the DAO and how the token is used in governance.


**Project Duration:** This project will take from 6 to 8 weeks to complete and publish the case study.

**Funding Requested:** A client would easily be charged $25,000 USD for a project of this scope. As a grant for a public good, we would like to raise $15,000 USD. If the grant request is exceeded we will add Phase 8 - Governance.
Token Design Project Case Study - Step-by-Step Guide with Outputs