"Token" is a hot topic in the field of encryption and web3. Even outside of web3, tokens are attracting the attention of anyone interested in art, cryptography, design, economics, games, mathematics, psychology, and more.

Tokens are described as everything from a "breakthrough in open network design" to a "new digital lingua franca" (similar to a website). We can generally define tokens as "internet-native units of value." However, the key point is that tokens represent not only monetary value, but also social value, reputation value, and more. Value takes on multiple forms.

Tokens represent multidimensional value; they are vectors, not scalars. Borrowing from mathematical symbols, scalars only have magnitude, while vectors have both magnitude and direction. Specific tokens can represent ownership, membership, identity, and more. Importantly, the significance of tokens lies in their ability to maintain inherent high dimensionality in any representation of value, opening up a rich new design space.

This is also why I believe the term "token economics" (used to describe the study and design of tokens) is very limited and inherently restrictive. It fails to capture and convey the full dimensionality of the rich design space. Tokens can be used to coordinate and organize people, not only within a purely economic context, but also beyond the realm of pure economics.

Token design is still in its infancy, so limiting the dimensions of tokens to purely economic contexts would restrict their potential construction. This is why I believe we need another term. I propose using "token studies" to refer to this "discipline," primarily studying how to coordinate people, organizations, and/or computation to achieve common goals through the use of cryptography and mechanism design.

Placing tokens in the broader context of blockchain and cryptocurrency: Blockchain is a new computing paradigm that creates a novel way of organizing people, society, and capital. The two main advantages of blockchain are composability and tokens. Here, I am focusing on tokens.

The terms used in the crypto industry also include "token model," "token mechanism," or "token design" (we also use the latter; please see here). But they all refer to how tokens interact with related protocols, systems, or mechanisms. For example, Ethereum's token model specifies how Ether works in the protocol; the token model is a subset of the entire protocol.

So, more specifically, how do we use tokens? There are many methods, but to summarize some current use cases, we can use tokens in the following ways:

Used for ownership. Blockchain is a way to first introduce user-owned and operated open-source services on a large scale; Ethereum is a good example of a user-owned and operated "world computer." Tokens also give users digital "property rights," which is another important concept here. Finally, tokens allow for superstructures, defined as "cryptographic protocols that can run for free and permanently, without maintenance, interruption, or arbitration." In this case, they will also create value that owners can access and destroy; but this value is not necessarily just monetary, it can be very valuable in other ways.

Used for coordination. Creator coins, social tokens, and NFTs allow fans to interact directly with their favorite artists and prove their fan identity—whether as early purchasers, demonstrating support intensity, or for community and meaning. For example, the advantage of Dogecoin lies in the memes, community, and "faith" it represents. Tokens can also extend to not only representing membership in the community, but also establishing digital cultural identities; in this case, holders of such tokens can also vote on creative decisions for decentralized collaboration between creators and communities.

Used for incentive structures. Incentive design is often described as key to understanding and incentivizing human behavior, but it can also coordinate systems, organizations, and networks. Tokens help coordinate validators and miners in Ethereum and Bitcoin, respectively. They also support decentralized governance in DeFi protocols like Uniswap and Compound. Tokens can help with the growth of members in NFT projects like BAYC or digital-native DAOs and communities like FWB, and the creation of derivatives.

Used for accessing goods and services. Smart contract platforms like Ethereum sell computing services; Helium allows anyone to purchase LoRaWAN and 5G transmissions; Filecoin allows anyone to pay for data storage… These are just a few examples. Many NFTs are also used to "control" digital and physical experiences. Token control can be used to prioritize early or more active community members, or to distinguish temporary participants from more dedicated participants by other criteria, and ensure a richer overall experience.

Of course, this list of token uses is far from exhaustive, it is just a beginning. But as you can see, it is an extremely rich design space—it covers many fields such as art, economics, and more.

Tokens are clearly important—not only for the crypto industry, but also for industries outside of crypto. Once they are combined with another key feature and advantage of blockchain, we can better understand how tokens represent direction, not just numerical value, and the multitude of things tokens can represent.

Again, tokens represent a vector, not a scalar. Only when we view tokens as a native way of representing value vectors can we begin to convey the rich design space here.

"Value" is an abstract concept, and most people confuse "value" with "money." Tokens allow you to explicitly represent value without having to be currency. I believe that because the modern Western economy is almost entirely priced in dollars, by reducing high-dimensional vectors to scalars, it loses information. Today, value is roughly 1) implicit, or 2) presented only in the form of dollars. Value can be represented in several other ways, including centric to the dollar. In fact, all interactions convey value, most easily manifested in the form of time and information.

The key is that developers should be able to use new token designs to make implicit value explicit.

So, should we call it "token studies" as I suggest here, simply borrowing from the study of tokens; or is there another name— I'm also curious to hear what alternative you would propose!—we need to go beyond token economics = token + economics. It is token studies = token x economics x art x … A new term also helps us usher in a new and richer era of token design.

Author | Guy Wuollet

Translation | Yusi Cai

Proofreading | Shwana Zhou

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