GM PRO DOers,

Designing a successful token isn’t easy.

In fact, most tokens in web3 end up doing more harm than good for a business over the long run.

Axie Infinity, STEPN, and Luna are just a few examples of the consequences of poor tokenomics.

Now, it goes without saying that in order for a token to succeed it should retain or appreciate in value over time. If a token can achieve this, it can be one of the greatest acquisition and retention tools of all time. 🚀

But if the token depreciates in value, well, it can also be the worst…

It’s for this reason that tokenomic design is so important. So too is aligning incentives of your token holders with the business.

Whether you’re building in this space and utilizing a token, you’re partnering with an entity that utilizes a token or you’re simply investing across web3, understanding tokenomics is vital.

But it’s also important to note that the best tokenomics will not matter if the product or business behind the token doesn’t provide real sustainable value to its customers and users. 🤷

Tokens are a tool to amplify your business, they aren’t the business itself.

In today’s on-chain report, we are going to uncover the tokenomics of a technology that has both found incredible product-market fit as well as created what I believe to be the greatest tokenomic design for any fungible asset in web3 so far.

That technology is the Ethereum Blockchain and its native asset ETH.

Below we will explore:

The relationship between the Ethereum Blockchain and ETH 🧑‍🤝‍🧑
The fascinating design of ETH’s tokenomics 🪙
How Ethereum has used its token to align incentives across multiple participants within its ecosystem 📈

This isn’t meant to be a bull case for ETH (though it may be that too), but instead a means of inspiration and understanding for how a token should function within an ecosystem and community.

But first, a quick refresher on the foundations of tokenomics.