The Two Cap Tables of Crypto Companies: The Fine Balance between Short-Term & Long-Term Planning

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Aug 20, 2023

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The Two Cap Tables of Crypto Companies: The Fine Balance between Short-Term & Long-Term Planning

In the world of crypto companies, there are two cap tables that play a crucial role in determining ownership and allocation of tokens. These cap tables are the equity cap table and the token cap table. Understanding these two cap tables is essential for investors and participants in the crypto space.

The equity cap table is a familiar concept for anyone involved in traditional equity investments. It represents the ownership stakes of investors, founders, employees, and other stakeholders in the company. The distribution of ownership is typically dictated by the equity cap table, and it is divided pro-rata across the equity cap table. This means that the more equity you hold, the larger your ownership stake in the company.

On the other hand, the token cap table is unique to crypto companies. It includes a new element not found in classic equity cap tables, which is the treasury. The treasury captures tokens from the foundation's efforts to participate in the community, such as running validators or stakers. This treasury is an important source of tokens that can be used for various purposes, including incentivizing network participants to jumpstart network effects.

When it comes to planning for the future, there is a fine balance between short-term and long-term planning. Understanding this balance is crucial for individuals and companies in any field, not just in the crypto space.

Short-term planning focuses on finite time, which is within our control and the realm of near-term planning. It involves setting goals and creating strategies to achieve those goals within a specific time frame. This type of planning is important for immediate progress and growth.

Long-term planning, on the other hand, encompasses externalities and events that are out of our control. It involves thinking about the future beyond the immediate horizon and preparing for uncertainties. Long-term planning is essential for building resilience and adaptability.

To strike a balance between short-term and long-term planning, it is important to leverage the concept of infinite time. The infinite monkey theorem demonstrates the potential power of infinite time – given enough time, even random actions can produce remarkable results. This concept highlights the importance of considering the long-term possibilities and probabilities.

One way to achieve this balance is through the barbell approach to risk management, proposed by economist and philosopher Nassim Nicholas Taleb. This approach involves taking on two extreme positions – one with a low level of risk and one with a high level of risk – rather than a moderate position with a medium level of risk. By doing so, you can maximize your potential for gain and minimize the potential for loss.

In the context of crypto companies, this means focusing on offense in the near term and optimizing for finite time. This involves setting clear goals, executing strategies, and driving growth. At the same time, it is important to be on defense in the long term, leveraging infinite time to prepare for the unknown. This can include building resilience, diversifying investments, and staying adaptable to market changes.

In conclusion, understanding the two cap tables of crypto companies and finding the right balance between short-term and long-term planning is crucial for success in the crypto space. To achieve this balance, consider leveraging the concept of infinite time, adopt the barbell approach to risk management, and prioritize offense in the near term while being on defense in the long term.

Actionable Advice:

  • 1. Set clear goals and strategies for short-term progress while keeping a long-term perspective in mind.
  • 2. Embrace the barbell approach to risk management by taking on both low and high-risk positions to maximize potential gains and minimize potential losses.
  • 3. Continuously adapt and build resilience to prepare for the unknown in the long term while focusing on growth in the near term.

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