Token Design: Mental Models, Capabilities, and Emerging Design Spaces with Eddy Lazzarin

TL;DR

Tokens are powerful tools within a protocol, but protocol design should be the primary focus. This analysis provides insights into token capabilities and common pitfalls in token design.

Transcript

so I'm Eddie Lazer and I'm the head of engineering for the crypto team and this talk is a pretty brief one I cover a bunch of topics in it but stay pretty high level and that's because I think a lot of people when they think about designing tokens there's some common pitfalls that I notice and I hope that these are useful in helping your design pro... Read More

Key Insights

• 🎨 Token design is a subset of protocol design, where tokens serve as tools within a protocol to achieve decentralization and alignment.
• 🥅 Successful protocol design involves setting clear goals, introducing constraints, and developing mechanisms that satisfy those goals within the given constraints.
• 🎨 Token-first thinking and unconstrained design spaces are common failure patterns in token design.
• ✊ Over-reliance on the community to fix system problems without clear expectations and powers is another common pitfall.
• 🛄 Token capabilities can be categorized into payment, voting, stakeholding, metadata, and claiming.
• 🎨 Protocol design is influenced by nearby technologies and their potential to alleviate or introduce design constraints.
• 🥅 Anticipating future technologies can help refine design goals and constraints for protocols.

Questions & Answers

Q: What is the relationship between token design and protocol design?

Token design should be seen as a subset of protocol design, as tokens serve as tools within a protocol to achieve decentralization, ownership, and alignment among participants. Tokens are not the ultimate goal, but rather a means to achieve the desired protocol design.

Q: How can we avoid token-centric thinking in protocol design?

By focusing on the goals and functioning of the system without tokens, we can identify the essential elements and avoid overemphasizing the role of tokens. Asking what fails if the system fails completely without tokens can help clarify the importance of tokens in the overall design.

Q: What are some common failure patterns in token design?

Token-first thinking, where token allocations and rewards take precedence over protocol design, is a common failure pattern. Having an unconstrained design space, with too many possibilities and lack of direction, is another failure pattern. Over-reliance on the community to fix system problems without clear expectations and powers is also a common pitfall.

Q: How can we constrain the design space and address failure patterns?

Refining the goals of the protocol, understanding the powerful concept being built upon, and identifying the biggest weaknesses of the design can help constrain the design space. By accepting constraints and considering the powers and capabilities given to the community, we can avoid placing undue burdens on them and ensure a more coherent and successful design.

Summary & Key Takeaways

• Token design is a new and evolving field that should be seen as a part of protocol design, as tokens serve protocols and decentralize ownership and power.

• The design process for protocols involves setting clear goals, introducing constraints, and developing mechanisms that satisfy those goals within the given constraints.

• Successful examples of protocol design, such as Maker Protocol, demonstrate the importance of defining goals, accepting constraints, and creating mechanisms that support the design.