Recently we had the huge privilege of interviewing one of the world’s best tokenomist and ICO consultant Dunstan Teo, of Kryptoia! This is IKIGUIDE’s FIRST video interview so we are really excited!
Dunstan’s unique 9 years’ experience in the blockchain / cryptocurrency industry makes him one of the world’s most valuable tokenomist and ICO consultant. Trained by senior mentors and crypto-influencers/ veterans in the crypto world, he has a good sense of the worldwide geo-political and social-economic climate on the latest blockchain technology.
You may watch the full live video here (CAVEAT: the video went a little wonky after the 9:00 minute mark after I rejected a call during the live interview 😛 ). The transcript is as follows:
He is known in the industry as a very good tokenomist and ICO consultant. Today, this interview will be centered around the topic of tokenization and tokenomics so if you have any question, you can just ask in the comments below.
I will ask the first question now. Dunstan, can you tell us more about yourself and what you are currently doing?
Dunstan Teo: I am currently an ICO consultant, I consult on ICO projects. Also, I am doing several blockchain projects right now– That is what I am doing.
Can you tell us briefly– what is “tokenomics” and what does the tokenomist like yourself do?
Dunstan Teo: Generally, it is a bit difficult to talk about tokenomics because there are a lot of different views. Some people believe that tokenomics is like economics and some people believe that tokenomics is trying to figure out how much a utility token is worth.
We have different structures of different tokens that are coming up. For example, we have STOs “security tokens”, we have utility tokens right now, we may even have hybrid modules and even multiple token modules itself.
The current talk about tokenomics, I truly believe that in order to figure out what tokenomics is, we need to look at the different modules of the ICO’s. The token structure should fit their business model and not the other way round.
But most of the time, what is happening in the region is that people are doing a token distribution or a fund-raising model rather than tokenomics.
Dunstan Teo: If we talk about good tokenomics, maybe I will like to talk about Steemit. This is one of the cryptocurrency forums that many of the cryptocurrency guys have been using.
At first, they did not do tokenomics, which is why half a year into their ecosystem, you will find that suddenly, they have anew token structure and they went through a total construction actual.
Because they find out that their original model does not work. What happened is that when they started doing their ICO, what they did was… not even really an ICO, what they had was a fund distribution model but when they started doing their company operations, when they started moving around, they started doing business development. They found out that actually, that model does not work, their current model and they changed it to a new module; they actually changed it to a stable structure model, a stable coin model and they changed it to an investable coin model itself.
So that is the Steemit current model and actually, that is good tokenomics because it went through business alignment. The people in the team actually went through deep discussion including with the committee itself so that is why I believe it is a good token model itself. For bad tokenomics models, I would not lie to name anyone of them but I will like to give a couple of red flags. For instance, 99% of the models out there are talking about using the Ethereum protocol.
Dunstan Teo: And because most of the developers are on the Ethereum protocol itself. So the current system is that people believe that because of the smart contract structures, they would rather use Ethereum.
But they do not understand that when most of the ICO’s are fundraised on the Ethereum protocol and the blockchain itself, what happens if the Ethereum price tanks, whatever they have raised will drop by 20-30% in value.
I will give an example, we had EOS, they raised $4 billion in Ethereum and when they needed to use their funds, what did they do?
Dunstan Teo: They liquidated Ethereum and they got their own native tokens out.
So technically, sooner or later, you will see that the $4 billion is raised on the Ethereum blockchain to be liquidated and when that happens, the Ethereum price is going to tank.
So even if Ethereum has that utility function itself, these are contracts that we all love, we find that if the company does not understand this situation, they will not be able to craft out their fundraising model and their tokenomics model properly.
When they don’t put that in parameters and when they don’t add that as a parameter itself, when the token prices drop, they will find that they cannot raise enough funds for their ICO and that is a huge problem.
Dunstan Teo: Well, other than me being shot by the people up there, I believe that a good price for Ethereum will be $120.
Maybe most of the people are going to say that is bullshit or maybe they will say $200 or $300 but it looks like it is stabilizing at that number.
Dunstan Teo: Actually, that is the thing about tokenization or about tokenomics itself–Understanding the business model. With that understanding, you will be able to craft a good utility token, which most of the tokens out there are.
I know that we are shifting into security tokens but most of the tokens are not security. I will assume that the current tokens are mostly utility and in order to understand how utility tokens will work, we need to understand the business model.
The token must be built within their ecosystem if it doesn’t flow within their ecosystem, the token is of low utility and the prices of the token are going to follow that of bitcoin or even worse, that of Itorom.
I believe that the relationship between tokenization and ICO’s will be the fact that we have tokenomics right, the prices of the token will stabilize and it will follow a relatively semi-inflationary model.
Dunstan Teo: I do agree that many of the businesses can tokenize but they may not need to build their own.
Let me clarify, I think that many of the ICOs believe that the need to build their own blockchain but actually, they don’t need to. All they need to do is build on their existing protocol whether or not it is to build as a side chain itself, as a child chain. Many of them do not need to waste investors’ money by building a separate block chain.
But why many people are trying to build is a separate blockchain is that they can justify how they raise a larger sum of money. It is a form of justification, which I feel is incorrect actually, I will rather they raise the correct amount of money that they should have and what they do is that they raise it based on the context of their business.
Actually for good tokenomics, which I will go back to is this; in order to understand tokenomics, the basis of tokenomics is to understand that you are not getting investors’ funds. You are actually borrowing from future revenue.
Why I say that is because most of your utility tokens are going to be used in your ecosystem and it is going to gain true value in your ecosystem and in that value, part of that revenue runs within your ecosystem. If that is the case, you are actually borrowing future revenue and not getting investors funds.
Dunstan Teo: For lack of a better word, we can say simply that yes, it is a pre-payment model in a sense.
Because when the utility tokens start coming in, most of the time it is not true value at first. As the ecosystem becomes more stable, it start gaining value because of perceived value.
And because of the fact that people need to use perceived tokens to run within the ecosystem, to have resources in the business or to partake as a community itself so that is where it start gaining value.
For that fact to happen, it takes time so we are borrowing from the future that time first.
Dunstan Teo: The easiest way to see is whether they are raising on the Ethereum protocol itself.
Generally, if they are raising on it, I will ask the team a lot of question as to why.
Of course, other than that, the next most important thing I will talk about will be the team. Is the team used to running the business itself, that is very important. Is it that they have a paper ware ICO or white paper ICO? If they are building a new tech, go ahead.
But if they are building another business on top of it, the they need to have the experience and the industry know-how.
Dunstan Teo: Quite a few ICO consultants called me over and were talking to me about it.
They were telling me and they were using the supply and demand graph to talk to me about tokenomics.
I was asking then this; when you do tokenomics for the businesses itself, did you ask for their projections or their PNL of their business?
Usually, they will say no. And if they say no, do you think they have done enough due diligence to figure out what should be the true price of the tokens they should be looking at? Answer your own question. 😛
Dunstan Teo: Generally, I believe that good tokenomics is one of the keys. It will not be the main key but it is the main key of failure of recurrent ICOs.
What we are seeing now is that 99% of the ICO’s all have token distribution models and not tokenomics models itself. Because it doesn’t fit their business model, the token model does not fit what their business model is trying to do.
Many of them are fluctuating because the Ethereum prices fluctuate and even worse, when they put it on the Itorom protocol and bitcoin drops, Ethereum drops more. When Ethereum drops, they drop even more and there is a spiral effect downwards, which is why many of them have lost 90% of their value.
That is what we are seeing right now in the graphs. A lot of investors are now feeling a lot of fatigue because they are trying to chase a number, which was artificial to begin with, it was not a true value of the ecosystem of the ICO’s they invested in. I would not say that it is the key to success but I will say it is the number one reason why many of them will fail.
The other question you talked about is how the ICO founders can stay grounded. Even Google, Wikipedia and even ICO consultancies experience this and they really have to prerequisite good expertise to understand good tokenomics.
Because in order to understand tokenomics, you really need to understand economics, you need to understand business models and you need to research deep into the industry that the business is going to be, in which the ICO industry is going to be in.
They need to figure out whether their current model works or is it disruptive enough that it is a different model but it is something we can try. Investors need to understand that everybody is now testing so they might change their model halfway. Because after operating the business, they find that something is wrong like the Steemit situation and then it makes sense for them to change and investors are angry when he change.
That is a not a mature way for us investors to handle– we want the business and the ecosystem to grow.
Dunstan Teo: I feel that the biggest thing to share is that there are a lot of industry “experts” out there– the so-called “experts”.
It is extremely difficult to tell whether or not they are experts because the industry is relatively new. Because it is a new industry, there is no filtering system.
Even with the regulation coming in, the people who try to regulate the cryptocurrency and blockchain industry really don’t understand the crypto industry at all. And if they don’t understand what they are doing, they are using a Fintech model or a financial model to try to regulate cryptocurrency.
It is not going to work. So as an ICO consultant and us as crypto people, we should do more self-regulation and to prevent scams out there. We should talk to the public, explain to them whether this is okay or that is not, so that they don’t get scammed.
It is worth noting, however, that many people are in the crypto space to earn fiat. It is not to further cryptocurrencies. And that would be another thing. So if they are in the space to chase fiat, there is nothing we can do. But if they want to come into the space to partake and build upon, those are things we will be happy to assist.
We hope you have enjoyed the interview with our ICO Consultant Dunstan Teo! Feel free to connect with Dunstan Teo on linkedin.