Examples include gas fees, fee discounts, restricted access, governance rights, collateral usage, and validator requirements. The strength of each depends on whether the token is optional or mandatory for participation.
The table below details various aspects of token utility:
| Driver | Description | Key Considerations |
|---|---|---|
| Gas Fees | Native token must be spent to transfer assets or transact on the protocol | Is there a high demand to transfer assets or transact on the underlying protocol? |
| Fee Discounts | Holding the token grants users access to discounted fees when trading or transacting on the protocol. | What is the price sensitivity of the user base currently transacting on the protocol? How much of an impact (financial and psychological) might fee discounts have on the end user? |
| Restricted Access | Holding the token is required to access the protocol's products and offerings. | Is the protocol valuable enough to justify gating access to anyone who does not hold the token? Will this barrier to entry deter potential users and inhibit ecosystem growth/adoption? |
| Governance | Users are attracted to acquire the token due to the governance rights that it entails. | There is no easy way to discern token demand for governance. Still, we can look at similar projects to analyze their holder base and see what percentage of circulating supply they hold. Generally speaking, we can assume that the more tokens one holds, the more invested said user is in seeing the project succeed; thus, we can assume that these larger holders bought due to governance. |
| Collateralization | Users can provide their tokens as collateral in return for some form of yield. | Users are attracted to stake the native token (which can be used as collateral by the project) due to the staking yield they can earn. This will result in a certain percentage of the circulating supply being staked. Therefore, based on the monthly yield you wish to target, we can look at similar projects to analyze the percentage staked of circulating supply at that moment. This is what we will take to be token demand due to collateralization. |
| Network Security | Node operators must acquire and stake certain tokens to secure the network. This will result in a certain percentage of the circulating supply being taken out of circulation. | Based on the expected validator set growth and token requirement per validator, we can look at similar projects to analyze what that percentage of circulating supply is. This is what we will take as token demand due to network securing. |