Joel Monegro, who is one of the Partners at Placeholder and a former USV analyst, has written an important post that outlines the relationships between the three primary stakeholders in a cryptonetwork; users, miners/validators, and investors.
Joel calls it the Cryptoeconomic Circle, although it sure looks like a triangle to me
The most important “aha” that this post generated for me was the role of capital/investors in a cryptonetwork.
Maybe because I come from the world of venture capital, where the role of capital is to fund the cost of developing the technology and business, I had always seen the role of capital in a cryptonetwork similarly.
But as Joel points out in his post, that is one of two roles of capital in a cryptonetwork. The other role is to support and sustain the network by supplying financial capital to the validators who do the work in
As Joel explains in his post:
There are short-term investors (traders), and long term investors (holders). Traders create liquidity for the token so miners can cover operational costs, while holders capitalize the network for growth by supporting token prices. The former is a direct form of value transfer where miners sell earned tokens in the open market to cover their costs and reinvest profits, and the latter is an indirect transfer of value that shows up in miners’ balance sheets rather than their income statements.
Like Joel’s post on Fat Protocols two and a half years ago, I think this will be an important post in helping people understand how these networks actually operate and exchange/capture value. As Joel says at the end of the post:
it helped me see cryptonetworks as systems for exchanging labor for capital (vs. currency), the fundamental concepts of network capital, and what the different roles are for investors like us in the development of these new economies