Token Design Insights from Founders Summit 2022

At Founders Summit 2022, Eddy Lazzarin, Head of Engineering at a16z crypto, reframed token design as protocol design. “Tokens are not the goal, protocols are,” he emphasized. This talk offers key insights into designing strong protocols, avoiding fails, understanding token roles, and anticipating technological evolution.

Mental Models
Lazzarin’s three-step framework ensures clarity:
• Goal: a measurable objective with clear success/failure.
• Constraints: endogenous (self-imposed) and exogenous (external, e.g., tech limits).
• Mechanisms: align with goals within constraints.

This approach keeps the focus on protocol objectives, using tokens as tools.

Lazzarin outlined three common failure patterns in protocol design:
• Token-first thinking: focusing on rewards over alignment. Ask: How would this system work without a token?
• Unconstrained design space: refine goals and accept constraints to narrow possibilities. Ask: What’s the powerful concept?
• Community wastebasket: don’t offload issues to the community without clear roles. Ask: What powers are we giving them?

Avoiding these ensures a protocol-centric design process.

Token taxonomy
• Payment: internal currency, network resource (e.g., ETH), arcade token.
• Voting: fund allocation, upgrades, social consensus.
• Stakeholding: returns or risk (e.g., MKR in MakerDAO).
• Metadata: membership, identity (e.g., ENS), permissions.
• Claiming: on-chain deposits (e.g., DAI), off-chain noscripts.

DeFi Tech Tree
Lazzarin’s “tech tree” shows how ERC-20 standards enabled AMMs, stablecoins, and lending protocols. He asks: What tech will unlock future protocols? What will emerging tech like zero-knowledge proofs enable? This perspective helps anticipate design constraints.

Protocol design demands clear goals and constraints. Tokens are tools, not the focus. What tech will shape your protocol’s future?

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

@CoinstructLabs

Sky Protocol Governance Updates

The Sky Protocol, a key player in DeFi, has implemented significant governance enhancements through the Atlas Edit Weekly Cycle Proposal. Submitted by Atlas Axis, the proposal finalizes the transition from MKR to SKY tokens and introduces key functionalities.

Proposal Summary
Accepted on May 16, 2025, and executed on May 19, 2025, the proposal updates the Sky Atlas, the protocol’s governance framework, to streamline operations and enhance user participation.

Key Updates
• MKR to SKY Upgrade Process: Establishes a fixed conversion rate of 1 MKR to 24,000 SKY, with a new conversion contract replacing the legacy system. A Delayed Upgrade Penalty, starting at 1% on September 18, 2025, and increasing by 1% every three months, encourages timely transitions.
• SKY Staking Activation: Enables SKY holders to stake tokens via sky.money, earning sustainable USDS rewards based on protocol income, with specific rates pending further governance votes.
• Updated Atlas Section: Replaces A.4.1.2.1 with A.4.1 - Core Tokens - SKY - MKR to SKY Upgrade (Core), providing clear guidelines for the upgrade process.
• Additional Technical Changes: Disables MKR Flop Auctions (protocol's debt coverage mechanism), deactivates the Emergency Shutdown Module, and updates the Smart Burn Engine parameters to align with SKY governance.

Impact on DeFi
The MKR to SKY transition streamlines governance, while staking rewards incentivize participation and ensure protocol stability. These changes position Sky as a leader in DeFi governance. How will you engage with these new features?

Community Role
The Sky community’s approval reflects robust governance. SKY and MKR holders can continue shaping the protocol via onchain voting.

Review the full proposal here: Atlas Edit Weekly Cycle Proposal

@CoinstructLabs

SPL-404: New Solana’s Hybrid NFT Standard

Solana’s SPL-404, developed by Mutant Labs, introduces a hybrid token standard that blends the uniqueness of NFTs with the liquidity of fungible tokens. This innovation addresses NFT market challenges, enhancing trading efficiency and DeFi integration.

Understanding SPL-404
SPL-404 assigns each NFT a specific value in fungible tokens, determined by creators based on factors like rarity or quality. This enables seamless swaps and a reminting mechanism where users can exchange NFTs for tokens and later redeem them for new NFTs with different traits. Key features include:
• Intrinsic token value: NFTs are directly linked to fungible tokens for instant trading.
• Reminting process: Swap NFTs for tokens, then redeem for new NFTs with unique traits.
• Enhanced liquidity: Supports fractional ownership, lowering barriers for investors.

Key SPL-404 projects
Several projects demonstrate SPL-404’s potential:
• Mutantmon: A collection of 10,000 NFTs paired with $MUTANT tokens. Users can swap an NFT for 10,000 $MUTANT tokens, with a 2% catch tax (1% burned, 1% to treasury). Redeeming tokens generates a new NFT, a process called “catching.”
• Mall Street: Focuses on tradeable digital assets for DeFi marketplaces, boosting liquidity.
• Fluffys: Features cat-like NFTs swappable for $FLUFF tokens, simplifying trades.

Applications and future prospects
SPL-404’s versatility supports multiple use cases:
• Gaming: In-game items (e.g., 10 tokens for a common sword, 100 for a rare one) can be traded seamlessly.
• DeFi: Enables NFT-backed liquidity pools and DEX trading, bridging NFT and DeFi communities.
• Trait re-rolling: Reminting allows users to pursue rarer NFT traits, enhancing engagement.

Will SPL-404’s hybrid model become the default for NFT projects, or will liquidity fragmentation limit its growth?

Source: Medium article

@CoinstructLabs

Good token should be rooted into the product itself. Example? - $JTO!

Solana’s explosive growth in 2024 has been powered by its unmatched speed and low fees—but Jito is the critical infrastructure making it all run smoothly.

Why Jito Matters
Jito optimizes Solana’s performance through three key systems:
1. Transaction Processing & MEV Capture
• The Jito-Solana Validator Client (used by 94% of validators) replaces spam with structured auctions, ensuring fair transaction ordering.
• Bundles (atomic transactions) and tips (priority fees) have distributed 5.4M SOL to validators, improving network stability.

2. Staking with JitoSOL
• Solana’s leading liquid staking token (40% market share), JitoSOL offers MEV-augmented yields and deep DeFi liquidity ($200M+ weekly volume).

3. Restaking for Extra Yield
• Secures $180M+ in assets for oracles and other services, providing stakers with additional rewards.

JTO Valuation: A Share of Solana’s Economy
Multicoin’s model values JTO as a percentage of Solana’s total economic activity:
• Bear Case: $2.36 (2.4% of SOL’s market cap)
• Base Case: $6.80 (6.94%)
• Bull Case: $11.63 (11.87%)

Risks to Watch
• Competition: Alternative validator clients (e.g., Firedancer) could challenge Jito’s dominance.
• Market Shifts: Order-flow auctions may reduce reliance on Jito’s blockspace auctions.

Conclusion
Jito isn’t just infrastructure—it’s an economic engine for Solana. As adoption grows, JTO’s value could compound through fee capture, staking demand, and governance utility.

Multicoin Capital Report

NFA

@CoinstructLabs

Are you building in Web3?

Then check out the expanded video workshop from Max, senior Tokenomics Designer at Coinstruct.tech about building Web3 products. For Web3 founders, investors, product & project managers and just degens! Link to the video.

Max discussed latest blockchain narratives, Web3 business models, product design choices and GTM strategies🚀

Yield Basis Protocol – A New Approach to DeFi Yield Capture

The DeFi ecosystem is evolving with protocols addressing challenges like impermanent loss and inefficient token emissions. Yield Basis (YB) introduces an innovative approach to yield capture, particularly for Bitcoin-native yield. How does it work? Let’s explore its mechanics and potential.

Core Mechanics of Yield Basis
Yield Basis redefines token emissions by tying them to intrinsic costs, resembling mining rather than traditional yield farming.

“Every single $YB token has an intrinsic cost of being mined,” explains researcher Vasily Sumanov.

This design ensures users acquire $YB tokens at a specific cost, promoting economic stability. The protocol also eliminates impermanent loss, a key issue in liquidity provision, by restructuring yield distribution.

Token Utility and Governance
The $YB token follows a structured model:
• Tokens can be locked into veYB to direct emissions.
• Holders capture BTC-native yield.
• Governance is chain-specific, with unique tokens for each chain.

This multi-chain approach avoids bridging risks and aligns with local ecosystems, offering flexibility in non-Ethereum environments.

Implications for DeFi
Yield Basis could enhance DeFi by stabilizing yield capture and rethinking tokenomics. Its focus on intrinsic costs and chain-specific governance may attract projects seeking efficient liquidity solutions.

Conclusion
Yield Basis offers a fresh perspective on DeFi’s challenges, blending Bitcoin-native yield with robust tokenomics. As it develops, its impact on liquidity and governance will be critical to watch. What are your thoughts on YB potential to reshape DeFi?

Source: Vasily Sumanov’s analysis on X

@CoinstructLabs

Sonic Labs has made all seasons of its ~200 million $S token airdrop available to U.S. residents, becoming one of the first projects to legally include the U.S. in a token distribution. The move sets a new precedent for compliant airdrops and broadens $S token accessibility.

@CoinstructLabs

Aave Umbrella Activation: A Strategic Leap for DeFi Risk Management

BGD Labs announced the Aave Umbrella Activation proposal, a critical upgrade for the Aave protocol. This payload activates the Umbrella system, a new framework designed to replace the existing Safety Module, enhancing capital efficiency and risk management in decentralized finance.

“This payload activates the Umbrella system, that includes new staking tokens tailored to Aave risk management needs along with their reward and slashing configurations”

Key Features of the Umbrella System
The Umbrella system introduces advanced mechanisms to strengthen Aave’s resilience:
• Staking Tokens: Custom-built for Aave’s risk management, enabling precise capital allocation.
• Reward and Slashing Configurations: Balances incentives with penalties to ensure protocol stability.
• Comprehensive Coverage: Addresses potential shortfalls from bad debt, offering broader protection.
• Capital Efficiency: Optimizes fund utilization, replacing the Safety Module with a more flexible solution.

Strategic Implications
This upgrade enhances Aave’s ability to manage financial risks while improving operational efficiency. By replacing the Safety Module, the Umbrella system positions Aave as a leader in DeFi innovation. How will this transformation impact Aave’s competitiveness in the DeFi ecosystem?

Source: Aave Umbrella - activation

@CoinstructLabs

Coinstruct is back online!

The channel has been quiet for a while, but the team hasn’t been idle. We’ve grown from a small advisory hub into a full-cycle tokenomics design agency trusted by projects with a combined TVL of $800 M+.

What we do

🔹 End-to-end tokenomics — from research to simulations and stress-tests. We craft both the supply and utility sides of your token.
🔹 Tokenomics Scoring & Audit — our framework stress-tests supply-demand dynamics and delivers a weighted aggregate score, helping teams refine their models.
🔹 Tokenization — guiding Web2 companies in tokenizing real-world assets and building a reliable bridge to Web3.

With 40+ tokenomics delivered, dozens of VC partnerships, proprietary simulation software, and a team of PhD mathematicians, product people, and bona-fide degens, we’ve got you covered. More at coinstruct.tech

What to expect from this channel

◆ Analytical pieces — deep dives, DeFi strategies, early-stage alpha.
◆ Educational content — fresh cases, trends, protocol loopholes.
◆ Tokenomics breakdowns — from headline projects to hidden gems.

Founder or building a protocol? DM us - we’re always open to collaboration.

BLUM | Tokenomics

Tomorrow at 10:00 UTC trading kicks off for $BLUM. Here’s the key data and our thoughts on where it might be listed.

Supply Side
A quick look at the screenshot shows classic tokenomics, but the Community Rewards block has a twist:20 % allocated to the community, 10 % for the airdrop, only 3 % unlocked at TGE.

The remaining 7 % unlocks after 180 days if you don’t claim anything earlier. Claim a fraction and the rest burns.

The mechanic rewards long-term holders and eases sell pressure on day one, but the community isn’t happy.

Sentiment is already negative: the TGE was delayed, and most users farmed only 25–30 tokens out of a 1 B supply. The team is clearly trying to soften the inevitable sell wall.

Treasury & Ecosystem Growth - 48.08 % (with 6.6 % at TGE, most of it for liquidity).

Team & investors get zero tokens at TGE - standard, though investor cliffs and vesting could be tighter.

Utility Side
Official copy is thin:

“$BLUM unlocks real utility across the Blum ecosystem, including fee discounts, staking rewards, and eligibility for future airdrops.
Additionally, we're exploring the possibility of introducing a token buyback on top of the burn mechanism for $BLUM.”

No hard numbers, roadmap, or metrics. It’s a black box known only to the team and backers - transparency is definitely lacking.

Valuation
On Gate’s pre-market, $BLUM sits at an FDV ≈ $141 M. That looks rich: compare Notcoin at $178 M FDV with tier-1 listings already secured, while Blum has none (yet).

A qualitative valuation is tough: the team doesn’t disclose fee revenue (unlike Hyperliquid), and Dune shows volumes have dropped sharply. Community mood is bearish - chats plan to “short it to zero.” With that consensus and MM games, violent short squeezes are possible (see: Solayer). But again, it’s the same black box.

Short squeezes in $BLUM 🩳

As expected: with only about 3 % of the supply truly in circulation (liquidity aside), the market maker can pump the price hard enough to margin-call the shorts.

The chart looks highly artificial.

Stay safe, folks.

Ever wondered why 70 % of tokenomics models implode within 12 months?

Most protocols, especially DeFi-oriented ones, try to bootstrap usage by showering early users with tokens. It works: a high APR is the fastest way to attract new wallets.

The problem
Teams often hard-code the emissions stream. If traction lands below the founders’ projections, those fixed rewards pump APR against a tiny TVL; the price chart can’t absorb the sell pressure, emissions run out early, and a small circle walks off with most of the supply while everyone else watches the token bleed out.

The solution
Enter dynamic emission caps: emissions expand and contract with real on-chain activity. If network activity is low and the product isn’t quickly adopted, incentive emissions stay off the market—and vice versa when usage spikes.

We rolled this out for an early-stage AI-agent token launcher, crafting a custom cap curve and stress-testing it under volatility before TGE.

Outcome: Economic design locked in pre-launch, no post-TGE APR cuts for LPs, dilution risk went down.

KittenSwap | ve(3,3) Tokenomics

TGE $KITTEN - 30 June, 17:00 UTC. The token looks poised for solid performance, at least in the short term post-TGE.

Supply side

(full breakdown in the screenshot — here are the key points)

🔹 35 % goes to an airdrop, but in staked $veKITTEN that unlocks linearly over 2 years.

🔹 15 % was sold in previous presale rounds (valuations 2.5-13 M FDV). At TGE, only half of that (7.5 %) can be converted to liquid $KITTEN — and only after paying a 50 % penalty in $HYPE.

Example: a user with 59 000 $veKITTEN ≈ $1 100 (TGE price $0.019). Unlocking 50 % ($550) costs $275 in $HYPE.

🔹 20 % goes to the team — mainly as $veKITTEN; the liquid share of $KITTEN hasn’t been disclosed.

Utility side

Holders of $veKITTEN receive:
◆ 100 % of DEX trading fees
◆ Extra rewards in $KITTEN / $veKITTEN
◆ Voting power over incentive allocation → bribe income

The ve(3,3) design encourages long-term locks, but historically it often triggers early supply shocks and later sell pressure from ongoing incentives.

Valuation

Here’s where the magic happens:

Initial liquidity will be seeded at ~$20 M FDV.

Yet wrapped $veKITTEN NFTs are already trading at ~$35 M FDV, so we’re likely to open with an upward gap.

Why are people buying? The team will distribute $1.2 M among $veKITTEN voters: if only ~50 % of holders vote, that’s ~12 % yield on your position (assuming 20 M FDV). The DEX itself earns ≈ $1.15 M per month - if all of that flows to voters, APR turns huge.

A recent parallel: the strong run of $SHADOW, which uses a similar ve(3,3) structure.

If you can snag $KITTEN below $40 M FDV and the $SHADOW scenario repeats, you might ride the Hyperliquid ecosystem hype.

Hyperliquid.🐱

ICYMI: Telegram Wallet now lets you deposit USDe at 15 % APY.

Limit: 25,000 USDe per account

Risks: funds sit in Telegram’s internal wallet and KYC is required

On a risk-reward basis it’s a solid way to park some stables for the summer - especially for mid-large sized balances.

You can even deposit USDT directly, it’ll be auto-converted to USDe.

Stocks are now on-chain

xStocks, in partnership with Kraken, Bybit, and Solana, has finally brought TradFi into DeFi.

You can now trade 55 top U.S. equities (TSLA, NVDA, etc.) and 5 tokenized ETFs directly on Solana.

🔹 Each xStock is backed 1:1 by the underlying asset and issued as an SPL token on Solana.
🔹 Dividends are auto-reinvested: instead of cash payouts, the xStock token price increases.
🔹 Hold your tokens in hot wallets like Phantom.

Why on-chain stocks beat broker stocks

◆ 24/7 trading. React to global events at any time (liquidity may thin out overnight and on weekends).
◆ Fractional buys. Grab just a few cents’ worth of a share on-chain.
◆ Collateral for loans. Kamino already accepts xStocks as collateral, so your capital works harder.
◆ LP yield. Provide liquidity in pairs like NVDAx/USDT and pocket the fees instead of Jane Street.
◆ No broker KYC. Useful for sanctioned regions (issuer can freeze tokens if needed, similar to USDT/USDC).

Although based on the data from this Dune, there are no volumes yet.

Big congratulations to our client ARCOIN Tiles on securing an investment from TBV, a leading early-stage Web3 venture capital fund.

ARCOIN is addressing one of the biggest challenges in digital marketing: fake traffic and wasted advertising spend.

For context, Web3 businesses can lose up to 50% of their advertising budgets to fraudulent traffic (bots, sybils, drophunters)

Proud to be part of ARCOIN Tiles’ journey and to help them level up their game in the Web3 ecosystem.

TON Drama & High Stakes

We’ve been watching the TON ecosystem closely, and lately Telegram has sparked a string of questionable headlines:

“Grok × Telegram” - a fake partnership announcement that sent TON vertical; 24 hours later Elon Musk clarified nothing had been signed.

“Golden Visa for staking 100 K TON” - the news raced across CT, only for UAE officials to deny any such program.

Why these pumpy news drops keep happening is an open question. We’re still bullish, but the backstage games around TON aren’t going away and risk-assessment is getting harder.

Why TON can still become a big thing

A new interview (ru language) with Pavel Altukhov (co-founder of TAC) hints that TAC could be the real turning point:

◆ TAC is an EVM layer - a gateway for Ethereum protocols into TON
◆ Not an L2. Liquidity stays in TON wallets; TAC simply adds a familiar EVM runtime on top.

Key numbers

🔹$11.5 M raised - the largest seed + strategic round in the TON ecosystem.

🔹 TVL > $750 M pre-mainnet - already 4× the TVL of the TON base chain.

🔹 Uniswap, Curve, Morpho, Euler are reportedly ready to deploy with zero marketing spend - they want access to Telegram’s potential billion-user funnel.

🔹 Co-founder Marco (ex-Linea, ex-ConsenSys growth) brings deep Ethereum DNA and is steering go-to-market & partnerships.

If TAC launches clean and holds liquidity, it could give TON a fresh growth engine in the post Tap-a-Coin era.

Crypto’s biggest crisis - bloated metrics and inflated valuations.

Let’s start with the basics: TVL is often treated as a proxy for success and liquidity, but it can be wildly misleading.

🔹Protocols artificially inflate their TVL with looping strategies - one user deposits $100, borrows against it, redeposits, and suddenly the dashboard shows $200–300 “locked.”

🔹Many platforms incentivize farmers with high yields in native tokens or points. Users chasing these outsized APYs will park funds in the protocol temporarily, pumping the TVL

🔹Sometimes protocols even route deposits into external yield venues like Pendle Finance, so the same dollars get double-counted: once in the protocol, once in Pendle.

All of this produces fake TVL that leaks out right after the TGE. You don’t have to look far for examples - the yield-bearing stablecoin / “fixed income” crowd (Usual, Resolv, Treehouse, Level Finance) makes it obvious.

Why pump the metric? Simple: look bigger, raise faster, then cash out at a higher valuation.

Most high-FDV launches backed by VCs follow the same noscript: massive insider allocations, a nine-figure headline FDV, and a sharp slide once insiders unload (usually via OTC deals or perp hedges before their tokens unlock).

The industry has, in part, “naturally attracted bad actors” due to the lack of stringent oversight and the riches to be made

How do we fix it?
To be continued…