Good Profit, Good Token - Building the Next Era of Crypto Businesses - Kirsten Pomales

Transcript

So first of all, thank you all for being here. Pleasure to meet you. Um, so basically this talk is all about what is a good token. But before we get into that, I wanted to share a little bit about my weird background. So, I'm Kirsten and I spent five years working as a lobbyist in the United States. Through that, I realized that the current institutions that we have today that are running everything don't really work. They're corrupt. They're really just abusing people. And after having that realization, I decided to jump into tech and try to build different systems.

And eventually, eight years ago, I got into crypto. And since then I've had a few venture-backed startups um building decentralized tech, privacy tech, and more recently I joined the team at Logos where we're trying to rebuild society using exactly this tech. For the purposes of this talk though, I'm just sharing my personal thoughts. So what we're going to cover today is a brief history of tokens. We're going to look at all of the different trends that have happened over the past years and some insights behind that. Then we're going to look at the original token use case. So this is going back to ICO era.

And then we're going to take a look at some real world tokens that I would consider a good application of the technology. I'll start with a brief trigger warning. I know that we all have our darlings. We all have our favorite token economic models and trends and whatnot, but I want I want you to just maybe take a step back, let go of these preconceived notions and we can maybe discuss a bit after. So I believe very firmly that every single major trend that we have seen in tokconomics outside of the first era of ICOs has been a reaction to SEC pressure. Not what is actually good for ecosystems, what is actually good for

businesses. So what I'm going to do is I'm going to walk us through the four main stages that we've gone through as an industry and how we've been building tokens and modeling token economic systems. So, we'll start back in the day, back in the good old days. Um, people were launching tokens primarily as fundraising vehicles. You'd have a vision for a specific idea that you want to build and then you would just see if you could crowdfund it. It was essentially a crowdfunding mechanism. And a good example of this would be the DAO. So, you guys have probably heard of the DAO hack, but a lot of people don't know that the DAO was originally created to fundraise for a peer-to-peer scooter

project. So, you think about like the Bolt scooters, the Lime scooters. That was originally the vision there. And you had a lot of similar projects back in the day that were basically just fundraising for startups. But unfortunately, as a reaction to a lot of these projects, you had the SEC starting to come after teams and saying, "Oh my god, you're using this for fundraising that looks like a security." And people got scared. And when people got scared, they were like, "Oh my gosh, oh my gosh, what? How do we make it not a security?" And the SEC uh very early on labeled Ethereum as definitely not a security because it was a utility, not a security. So that inspired a lot of projects to try to figure out how can I

make my token a utility. So they wanted to do the fundraising but as a consequence they were like okay how do we figure out some sort of ponzenomic system that is believably enough a utility and what this resulted in is again a lot of weird sort of ponzomic systems where you look at it and you know like you don't really need this thing but we tell ourselves that we need this thing and the VCs are like yeah yeah we need this thing wink wink because again they didn't want to get harassed by the SEC.

But then what happened is the SEC was like, I see what you're doing there. That's not actually a utility token. And then the industry was like, oh man, oh man, okay, utility tokens, these are still risky. What else can we do? So then there was the big governance token trend and everyone was doing a governance token. This is like unis swap governance token era. But the thing is is if if you really look at like you know unis swap and other ecosystems are they really using the governance token to guide core protocol decisions a lot of the time no and even though everyone was using this as again a protection against securities accusations in the end the SC still kept sending people letters and uh they needed to

come up with new ideas for how to avoid harassment. And then we enter the more recent era. I think we're sort of exiting this era now, but we'll see. And that's the memecoin era. Do y'all remember when all the VCs were on Twitter talking about how memecoins are amazing for like venturebacked startups to launch because it's community and it's vibes and it's XYZ. But in the end, that also was just misdirection for SEC because it was primarily a fundraising vehicle. But you can't say that it's a fundraising vehicle. So saying that it's a meme token allows them to sort of shift responsibility, especially when you have meme tokens that are launched by the

community, definitely not launched by the team. And we saw how that went. We had a lot of weird stuff going on. Um, but in the end, all of these different phases, like if we look at the actual reason why we were trying to do things in the beginning, it's like we're fundraising for a business. We're fundraising for something that's like, you know, ideally gonna have some sort of benefit to users and ideally have some sort of revenue hopefully. It's basically a startup, right? And when we get down down down down down into this like trickleon effect, meme coins really like do these have any sort of tie to like profit generation ROI?

No, it's just LAR. It's penny stocks. And that's why I do believe, you don't have to agree with me, but I do believe that virtually every trend that we've had so far in tokconomics has been a reaction to the SEC. But what's the alternative to this? So, I propose and I think that we're headed in a new trend of going back to the original token use case and that is a fundraising vehicle that is ideally going to reflect some upside for investors. But in order to get there, we really need to change our mental models about how we even build systems. And that's why the title of this talk is

called good profit, good token. It's because we're trying to build businesses here. This is not true for every project, but I think that it's going to be true for more projects. So, I want to be clear. I'm not talking about securities here. Definitely not talking about securities. So, I just want you to maybe maybe consider calling them this something like that. We can make up our own word. Not securities. Maybe might sound a bit like it, but it's not. So let's dissect ICOs. What exactly were ICOs? We're going to crowdfund.

And then ideally when your project is at the stage where it's generating revenue, you do token buybacks. And as a result, you in many cases do have price appreciation. There are not very many projects these days that are doing that. There are a few. Um, and oftent times you have some sort of limited governance rights when that makes sense for the project. And the ideal ICO was literally just raise money from people who like your idea, crowdfund, build a profitable business, and then again roll that profit into buybacks.

So the most important thing about ICOs that makes them better than any sort of fundraising vehicle that we've had before is you can raise funds from anywhere, anyone without limits. And this is really important because more than 50% of businesses globally do not have access to investment. And this is because of a lot of reasons. It's geographic issues, it's government regulation, um capital controls. like you try to fundraise for a startup in Africa. Tell me how that goes for you. And if we can do this model, if we can bring back that sort of ICO era vibe, that's real value creation and that's what I call good token.

So, another really nice part about ICOs versus these other weird flavors of token system is basically any business can leverage this. Like you try putting a utility token on a grocery company or trash collection company and then then you get, you know, weird stuff going on. And that's why a lot of the projects that have tried to do that stuff have failed. Um, but if you just focus on it as a fundraising vehicle, virtually every profit generating business on Earth can benefit from capital infusion via a system like this.

So, it's not just fundraising though. If we think about like other good token use cases in general, like there's different kinds of funding. So you can have like you can have lending to businesses, you can have uh purchasing of businesses via sort of private equity style deals, venture funding that's like you know traditional crowdfunding, getting VCs involved etc. And also worker incentives this is very interesting because if if you look at like you know why why are people so excited about working for you know Salesforce or Apple? They're thinking that the business is going to do well and they're looking at some incentives that are being put on the

table there. So, I did tell you before that not many projects are doing this model, but I'm starting to see more and more. And there are also a few ICO era projects that are still around that have been doing this model for quite a while. And I'm going to talk about one of them that you probably know about. You guys have heard of Brave, right? I'm a Brave user. Probably plenty of you are Brave users. Brave is a web browser. It's a privacycentric web browser. And what they have been doing for I think like eight years, maybe even more, is they raised money via a crowd sale.

They've been paying workers in their token partially. Um, and they've been doing user rewards. And what this has resulted in is Brave climbing, climbing, climbing, climbing into, you know, one of the top web browsers in the world. And obviously the team had a lot of hard work to get there. But I think that the fact that they structured their fundraising this way is one of the reasons why they're there. And the best thing about Brave is they have a real business model. That's why they're still around. Um, their business model is selling ads. That's very classic for a web browser. And they also have of course token buybacks which is ideally going to appreciate the price of the token outside of your standard

market forces of course. And the next project that I want to talk about is very very special to me because it's actually a project of my friend. So I'll just like briefly introduce it. I had I had a startup that was trying to do this but I was sitting in an ivory tower and I was you know building core infra and stuff like that. I wasn't going on the ground and actually talking to the people, getting my hands dirty. Um, so I'm going to hand it off to Mache and he's going to tell you a little bit about Aquari, which is a labor coordination platform. >> Hey guys, it's great to have you all here. Uh, I'm Mate. I'm one of the co-ounders of Aquari.

uh I probably going to cover our most recent operation that was Nigeria and we are currently focusing on expanding our operational capability in Nigeria and what's great about creating projects that use decentralization is we can basically create a in a way a bond or a contract uh for any place in Nigeria and people can apply for that contract or that bond to perform that work and without having to uh manually hire all of those people, we can deploy the

workforce in any place at world. But Nigeria was a very specific example because very early on we realized that most of the logistical chain that they have for example for waste management that we are utilizing for both environmental protection cleanups and uh later on leveraging that to provide waste management uh services to local governments. uh was that most logistical service like entire logistical chain was fully monopolized and people were able to tell you whatever the price they wanted to uh for example $30 per one short track uh trip in a country where $50 is

average monthly salary. So we realized very early on that we have to build our our own infrastructure. So we started deploying our own heavy equipment, our own trucks, our own payloaders to be able to support those people and support local communities as well as be able to leverage that uh to to showcase our our work to uh local governments.

And do you want me to cover anything else or >> I I can say a few more words. So just to like recap the TLDDR of Aquari, they are winning government contracts for trash collection in Nigeria as well as other African countries. They're tokenizing those contracts and then rather than having uh you know corrupt government contractors laundering the money, they're paying locals to actually do the work. And how much trash did you clean up on the last mission?

>> On the last mission that was in Abuja, that's capital city of Nigeria. Uh that was 22,000 metric tons. that was high up to like five five store building with like 50 55 square meters of like like length and size. So that was a massive it took us over 500 uh truck tracks to to be able to actually tackle it. And that pile was deemed uncleanable by local government because all the attempts they tried to clean it uh were unsuccessful and that pile simply kept regenerating. in lo in local communities it was deemed a zombie

pile because whatever they tried to do uh it never worked and yeah like Kirsten mentioned uh also the biggest issue is having to deal with the corrupt government that wants to that at every contract bidding they have their own potential friends or companies that they want to prioritize over whatever company might be better and most of those companies simply don't even provide on those services or even if they want to provide on those services the money disappears along the entire chain of command before it even

gets to that company because at every stage of the process every politician every management uh and every person in management and every uh cooperate coordinator basically takes a little bit of top until there is no nothing less. So this is why we are trying to cut the middleman and create a paral way to provide those services with a huge emphasis on empowering local communities to solve the problem they are dealing with every single day. And the biggest pro actually the biggest problem the those communities are dealing with is

not even those that trash and it being there. It's the fact that for example that trash can trap water and be a malaria breeding ground. That trash releases uh toxic chemicals in the groundwater. uh that trash is also a huge uh vector for spread of kolera and people that we talked during our operation in Nigeria uh I think every single one of them lost a per some of the family members because of those trash piles. So we are not only trying to help the environment at the and at the same time provide services to governments in developing countries. We

are also trying to empower and help local communities without without the exploitation that sometimes NGOs's do when they go in promise whatever they want to promise make photos for potential donators to look good and they simply leave without doing anything. >> Thank you Machu. Thank you. >> Oh, thank you guys. >> So to me, this project is a perfect example of building a parallel institution.

If we look at all of the corruption, all of the issues that we have with government managing stuff, ma monopolies managing stuff, we're basically forced to build solutions completely outside of the realm of what everyone else is doing right now, what government is doing right now. Another highlight is this is a real business. This is not just some, you know, donationfunded NGO. And because of that, that's how it's able to be sustainable. So what Aquaria used their initial token sale for is funding. They did a crowd sale. They also use the token for worker incentive. So the people that are actually cleaning up the trash are

receiving the token and then they can, you know, off-ramp it to their bank account within a few clicks. And they're also using it for governance. So the actual people that are contributing can decide, okay, yeah, like that city has a big trash issue. Let's pick that as the next site that we're going to clean up. And again on the real business model, they uh have the government contracts and they're able to roll profits of that back into the token. So just wanted to share some final thoughts with you all. Access to capital to build interesting systems like Aquery, Brave, other innovative solutions is not evenly distributed.

Again, more than 50% of businesses in the world don't have access to the capital that they need to get started, to grow, to scale. And I just want to ask you a question like what what would society look like if we were able to actually scale this model? If we were able to fund all these teams that are doing the real work on the ground with profit, with sustainability. This is what I want to see in the next cycle. And the reason this is important is because this is all outside of the existing systems. It's outside of the systems that try to squash the projects that are actually doing the good work to

benefit the big guys. This is the future. This is good profit, good token. Thank you. happy to take questions if there are any. >> I can ask. >> Uh thanks a really cool topic. Um I wanted to ask more about the challenges for people like who are thinking about tokens in the real world. Obviously, you know, there's a lot of push back about what token like does it work well in juris specific jurisdictions?

Are there any tricks that have people how do they overcome like convincing people to use tokens? Um the whole chain thing like you know that's always a big question which chain shall I you know do it on um yeah like in terms of challenges and how people overcome them in your survey. Any any patterns any high level like I pointers? >> Thank you for the question. So, two things come to mind. So, one of them is more on the legal side. I'll preface with I'm not a lawyer. Um, but just like in the ICO era, people have learned to try to not touch US investors. Generally, it's not. It just makes your life more complicated because the US has the most strict rules around

crowdfunding and stuff like that. Um, so generally teams are usually trying to avoid US market. Um, aside from that, there's a whole boatload of things that you can do to make your token more sound from a legal perspective, but that's like a whole hour of conversation. Um, so the next uh problem that you highlighted um is around like getting people to use tokens. So conveniently, the areas of the world that most desperately need this kind of tech are already using it. So if you look at like Africa, Latin America, Southeast Asia, you have like grandmas that are already touching Ethereum, they're using it as

uh, you know, way to touch stable coins, make sure their money's not inflating away, a way to get paid. So even in Nigeria, like a lot of people are interacting with the crypto ecosystem. So from Aquarius's perspective, people are eager to get paid in the token. And if you make your systems sort of easy for people from the perspective of like allowing easy off-ramps to local banking infrauring out how people can spend that's very important as well. Um and a lot of teams are thinking about that. So thank you. >> Okay, we have time for one quick question maybe.

>> Go ahead. Uh I would be curious about the distribution on the ground like how do you find the people that actually do the work and how do you explain them how the entire system works? >> Yeah. Well for Aquaria it's been really word of mouth because again think about it in Nigeria the average salary is $50 a month. That's you know that that's really not great. Um, and when it comes to a query, people are able to make like a really good uh good amount of money by working on these government contracts and just cleaning up trash for a day, two days. Um, it's better than most salaries on the ground. So a few people join and then they tell their friends

and then a few pe more people join and it's just this sort of word of mouth situation where we are paying like three times the daily salary for them. So like Kirsten mentioned that was very enticing to for them to join and at the same time those people were part of the most affected communities. So they were willing to solve the problem that was already bothering them for with Abuji pile that was that was uh in Mabushi district that was a pile that was causing issues for past 10 years. So they were extremely willing to help us and provide the labor

even for free but we didn't want to exploit those people. We wanted to empower them and pay them for the work they were doing. So this is why we don't really do volunteers. We want to have workers that are able to make a living out of providing services that help them and help improve the standard of life. >> Thank you.