--- title: "Token™" author: David Hernandez (@davernandez) date: 2026-06-24 url: https://x.com/davernandez/status/2069854959550570861 source: X article --- # Token™ Originally published on X on June 24, 2026: https://x.com/davernandez/status/2069854959550570861 Three years ago I began my career working at BlackRock, as part of an Investment Strategy team. Our role was to look across assets and markets and form macro-driven outlooks for the next 3-12 months. It was very exciting; learning about the economy and markets in aggregate - how they intersect - is a knowledge base I'll carry with me forever. Most importantly, however, spending time on that team taught me all the different ways people derive value, and all the different assets investors buy based on their profiles. Then came crypto, which threw me into a bit of a tailspin. Up until that point I had been a casual participant, stepping in and out of bitcoin, alts, and memecoins as they came in and out of fashion. But in early 2023 I began seriously diving deeper into the mechanics of blockchains and all of crypto's use cases, trying to figure out how to frame a proper investment. Many people around me dismissed the idea of crypto - citing the same reasons as all non-believers - but this was unsatisfactory. Had they been personally affected by crypto and become disillusioned? Or have they never tried to see its merits, and only adopted the negative perspectives of others? It's very easy to see a chart go down 90% and dismiss the entire category as a fad or scam. I had read several whitepapers, and understood at a high level how crypto worked, but that didn't necessarily translate into investability. At the end of the day, blockchains are infrastructure technology, and technology can be used for positive value-add or negative value-extraction similar to the internet or AI. Three years later and I still don't have all the answers - I don't think anyone does - but the opportunity set for tokens appears much bigger than other, well-established assets. Even after many years, builders continue to innovate on how tokens are used in their respective ecosystems, and that constant change, though uncertain, is what keeps me very optimistic. Searching for these answers is what led me to 21shares, where we think deeply about tokens as sound investments - as assets that could belong in a diversified portfolio next to equities and bonds. To the benefit of opportunists and the detriment of those who appreciate standardization, tokens will always be used in different ways, which makes them difficult to compare. ETH behaves differently than SKY, and both behave very differently than AERO. Today, we place traditional assets into one of three classes: commodities, capital assets, and stores-of-value. Digital assets are more complicated: sometimes existing in two or all of these categories, moving from one to another during their lifespan, or living on some spectrum between them. Let's go back to the internet and AI as examples. These technologies on their own don't make money without an entity leveraging them and creating conditions to offer their value in exchange for dollars. Network tolls (e.g. Facebook ads) and limiting value access (e.g. OpenAI subscriptions) allow corporate entities to make money which, combined with legal assurances, grant the owners of those entities the ability to estimate a fair share price. This seems obvious, but tracing how value is monetized was the meta-analysis I took for granted when evaluating traditional investments, and the key to understanding token investing. The flow of value is always inverse to the flow of money; to be more specific, money is the objective medium people use to exchange for subjective value. But it's not enough to simply create value. Capturing that value effectively gives investors an understanding of what they're buying; for equities, that's done by cash flow and the rule of law. A naked token is born with neither benefit. Cash flow ingested by an equity can then be used to cover the expenditures of value added in the past (debt payment), preserve and expand the value provided (R&D), or support the scarcity of its own ownership (buybacks). A token has no obligation to do any of this; it's an empty vessel. The rule of law keeps issuers accountable: preventing fraudulent activity, disclosing financial reporting, and keeping investors updated on where the cash flow is going. Again, the token doesn't have to do this. Most multi-asset managers I've spoken with have dismissed tokens entirely, instead choosing to focus on the merits of blockchain rails. Understandably so, given the promise of split-second finality, incredible throughput, and very low transaction costs. Stablecoins and other tokenized assets have captured the minds of everyone including those outside of crypto. TVL charts in those categories go up and to the right, while digitally native assets (ETH, SOL, protocol tokens) slip into bear markets. From my vantage point, crypto VCs primarily work on equity deals and rarely touch tokens. For some time, many startup projects were told explicitly to not launch a token, as it could easily draw community backlash if prices plummet. Like it or not, a token has always been a psychological barometer for the performance of a project because a) it's true for equities and b) the quick flush of capital from perverse insider incentives has historically left projects smelling foul. Regardless of price action, the linkage between protocol performance and token price is almost always broken, leaving even the more successful projects with a limp token. Consensus tells us that all the functions of traditional financial services will likely be mapped onto blockchain rails. Though I do think this is extraordinarily powerful, it's naive to assume that's all crypto is good for. There have been other incredible crypto-native innovations that were not possible beforehand, at least not in their current form. Though revolutionary, it seems mainstream capital is currently ignoring much of this. The mainstream focus on blockchain buildout - combined with the harsh downtrend after 10/10 - has left the token in a fragile place. The community has gone back to basics, asking critical questions like: "What do I get for holding this token for the long term?", "Can I get a complete picture of what this project does and how this token behaves within it?", and "What should the fair value of this token be?". The net result is an apprehensive optimism - one that amplifies the projects that reward tokenholders and punishes the projects that don't. In other words, we're in a value investing era for crypto. For the public to feel confident holding onto a token, they need complete transparency into how the token operates, now more than ever. @Blockworks' Token Transparency Framework has done incredible work in standardizing project attestations. Combined with onchain verifiability, transparency frameworks give tokenholders long-term confidence. @novora_'s IR Leaderboard is another leader in accountability, charting how well crypto protocols communicate with their investors. The protocols championing tokenholder communication will serve as role models for the next generation of tokens, one which aims to benefit everyone - both insiders and outsiders. However, those applying traditional value investing frameworks to tokens need to be careful: not every rising token can be valued according to these frameworks, and there are many tokens to which you could apply these frameworks, but lack transparency. A project can change its token's fair value by changing how much revenue it passes to tokenholders through buybacks, for example. In other words, a token can behave like an undervalued equity, but it doesn't always have to. To make matters more complex, revenue is only one way a tokenholder can derive value. Utility and governance can be valuable too. The reality is that tokens are eccentric assets capable of many different valuable functions, which make them more complicated than traditional assets in ways we haven't thought of yet. Hence the investor apprehension - and the potential opportunity. Protocols with successful token structures and confident investor bases manufacture their own equivalent cash flow and rule of law. They create ecosystems and rules that maximally reward tokenholders - sometimes in more ways than one. I highly recommend digging through @valueverse_ai 's Token Screener and research articles, which do an incredible job at mapping the sources of value for a token and providing what I deem their most accurate valuations. If you're an academic, please dive into @vasily_sumanov 's Token Classification Framework. As a preview, Sumanov breaks down the origins of value into basic components, categorized by positive and negative impact. By breaking down sources of value into their atomic components, we can assemble molecules of value structures for each protocol/token. Mapping protocols by how their tokens build value allows us to see all the mechanisms of value working together. Every protocol treats their token differently, so no two maps are going to look the same. Read Sumanov's full article. Altogether, token investing requires much more than looking through an equity investing lens. It requires identifying the sources of value and how that value is captured by the token, which in turn requires transparency and predictability. Token investing has only just begun, and no one knows with absolute certainty what they could unlock or how they could move in the long term - or how they could appropriately fit in a diversified portfolio. The more time passes, the more we learn about sound tokenomics, and the more investors demand transparency and value. This year a lot of optimism has been squeezed out of liquid funds, including some focused on shorter-term directional and market neutral bets. I recently came across this post by @tumilet, which discloses the onchain token holdings of reputable liquid and VC funds: Some of these assets are consensus, some are past their heyday, some have the potential to resurge. The point is that we're all trying to figure these assets out together at the same time, and there's still much more to figure out in the future. That keeps me excited. Disclaimer: This article is not financial advice. The views expressed are solely my own and do not reflect those of any other person, firm, or entity.