Token Checklist

Do You Even Need a Token?

You probably don’t need a token if you don’t meet the below criteria:

At least one of:

The product intends to be either fully decentralized, permissionless, or community-owned/operated

The token benefits the product itself (ex. product will be faster, simpler, less expensive, more secure, etc. than possible without a token)

The token will be a native form of gas or currency to a chain, or it represents or tracks a value pegged to an off-chain or on-chain asset (ex. stablecoins, carbon credits, etc.)

And, at least one of:

The token is used for reputation (not transferable, no explicit monetary value)

The token has legitimate use cases and utility for holders (providing liquidity, staking to earn more of the same token, and price speculation trading are not legitimate utilities)

The token can financially reward holders via buybacks, revenue distributions, or similar mechanisms funded by paying users of the protocol, not ponzi transfers of wealth (you must be conscious of legal/regulatory aspects if this is the option you’re relying on - speak to your legal representation)

Is Now the Right Time to Launch a Token?

Even if you need a token at some point, you probably aren’t ready to launch one until you meet these additional criteria:

Launching the token now is will materially help with at least one of:

Attracting new users you are able to retain (you have product market fit)

Retaining existing users (even when emissions decline)

Protecting from competitors (defending against a vampire attack)

Enabling significant community control and governance (not decentralization theater)

At least one of:

The core team is prepared to operate a “public company”

The core team is ready to fully abdicate responsibility to token holders, and token holders are ready to take full control of day-to-day governance and operations

There is no “core team” to begin with, or all of the contracts have been deployed and are non-upgradeable and immutable (i.e. Bitcoin or Liquity)

At least one of:

The product has achieved “sufficient decentralization” (legal risks may still apply)

You will not be selling tokens to non-accredited US investors (there may still be regulatory implications for tokens given away for free)

You have registered your token offering sale with the SEC or the relevant regulator for your jurisdiction such as FINMAS in Switzerland.

And:

Your token launch plan has been reviewed by a knowledgeable legal professional