[simon_kun]

I understand. Governance tokens are equity (usually with voting rights), and are used to generate a capital base for a decentralised product (think: crowdfunding). Not all governance tokens are airdropped and the secondary market for said tokens often results in them appreciating over time. I would suspect shapeshift to fund itself and generate wealth for the founders through doing this both at the point of issuance and over time.

[vlovich123]

With no incoming revenue, it seems like you've just described a pyramid scheme, albeit with extra technical steps. Can you help me understand the difference?

[thomaszander]

The various companies use such coins as a way to do the same thing as shares in a company. In fact, shares are just a pyramid scheme too, if you assume there is no obligation from the company to pay dividends or such.

The difference between coins and shares is such that shares can only legally be owned by a very very small number of people that are licensed to. You can ask them to buy and give you a certificate, but you yourself probably are not one of the few that can own stock. (series 7 in https://www.investopedia.com/articles/financialcareers/07/se...)

On the contrary, coins like these can be bought and sold by anyone. And this makes the balance very different. Should you see the company do stupid things, you can sell your coins in a very short time for nearly no cost and without asking for permission or waiting for banking-hours. Noteworthy is that you can sell them to anyone on the Internet.

Naturally, such companies (and there are quite a lot doing this today) pay out dividends as well. Typically to coin-holders addresses they arrange an air-drop. So simply you own 1000 and they pay 10 extra to that address.

Other strategies are buy-backs when the company is profitable which are meant to make the price go up because there is more demand than supply.

As you can see, there are quite a lot of similarities to stocks, and certainly also differences.

[aidenn0]

> In fact, shares are just a pyramid scheme too, if you assume there is no obligation from the company to pay dividends or such.

Yes, a company that promises to never make a profit, pay out any dividends to its shareholders, or buyback stocks is a pyramid scheme. Your statement here is a bit like saying a credit card is just like bank robbery, if there's no obligation to pay off the balance.

[thomaszander]

notice that the disingenuous statements came not from me, but from the parent comment who asserted (without basis):

> With no incoming revenue []

I didn't want to be an ass to point this out, seems I confused you instead.

[vlovich123]

I'm still not sure I understand the revenue stream. Stock generally is a bet on the future value of the company. That value is derived from the business itself (revenues, costs, new business markets, etc). If a company isn't actually taking in any revenue, what's it paying payroll with? The alt coin they created and trading amongst third parties? Are they taking a cut of this? Or just constantly selling more of their coin reserves once it appreciates?

Generally even loss-leading plays that try to create a huge community before monetization still have plans to monetize that community. I asked how this is different from a pyramid scheme/Ponzi scheme. I don't feel like you actually addressed this point. How will ShapeShift make money on connecting these users in a way that doesn't require following KYC rules?

[simon_kun]

I'm by far not an expert in this space, but governance coins can also be utility coins - eg provide you with certain rights to use a service, or use a service at a discount or priority in some way ( eg. see Celsius). In this way, the coins circulate and can be used as a form of payment in an alternative to fiat but that were originally bought with fiat (similar to tokens at a laundromat). Overall, I recommend you look into DeFi for a few examples of this (eg Uniswap, Celsius)

[brokensegue]

ok but making a coin doesn't solve the lack of revenue problem which is I thought aidenn0 was proposing they would. it seems totally unrelated to the question at hand. Edit: Simon not aiden

[aidenn0]

Thanks for the clarification.