How to Use This Answer Key
Token design has no single correct answer — the workshop intentionally allows multiple valid designs. This key provides:
- Model designs for three sample project briefs to guide evaluation
- Evaluation criteria with examples of strong vs. weak answers per rubric category
- Common pitfalls and how to address them in debrief
Grade the reasoning quality, not whether the student picked the same percentages as the model answer.
Model Design A: Decentralized Ride-Share Platform
RIDE Token — Model Answer
Token Utility: RIDE tokens serve three functions: (1) payment medium between riders and drivers on-platform, (2) governance votes on fee structures and protocol upgrades, (3) staking requirement for drivers to activate on-platform (skin in the game to prevent fraud). This three-function design creates genuine demand without pure speculation.
Supply Model: Deflationary with burn
Total supply: 1,000,000,000 RIDE (fixed cap). 1% of every ride payment is burned, creating deflation as adoption grows. This directly links token value to platform usage — more rides = more burns = fewer tokens = higher price per token. Rationale: deflationary models align driver and rider incentives with the token's long-term value.
Distribution (sums to 100%):
Vesting Schedule:
| Allocation | Cliff | Vesting | Rationale |
|---|---|---|---|
| Team (15%) | 12 months | 36 months linear after cliff | Aligns team incentives with long-term success; prevents early exit |
| Investors (15%) | 6 months | 24 months linear after cliff | Shorter than team (investor rights) but prevents immediate dump |
| Driver Rewards (30%) | None | Earned over 5 years based on rides completed | Immediate access needed for driver participation; earned not dumped |
| Treasury (20%) | None | Governed by DAO vote | Flexibility for protocol needs; DAO prevents unilateral use |
| Ecosystem (10%) | None | Milestone-gated grants | Released only upon delivery of integrations/partnerships |
| Public Sale (10%) | None | Immediately liquid (sold at launch) | Creates initial liquidity and price discovery |
Value Capture Mechanism: Burn + staking. Drivers must stake 1,000 RIDE to operate (locks ~9% of supply at full adoption). Fee burns remove tokens from circulation. Governance utility prevents complete sell-off by active community members. Three mechanisms collectively create holding demand.
Model Design B: Decentralized Content Platform
CREATE Token — Model Answer
Token Utility: CREATE enables: (1) tipping creators directly (micropayment utility), (2) unlocking premium content (access utility), (3) curation staking — stake tokens on content to earn a share of its revenue (curation utility). Curation staking solves the "quality signal" problem by aligning curators' financial incentives with surfacing good content.
Supply Model: Inflationary with cap
Total supply: 500,000,000 CREATE initially, 5% annual inflation for 4 years (max ~600M), then fixed. Inflation funds creator rewards without depleting treasury. After cap reached, burns from platform fees create deflationary pressure. Rationale: early inflationary supply bootstraps creator ecosystem; deflation kicks in once network is mature.
Distribution (sums to 100%):
Key Design Choices:
- 35% to creators — The most important stakeholder group. Without creators, no users. High allocation signals mission alignment.
- Curation staking prevents free-rider problem on quality signals — curators only earn if content they back succeeds.
- No "foundation" category — treasury serves this purpose; reduces centralization risk by making funds governance-controlled.
Vesting: Team: 12-month cliff, 36-month linear. Investors: 6-month cliff, 18-month linear. Creator rewards: no cliff (earned through activity). Treasury: DAO-governed with time-lock on large disbursements.
Model Design C: Decentralized Lending Protocol
LEND Token — Model Answer
Token Utility: LEND provides: (1) governance — vote on supported collateral types, interest rate models, risk parameters; (2) fee discount — protocol borrowing fee reduced by 25% when paying in LEND (demand sink); (3) safety module — stake LEND as last-resort insurance against shortfall events, earning 8% APY. Aave's AAVE token is the real-world reference for this design.
Supply Model: Fixed supply with buyback
Total supply: 100,000,000 LEND (hard cap). Protocol earns fees from interest rate spreads. 20% of protocol revenue used to buy back and burn LEND quarterly. No inflation — scarcity is maintained by buybacks. Rationale: connects token value directly to protocol revenue; the more lending activity, the more buybacks, the higher token value.
Distribution (sums to 100%):
Key Design Choices:
- 25% to liquidity mining — Lending protocols live or die by their initial liquidity. Bootstrapping lenders and borrowers with token rewards is standard practice (Compound, Aave both did this).
- Safety module staking addresses agency problem between tokenholders and protocol users — tokenholders are at risk if they vote in dangerous collateral types.
- Revenue buyback is more capital-efficient than dividends in a DAO context (avoids taxable events for holders).
Vesting: Team: 12-month cliff, 48-month linear (longer cliff = more trust signal). Investors: 6-month cliff, 24-month linear. Liquidity mining: 0 cliff but 4-year distribution schedule prevents front-running.
Evaluation Guidance by Rubric Category
Token Utility Design (15 points)
Distribution Fairness (10 points)
Vesting Schedule Quality (10 points)
Incentive Alignment (10 points)
Presentation Clarity (5 points)
Common Pitfalls to Address in Debrief
- "Our token will be worth $X in year 3": No projection is legitimate without a demand model. The token's value depends entirely on adoption, not the team's wishful thinking. Ask: what happens to token price if adoption is 10% of projection?
- Copying Ethereum's distribution: ETH did not have a team allocation cap — it was controversial. Later projects (Uniswap, Aave) learned from this and gave larger community shares. Context matters.
- Team cliff = 1 month: A 1-month cliff provides essentially no protection. The VC-standard 1-year cliff exists for a reason. Challenge any cliff under 6 months.
- "Governance token" with no actual governance rights: Many projects claim governance utility but governance decisions are already made by the core team. Ask: which specific parameters can token holders actually vote to change?
- Inflation with no cap or burn mechanism: Pure inflation without a ceiling devalues the token indefinitely. Every inflationary token needs a counterbalancing deflation mechanism (burn, buyback, cap).
- Treasury controlled by founders: A DAO treasury controlled by a multisig owned by founders is not decentralized. Students should specify governance requirements for large treasury disbursements.
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