Tokens are blockchains’ way of controlling people. Bitcoin and Eth make people mine. When Casper comes in, Eth will make people vote on blocks. Moreover, if you misstep, your deposit will disappear. Tokens can facilitate rewards and punishments without identifying people. Tokens are like wages and employee badges.

Before you buy tokens, ask yourself:

Is there a way to earn the tokens by providing some critical service for the application to survive?

Do you lose the tokens when you are lazy, careless or malicious?

If your answers are no and no, perhaps the application does not need you. The application wants your money but doesn’t need you. The token holders as a whole will probably lose money because the application has no reason to keep paying the token holders. Or, if you believe so-called “utility tokens” are different, the application has no reason to keep providing utilities to the token holders.

But they promise to do so!

You don’t need blockchains if you are happy with moral commitments or legal obligations. For that, blockchains are no better than paper with signatures. Although you are free to trust people and fund projects, don’t get extra-excited for doing that on a blockchain. Equity might work better because investors and judges have clearer idea what should be done about equities than about cryptotokens.

Without a debt enforcer, nobody pays you back just because you paid them. Token holders will get anything only if the token holders play a critical role in the application. Do you still think you will get something out of the tokens? What kind of critical service will the token holders be providing? Are you sure that the application dies when the token holders leave?

Yes, the application has to die when the token holders leave. Otherwise, the application can get rid of the token holders and the tokens are worthless.

Warning

If you follow my advice, you might lose an opportunity to fool a greater fool. Want to fool a greater fool? Good luck.