Crypoassets Author Chris Burniske: Less than 2.5% of Crypto Tokens Have 'Real Utility'

  • Cryptoassets book author, Chris Burniske has argued that tokens may in the long-term be more valuable than equity-based crypto investments.
  • Burniske believes crypto tokens are currently being overlooked by investors due to the excessive hype.

Chris Burniske, a partner at Placeholder, a “thesis-driven” venture capital firm that is focused on investing in “decentralized information networks”, has argued that business leaders have increasingly been turning to the “relative equity-capitalized, cash-flow extracting” markets.

In his detailed Medium blog post, Burniske also wrote that investors are no longer as focused on token-based protocols - as a means to raise funds for blockchain projects. The Stanford University graduate pointed out that “if 2017 deal-flow was 75% token-based, 25% equity-based, then 2019 has been the inverse, and the token-based deals are continuing to slow” down considerably.

"Reversion To Psychological Safety"

According to Burniske’s firm, there will likely be “thousands of equity-capitalized businesses” that will be using a select few crypto-related protocols. This means that there will “be more companies than protocols” as the digital asset market continues to mature, Burniske noted.

Because of this trend, the author of Cryptoassets believes that the expected “inversion [in] deal-flows is rational.” He added that investors should also be prepared for “a reversion to the psychological safety of what’s known in a time of heightened risk aversion.”

Interestingly, Burniske has predicted:

Just as people in 2017 regretted their 2014/2015/2016 decision to abandon bitcoin for blockchain, many people in 2021 will regret their 2018/2019/2020 decision to abandon tokens for equity.

Launching a new crypto-based protocol currently has “a greater chance of failure” than launching a blockchain startup, however there will likely be more successful digital asset-based protocols in the long-term than successful companies, Burniske argued. In a couple years from now, Burniske believes there will be “a strong sense of FOMO” - which could potentially lead to another “better-regulated token boom” during the “middle stage” of the “next [cryptoasset] bull market.”

"Roughly 50 Existing Tokens" May Have Real Value

Expressing views similar to those of other crypto analysts, Burniske thinks “bull markets tend to at least double the number of participants in crypto.” These newcomers also bring their own narratives as we saw in 2015 with “blockchain not bitcoin” and now in 2019 with “equities not tokens”, Burniske wrote.

At present, Burniske acknowledged that “95% of the tokens” in the volatile digital asset market “don’t work”. However, investors should be paying close attention to tokens that were “thought through thoroughly from inception and are [now] showing signs of working”, Burniske noted.

According to Burniske’s assessment:

Roughly, I’d say there are less than 50 tokens with real utility in existence, placing us at < 2.5% of the tokens listed on CoinMarketCap; but 50 still provides plenty of inspiration to study and learn from.