CoinFund’s David Pakman says crypto hasn’t solved tokenomics

The Great Tokenomics Failure

We have been at this for over a decade, and we still haven't figured out how to make a token actually work like money for the people building the systems. CoinFund’s David Pakman recently pointed out something that most founders are too scared to admit: we haven't solved tokenomics. In fact, we might be moving further away from a solution as we prioritize hype over utility.

As a founder, I see the cycle constantly. You start a project, you mint a billion tokens out of thin air, and you use those tokens to pay your engineers, your marketers, and your early community. It looks great on a spreadsheet when the price is going up. But the moment the market turns, your entire payroll becomes a liability. You aren't just paying people; you are asking them to take a massive gamble on your future treasury management skills.

The Volatility Trap

The core issue is that we are trying to use a single asset to do two opposing things. We want a token to be a speculative investment that rewards early believers with high growth, but we also want it to be a stable medium of exchange for the work being done on the platform. These two goals are fundamentally at odds. If a token is a good investment, people want to hoard it, not spend it. If it is a bad investment, workers don't want to be paid in it because their rent doesn't drop just because the market crashed.

Pakman’s suggestion is simple but radical for the current crypto climate: stop paying everyone in your native token. Instead, look toward stablecoins for the actual labor. This sounds like heresy to the 'all-in' crowd, but it is actually the most builder-first approach you can take. It decouples the survival of your workforce from the fluctuations of a volatile market.

Why Native Tokens Often Damage Growth

When you pay a contributor in your own token, you are essentially creating a constant sell-pressure. Most developers don't want to hold a speculative bag; they have bills. So they sell. This creates a downward trend on the price, which hurts the morale of your community and makes it harder to attract the next round of talent. It is a self-inflicted wound that many projects never recover from.

Furthermore, we have an incentive alignment problem. If the entire team’s net worth is tied to a token that can be pumped by a few marketing stunts rather than actual product-market fit, where do you think the effort will go? It goes to the hype. It goes to the Twitter threads and the paid influencers. The actual code, the security, and the user experience take a backseat because they don't move the needle on a short-term price chart.

The Stablecoin Alternative

Paying contributors in stablecoins forces a project to have an actual business model. You can't just print more USDC. You have to earn it, raise it, or manage a treasury that isn't entirely comprised of your own 'funny money.' This creates a discipline that is severely lacking in the current landscape. It forces founders to ask: Does this feature generate revenue? Does this partnership save us money?

Using stablecoins for operations allows your native token to focus on what it is actually good for: governance and ecosystem participation. It removes the 'salary' burden from the token's value. This allows the token to accrue value based on the actual usage and success of the protocol rather than being a glorified paycheck that everyone is trying to dump at the end of the month.

What This Means for Founders

If you are building right now, you need to be honest about your cap table and your payroll. Relying on your own token to fund operations is a shortcut that often leads to a dead end. Here is what I believe the next generation of successful builders will do:

• Separate Work from Investment: Use stablecoins for salaries and operational costs to ensure the team stays focused on the long-term mission regardless of market cycles.
• Redefine Utility: Stop asking how to get the token price up and start asking why your token needs to exist at all. If its only purpose is to pay people, you don't have a protocol; you have a central bank for a failing economy.
• Treasury Diversification: A treasury that is 100% your own token is a ticking time bomb. Diversifying into stables and other major assets isn't 'selling out'—it is basic survival.

The Skeptical Edge

I know the pushback. People say that giving tokens to contributors is how you get 'skin in the game.' But let's be real: skin in the game doesn't mean much when the skin is paper-thin and the game is rigged by whales. True skin in the game comes from building a product that people actually pay to use. If your project can't survive without using its own token as a printing press, then you aren't building a decentralized future; you are just repeating the mistakes of the legacy financial system with better branding.

The era of 'tokenomics' as a buzzword is hopefully coming to an end. We need to move toward 'token-utility' and 'business-logic.' The fact that venture capitalists like Pakman are starting to voice these concerns openly suggests that the honeymoon phase of the token-only economy is over. Investors are going to start looking for projects that can pay their bills with real money, not just promises recorded on a ledger.

The goal is not to have a token that everyone holds. The goal is to have a system that everyone uses. If the token gets in the way of the usage, the token has failed.

We have to stop treating tokens like they are magic. They are tools. And right now, we are using a sledgehammer to do the work of a scalpel. It is time to get back to basics. Build a product that works. Pay your people in a currency that keeps their lights on. Use your token to reward the people who actually add value to the network, not just the people who were there first.

The Final Takeaway

The takeaway for builders is clear: Stop using your token as a crutch for a lack of a business model. If you can't pay your team without minting new supply, your project is structurally unsound. Moving toward stablecoin payments isn't a sign of weakness; it's a sign of maturity. It shows that you value your contributors' security as much as you value the project's longevity. This is how we move from the 'crypto' phase into the 'sustained technology' phase.

Read the original at The Block →