Tokenomics are the economic values each token represents, in order for the holder to determine some kind of a fair value for it. What happens though when tokenomics do not exist, or they have no impact to the value of a token?

Utility tokens, tokenized assets, or what?

There are two main types of tokens: utility tokens, and tokens representing a fraction of ownership in an asset (e.g. a security).

Utility tokens are used as a currency for consumers to buy a product or service, and vendors and contributors be compensated. In utility tokens, their value is determined by how popular the product or service is. Ethereum is a good example of a utility token. Miners are compensated in ETH, while users of the Ethereum network are paying gas fees in ETH. Pretty straightforward.

Tokens representing tokenized assets are held as investments. Their value is determined by the Internal (Book) Value of the underlying asset, and/or any future income holders are expecting to be passed to them in the form of distributions (either of the liquidated asset itself, or profits generated by it). Again pretty much straightforward. Tokens representing a fraction of ownership in a liquidity pool are a good example.

There is another shady type of token. This type cannot be used to buy any real products or services, and is not representing any real asset, or even a future asset. The majority of tokens created every day falls under this type. We may call them donation tokens (since buyers are in reality donating funds to the dev teams), or fraud/con tokens (since dev teams offering those tokens for sale are defrauding token holders, by leading them to believe they get some kind of an ownership on the project or its future revenue or profits, while in reality they are not), and be equally accurate on the name of the token classification.

How donation/con tokens defraud buyers

Let's take the least fraudulent version. A version where the token creator is honest about the business and the business model/economics, and has no intention to take the money and disappear. Say you have a little known filmmaker, who has directed a low budget feature film. The filmmaker has some 20,000 followers in his Facebook/Instagram page and another 30,000 followers in his Twitter account. He has an idea or concept for a YouTube series, has writers, actors, and editors committed to the show, but has no money to buy equipment, or pay any fees to the team. His savings were enough to pay the team for the first episode of the series, but it still needs some VFX and editing before he is able to release it in the channel.

So, he decides to issue a 'utility' token with its value determined by the ad revenue generated by YouTube ads that will be showing in each episode. Any proceeds from the token sale will be used to buy equipment, and pay salaries to the team until the channel starts generating enough ad revenue to finance the show.

Sounds legit, right? Only, it is not!

Token holders will have no ownership rights on the equipment. They will have no ownership rights on the show, or even the script of the show. They will have no rights to any ad revenue or profits generated by the channel. All profits will go to the filmmaker. So, although the 'value' of each token may be determined by the ad revenue the channel is generating, this value is simply thin air for the token holders. They are not entitled to anything, except - maybe - voting on guest stars to the show.

So next time you go to buy a token, ask yourself what exactly is you are buying with this token. If there is no clear answer to this question, chances are you are buying a con token.

At ScreenTag, we are running a sharedrop campaign, offering tokenized stock in the company, for free. Some have called it airdrop on steroids. If you haven't joined us yet, you may do so here: https://www.screentag.mobi/sharedrop