A high level overview of the tokenized economy, powered by Unit Network.
The Problem: Wealth Inequality Is at All-Time Highs
Wealth inequality is at an all time high. While there are many reasons for this, such as the Cantillion Effect, one of the primary driving factors is that quite frankly, it’s hard to be wealthy, but easier to maintain one’s wealth once they accrue it.
In a recent conversation with Michael Healy, co-founder of Unit Network, we discussed the following thought experiment.
John works a solid job and makes $100,000 per year, which puts him in the 90th percentile in the richest country in the world. Still, it would take him a full decade to make $1,000,000. Naturally, he would save a lot less than that, as he has taxes, housing, health insurance, a car payment, and a myriad of other expenses.
If he’s lucky, he’ll have saved $250,000 after a decade, not even enough to afford the median home in America. The point is it’s extremely hard to accrue wealth simply by working for the man.
Warren Buffett summed it up best. “If you don’t find a way to make money while you sleep, you work until you die.”
Making money while you sleep requires one to own something productive. Whether it’s real estate, stocks, or businesses, owning an asset which can grow in value is arguably the only way to build a large nest egg.
The question becomes, how do we create a world in which more people are owners of productive assets?
Currently, society lacks an effective way to distribute value that benefits both owners and users. It seems we have two extremes, whereby communism flattens ownership such that efficiency and innovation is stifled, whereas our current form of capitalism results in extreme wealth gaps whereby a small subset of owners retains most of the pie, and the employees and customers wind up with nothing.
The Solution: The Tokenized Economy
What if there were a way to alleviate the disparity in wealth, that both increases the size of the pie and those who have a share in it?
Enter the tokenized economy, powered by cryptocurrency. With tokens the distribution of equity is simple, transparent, and accessible to all. Individuals, businesses, and organizations can launch tokens, secure their value by backing them with real assets (such as Bitcoin), and then making them freely tradable to anyone.
Just like the internet did in the early 90’s, this sounds like a far-fetched, revolutionary idea, but I believe we’ll live to see a world in which most productive individuals, businesses and organizations use tokens to increase the pie for everyone.
In fact, I’ll go so far as to say that the legacy way of conducting business (through traditional venture capital), will become be seen as archaic, become socially untenable and be perceived as greedy by future generations.
How Does the Tokenized Economy Work?
Within our lifetime, tokens will be used to represent value in just about everything we can imagine, from bets on individuals like athletes, to a chance to participate in the asymmetric upside of a startup, such as the Amazons of tomorrow.
Imagine your high school friend Brian is a basketball prodigy, who you believe is destined for greatness. In our current system, only a small handful of people will reap the benefits of his success, despite many more contributing to it. This reward and incentive asymmetry is both unfair and inefficient.
As an aside, whenever there’s a gaping inefficiency like the one that exists in our current economy, it’s only a matter of time before a solution comes to disrupt it.
Imagine if there was a way to better reward everyone who contributes to Brian’s success, proportionally to the risk they took on him. Instead of merely having Brian’s fortune shared with his agent, what if his high school basketball teammate or coach could get a piece? Wouldn’t that be not only be fairer, but also encourage those who are contributing to Brian’s success work harder to ensure he makes it since they are now stakeholders?
That future becomes possible in the tokenized economy. Here’s how.
As an up-and-coming athlete, Brian launches a social token, $BRIAN, with a supply of 1,000,000 tokens, built on the Unit Network. His teammates, fans, coaches, family, and friends all believe in him, so they purchase some $BRIAN from him for an initial price of $1.00 This gives the $BRIAN token a market cap of $1,000,000, indicating his current value.
One can think of $BRIAN like they would a company or stock; owning one $BRIAN token is the same as owning one share in a company. As Brian’s career progresses and he becomes more valuable as an athlete, so too should the value of the $BRIAN token.
Brian gives his token value by clearly outlining his operating terms: he’ll utilize 50% of the funds to advance his career, and 50% to put in the treasury. When he signs a contract, he’ll distribute 20% of the funds to token holders.
As opposed to relying on the goodwill of his mentors and early coaches, Brian now has a group of stakeholders who are incentivized to ensure he succeeds. One of Brian’s friends is a great networker, so, instead of getting a job selling insurance contracts he cares nothing about, he spends his summer scouting for a recruiter to watch Brian play ball. He knows that if Brian makes the big leagues, he’ll get rewarded when $BRIAN goes parabolic.
Fast forward five years. Brian signs a $10,000,000 contract with the Lakers. Brian has a low time preference and thinks long term, so he takes $1,000,000, converts it to $UNIT, and deposits it into the $BRIAN treasury on the Unit Network, creating a stronger backing to his token. This increases the floor price of $BRIAN by backing the token with real assets. Since Brian is of course the biggest holder of $BRIAN, he benefits the most. He then distributes $2,000,000 of his salary to token holders.
What About Bad Actors, Scammers and Rug Pulls?
The ability to tokenize a person or business is not inherently good nor evil, but rather a tool for humans to use. Like all tools, such as fire and knives, they can burn or heat, kill or cut.
Brian would have a plan for what percent of purchases or profits go into the treasury. If this is not clear from the get, few would buy. If Brian defects, his token price would keep plummeting until it reaches floor price (the amount it’s backed by in the treasury) because nobody would trust it, and no value is being added to his token ecosystem.
I saw this happen firsthand on BitClout, where people would pump their token price, then pull all the liquidity out (also known as a rug pull).
Bad actors always have and always will exist. They came before and will continue to exist within the token economy.
Brian may be a bad actor, and he could theoretically scam everyone he knows, and move to a beach in Costa Rica, however successful people have more incentive to cooperate, as his social construct would strongly hinder this. If he did rug, his token would go to zero, and he’d be the biggest long term loser.
The revolutionary Unit treasury is a vehicle to allow market participants to properly evaluate risk. By seeing what multiple a given token is trading at, they can properly determine the premium they are willing to pay.
One of those risks of course, is the token owner defecting, the same risk as one has when they invest in a startup and trusting the CEO not to embezzle the funds, or write off a dinner at his house with Dom Perignon hosted by a 5-star chef as a business expense.
The tokenized economy is quite unforgiving. Every transaction is made on chain and public for anyone to audit. One wrong move is enough to lose trust with one’s audience.
This discourages public market participants from defecting as once trust is broken, it’s very difficult to regain. If anything, a public, immutable ledger of everyone’s transaction history incentives market participants to behave honestly. As it’s been said about Bitcoin, it’s inherently a bad technology for criminals as every transaction is permanently saved on a public ledger.
My Thoughts on the Tokenized Economy
The same first principle of a tokenized economy doesn’t only apply to individuals, but businesses as well. Traditional venture capital is gate kept by a small group of people who cut large checks and have exclusive access to the best opportunities.
I vividly remember the first time I used Uber. I was in Rome in 2015 and my friend Justin, an early adopter, pushed a button on his phone. A few minutes later a black car appeared. I loved the convenience and experience, and became a user.
I was also one of the first users on Spotify, as I was spending quite a bit of time in Sweden. What if the people who referred me to the platforms were compensated, and I as an early user had an option to purchase a share of what I believed would be a rapidly growing network?
I was an early advocate for both Uber and Spotify, and although both companies have had wild financial success, I received nothing for my efforts.Don’t feel sorry for me, I’m merely an active user. I can’t even imagine how I would feel if I were one of the 2,000,000 drivers in the Uber network that received nothing when the company went public for 80 billion. That amounts to $40,000 worth of value per driver, yet they received nothing!
How the Tokenized Economy Fuels Businesses
Now picture a world where early Uber drivers took 10% of their compensation in $UBER token, and as the network grows, so too does the value of his asset.
With the tokenized economy, anyone can invest any amount in a company at any stage, allowing for more people to share a larger potential upside. This creates a positive ripple effect where new users are financially incentivized to help the network grow to see their investment succeed.
I saw this phenomenon happen first hand on the experimental social media platform BitClout (now known as DeSo), a platform that looks and feels a lot like Twitter. A profound shift occurs I bought another person’s token. I was more likely to reclout (the native word for retweet) one of their posts, or put them in touch with someone who could help their brand grow.
I believe that same financial interconnected web will help catapult the tokenized economy forward, whereby hundreds or thousands of people will all be working together to see an individual or business succeed.
Instead of customers and owners having competing interests (both wanting the best price), a tokenized economy flips the switch, aligning the interest of all parties involved. The result? More people have a piece of a much bigger pie, resulting in a net benefit for all participants.
I believe this revolutionary new economic model needs a name, and I’m calling it “Cooperative Capitalism”. It has all the benefits of a traditional capitalistic economy, where early adopters who take risk are rewarded, and a competitive free market determines the price of goods and services, while benefiting from collective shared ownership that results in a more equitable world.
I share the vision of those building this world that participants in the economy will have hundreds of tokens in their wallet, a combination of an equity stake in their favorite people (athletes, mentors, politicians, artists) and the businesses they shop at most frequently, from their local coffee shop to mainstream retailers.
Money In the Tokenized Economy
I’ve written extensively about The Future of Money in my series, but what if Bitcoin is just the first step in a revolution of money and value?
What if we live in a world where there are hundreds, even thousands of different currencies, each its own distinct social token?
Imagine that Pour, your local coffee shop, exclusively accepts the $POUR token. First time there? No problem. Simply pay with the $COFFEE token, and just like your credit card company automatically sells dollars for euros when you pay for something in Italy, your crypto wallet automatically swaps whatever is in your wallet for the local currency. Voila, your bill is paid.
All this happens seamlessly behind the scenes. As an end user, you simply see the overall balance in your wallet update, as if you paid in any other currency of your choosing.
This entire economy is being powered on the Unit Blockchain, built atop the Polkadot network.
The Economy of the Future, Powered By Unit Network
Most cryptocurrencies are based on pure speculation. Having been in the space for five years, I still haven’t come across a reliable way of evaluating the fair market value of a given project.
Frankly, evaluating tokens is a learned art that one acquires from getting burned many times. Much of the process lies in comparing the value of one speculative asset to another, such as looking at the number of wallets on two given Layer 1 Blockchains, then comparing if there’s a mismatch in price or market cap.
The Unit Network fixes this by the advent of their treasury. In traditional markets, companies are much easier to value. Investing tycoons like Warren Buffett have made their fortune by buying objectively undervalued companies.
An imperfect yet widely used metric is what is called the price to earnings ratio, or P/E ratio for short. The idea is simple. One measures its current share price relative to its earnings per share. P/E ratios are used by investors to determine the relative value of a company’s shares in an apples-to-apples comparison. For example, a P/E ratio of 10 means a company is valued at 10 times their earnings.
Cryptocurrency tokens don’t follow these current models but rely merely on speculation. What if there were a better way?
Enter the Unit Treasury. The treasury is an effective way to objectively measure the relative value of the token, based on the assets that are backing it.
Let’s say our star athlete Brian creates a $BRIAN token with a supply of 1,000,000. In the beginning, the treasury was empty. He wants to raise money to further his career, so he sells 100,000 tokens for $1.00 each. In a traditional social token, the full $100,000 now goes into the bank to be used however Brian wants, leaving investors susceptible to rug pulls and exit scams.
With the Unit Network, some of this money would be moved into the treasury, which is only accessible by investors, proportional to the tokens they own. If Brian moves $50,000 into the treasury, his token essentially has a floor price of $0.05. (1,000,000 tokens x $0.05 per token is $50,000).
Just like companies’ trade at a premium to the amount of assets and earnings they have, based on the market’s belief in their future growth potential, the $BRIAN token would likely trade well above the $0.05 floor price, based on Brian’s expected ability to earn in the future.
If $BRIAN trades for $1.00, at least all market participants are aware they are paying a 20x multiple on the treasury backed assets of his token. Armed with transparent information, independent economic actors can properly value tokens built atop the Unit Network. They can also compare relative values of tokens and decide perhaps to invest in the $JOHN token, which is only trading at a 10x multiple.
Over time, I believe this will create an expected fair market value for tokens across various niches that market participants are willing to pay. Current expectations for stock market participants are to pay a 20x P/E multiple. Perhaps over time markets will come to value upcoming music artists as a 10x multiple, while basketball athletes will have a 20x multiple.
Naturally, there will be some tokens which have incredible hype, while others with weaker marketing will trade at lower premiums. Over time, tokens will tend to trade at multiples relative to the potential of the individual or business to earn, with higher grossing individuals and companies benefitting from trading at higher multiples relative to the assets backing the tokens in the treasury.
In the economy of the future, active market participants can become shareholders and gain exposure to the upside of 100 of their favorite people, businesses and institutions in a matter of minutes with the click of a few buttons, whereas in our legacy system, not only is that option not available because it’s currently impossible to invest in people, but investing in businesses is a time consuming, capital intensive project reserved exclusively for a select group of people who dedicate countless hours to this endeavor.
The Unit Network makes creating a token extremely easy. I experimented with creating an $ALEC token, and it literally took three clicks. Simply enter the token name, supply and symbol, click ‘CREATE’ and voila! I’ve yet to officially launch my token yet, as I want to think through it’s use case first, but creating it was both inspiring and a breeze.
Unit plans to provide extremely easy to use tools, resources, and a dashboard to help market participants to create, evaluate, and exchange tokens.
The Roadmap to the Future Economy
Currently issuing a token for a business or individual is extremely cutting edge. Most still dismiss it as a scam. But just like the internet completely transformed the world we live in, our economy and everyday commerce, I believe the tokenized economy will radically transform money, value and investing.
I can’t be 100% confident that Unit will be the platform upon which the tokenized economy will be built, but I believe they are the leading contender in the world today, and that’s why $UNIT is the single biggest alt coin crypto bet I’ve ever made.
If you look at the list of companies that didn’t exist 10 years ago, it’s hard to imagine how such a world existed.
I believe that in the next decade (sometime in the 2030’s), most new startups will be tokenized. Just how few companies had websites in the early 2000’s, yet now it’s impossible to be taken seriously without one, the tokenized economy is currently seen as speculative hype, but in time it will radically disrupt the traditional markets.
The Unit Network Business Model
Unit charges fees for exchanges and withdraws, which are then distributed four ways:
0.5% goes to the Unit Treasury
0.5% goes to the respective token’s treasury.
0.5% goes to the liquidity providers
0.5% goes to the person who invited the exchanger.
Although they just launched the exchange, Unit is currently generating $10,000 in revenue a week from exchanges. Their goal is to generate $100,000,000 in exchanges per day by the end of the year, which would result in 2M in profits/fees daily.
$500,000 of that would go toward the Unit treasury.
If they reach this goal, the Unit token would generate $182,500,000 in fees in 2023 alone. If Unit trades at a 20x multiple, that’s a 3.5 billion evaluation.
Unit plans to expand their network by hosting both virtual and in person conferences in the most popular cities around the world. I gave a keynote at their latest virtual summit, and have since spoken with the head of several of these conferences.
It’s exciting what they have in store, as they continue to expand their vision of helping onboard others onto the tokenized economy.
Although I have no control over the future of Unit, the people I’ve spoken with whom are part of the team seem very sharp and driven by a common purpose. They’re committed to shaping the economy of the future and seeing Unit grow.
The Unit Network Team
I believe a bet on Unit is every bit as much a bet on the team as it is the idea. What impressed me most about Unit, is the incentive structure of the core team. Unit team members all receive equal compensation.
Each core member receives 100,000 UNIT that’s paid out on a 3-year vest with a 5 year cliff. This means they don’t receive a dime for 3 years, and their full payment isn’t vested for 5 years.
100,000 $UNIT is an extremely small amount. For this to be worth the risk of dedicating five, or in some cases seven (many team members worked for two years before the token launched), the price of $UNIT would need to be $50 or more.
It was only a few months ago that Unit was raising money at a $0.20 round, meaning the initial value of the core team’s 100,000 $UNIT was a mere $20,000.
This incentive structure creates a team of people who are literally all-in and firm believers in Unit to shape the future economy. The only way this is worth it for them is if $UNIT goes to the moon. If not, they’re better off locking up six figures a year at a ‘normal’ job with benefits and zero risk.
How to Get Involved with the Tokenized Economy, Powered by Unit Network
Unit is an invite only network. They strategically designed the protocol to create win-win incentives to grow their platform (as is evidenced by providing 0.5% to the person who invited other users).
You can create an account on Unit here. From there, you can deposit Bitcoin, ETH, DOT, Solana, BNB or others, and then swap them for Unit using the exchange feature.
For a walk through on how to do that, watch this short video or DM me on Telegram or Twitter at @AlecTorelli (beware of scammers) and I can help you out.
Should You Invest in Unit?
I am not a licensed financial advisor and nothing I say is meant to be investment advice but for educational purposes. I cannot tell you whether or not to invest in Unit, but I encourage you to do your own research and come to your own conclusions.
Here is a high-level overview of what I see when it comes to Unit Network.
Risk: 9 (It could go to zero. It’s a new industry. Will be competitors.)
Reward: 10 (It could disrupt the economy as we know it!)
– Huge addressable market (trillions of dollars).
– Massive inefficiency.
– First mover advantage.
– Great team, motivated by vision.
– Leveraging adoption of an exponentially growing sector.
– Competition will be large.
– New nascent industry.
– Token economy may not catch on.
– Regulation risk.
– Other risk factors that are not yet known.
– Most startups fail.
As I mentioned, I made a sizable bet on Unit and it’s my single favorite alt coin bet. That said, I wouldn’t risk money I wasn’t comfortable losing or willing to ride to zero. Be smart, only risk what you can afford to lose and even though I believe there is huge upside potential, I also think it’s prudent to assume you can lose every dollar you invest.
If you’re interested in investing in Unit, you can either do so through the exchange or the Sale page. The exchange price has been trading higher (roughly $4.50), so to get the best deal you’ll want to be whitelisted for the sale page (currently at $3.59). As an advisor to Unit, I can get your address whitelisted so you can save 20-30% on your Unit allocation.
DM me once you create an account with your Unit ID, and I’ll get your address whitelisted.
As always, good luck!
If you have questions, be sure to leave them in a comment, or DM me, and I’ll do my best to get back to you. I’ll also have Michael Healy on my YouTube in a future AMA.