By​ ​Kyle​ ​Samani

There​ ​are​ ​a​ ​lot​ ​of​ ​variables​ ​that​ ​that​ ​impact​ ​the​ ​valuation​ ​of​ ​a​ ​token.​ ​The​ ​primary​ ​ones​ ​are:

1) Why​ ​is​ ​a​ ​decentralized​ ​protocol​ ​superior​ ​to​ ​a​ ​centralized​ ​alternative?
2) Why​ ​is​ ​a​ ​particular​ ​protocol​ ​superior​ ​to​ ​decentralized​ ​alternatives?
3) Total​ ​addressable​ ​market​ ​-​ ​if​ ​the​ ​protocol​ ​fulfills​ ​its​ ​vision,​ ​how​ ​much​ ​commerce​ ​can​ ​it​ ​power?
4) How​ ​strong​ ​are​ ​the​ ​network​ ​effects?
5) Quality​ ​of​ ​team
6) Progress​ ​-​ ​how​ ​far​ ​along​ ​is​ ​it?
7) Token​ ​velocity​ ​-​ ​will​ ​people​ ​hold​ ​onto​ ​the​ ​asset,​ ​or​ ​will​ ​they​ ​sell​ ​it​ ​immediately?

Velocity​ ​is​ ​probably​ ​the​ ​least​ ​discussed​ ​of​ ​these,​ ​and​ ​the​ ​hardest​ ​to​ ​understand.​ ​In​ ​this​ ​post,​ ​I’ll​ ​dive
into​ ​velocity​ ​and​ ​provide​ ​some​ ​examples.​ ​I’ll​ ​conclude​ ​by​ ​reviewing​ ​how​ ​teams​ ​can​ ​engineer​ ​lower
velocity​ ​into​ ​their​ ​protocols.

A​ ​High​ ​Velocity​ ​Example:​ ​Ticket​ ​Issuance

Ticket​ ​fraud​ ​(literally​ ​reprinting​ ​and​ ​selling​ ​the​ ​same​ ​ticket​ ​multiple​ ​times)​ ​for​ ​live​ ​events​ ​is​ ​a​ h
​ uge
problem​.​ ​There’s​ ​a​ ​reasonable​ ​case​ ​to​ ​be​ ​made​ ​that​ ​tickets​ ​for​ ​live​ ​events​ ​should​ ​be​ ​issued​ ​on
blockchains.​ ​If​ ​venues​ ​come​ ​to​ ​accept​ ​blockchain-issued​ ​tickets,​ ​this​ ​solution​ ​should​ ​stomp​ ​out​ ​100%
of​ ​fraud.​ ​You​ ​can’t​ ​double​ ​spend​ ​blockchain-based​ ​assets.

Issuing​ ​tickets​ ​on​ ​blockchains​ ​can​ ​bring​ ​other​ ​benefits​ ​(e.g.​ ​disallow​ ​resale,​ ​profit​ ​shares​ ​on​ ​resale
back​ ​to​ ​venue,​ ​capping​ ​resale​ ​amounts,​ ​etc.)

I​ ​love​ ​this​ ​use​ ​case​ ​for​ ​blockchains.​ ​This​ ​use​ ​case​ ​unlocks​ ​a​ ​lot​ ​of​ ​value:​ ​no​ ​fraud,​ ​reduced​ ​scalping,
reduced​ ​fees​ ​to​ ​middlemen​ ​like​ ​Ticketmaster/Stubhub.

But​ ​I​ ​don’t​ ​own,​ ​or​ ​plan​ ​to​ ​own,​ ​any​ ​cryptoassets​ ​that​ ​are​ ​trying​ ​to​ ​solve​ ​this​ ​problem.​ ​Why​ ​not?
Because​ ​these​ ​tokens​ ​will​ ​have​ ​a​ ​high​ ​velocity.

There​ ​is​ ​no​ ​reason​ ​that​ ​I,​ ​as​ ​a​ ​full​ ​time​ ​crypto​ ​investor,​ ​want​ ​to​ ​actually​ ​want​ ​to​ h
​ old​​ ​Aventus​,
Ticketchain​,​ ​or​ ​Blocktix​​ ​tokens.​ ​But​ ​I​ ​think​ ​that​ ​in​ ​time,​ ​many​ ​people​ ​will​ ​want​ ​to​ u ​ se​​ ​these​ ​tokens.​ ​I’ll
use​ ​Aventus​ ​as​ ​an​ ​example​ ​below,​ ​but​ ​I​ ​don’t​ ​mean​ ​to​ ​pick​ ​on​ ​Aventus​ ​in​ ​particular.​ ​Everything​ ​below
is​ ​generally​ ​true​ ​of​ ​Ticketchain,​ ​Blocktix,​ ​and​ ​many​ ​other​ ​cryptoassets​ ​as​ ​well.

Consumers​ ​generally​ ​want​ ​to​ ​pay​ ​a​ ​price​ ​denominated​ ​in​ ​USD​ ​(or​ ​maybe​ ​in​ ​the​ ​future,​ ​ETH​ ​or​ ​BTC)
and​ ​get​ ​their​ ​tickets.​ ​They​ ​may​ ​purchase​ ​Aventus​ ​tokens​ ​as​ ​part​ ​of​ ​the​ ​process​ ​to​ ​acquire
blockchain-issued​ ​tickets,​ ​but​ ​Aventus​ ​will​ ​just​ ​that:​ ​a​ ​small​ ​and​ ​temporary​ ​step​ ​in​ ​the​ ​process.
Consumers​ ​will​ ​generally​ ​not​ ​hold​ ​Aventus​ ​tokens​ ​for​ ​more​ ​than​ ​a​ ​few​ ​minutes​ ​at​ ​a​ ​time​ ​because​ ​they
have​ ​no​ ​incentive​ ​to.

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Venue​ ​hosts​ ​won’t​ ​care​ ​to​ ​hold​ ​these​ ​cryptoassets​ ​either.​ ​Venue​ ​hosts​ ​care​ ​about​ ​generating​ ​profits
denominated​ ​in​ ​the​ ​currency​ ​of​ ​their​ ​choice,​ ​likely​ ​USD,​ ​or​ ​eventually​ ​BTC​ ​or​ ​ETH.​ ​After​ ​consumers
trade​ ​Aventus​ ​tokens​ ​for​ ​concert​ ​tickets,​ ​venue​ ​hosts​ ​will​ ​trade​ ​Aventus​ ​tokens​ ​for​ ​their​ ​preferred
currency.

This​ ​process​ ​is​ ​shown​ ​below.​ ​In​ ​this​ ​example,​ ​I’m​ ​assuming​ ​that​ ​all​ ​parties​ ​prefer​ ​USD​ ​as​ ​their​ ​reserve
currency.​ ​This​ ​diagram​ ​would​ ​still​ ​hold​ ​true​ ​with​ ​another​ ​reserve​ ​currency​ ​such​ ​as​ ​BTC​ ​or​ ​ETH.

This​ ​creates​ ​an​ ​interesting​ ​dynamic​ ​in​ ​which​ ​the​ ​people​ ​who​ ​get​ ​paid​ ​in​ ​Aventus​ ​tokens​ ​don’t​ ​actually
want​ ​to​ ​hold​ ​Aventus​ ​tokens.​ ​The​ ​moment​ ​they​ ​receive​ ​Aventus​ ​tokens,​ ​they​ ​will​ ​sell​ ​them…​ ​to
someone​ ​else​ ​who​ ​wants​ ​to​ ​buy​ ​different​ ​concert​ ​tickets,​ ​or​ ​a​ ​market​ ​maker​ ​(who​ ​will​ ​sell​ ​them​ ​to
someone​ ​who​ ​wants​ ​to​ ​buy​ ​concert​ ​tickets).

Even​ ​if​ ​Aventus​ ​becomes​ ​the​ ​global​ ​standard​ ​for​ ​ticket​ ​issuance,​ ​no​ ​one​ ​will​ ​want​ ​to​ ​hold​ ​Aventus
tickets.​ ​BTC,​ ​ETH,​ ​and/or​ ​USD​ ​denominated​ ​trading​ ​volume​ ​for​ ​Aventus​ ​tokens​ ​may​ ​skyrocket​ ​as
Aventus​ ​becomes​ ​the​ ​global​ ​ticketing​ ​standard,​ ​but​ ​the​ ​price​ ​won’t​ ​actually​ ​go​ ​up​ ​much.​ ​Everyone​ ​who
buys​ ​into​ ​Aventus​ ​will​ ​sell​ ​their​ ​Aventus​ ​immediately.

The​ ​only​ ​people​ ​who​ ​will​ ​profit​ ​from​ ​the​ ​success​ ​of​ ​rise​ ​in​ ​trading​ ​volume​ ​of​ ​Aventus​ ​tokens​ ​will​ ​be
market​ ​makers​ ​who​ ​provide​ ​liquidity​ ​for​ ​those​ ​entering​ ​and​ ​exiting​ ​the​ ​Aventus​ ​market.​ ​This​ ​is​ ​not​ ​a
bad​ ​thing.​ ​As​ ​asset​ ​pairs​ ​increase​ ​in​ ​volume​ ​and​ ​become​ ​highly​ ​liquid,​ ​bid-ask​ ​spreads​ ​will​ ​collapse​ ​to
near​ ​0%,​ ​which​ ​is​ ​good​ ​for​ ​consumers​ ​and​ ​venue​ ​hosts.​ ​Market​ ​makers​ ​may​ ​take​ ​a​ ​few​ ​basis​ ​points,​ ​or
even​ ​a​ ​few​ ​dozen​ ​basis​ ​points,​ ​but​ ​not​ ​more​ ​than​ ​that.​ ​These​ ​fees​ ​are​ ​certain​ ​to​ ​be​ ​lower​ ​than​ ​credit
card​ ​fees.

To​ ​be​ ​clear,​ ​in​ ​this​ ​proposed​ ​future​ ​venue​ ​hosts​ ​still​ ​win​ ​by​ ​cutting​ ​out​ ​scalpers,​ ​and​ ​consumers​ ​win
because​ ​of​ ​increased​ ​fraud​ ​protection.​ ​But​ ​coin​ ​holders​ ​don’t​ ​really​ ​win​ ​since​ ​the​ ​price​ ​of​ ​the​ ​coin​ ​won’t
go​ ​up​ ​enough​ ​to​ ​justify​ ​the​ ​risk​ ​of​ ​investment.

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The​ ​analysis​ ​above​ ​doesn’t​ ​imply​ ​that​ ​Aventus​ ​should​ ​be​ ​worth​ ​near​ ​$0.​ ​This​ ​analysis​ ​assumes​ ​no
speculation,​ ​which​ ​will​ ​never​ ​be​ ​true.​ ​Also,​ ​if​ ​volumes​ ​increase,​ ​it’s​ ​natural​ ​that​ ​some​ ​people​ ​will​ ​buy
and​ ​hold​ ​the​ ​asset​ ​simply​ ​because​ ​increases​ ​in​ ​volume​ ​typically​ ​correlate​ ​with​ ​increases​ ​in​ ​price​ ​in
crypto​ ​land.​ ​Insiders​ ​will​ ​also​ ​hold​ ​shares.​ ​However,​ ​this​ ​limited​ ​number​ ​of​ ​market​ ​participants​ ​will​ ​not
be​ ​sufficient​ ​to​ ​counteract​ ​the​ ​market​ ​forces​ ​of​ ​high​ ​velocity,​ ​especially​ ​in​ ​the​ ​absence​ ​of​ ​massive
speculative​ ​value.

Quantifying​ ​Velocity

Velocity​ ​=​ ​Total​ ​Trading​ ​Volume​ ​/​ ​Average​ ​Network​ ​Value

Velocity​ ​can​ ​be​ ​measured​ ​over​ ​any​ ​time​ ​span.​ ​For​ ​standardization​ ​purposes,​ ​we’ll​ ​measure​ ​it​ ​annually.

We​ ​can​ ​say​ ​that​ ​an​ ​asset​ ​has​ ​a​ ​velocity​ ​of​ ​0​ ​if,​ ​over​ ​the​ ​course​ ​of​ ​one​ ​year,​ ​no​ ​one​ ​buys​ ​or​ ​sells​ ​the
asset.​ ​The​ ​lack​ ​of​ ​liquidity​ ​would​ ​cause​ ​the​ ​asset​ ​to​ ​trade​ ​at​ ​a​ ​discount​ ​to​ ​“intrinsic”​ ​value.​ ​Assets​ ​need
some​ ​velocity​ ​to​ ​achieve​ ​intrinsic​ ​value.​ ​This​ ​is​ ​known​ ​as​ ​the​ l​ iquidity​ ​premium​.

Let’s​ ​say​ ​Bitcoin​ ​has​ ​an​ ​average​ ​network​ ​value​ ​of​ ​$1B​ ​over​ ​the​ ​course​ ​of​ ​a​ ​year.​ ​Bitcoin​ ​would​ ​have​ ​a
velocity​ ​of​ ​1​ ​if​ ​$1B​ ​worth​ ​of​ ​Bitcoin​ ​trades​ ​over​ ​that​ ​period.

In​ ​the​ ​last​ ​24​ ​hours,​ ​there​ ​were​ ​about​ ​$1.5B​ ​of​ ​Bitcoins​ ​traded​ ​on​ ​exchanges.​ ​This​ ​excludes​ ​OTC
volumes,​ ​which​ ​could​ ​be​ ​significant.​ ​The​ ​network​ ​value​ ​of​ ​Bitcoin​ ​is​ ​about​ ​$70B.​ ​This​ ​implies​ ​an
annualized​ ​velocity​ ​of​ ​$1.5B​ ​*​ ​365​ ​/​ ​$70B​ ​=​ ​7.8x​ ​(ignoring​ ​OTC).

By​ ​non-crypto​ ​standards,​ ​this​ ​is​ ​an​ ​extraordinary​ ​velocity.​ ​Equities​ ​as​ ​a​ ​whole​ ​are​ w
​ orth​​ ​about​ ​$70T
and​ ​trade​​ ​about​ ​$70T​ ​annually.​ ​Amazingly,​ ​Litecoin​ ​has​ ​an​ ​even​ ​higher​ ​velocity​ ​than​ ​Bitcoin.

(Note,​ ​this​ ​rudimentary​ ​analysis​ ​implies​ ​that​ ​crypto​ ​prices​ ​will​ ​continue​ ​to​ ​rise​ ​as​ ​institutional​ ​capital
converts​ ​from​ ​fiat​ ​to​ ​crypto.​ ​In​ ​comparing​ ​crypto​ ​velocities​ ​to​ ​equity​ ​velocities,​ ​institutional​ ​capital​ ​tends
to​ ​hold​ ​equities​ ​on​ ​average​ ​longer​ ​than​ ​current​ ​crypto​ ​holders​ ​hold​ ​crypto.​ ​Given​ ​how​ ​large​ ​the
disparity​ ​is​ ​between​ ​equities​ ​and​ ​crypto​ ​velocities,​ ​it’s​ ​likely​ ​that​ ​crypto​ ​velocity​ ​will​ ​decrease​ ​as​ ​equity
capital​ ​transitions​ ​to​ ​crypto​ ​capital.)

It’s​ ​difficult​ ​to​ ​say​ ​what​ ​future​ ​velocities​ ​should​ ​or​ ​shouldn’t​ ​be.​ ​We​ ​can​ ​look​ ​to​ ​things​ ​like​ ​equities,
commodities,​ ​and​ ​retail,​ ​but​ ​cryptoassets​ ​are​ ​different.​ ​It’s​ ​difficult​ ​at​ ​this​ ​stage​ ​to​ ​confidently​ ​say​ ​what
normal​ ​velocity​ ​ranges​ ​should​ ​be.

How​ ​Protocols​ ​Can​ ​Reduce​ ​Asset​ ​Velocity

There​ ​are​ ​a​ ​few​ ​ways​ ​a​ ​protocol​ ​can​ ​reduce​ ​the​ ​velocity​ ​of​ ​its​ ​associated​ ​asset:

1)​ ​The​ ​first​ ​mechanism​ ​to​ ​reduce​ ​velocity​ ​is​ ​to​ ​introduce​ ​a​ ​profit​ ​share.​ ​For​ ​example,​ A
​ ugur​​ ​($REP)
tokens​ ​pay​ ​out​ ​coin​ ​holders​ ​who​ ​report​ ​event​ ​outcomes​ ​to​ ​resolve​ ​prediction​ ​markets.​ ​$PAY​ ​holders

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get​ ​paid​ ​as​ ​consumers​ ​transact​ ​using​ ​TenX​​ ​cards.​ ​A​ ​dividend-like​ ​mechanism​ ​reduces​ ​token​ ​velocity
because,​ ​as​ ​the​ ​market​ ​price​ ​of​ ​an​ ​asset​ ​decreases,​ ​its​ ​yield​ ​increases.​ ​If​ ​the​ ​yield​ ​becomes​ ​too​ ​high,
market​ ​participants​ ​seeking​ ​yield​ ​will​ ​hold​ ​the​ ​asset,​ ​lowering​ ​velocity.

Also,​ ​a​ ​dividend​ ​stream​ ​makes​ ​a​ ​token​ ​easier​ ​to​ ​using​ ​a​ ​traditional​ d
​ iscounted​ ​cash​ ​flow​​ ​(DCF)​ ​model.
Side​ ​note:​ ​check​ ​out​ ​our​ ​recent​ ​Augur​ ​analysis​ ​and​ ​valuation​.

2)​ ​The​ ​second​ ​way​ ​a​ ​protocol​ ​can​ ​reduce​ ​velocity​ ​of​ ​its​ ​asset​ ​is​ ​to​ ​give​ ​token​ ​holder​ ​influence​ ​over​ ​the
future​ ​of​ ​the​ ​protocol.​ ​This​ ​is​ ​typically​ ​handled​ ​via​ ​a​ ​one-token:one-vote​ ​mechanism.​ ​The​ ​theory​ ​is​ ​that
stakeholders​ ​in​ ​the​ ​ecosystem​ ​will​ ​be​ ​unwilling​ ​to​ ​sell​ ​their​ ​coins​ ​because​ ​they​ ​have​ ​a​ ​vested​ ​interest​ ​in
the​ ​future​ ​of​ ​the​ ​ecosystem​ ​and​ ​want​ ​to​ ​have​ ​some​ ​influence​ ​over​ ​the​ ​future​ ​direction​ ​of​ ​the​ ​protocol.
This​ ​sounds​ ​nice​ ​in​ ​theory,​ ​but​ ​I’m​ ​dubious​ ​of​ ​this​ ​claim​ ​in​ ​practice.

Token-based​ ​voting​ ​is​ ​appealing​ ​to​ ​many​ ​because​ ​it’s​ ​analogous​ ​to​ ​democracy.​ ​But​ ​voting​ ​on​ ​protocol
governance​ ​is​ ​unlike​ ​voting​ ​on​ ​elected​ ​officials​ ​in​ ​one​ ​important​ ​way.​ ​It’s​ ​easy​ ​to​ ​sell​ ​cryptoassets​ ​and
move​ ​wealth​ ​elsewhere.​ ​You​ ​can’t​ ​easily​ ​move​ ​in​ ​and​ ​out​ ​of​ ​a​ ​given​ ​democracy​ ​(possible,​ ​but​ ​high
switching​ ​costs).​ ​If​ ​you​ ​disagree​ ​with​ ​the​ ​future​ ​direction​ ​of​ ​a​ ​protocol,​ ​you​ ​always​ ​have​ ​the​ ​option​ ​to
leave​ ​that​ ​“democracy”​ ​at​ ​will​ ​for​ ​near​ ​$0​ ​cost.

Moreover,​ ​for​ ​a​ ​protocol​ ​that​ ​becomes​ ​even​ ​moderately​ ​successful​ ​-​ ​let’s​ ​assume​ ​a​ ​terminal​ ​network
value​ ​of​ ​$200M​ ​-​ ​a​ ​token​ ​holder​ ​would​ ​have​ ​to​ ​hold​ ​$5-10M​ ​worth​ ​of​ ​tokens​ ​before​ ​her​ ​vote​ ​would
move​ ​the​ ​needle.​ ​Even​ ​then,​ ​the​ ​movement​ ​would​ ​be​ ​small.​ ​The​ ​ability​ ​of​ ​any​ ​given​ ​token​ ​holder
moving​ ​the​ ​needle​ ​decreases​ ​as​ ​network​ ​value​ ​increases.

3)​ ​A​ ​third​ ​mechanism​ ​to​ ​reduce​ ​velocity​ ​is​ ​to​ ​build​ ​staking​ ​functions​ ​into​ ​the​ ​protocol​ ​that​ ​literally​ ​lock
up​ ​the​ ​asset.​ ​This​ ​includes​ ​proof-of-stake​ ​based​ ​staking,​ ​although​ ​this​ ​alone​ ​shouldn’t​ ​reduce​ ​velocity
too​ ​much.​ ​But​ ​extended​ ​staking​ ​mechanisms​ ​can​ ​reduce​ ​velocity​ ​further.​ ​For​ ​example,​ N ​ umeraire
requires​ ​data​ ​scientists​ ​to​ ​stake​ ​their​ ​NMR​ ​tokens​ ​for​ ​30​ ​days​ ​to​ ​compete​ ​for​ ​prize​ ​pools.​ ​This​ ​staking
by​ ​definition​ ​reduces​ ​velocity​ ​since​ ​the​ ​tokens​ ​are​ ​illiquid​ ​while​ ​staked.​ ​Moreover,​ ​in​ ​the​ ​case​ ​of
Numeraire​ ​specifically,​ ​the​ ​amount​ ​of​ ​NMR​ ​staked​ ​is​ ​a​ ​function​ ​of​ ​the​ ​data​ ​scientist’s​ ​conviction​ ​in
herself​ ​and​ ​amount​ ​of​ ​money​ ​the​ ​data​ ​scientist​ ​believes​ ​she​ ​can​ ​win.

4)​ ​A​ ​fourth​ ​mechanism​ ​is​ ​what​ ​I’ll​ ​call​ ​the​ ​“network​ ​utility​ ​expansion”​ ​mechanism.​ ​This​ ​applies​ ​to
decentralized​ ​cloud​ ​protocols​ ​such​ ​as​ ​Golem,​ ​STORJ,​ ​Sia,​ ​Filecoin,​ ​and​ ​Maidsafe.

Since​ ​token​ ​supply​ ​is​ ​fixed,​ ​each​ ​token​ ​can​ ​purchase​ ​a​ ​defined​ ​percentage​ ​of​ ​total​ ​capacity​ ​of​ ​a
network.​ ​Overtime,​ ​if​ ​a​ ​protocol​ ​is​ ​successful,​ ​the​ ​capacity​ ​of​ ​these​ ​networks​ ​will​ ​grow​ ​as​ ​more​ ​people
seek​ ​profits​ ​and​ ​rent​ ​out​ ​underutilized​ ​assets.​ ​Therefore,​ ​each​ ​token​ ​will​ ​be​ ​able​ ​to​ ​purchase​ ​a​ ​larger
absolute​ ​amount​ ​of​ ​total​ ​compute​ ​power​ ​/​ ​disk​ ​space.​ ​Although​ ​price​ ​per​ ​CPU​ ​cycle​ ​and​ ​KB​ ​are​ ​always
falling,​ ​markets​ ​have​ ​generally​ ​shown​ ​an​ ​appetite​ ​for​ ​ever​ ​increasing​ ​amounts​ ​of​ ​both.​ ​It’s​ ​therefore
likely​ ​that​ ​those​ ​who​ ​own​ ​access​ ​to​ ​these​ ​networks​ ​will​ ​hold​ ​their​ ​tokens,​ ​reducing​ ​velocity.

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5)​ ​A​ ​fifth​ ​mechanism​ ​is​ ​to​ ​become​ ​a​ ​crypto​currency​ ​(this​ ​is​ ​a​ ​similar,​ ​but​ ​different​ ​lens​ ​on​ ​#4).​ ​This​ ​is
non​ ​trivial.​ ​If​ ​people​ ​start​ ​holding​ ​a​ ​currency​ ​so​ ​they​ ​can​ ​purchase​ ​goods​ ​and​ ​services​ ​at​ ​a​ ​later​ ​time,
velocity​ ​is​ ​by​ ​definition​ ​reduced.

Today​ ​Bitcoin​ ​is​ ​the​ ​reserve​ ​currency​ ​in​ ​crypto​ ​land.​ ​But​ ​other​ ​cryptocurrencies​ ​are​ ​emerging.​ ​For
example,​ ​let’s​ ​examine​ ​distributed​ ​VPNs​ ​like​ M ​ ysterium​​ ​and​ ​Mesh​ ​Labs​ ​(no​ ​website​ ​yet).

Mysterium​ ​is​ ​a​ ​distributed​ ​VPN.​ ​The​ ​basic​ ​problem​ ​Mysterium​ ​solves​ ​is​ ​one​ ​of​ ​trust.​ ​Centralized​ ​VPN
services​ ​are​ ​not​ ​safe​.​ ​As​ ​a​ ​user,​ ​you​ ​have​ ​no​ ​idea​ ​what​ ​the​ ​centralized​ ​VPN​ ​is​ ​doing.​ ​You​ ​could​ ​setup
your​ ​own​ ​VPN​ ​on​ ​AWS,​ ​but​ ​this​ ​is​ ​not​ ​something​ ​most​ ​users​ ​can​ ​do.​ ​Mysterium​ ​aims​ ​to​ ​solve​ ​this
problem​ ​by​ ​decentralizing​ ​the​ ​VPN​ ​host​ ​across​ ​many​ ​computers.​ ​Tor​​ ​has​ ​done​ ​this​ ​for​ ​years,​ ​but​ ​Tor
relies​ ​on​ ​altruistic​ ​hosts,​ ​which​ ​limits​ ​the​ ​number​ ​of​ ​hosts​ ​and​ ​reduces​ ​speed​ ​for​ ​the​ ​end​ ​user.
Mysterium​ ​is​ ​effectively​ ​“Tor​ ​with​ ​a​ ​token.”

The​ ​kinds​ ​of​ ​users​ ​who​ ​would​ ​act​ ​as​ ​hosts​ ​on​ ​the​ ​Mysterium​ ​Network​ ​are​ ​also​ ​the​ ​kinds​ ​of​ ​people​ ​who
would​ ​want​ ​to​ ​use​ ​Mysterium​ ​as​ ​they​ ​traverse​ ​the​ ​Internet.​ ​As​ ​Mysterium​ ​hosts​ ​accrue​ ​MYST​ ​tokens,
they’re​ ​unlikely​ ​to​ ​sell​ ​them​ ​since​ ​they’re​ ​going​ ​to​ ​use​ ​them​ ​again​ ​in​ ​the​ ​near​ ​future.​ ​This​ ​reduces
MYST​ ​velocity.

Conclusion

Velocity​ ​is​ ​one​ ​of​ ​the​ ​key​ ​levers​ ​that​ ​will​ ​impact​ ​long​ ​term,​ ​non-speculative​ ​value.​ ​Most​ ​app​ ​coins​ ​like
Aventus​ ​don’t​ ​provide​ ​a​ ​compelling​ ​reason​ ​for​ ​coin​ ​holders​ ​to​ ​hold​ ​the​ ​token​ ​long​ ​term.​ ​Absent
speculation,​ ​assets​ ​with​ ​high​ ​velocity​ ​will​ ​struggle​ ​to​ ​maintain​ ​long​ ​term​ ​price​ ​appreciation.​ ​Protocol
designers​ ​will​ ​be​ ​well​ ​served​ ​to​ ​incorporate​ ​mechanisms​ ​into​ ​their​ ​protocols​ ​that​ ​encourage​ ​holding,​ ​not
just​ ​usage.

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