What Is the Risk of a Token Having Utility Only as a Medium of Exchange? ⎊ Path

What Is the Risk of a Token Having Utility Only as a Medium of Exchange?

A token with utility only as a medium of exchange (i.e. used solely for payment) faces the risk of high velocity, meaning users quickly acquire and then sell the token. This high velocity prevents the token from being held long-term, which limits its price appreciation and intrinsic value.

Investors are less incentivized to hold it, as it acts more like a transaction medium than a store of value.

How Does Token Velocity Relate to the Utility and Distribution Model?

What Is “Token Velocity” and Why Is a Low Velocity Often Desirable for Valuation?

What Factors Primarily Influence a Token’s Velocity in a Decentralized Application?

How Does the Concept of “Liquidity Mining” Influence the Observed Token Velocity?

How Does a Deflationary Model Affect the Incentive for Long-Term Holding?

How Do Stablecoins Generally Exhibit a High Velocity Compared to Governance Tokens?

What Factors Typically Cause a Decrease in a Token’s Velocity?

What Is the Impact of a Token’s Liquidity on Its Velocity?

Glossar

Transaction Medium

Medium ⎊ The transaction medium is the asset or system universally accepted for the exchange of value, acting as the bridge between a buyer and a seller in any financial or commercial interaction.

Medium of Exchange

Facilitation ⎊ A medium of exchange within cryptocurrency, options trading, and financial derivatives functions as a standardized instrument reducing transaction costs and enhancing market participation.