# 8. Token Utility & Necessity

## Token Utility & Necessity

### What to Evaluate

Not all tokens are created equal.\
A project might be legit but if its token isn’t needed for core functions, it may be **economically weak**.

This section focuses on whether the token has **real, enforced utility** inside the ecosystem.\
Or if it’s just a speculative side-product of fundraising.

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#### 🧩 Native Use Cases

* Is the token required for the core functionality of the platform?
  * Transaction fees
  * Staking to access services
  * Governance with actual impact
  * Collateral for lending
  * Payment for data or compute

> If you can use the product **without ever touching the token**, that’s a major red flag.

**Scoring:**

* ✅ Token required in core usage = high
* ❌ Token has no purpose = low

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#### 🔒 Access Control

* Does holding or staking the token unlock specific features or tiers?
* Is access structured in a way that **scales token demand** as the user base grows?

> Example: Tiered rewards, DAO voting power, or exclusive features for stakers.

**Scoring:**

* ✅ Strong correlation between token holding and product value = good
* ❌ Token is optional or only cosmetic = weak

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#### 🔁 Value Capture / Token Sinks

* Does using the platform **burn tokens**, or remove them from supply?
* Are there staking mechanisms that **lock** tokens or reduce circulation?

> Look for actual feedback loops: usage → token demand → scarcity.

**Scoring:**

* ✅ Token has deflationary mechanics linked to usage = higher
* ❌ Token is only inflationary and used for yield = lower

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#### 🪙 Multi-Token Complexity

* Does the ecosystem have multiple tokens?
  * If yes: is the utility clearly divided?
  * If no: does a single token handle all governance, utility, and staking?

> Bonus if utility is simple and clear.\
> Penalty if tokenomics are overly complex or poorly explained.

**Scoring:**

* ✅ Elegant, effective token utility = higher
* ❌ Confusing token system with unclear roles = lower

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### Summary of Scoring

**Score higher if:**

* Token is *required* for product access or core function
* There are deflationary or locking mechanics
* Holding the token ties you to platform value

**Score lower if:**

* Token is optional, cosmetic, or only for speculation
* No enforced usage or long-term demand
* Vague “governance token” with no actual power

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