Token Economy (Third Edition)

Shermin Voshmgir, April 27 2025

After three years of intensive research, writing, an editing, I’m thrilled to announce the third edition of Token Economy. What I though would be only a minor update, ballooned into a comprehensive overhaul—where I expanded, deconstructed and then restructured the text into a book that aims to reflect the maturity and depth of today’s crypto-economic landscape.

Scope, Structure & Process

Since the second edition was published back in 2020, the crypto landscape had rapidly matured, and there were so many more topics to cover. I initially felt that I needed three separate volumes to cover the necessary depth and scope:

• Money, NFTs & DeFi
• DAOs & Purpose-Driven Tokens
• Web3 Infrastructure

After publishing the first two volumes, I realized that readers preferred the all-in-one format of earlier editions, and I pivoted back to the idea of one unified book.

In the final process, I also experimented with ChatGPT, Claude, and Gemini for research, copy editing, and text condensation. While their utility for research proved somewhat mixed, they were exceptionally helpful for copy editing. I mostly used AI to condense the text of the already published volumes–”Money, NFTs & DeFi” and “DAOs & Purpose-Driven Tokens”–in order to create a more compact third edition that integrates all three volumes into one book. These tools proved particularly effective in refining my sometimes verbose language, enabling me to compress the text to approximately 60 percent of its original length without sacrificing depth or scope—though the process was not without its complexities: They were very effective in helping me streamline certain sections, but struggled with topics that required more nuance. In these cases I reverted back to my original writings. The synergy between AI and my own writing and editing process ultimately produced superior results compared to what either could have achieved independently.

While I would have loved to experiment with other AI tools as well, I simply did not have the time to do so. The choice of tools is not an endorsement but was the start of an experiment. I might write a separate post on my experience with the different tools.

Why It Matters & Target Audience

Understanding the cryptoeconomic fundamentals of blockchain networks and complexities of token design is the foundation for sound investments, resilient applications, and sensible regulation. This edition bridges idealism and realism, offering both a high‑level overview for newcomers and in‑depth analysis for seasoned practitioners:

• Developers & entrepreneurs: Gain a solid foundation in protocol design, incentive mechanisms, and token utility to build robust Web3 products.
• Investors & analysts: Understand economic fundamentals behind token valuation, network effects, and sustainable growth strategies to inform investment decisions.
• Policymakers & regulators: Learn how decentralized networks and tokenized systems function, enabling balanced, effective regulatory frameworks.
• Educators & students: Fill critical gaps left by traditional curricula with a comprehensive overview of money, finance, and decentralized governance.
• Curious readers & early adopters: Explore real-world case studies and practical insights that make today’s evolving crypto landscape accessible and engaging.

Inside The Book

• Part1: Web3 Infrastructure The first part provides an introduction into the workings, evolution and challenges of Bitcoin, Ethereum, and next-gen blockchain networks as well as complementary Web3 protocols. The growing role of AI at the heart and edges of these protocols is also discussed. This part also provides an analysis of how blockchain protocols capture value and enforce incentives at the protocol layer—which is essential knowhow for anyone who wants to invest or build into or on top of these protocols.
• Part 2: Money, NFTs & Defi From the history of money to the tokenization of everything, in particular programmable assets and programmable finance—this section focuses on the use case of tokens as the atomic unit of Web3. It tries to demystify the impacts of tokenization on money, finance and the real economy showcasing many real life use cases.
• Part 3: DAOs & Purpose-Driven Tokens Six real-world case studies, analyzed through a token design-thinking framework that I developed, reveal both the best practices and pitfalls of purpose driven tokens that are designed to steer collective action in Web3 based decentralized organizations. The idea was to show that token design is use case, purpose and community dependent. A P2P payment network like Bitcoin has vastly different requirements than a P2P data exchange (Ocean Protocol), a P2P telecom network (Helium), or a P2P stable token (MakerDAO). Stakeholder preferences, governance constraints, and market mechanisms must be tailored accordingly, and when they fail to do so, the market collapses and the community around the protocol fades into oblivion.

Personal Journey

Completing this edition marks the end of a ten‑year journey that began with the creation of BlockchainHub Berlin in 2015. At that time, the crypto community was smaller, concepts were new, and everyone was trying to find appropriate words for this novel Internet that was still too abstract to grasp. Books on crypto were almost nonexistent and meetups served as the primary venue to learn from those who were building the first protocols.

I started to write the first edition in 2017. That was before DeFi Summer, before the NFT craze, before the implementation of scalability solutions, and before governments began to consider Bitcoin as part of their reserves. It was also before presidents started to rug pull their constituents with celebrity coins and meme coins. The vision then was of a profoundly self-sovereign and decentralized web. However, pragmatism and realism has replaced idealism in this evolving crypto landscape.

In this third edition, while I still write about what Web3 was initially conceived to be, I find myself observing a starkly different reality. Many services that were meant to embody decentralization and asset sovereignty have, in practice, become recentralized. Most people don't control their tokens because they don't have a wallet. Instead, they rely on custodial services of centralized exchanges. Protocol developers are faced with KYC and AML regulations that could censor their operations, and most people still mistake CeFi services for DeFi.

I hope that this book strikes a good balance between then and now, idealism versus realism, as well as depth and breadth–while providing valuable insights without overwhelming readers who are new to the world of crypto.

The third edition of Token Economy is available in various formats on Amazon and soon also many other bookstores. - If you recently purchased an older edition, please dm me on social media or send an email to shermin@token.kitchen with proof of payment of the old book, so I can send you a free version of the new edition. - If would like to become the copy editor of a translation of the book, helping with quality control into your language, contact me over the same channels.