Token Rights
What this Framework Does
The Token Rights Framework helps investors understand what they actually own when they buy a token. It provides a systematic way to evaluate and compare token rights across DeFi protocols by collecting and organizing data about governance power, economic benefits, and legal ownership.
The Three Core Questions
Every token holder should be able to answer these questions::
Governance: What decisions can token holders vote on?
Economic: How does the token capture value from a protocol?
Ownership: Who actually owns the protocol's assets?
The framework organizes all data collection around these three categories.
Classification Structure
- Governance Rights
Governance rights define what token holders can control through voting. This category tracks the scope and mechanics of onchain governance.
Not all governance is equal. Some tokens let holders vote on everything from protocol parameters to treasury spending. Some limit voting or require staking to participate.
Governance-only tokens can have value, but investors need to understand what power they actually have. If a protocol makes all meaningful decisions offchain or through a separate company, it's important for token holders to know that.
- Economic Rights
Economic rights define how token holders capture value generated by the protocol. This includes mechanisms like buybacks, burns, revenue sharing, fee burns, and the primary way a token accrues value, if at all.
Revenue flows determine whether token holders benefit financially from protocol success. A protocol can generate millions in fees, but the token may not capture that economic activity.
Many protocols have "fee switches" that can direct revenue to token holders. Understanding whether this economic function is active, pending, or non-existent is critical for valuation.
- Ownership Rights
Ownership rights identify who legally owns the protocol's assets and whether there are conflicts between token holders and equity holders.
Protocols can have multiple entities (DAO, Foundation, Labs, equity-funded company, etc). The brand name, domain, IP, and development resources may be owned by a company, not by token holders.
Understanding the entity structure helps token holders identify what might be included in an acquisition or corporate restructuring..
Data Definitions
Governance Rights
Governance Decisions
Whether token holders can vote on governance proposals (Token / None / Unknown)
Why we track it: Base level governance right - can you vote at all?
Governance Details
Detailed explanation of governance scope and mechanics
Why we track it: The specifics matter. Can holders vote on everything? Are there restrictions? Do they need to stake? Is there a token threshold to create proposals?
Treasury Decisions
Whether token holders can vote on treasury allocation (Token / None / Unknown)
Why we track it: Treasury control is a key governance right - it determines if holders can direct what happens with a protocol’s treasury
Revenue Decisions
Whether token holders can vote on revenue allocation (Token / None / Unknown)
Why we track it: This determines if holders can activate fee switches or change how protocol revenue is used
Fee Switch Status
Current state of the fee switch mechanism (ON / OFF / PENDING / UNKNOWN)
Why we track it: Indicates whether token holders are currently receiving value from protocol revenue, or might be in the future
Fee Switch Details
Explanation of fee switch mechanics and history
Why we track it: Details matter for valuation. How much revenue goes to token holders? What's the governance process to turn it on? Has it been attempted before?
Economic Rights
Buybacks
Whether the protocol uses revenue to buy back tokens (ACTIVE / INACTIVE / NONE / UNKNOWN)
Why we track it: Buybacks reduce circulating supply and are a form of value return to holders
Burns
Whether tokens are burned (permanently removed from supply) (ACTIVE / INACTIVE / NONE / UNKNOWN)
Why we track it: Burns directly reduce token supply, creating deflationary pressure
Dividends / Revenue Share
Whether token holders receive direct payments from protocol revenue (ACTIVE / INACTIVE / NONE / UNKNOWN)
Why we track it: Revenue sharing is a direct economic right granted to token holders
Value Accrual
Main source by which value accrues to token holders
Why we track it: Summary of economic rights - shows the main way token holders capture value, if at all
Value Accrual Definition
Detailed explanation of how value accrual works
Why we track it: The specifics of economic models vary widely and require explanation
Ownership Rights
Associated Entities
List of all entities involved (DAO, Labs, Foundation, DevCo, Equity Company, etc.)
Why we track it: Maps the organizational structure to identify who controls what
IP & Brand
Who owns the intellectual property and brand/trademark (Entity name / DAO / Unknown)
Why we track it: IP ownership determines who can monetize the protocol name and who benefits in an acquisition
Domain
Who owns the primary domain name (Entity name / DAO / Unknown)
Why we track it: Domain ownership controls user access and can be used to capture value independently of token holders
Fundraising
Whether the protocol raised equity or token funding (EQUITY / TOKEN / NONE / UNKNOWN)
Why we track it: Equity raises create a separate class of stakeholders with potentially different incentives than token holders
Raise Details
Details and links about fundraising rounds
Why we track it: Transparency about who invested, how much, and at what valuation helps identify potential conflicts
Equity Revenue Capture
Whether equity holders capture protocol revenue separately from token holders (YES / NO / PARTIAL / UNKNOWN)
Why we track it: This is a key misalignment risk. If a Labs entity captures fees before they reach the DAO, this should be transparent.
Equity Statement
Additional context about the equity/token relationship
Why we track it: Provides nuance about alignment or conflicts between stakeholders
Resources
Foundation Multisigs / Addresses
Links to publicly disclosed treasury addresses
Why we track it: Transparency check - can token holders verify treasury holdings?
Latest Treasury / Token Report
Link to the most recent financial disclosure
Why we track it: Helps investors verify data and assess transparency practices
Frequently Asked Questions
Why do we separate governance, economic, and ownership rights?
Because they're independent. A token can have strong governance rights but no economic rights. Or it can have economic rights (revenue sharing) but limited governance. Many protocols are different, and understanding the nuance is important.
What's the difference between Revenue Decisions and a Fee Switch?
Revenue Decisions ask: "Can token holders vote on what happens to protocol revenue?" A fee switch is a specific mechanism that directs revenue to token holders. You can have Revenue Decisions rights without having an active fee switch.
Why does ownership matter if I have governance rights?
Because governance doesn't always control everything. If a Labs entity owns the domain, brand, and IP, they can monetize those assets independently of governance.
What's "Equity Revenue Capture" and why does it matter?
This tracks whether equity holders (VC investors, team) receive protocol revenue through corporate structures separate from token holders. This helps token holders understand which parties benefit from protocol growth.
Why track both "Buybacks" and "Burns"?
They're different mechanisms. Buybacks use protocol funds to purchase tokens from the market (reducing circulating supply, potentially supporting price). Burns permanently destroy tokens (reducing total supply). A protocol might do one, both, or neither.
What if the protocol says "Fee Switch: OFF" but plans to turn it on later?
That's why we track both Status and Details. The Status field shows current reality. The Details field explains plans, governance proposals, and history. Investors can assess both current value accrual and potential future value accrual.
Why ask about fundraising history?
Because it reveals potential conflicts. If a protocol raised $50M in equity funding, those investors have their own claims on value. Understanding the entity structure helps identify if equity and token interests are aligned or competing.
What counts as "Utility"?
Utility means functional benefits from holding the token beyond governance and speculation. Examples: staking for rewards, fee discounts, access to protocol features, liquidity mining incentives, collateral in lending, required holdings for certain actions.
How do we verify this data?
We ask protocols to provide documentation, links to governance proposals, onchain addresses, and official reports. Everything is cross-checked against public information. When data is unavailable or unclear, we mark it as "Unknown" rather than guessing.
Why not create risk scores or ratings?
We present data, not opinions. An "alignment score" or "governance quality rating" would inject our judgment into what should be objective information. Our goal is to provide helpful data that investors can look at and reach their own conclusions about what matters to them.
What if a protocol has multiple tokens?
We track each token separately since they often have different rights. A protocol might have a governance token and a separate revenue-sharing token. The framework captures that distinction.
Who uses this data?
Token holders trying to understand what they own
Prospective investors comparing protocols before buying
Protocols looking to benchmark their tokenomics against peers
Researchers analyzing token design trends
How is this different from existing token classification frameworks?
Most frameworks classify tokens by technical properties (ERC-20 vs ERC-721) or high-level categories (governance vs utility). This framework focuses on rights and value capture. It asks:
What can token holders control?
How do they benefit economically?
Who owns the underlying assets?
These are the questions that matter for investment decisions.
Ready to submit your protocol’s Token Rights?
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