Why Are Tokens Being Viewed As A Better Mode To Incentivize Start-up Employees Rather Than Equity – Part 2

Disrupting Traditional Ways Of Compensating Employees Through Token Incentives

Becoming popular in places like China, these changes to employee compensation comes as several Chinese blockchain companies starting on the foundation of distributing tokens as compensation. Therefore, companies similar to Ontology, NEO, Huobi, and Binance pay their employees in the tokens they own. Operating worldwide are many of these teams as they can manage hundreds of the people who often come with just a handful of HR staff through a shared incentive structure. 

It was found that in the case of NEO which comes to be the original founding team, it, therefore, didn’t have anyone with a computer science background. To do the development work for them, they would pay tokens to people when they were looking for developers where for Ontology it became far more extreme. Thereby the founding team had initially set up the Ontology Foundation where it didn’t want to hire people and instead of that, they listed out a list of things needed to be developed with paid tokens to all the developers contributing.

In the case of Binance, it was similar that they paid their employees in tokens as they would finally use their quarterly profits in effect to burn tokens subsequently boosting the value of remaining tokens. 

Furthermore, it comes to be possible that it is partially due to effective token incentives as Ontology is observed to be the best performing token as Binance continues to hold the lead in the exchange space. 

How Is China Leading The Race?

Taking the lead when compared to the US, China comes partially because of the regulatory uncertainties whereas in America as well there are changing compensation norms. It was in the early days of the cryptocurrency that it was the wild west as Consensys started compensating employees in tokens as the first legal hire coming along. With a similar story, Coinbase had initially numbered the first employees given the choice of being paid in coins and/or cash. 

The next comes close in the heels of the giants in the industry moving to the tokenization of incentives. Seeming to be particularly powerful incentives, the token compensation for Chinese blockchain companies is more so than their US counterparts. Talking about this is and the psyche of the young generation of Chinese developers is Maomao Hu partner at Eigen Capital as well as the CTO of Chinese developers stating as they are Chinese, the engineers especially the young ones have the hunger that you see in some parts of Silicon Valley where it is like everyone doing just 80 hours or 100 hour weeks because they hate being poor and hating not having an opportunity as they don’t have other ways to get the opportunity like everyone. 

Moving on China is leading the race while there are many reasons behind this. As there have been fewer technology cycles in China, along with the rise of the largest technology companies as it happened that only in the last decade had the equity compensation remaining a relatively new concept to local citizens. Introducing the token compensation is the first time for many Chinese people able to participate in a company’s upside so directly. 

Presenting the incentive schemes comes despite their growing popularity that is still early and experimental as there are unforeseen risks associated with token issuance as compensation with particularly the appeal of short-term, quick gains from tokens that is ever more attractive. People in case of wrongly incentivized could then end up spending time hyping their tokens instead of building product, thereby allowing employees to cash out quickly without producing. 

Finally Closing Down The Discussion

Serious founders of the new token-based companies as a result should then be aware of the short-sightedness of designing the employee token incentives. Hereafter they can potentially introduce the long-term token vesting schedules hiring people who care about driving long term value. It is then going to be the increasingly important role they will have taken in the token economy from the blockchain for the CEOs as though the next set of large unicorns are set to come from tech companies with the great token incentives structures in or outside the US. With even more reasons China still holds the pole position in the mad race of countries all over the world to make the effective transition to incentivising tokens for compensation. Let’s watch closely and learn from the way the world is changing.