At SGV, we think about tokens as more than a speculative instrument. They can be the backbone of an economy, a growth flywheel, and a source of enduring network effects, but only if they are designed with clarity.

We recently worked through a deep token model design session with a portfolio company. While the details are confidential, the frameworks we discussed apply broadly to anyone building in consumer crypto.

This is a small playbook for founders, the athletes in our arena, who want to design tokens that last.

Points First, Tokens Later

The logic is simple: points/loyalty programs work, whether it’s for consumer brands like Sephora or Starbucks, but also B2B software like Salesforce or Adobe. 

Web3 platforms also have points, think of examples like Friendtech, Kaito, Blast, Blur, Eigenlayer, and many others.

Done right, points serve as a flexible testing ground. As Galaxy Research notes, points “simulate token incentives without committing to a token,” allowing teams to experiment with reward mechanics, sybil resistance, and retention without locking into an irreversible onchain economy.

In many cases, the points program drives initial hype, but then are one of the contributing factors for the project to wind down, so we need to thread carefully. This is mainly because in crypto points programs, there’s a high sybil and mercenary user base that are expecting an airdrop for a future token. The Variant team emphasizes that points should feel like progress toward a meaningful future stake, not “free money” farming. This expectation-setting is key.

Let’s start with Starbucks, they run two loyalty programs:

• Stars (User Retention): This is the end consumer app, every time you buy at Starbucks you’ll get coupons, status, etc

• Stock Beans (Partner Ownership): This is for employees, and branch owners, where they vest stock units.

Crypto can help tie both ends together, start with points program for user retention, and then layer in a token for user ownership. The best-performing ecosystems start with points before introducing a liquid token. Points are low-risk, flexible, and allow you to test incentive mechanics without committing to an irreversible onchain economy.

Points let you:

• Incentivize specific behaviors you want to see more of (high-quality content creation, liquidity provision, referrals).

• Experiment with reward curves, decay, and tiered benefits before locking in a tokenomics model.

• Build a core of engaged prosumers before inviting in broader speculation.

• Create status and exclusivity with leaderboards, badges, or limited-time events.

Points programs that work tend to make earning points feel like progress toward a meaningful future stake in the network, not just “free money” farming. When points convert to tokens, the early prosumers are rewarded, and their loyalty becomes ownership.

From Points to Tokens: The Graduation Moment

A token is a public commitment. Once you launch, you’re introducing a tradeable, volatile asset into your community. The switch from points to tokens should be:

• Timed after product-market fit is clear.

• Structured to reward the right early behaviors.

• Designed for economic sustainability from day one.

Core Mechanisms of a Strong Token

Regardless of model, good tokens share certain traits:

1. Clear value accrual: transaction fees, protocol revenue, or buyback/buyback-and-burn mechanisms that tie token demand to actual usage.

2. Utility beyond governance: boosts, discounts, staking rights, access gates, and in-product upgrades.

3. Earned distribution: rewards aligned to real contribution, not pure speculation.

4. Liquidity and composability: usable in DeFi, as collateral, or integrated into partner ecosystems.

5. Governance over value capture and capital allocation: real decisions that influence the system’s economics and capital allocation.

6. Scarcity and defensibility: capped supply or strong network effects that make token value less replicable. 

7. Clarity on Seniority: if it’s a multi token/instrument system, there should be clear seniority on the different assets, something Ryan from blockworks has highlighted before.

The Token Transparency Framework proposed by Blockworks and Theia highlight the need for credible, transparent signaling at this stage. By making token design choices publicly auditable, teams can earn market trust and reduce the information asymmetry that fuels mispricing and skepticism

A single token that handles governance, utility, and value accrual.

Strengths: Simplicity, easier narrative, easier mechanics.

When it works: Mature products with strong PMF, where the token can be woven into the product’s core revenue loop from day one.

Positive examples:

• $HYPE: tightly integrated into core app features, with revenue capture and buyback and burn from day one.

• $HONEY: in-game economy where token utility was deep enough to support sustained demand.

Non-example: $UNI, a governance token without direct revenue share, leaving value to accrue to the labs entity instead.

Two tokens: one governance/value token, one utility/incentive token.

Strengths: Protects governance token from inflation while allowing flexible incentives.

When it works: Protocols with both power users and casual participants, or those needing a stable incentive layer without risking core token volatility.

Positive examples:

• Helium ($HNT, $MOBILE, $IOT): governance token accrues value from network usage, while utility tokens serve as network credits.

• $SKY and $SPK: Separates governance from utility, enabling rapid iteration of reward programs without touching governance supply.

• $F2 and $FLY: Flybird’s F2 is the native, fixed supply, gas token for the Flybird network, while $FLY is a loyalty “stablecoin”, being priced by the company directly, $F2 is going to be the gas token, and as more transactions and 3rd parties build on top of the blockchain, F2 gains value. It’s uncertain whether it has a revenue mechanism directly.

Tokens that gate access, enhance visibility, or give higher earning power when staked.

Strengths: Creates demand tied directly to product utility and user ambition.

When it works: Marketplaces, creator platforms, and prediction markets where access and visibility are scarce and valuable.

Positive examples:

• ETH, SOL

• Staking to unlock premium marketplace slots or better matching algorithms.

• Models where creators or curators stake to boost their own earnings or visibility.

• Launching tokens only after proving PMF with a strong points phase.

• Directly connecting revenue to token demand (strategic periods of buyback-and-burn or fee share).

• Ensuring multi-surface utility, governance, boosts, staking, access, partner integrations.

• Focusing early rewards on prosumers who drive volume and depth, not just broad but shallow user counts.

• Blast, Friend.tech:  speculative points hype cycles without sustainable post-token utility, leading to rapid drop-offs in engagement.

• UNI: governance token divorced from value capture, leaving token as a symbolic asset.

• Points programs that reward any onchain action equally, attracting mercenary farmers who churn post-airdrop.

One of SGV members has written extensively on the subject. The key here is around liquidity and market making. It has a lot of nuts and bolts. The core questions answered by Lata in the articles are:

1. The how, where, and when of the launch

2. Coordinating the launch stack

A16z has also put in a lot of effort publishing educational content on the know-how and compliance framework to launch tokens.

We back founders who think about tokens as part of the product’s spine, not as a marketing gimmick. Your job as a builder is to make sure every critical product action either earns, uses, or strengthens the token.

Before launching, ask:

• What behaviors am I rewarding, and do they align with long-term health?

• Will my early distribution set the right tone for the community?

• Does my token accrue value from real usage, or am I relying on speculation?

• How am I protecting core token value while incentivizing growth?

• Is the token amplifying the product, or is the product being built to justify the token?

When you nail these answers, your token can become the ultimate retention tool, a moat, and a rallying point for your community.

If you’re building a points program or designing a token economy, we’d love to help pressure-test it. At SGV, our heroes are the founders who build with conviction, clarity, and the long game in mind.

This post is for informational purposes only, and does not constitute a recommendation to buy or sell securities or to pursue any particular investment strategy. This post should not be relied upon in evaluating the merits of any investment or any particular investment strategy. You should consult your own advisers as to business, financial, tax, legal, and all other related matters concerning any investment. The views expressed in this post reflect the current opinions of the authors and do not necessarily represent the opinions of Social Graph Ventures LLC