Token Functionality Framework
The Token Functionality Framework classifies the roles that a token plays within cryptoeconomic systems. It distinguishes between seven functionality classes: Service Provision, Governance, Value Distribution, Membership, Payments, Collateral, and Asset Ownership.
The framework operates at two layers. The first layer identifies the functionality class. The second layer identifies the specific subtype.
Core Principles
Only those roles that require token ownership to engage with and benefit from a system qualify as token functionalities.
Subtypes are rights, not mechanisms
Subtypes are defined as rights over a defined object. Mechanisms such as staking, locking, fee switches, bonding curves, and wrappers describe how a right is activated. They do not define the right itself.
No enforceable rights, no functionality label
Where a claimed functionality cannot be expressed as an enforceable right over a defined object, it is not treated as a functionality label.
Derived credits are usually mechanisms, not independent tokens
Non-transferable credits or accounting units created solely through burning, locking, or converting another token are treated as mechanisms of the originating token unless they have independent issuance and independent rights.
Endogenous and Exogenous Functionality
Endogenous functionality is built into the native system by design. Exogenous functionality arises when a token is used by external systems or in external economic settings.
Endogenous and exogenous tagging applies at both the functionality level and the subtype level.
Utility and Right
The framework distinguishes between utility and right, both of which fall under the broader concept of functionality. All functionality subtypes are defined in rights language. The distinction does not change that drafting convention. Rather, it indicates the economic character of the functionality: whether token ownership primarily enables use within the system, confers an entitlement or claim, or does both.
Functionality Classes
| Functionality | Summary | Utility or Right |
|---|---|---|
| Service Provision | Right to perform work or provide resources as a supply-side participant. | Hybrid (Utility and Right) |
| Governance | Right to control or influence system decision-making. | Hybrid (Utility and Right) |
| Value Distribution | Right to receive a share of system value without meaningful ongoing service provision or risk underwriting. | Right |
| Membership | Right to access limited features or benefits by holding or locking the token. | Right |
| Payments | Right to use the token as a medium of exchange or a native fee asset. | Utility |
| Collateral | Right to pledge the token for leverage, reserve backing, underwriting, or performance bonding. | Utility |
| Asset Ownership | Right to a claim on an underlying on-chain or off-chain asset. | Right |