Lesson 5 — Why Value Flows — and What Really Gets Paid For

Ava takes you somewhere noisier than code: the cash room. No glass walls, no graphs. Just a long steel table with four trays stamped Fees, Yield, Inflation, Treasury. She doesn’t dramatize it. She arranges it.

“Price is a scoreboard,” she says. “Value is flows. If you can point to where value enters, how it’s shared, and what leaks, you can tell the difference between a working economy and a costume.”

Fees. Networks charge to do work—store data, execute contracts, settle bundles. On some systems you pay with the native coin; on others you pay a token tied to a specific app. “Where do fees go?” Some are burned—removed from supply, like a buyback that helps every holder equally. Some are paid to operators or stakers who secure the network. Some flow into a treasury the community controls. The split is design. The market prices the split.

Yield. “Careful with this word,” she says. “Staking yield is paid for security—new issuance plus a share of fees, in exchange for locking value and behaving. That’s an economic service. Lending yield is paid by borrowers—credit wrapped in collateral and parameters. That’s a financial service. Then there is ‘yield’ that is really just new tokens handed out to attract attention. If the new tokens leave when rewards end, that wasn’t yield—it was rented attention.”

Inflation. Ava pours a third scoop, finer-grained, into the tray and doesn’t look away from it. “Inflation isn’t evil,” she says. “It’s a cost that must buy something worth more than itself. In a security budget, inflation hires guards to keep the ledger honest. In a protocol that grows, inflation can fund network effects—bootstrapping liquidity, builders, and users. When inflation exists with no job and no end, holders pay for heat with their savings.” Read the schedule, not the slogan: Who decides the rate? When does it decay? What does it buy? Can a vote change it overnight?

Treasury. “A treasury is not a prize pool. It’s a tool. Good treasuries know their job: extend runway, deepen liquidity, fund public goods that increase the pie. Bad treasuries sit like dragon hoards or evaporate in vanity. If a protocol earns fees but can’t say what they’re for, the market hears a shrug.”

Ava sketches three silhouettes: Money-like, Equity-like, Credit-like.
“Money-like tokens are used so often people hold some by default; here, velocity and fees matter. Equity-like benefit from fee share or buy-and-burn tied to real usage. Credit-like promise steady return backed by reserves or borrower demand; here, collateral and redemption mechanics must work on bad days.”

“When someone says, ‘this token will go up,’” she adds, “ask which silhouette applies—and which tray proves it.”

Sidebar — Legal / Tax Edges

Ava sets a narrow card by the trays.

• Legal character varies by jurisdiction. A token can be stock-like or credit-like only if there’s an enforceable wrapper; otherwise rights live on-chain.
• Stablecoins:
  • Fiat-backed: redeemable claims on off-chain reserves (dollars/treasuries) held by custodians.
  • Over-collateralized crypto: on-chain reserves with rules and liquidation.
  • Algorithmic: cautionary history; pegs can break under stress.
• Tax can surprise. Swaps or moves (even cross-chain) may be taxable events depending on local rules; check your jurisdiction.
• Compliance gates demand. Custody/reporting clarity can unlock institutional participation; it doesn’t fix poor economics.

Ava: “Law can invite. It can’t alchemize. Economics still has to work.”

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