Why are Treasury Protected Tokens Important?
More equitable, more desirable, better incentives
Why are TPTs important?
Allows employees to be paid in 100% equity without any downside risk
Paying people in equity reduces long-term wealth and income inequality
Aligns incentives of the organization and the employees
All upside, no downside.
If an employee is paid in TPTs, their possible payout is unlimited. If the team is successful, the value of the token will be incredibly high and allow contributors to reap the benefits of their hard work. Simultaneously, the worst-case scenario is that they simply earn a USD-based salary. This incentive structure is far superior to anything offered at US companies. This can be a tool for bringing in massive cohorts of new contributors to web3. If working in web3 is not risky, then we can recruit all of the best talent.
For example, let's consider the annual compensation of someone paid in USD vs. paid in TPTs with differing company outcomes:
Long-Term Equalizer
The greatest tool for wealth generation is owning equity. In the traditional corporate system, the vast majority of equity is owned by a small portion of people. Currently, concentrated equity owners reap the benefits of workers who are paid in appreciating USD terms. Employees happily take the USD payments because it’s guaranteed, safe, and secure. For those who do not have tremendous financial safety nets, USD payments guarantee that you’re able to pay for rent and food. There does not have to be a choice between stability and upside-opportunities.
Desirable for Risk-Averse Employees
If all companies provide TPTs, then individuals will naturally gravitate toward the most promising projects with the most future potential. Individuals know that they are going to have a guaranteed income to pay for basic expenses, so they’re not worried about working for truly innovative companies that have previously been viewed as “risky”. TPTs essentially provide a safety net to employees to encourage healthy career risk.
Currently, our system optimizes for safety. People work at big, steady companies because they desire security. They want to be able to pay for food, housing, and essentials. If the downside was a guaranteed USD-based salary, how many people would choose to work for a high-potential company? Most people.
Superior to RSUs
Restricted Stock Units (RSUs) provide a perverse incentive for individuals to hang around until their vesting completes, often long after the employee wishes to have left. TPTs implicitly provide real-time vesting, meaning that contributors will simply move on when they’re ready to work for another project. The standard 1-year cliff + 4-year vesting schedule is toxic. Everyone has friends who have dispassionately chosen to stick around for 1-2 more years to earn their RSUs payout. It’s unhealthy for the employee (who is ready to leave) and it’s unhealthy for the company (which is receiving sub-par efforts from the dispassionate employee).
Moreover, RSUs provide limited upside since it’s usually a fraction of the salary. If the company does tremendously well, you won’t receive the same proportional benefits as the company as a whole. For example, if a company 2x's in value, a RSU holder’s total compensation over the course of the year may be 1.2x their base-case expectations. With the TPT system, employees have the ability to 2x their money if the company 2x’s in value.