Is governance alone enough to create durable token demand?
As discussed in our governance tokens FAQ, governance alone rarely creates durable token demand. A governance token can be central to a DAO’s political process and still be economically optional for users of the product. Optimism’s docs describe OP as the token used for governance, voting, and delegation, while separate OP Stack docs allow chains to use any asset as the native gas token instead of ETH.
That distinction matters because governance demand is demand for influence, not demand for usage. Token-weighted systems map influence to holdings, so early allocation concentration can persist for years. Optimism’s Token House is explicitly token-weighted, while its Citizens’ House uses a one-member, one-vote model as a separate check.
For token holders, governance can still matter. It can control treasury spending, emissions, upgrades, and fee routing. But for real demand, governance is usually downstream of ownership concentration rather than a cure for it. If the token is only needed to vote, the main economic question becomes who already owns enough of it to matter.
Which utilities usually create real demand?
| Utility type | What actually creates demand | Representative example | Main concentration risk |
|---|---|---|---|
| Mandatory payment or burn | Users must spend or indirectly burn the token to access blockspace or network service. | Ethereum burns the base fee under EIP-1559, and Helium network usage consumes Data Credits created from HNT. | Usage may be genuine but concentrated in a few apps, operators, or enterprise buyers. |
| Security staking or backstop capital | Participants must post capital that secures the system and can be penalized for failure or shortfall. | Ethereum validators stake 32 ETH, and Aave Umbrella stakers accept slashing risk to cover deficits. | Yield and influence can pool around large operators or wealthy holders. |
| Productive residual claim | Protocol surplus buys, burns, or distributes value to the token, and losses can also hit the token. | Maker burns MKR in surplus auctions and mints MKR in debt auctions; GMX routes part of protocol fees into buybacks. | Buybacks can be discretionary, delayed, or captured by treasury politics. |
| Access, discount, or capacity rights | Holding or staking the token lowers user costs or expands product access. | stkAAVE holders were given a 30% GHO borrow-rate discount, capped at 25% of the GHO bucket. | Benefits often skew toward existing large holders and looping strategies. |
Does payment utility create the strongest demand?
Mandatory spend is the cleanest utility because it turns service consumption into token demand. EIP-1559 burns the base fee at the protocol level and keeps ETH as the asset used to pay for transactions. That ties blockspace demand directly to ETH demand and sink mechanics.
Helium shows the same logic in a more explicit billing system. Data Credits power network usage, each Data Credit equals $0.00001, Data Credits are created by converting HNT, and they are non-transferable once created. That design shields users from token volatility while still making HNT the upstream asset consumed by usage.
Usage-based demand is strongest when a non-holder must buy into the token pathway to consume a service. Helium’s Foundation reported that from January 1, 2024 through May 16, 2024, nearly 160,000 HNT had been burned, worth more than $1.47 million, and most of that Data Credit burn came from the MOBILE network. The demand was real. The distribution lesson is different: real demand can still be highly concentrated in one buyer or one application layer.
That is why “used for fees” is not enough on its own. The harder question is who generates those fees. A token backed by one dominant integrator may have authentic utility, but it can still produce a narrow ownership and bargaining structure.
Does staking create real demand or just reduce float?
Staking creates real demand only when stakers are underwriting something the system genuinely needs. On Ethereum, solo staking requires 32 ETH to activate a validator, and Ethereum’s own staking docs describe home staking as the most impactful way to improve decentralization and security.
Ethereum’s docs also make the distribution trade-off plain. Home staking keeps users in control of their own keys and client choices, while third-party staking services make those decisions for them and “don’t always make the safest choices.” Utility exists here because staking secures consensus. But access is still shaped by capital thresholds and operating skill.
Aave Umbrella passes the same test more clearly than many generic staking programs. Users stake aTokens or GHO to provide automated bad-debt protection, earn additional rewards, and accept slashing risk if deficits occur. Aave’s staking interface describes that pool as an added protection layer for protocol deficits, not just a cosmetic lockup.
Inflationary staking without meaningful security work is weaker. It may reduce circulating float, but reduced float is not the same as durable demand. If nobody outside the existing holder base needs the token, the design is still mostly reflexive. For a broader view of those trade-offs, see our staking FAQ.
Do buybacks, fee shares, and surplus rights count as utility?
They do, but only when the economic claim is explicit and credible. Maker remains one of the stronger designs because the token sits on both sides of the balance sheet. When surplus from stability fees accumulates, Dai is auctioned for MKR and the MKR is burned. When the system cannot cover bad debt, a debt auction mints MKR. Holders benefit from system surplus and absorb dilution when risk management fails.
That symmetry matters. Many token designs promise upside exposure but hide or socialize downside. Maker’s mechanism is harsher, but analytically cleaner, because the token is tied to protocol performance in both directions. That is closer to a true residual claim than a marketing narrative about “value accrual.”
GMX links token value to protocol activity through a different route. Current GMX docs state that 27% of fees from leverage trading, liquidations, borrowing fees, and swaps are used to buy back GMX on the open market. The same docs also state that staking rewards are currently accumulating in the treasury and distribution is suspended until GMX reaches $90. That is still a real economic linkage, but it shows how treasury policy can delay tokenholder realization even when the protocol produces fees.
Discount utility is real too, but it often privileges incumbents. In Aave’s GHO genesis parameters, stkAAVE holders received a 30% borrow-rate discount, capped at 25% of the total GHO bucket size. That changes user economics in a concrete way. It also channels the best terms to users who already hold and stake AAVE.
What usually fails in practice?
Utility fails when the token is adjacent to the product instead of embedded in it. If users can access the same service with a stablecoin, with ETH, or with no token exposure at all, then the token’s role is probably promotional or political rather than operational. OP Stack’s custom gas token framework makes this plain: chains can choose another native asset as the fee token. Product usage and token demand do not automatically coincide.
Utility also fails when it is one-sided. Buybacks without downside, staking without slashing, and governance without broad participation all tend to produce the same outcome: insiders capture most of the benefits while later holders fund the appearance of alignment. The mechanism may still move price. It does not necessarily broaden economic participation.
Finally, utility fails when it is inaccessible. Large minimums, long lockups, whitelist-only access, and complicated vesting pathways can create demand on paper while reserving the best economics for founders, treasury insiders, market makers, or a narrow validator class. Builder incentives matter. Concentration risk matters too. Good token design has to admit both.
How should teams judge whether utility is real?
The right first question is not “what can the token do?” The right first question is “who must hold it, under what conditions, and who gets priced out?” If non-holders must repeatedly acquire the token to use a product, secure a protocol, or access a contractual economic right, utility is probably real. If only existing holders interact with it, demand is probably circular.
The second question is distribution. Real demand can still produce unhealthy power dynamics if the utility is mostly exercised by whales, treasuries, or a few operators. Teams should publish concentration metrics next to utility claims: eligible supply, top-wallet share, validator or operator concentration, reward distribution by cohort, and the portion of utility accessible to new users versus early insiders.
At FinDaS Tokenomics, that is the practical standard we use in token economy design. In our tokenomics consulting work, the strongest utilities are the ones that convert product usage, security provision, or explicit residual claims into repeatable demand. The weakest are the ones that only grant votes over a system most users can already access without the token. Beyond governance, real demand is possible. Broad economic participation is a separate design problem, and in many token economies it is the harder one.
