Source: Medium, Sep 2018
one of the key paradoxes that is hardly ever addressed when people throw money at various crypto projects is this:
When I invest in a token, I am hoping someone in the future will want to buy it at a higher price to use the platform. However, why would anyone buy my tokens to use the platform if the price of the token keeps increasing as I expect it to?
people will tend to hoard store of value forms while minimizing the time as well as amount for medium of exchange or utility forms. This effectively means that the less the medium acts as a store of value, the more likely we are to trade it only when we require access to the platform.
As such, the costs of using the platform becomes the determining demand factor for such tokens. If the token price and transaction costs are not decoupled, the network will not be able to scale. Even if completely decoupled, the token’s value will only grow linearly with the demand for the underlying utility and as covered in the section above, market dynamics are constantly pushing the costs of such utility downwards.