Underwear exposed! The inflation rate of private chain tokens is actually infinite, and their value is even less than an honest Meme coin.

We always discuss the value of $BTC and $ETH, but have you ever considered where the value foundation lies for those so-called “private chain” native tokens issued by companies or alliances? Market analysis indicates that such tokens may lack the necessity of existence from the very beginning of their design.

True public chains, such as $BTC, $ETH, and $SOL, have their native tokens serving two core functions. The first is security assurance, which defends against Sybil attacks through economic incentives. Bitcoin miners consume energy to earn $BTC rewards because $BTC itself is an anti-inflation, property-rights-secure asset. If it were a stablecoin, miners would not only worry about purchasing power but also have to guard against the issuer freezing assets.

In proof-of-stake networks, validators stake $ETH or $SOL, tying their vested interests deeply to network security. They are the largest natural holders of the tokens, and if the network succeeds, they benefit the most. Using the native token rather than other assets is key to realizing this incentive closed loop.

The second function is the transaction fee mechanism. Paying fees with the native token creates a profit closed loop for miners and validators, provides users with censorship resistance, and creates an auction market for scarce block space. All of this constitutes a positive cycle of security and value creation. Holding the native token is the best way to capture the value of these network effects.

There is a viewpoint that Satoshi Nakamoto’s innovation may not have been the invention of decentralized infrastructure to create new currency, but rather the invention of a new currency to safeguard the security of decentralized infrastructure. This reversal of causal order makes the prospects of the entire system seem more solid.

However, private chain databases do not require these designs at all. Their security does not come from incentives, but from authority. The way to defend against Sybil attacks is through a “dictator model,” where a single entity decides who can participate. This model existed decades before Bitcoin appeared, at a time when there was no need for “coins.”

It also does not need a native token for charging fees. It can choose not to charge fees at all, or use fiat currency directly. Public chain fees are intended to prevent spam attacks, which is a side effect of censorship resistance. In contrast, corporate databases are inherently built with censorship; they can filter users through real-name verification and kick out non-compliant ones, which is essentially the operating model of traditional finance.

As for incentives, they are even more superficial. If the dominant entity truly wants to incentivize participants, they can directly pay in fiat or grant equity. In any private chain environment, the legal effectiveness of contracts far exceeds that of database records. More importantly, incentives only create token supply; where does the demand come from?

$BTC has value because someone wants to hold it as currency and use it to pay fees. $ETH and $SOL have value because someone needs them to stake and pay for gas fees. The demand source for private chain tokens is very vague, and it is not an effective way to monetize the platform’s success, as stakeholders hold equity, which is always valued higher than tokens.

The most fatal issue lies in inflation. The credibility of Bitcoin’s cap of 21 million coins is due to the difficulty of altering decentralized protocols. But if a network is controlled by companies or alliances, the credibility of all promises regarding supply depends entirely on the authorities themselves.

Authoritative entities can command validators to change the inflation rate at any time and threaten noncompliance with disqualification. This means a single entity can inflate the supply indefinitely. Even with two thousand validators, there is no physical mechanism to prevent this. Power leads to corruption, a lesson that has been validated throughout the history of currency for thousands of years.

What’s trickier is that many private chain systems claim to have privacy features. This leads to a lack of transparent oversight from the outside. Unless anyone is allowed to run nodes for validation, the controlling party can inflate tokens without anyone knowing. They might be doing just that.

On $BTC or $ETH, you can run your own node to validate total supply. But in a closed private system, you cannot do that. The only entity that knows the total supply information is precisely the one most motivated to inflate and conceal it.

Therefore, private chain databases do not need native tokens. They can issue them, but they cannot guarantee the property rights of holders, cannot provide spontaneous demand, and cannot even prove the authenticity of total supply. Overall, the fundamental value of such assets is even less than that of meme coins that openly admit their uselessness. Meme coins at least have property rights that are difficult to infringe upon, and their supply is fixed and verifiable. They may be void, but they are not deceptive.

On the other hand, the native tokens of private chains may only have one endpoint for their value trajectory over a sufficiently long time scale.

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