Don't launch a token no one wants today.

While that may seem obvious, it's the distilled version of the advice Coinbase co-founder and board director Fred Ehrsam gave during his fireside chat at Token Summit II, a conference taking place today in San Francisco.

According to Ehrsam, demand in the crypto space is driven by people who are actually using the technology – largely entrepreneurs and developers working at crypto startups and early investors interested in building the basic architecture of the decentralized economy.

Demand isn't coming from consumers interested in the prospective benefits of a blockchain-based Uber or Airbnb, he continued.

And in turn, Ehrsam – who since leaving Coinbase has continued to invest in and advise crypto projects – said that evaluating new tokens is about "matching the token and the project to the maturity of the ecosystem."

Sure, the quality of the team and the progress they have made on building on their product are also good indicators of successful projects, but still, there are projects the world isn't ready for yet.

Turning back to valuable projects for the ecosystem today, Ehrsam, specifically pointing to TrueBit and Basecoin, said:

For example, blockchain developers, including those for the two most widely used networks – bitcoin and ethereum – have been under pressure recently for the technology's inability to scale for new adoption. Bitcoin's scaling debates created enough contention this year that several groups split off the main chain, creating competing cryptocurrencies.

Otherwise, Ehrsam said he relies on an equation he learned as a currency trader to guide some of his investments – MV = PQ (money supply multiplied by the velocity of money is equal to the price of goods multiplied by the number of goods sold).

The velocity of money simply means how many times a given unit of money changes hands. So, if a lot of people are using a given product, then it should have a fairly high velocity, which starts to show the value of the overall protocol.

"Through this equation, I think you can start backing into how much a token is actually worth," Ehrsam said.

However, he acknowledged (and moderator and Token Summit organizer William Mougayar agreed), this model requires more research.

Velocity, Ehrsam continued, is the most sensitive measurement in the crypto industry, since it depends on getting tokens into the hands of people likely to use them.

Because of that, many in the crypto community respond well to the "perception of fairness" in the economics of a token, whereby tokens favor potential users over speculators.

Citing the popularity of bitcoin betting site Satoshi Dice and the ethereum-clogging CryptoKitties, Ehrsam said the most valuable products today are sometimes the simplest decentralized apps (Dapps). He concluded:

Disclosure: CoinDesk is a subsidiary of Digital Currency Group, which has an ownership stake in Coinbase.

Image by Brady Dale for CoinDesk