Author: Lianyanshe (X: @lianyanshe)
Amidst the BTC ath, meme craze, and the death of value coins, Binance has consecutively listed pnut and act on its spot market. With low market cap and small selling pressure, it has provided ample room for secondary market profits, further igniting the meme sector's fervor. Binance's coin listing has always been a market barometer, and after half a year of VC listing interrogation, Binance has finally learned its lesson, avoiding coins that cannot bring positive trading value, and focusing more on community effects and secondary market opportunities. Looking at the overall market heat, the market value of the entire meme coin market has exceeded $120 billion, and it has dominated the market in every quarter. The market trades where the action is, so where did the other coins go wrong?
People used to categorize the crypto industry's business areas by sectors, such as L2, LSD, Depin, AI, etc. But after experiencing the prolonged "bear market" for half a year, they realized that the entire crypto industry actually only has two classifications: meme coins or VC coins. VC coins are known for their value, but their prices have consistently dropped to zero, while meme coins have always touted their uselessness, but their prices have repeatedly reached all-time highs. Where is the problem?
Binance's May report pointed out this phenomenon: the trend of low circulating supply and high fully diluted valuation (FDV) tokens in the crypto market has attracted widespread attention. This is mainly due to the influx of private equity capital, aggressive valuations, and optimistic market sentiment. It is estimated that around $155 billion worth of tokens will be unlocked between 2024 and 2030, which may put selling pressure on the market. Investors should focus on fundamentals when choosing projects, and project teams need to consider long-term impacts and ensure reasonable token economic design. Overall, market participants need to be cautious to avoid potential risks from token unlocks.
Clearly, the essence of so-called VC coins is low circulating supply and high diluted valuation. In this dilemma, investors need to consider many factors, such as whether to evaluate the coin price based on the current supply market cap or the FDV valuation? How will future dilution affect current investments? Is the unlocking and release a release of value or a slow suicide? Can the growth of the entire crypto market cap over the next 5 years accommodate the massive release? In the face of so much uncertainty, the requirements for investors have gradually deviated from the fundamental value of the tokens, turning to their complex token economic design, and the multi-stakeholder distribution and game theory of the tokens have already been reflected in the coin prices. Therefore, instead of researching tracks, technologies, and token economics, it's better to simply hype up memes.
What is the essence of memes? What is the difference from VC coins? The answer is fair launch. Although this fairness is relative, the open conspiracy is still far superior to the closed conspiracy of the team/VC/CEX collusion. For any VC-backed token, a fair launch is impossible, as VCs have already bought in at a lower price before the token generation event (TGE).
Is there a better solution? After communicating with @Dr. Daoist (@Dr_Daoist) / X, we generally agree that the timed unlocking of VC coins is actually the root cause of the "low circulating supply, high FDV" surface problem. The economically reasonable approach is to abandon timed token releases and instead release them based on market demand.
Their thoughts on tokens are very insightful, you can check out their three versions of fair token release ideas:https://x.com/Dr_Daoist/status/1847937835653099726
There are three versions of fair release: 1.0 is actually a flawed fair release version, as each round of release will effectively dilute the community's share in the circulating supply. 2.0 fixes the Ponzi problem in the previous version, as token unlocks only occur in the inflationary portion of each release round, but the impact on token price is still neutral. Version 3.0 introduces a positive feedback loop to drive sustained token price growth: in each fair release round, a portion of the revenue will be injected into the liquidity pool to boost the token price, further incentivizing the community to hold and participate.
Version 1.0 Ponzi (no revenue): Whenever the circulating tokens are consumed and burned, an equal amount of new tokens will be released (allocated to the team/VC/community/treasury, etc.) to maintain a constant circulating supply;
Version 2.0 HODL (with revenue): Similar to the Ponzi version, but a certain amount of inflationary tokens will be released, and the revenue will be used for buybacks and burns to offset the inflation, maintaining a stable circulating supply;
Version 3.0 Moonshot (with revenue): Similar to the HODL version, but a portion of the revenue will be used to boost the token price, rather than just buying back the inflationary releases, creating a "only up" potential.
This version seems to respond to Litecoin's wish, and copying meme coins is not difficult, provided that the design is based on a fair launch: including setting the optimal inflation rate and the ideal revenue allocation - ensuring that a portion of the revenue is used to cover inflation buybacks, and the remaining portion effectively boosts the token price. Apart from these calculations, the rest is careful execution.
Although this may be the fairest and most sustainable token economic model for any VC-backed token, for many scarred old coins, the damage is already done. The new project Gabby World has quietly implemented the fair release 3.0 (Moonshot version) in its token generation event (TGE) on a decentralized exchange (DEX), and we can look forward to whether this new token model can create a flywheel for meme coin prices. If feasible, this will also be a good economic correction opportunity for other tokens awaiting TGE!
