Written by: Mark
Compiled by: TechFlow TechFlow
There’s an old saying in the venture capital world: “First-time entrepreneurs focus on product, while second-time entrepreneurs focus on distribution.” This describes how product developers often expect to be able to grow based solely on product quality, rather than putting their energy into the process of creating repeatable patterns that will help them continue to attract attention and users to their products.
However, there is another factor here that I think many cryptocurrency founders overlook, and that is the token. Cryptocurrency founders generally overestimate the marketing value of their products and underestimate the marketing value of their tokens. I'm not kidding when I say "the token is the product", I actually believe that for anyone trying to build a valuable company in the cryptocurrency space, your first goal should be to attract permanent attention to your token attention and liquidity, that is, selling it to anyone willing to hold it for the long term.
As anyone can see, the main use cases for blockchain so far are buying, transferring, and selling tokens. Some applications add extra steps or metadata to these interactions, helping users build complex ways to create value for themselves using the tokens they own. But everything we do in the cryptocurrency space, every hurdle we jump over, is ultimately in service of an interaction that is triggered by our purchase of certain tokens in the ecosystem.
While there have been a small number of successful cryptocurrency projects that have managed to achieve widespread and lasting distribution of their software without a token, they are the exception. If you compiled a list of cryptocurrency products or protocols with over 100,000 monthly active users (MAUs), you would notice that the vast majority of them either already have a token or have indicated plans to eventually launch one plan. Crypto markets offer greater efficiency and fairness to users, so naturally it is extremely difficult to establish a sustainable competitive advantage against new entrants trying to drive down profits.
One example is Uniswap, they were able to maintain their dominance for many years through their strong brand and high-quality technology. Even they eventually released a token as a response to competitors like Sushi who offered more value to users through their tokens than product functionality. Examples like this are why I believe that, over a long enough time horizon, any successful crypto product that doesn't launch a token will eventually lose its profits, and/or will be defeated by competitors that launch and build tokens.
This may eventually apply to businesses outside of cryptocurrencies as well, in response to increasingly efficient markets driven by developments in the internet and artificial intelligence. It's worth noting that this is closely related to how airlines currently operate in the real world - as they operate on razor-thin margins and derive most of their value from their loyalty programs . Delta’s primary product is no longer flights, it’s Delta points.
Looking back at cryptocurrencies, history seems to suggest that very successful cryptocurrency projects can be built by:
Leverage tokens to continue attracting attention and capital
Convert this liquidity into products of value to users
The best evidence that successful cryptocurrency products can be built in this specific sequence is Justin Sun and the TRON network. Although people have criticized their sleight of hand over the years, there is inevitably no doubt about the actual utility that the TRON network provides ( as a stablecoin payment). giants in the ecosystem ) were impressed. He has proven himself very good at attracting liquidity attention and turning it into a real network that has created value for millions of people. It is clearly shown that tokens can act as self-fulfilling prophecies of their own value, where price increases can occur before value creation itself. This is in direct contrast to the traditional way of building/valuing companies, which is why cryptocurrencies can still be confusing to people who are not used to this new paradigm.
When the price of any asset skyrockets, people pay more attention to it, and this is true in cryptocurrencies and any other asset. However, crypto assets appear to be particularly adept at converting this increased attention into increased inherent value of the underlying network. This is because cryptocurrency networks welcome skilled contributors of all professional backgrounds to their communities. Few non-cryptocurrency organizations have been able to capitalize on the massive influx of attention amid the reflexive price swings. Therefore, when people value encrypted assets, they cannot only rely on the current and future value created by the network, but also need to consider the impact of subsequent liquidity on the future development trajectory of the network.
People enter this ecosystem to make money through this new business model, which offers huge rewards to those who can predict future liquidity flows and value creation early. The best founders in crypto are not blind to this fact, but seek to capitalize on this inherent desire in order to build valuable networks where all participants make money by virtue of their existence.
A prime example is the Helium network, they were able to attract enough liquidity to their ecosystem (via their HNT token) to provide a stable incentive for selfish strangers to buy mining rigs and start making real profits for themselves . Through the power of token liquidity, they were able to launch their network with enough miners to capture the stale mobile broadband market. Coordinating nearly 400,000 users to join such a network would be a daunting task without the help of deep liquidity, which provides a useful stopgap during the early volatility that occurs when any multi-sided market develops. In this way, the first and most important product Helium needs to sell is their token, without which they are unlikely to attract and sustain enough attention, no matter how impressive their hardware or software is, Nor can it challenge large incumbents.
In a tokenized product like Helium, the price of the token is a measure of attention flowing into/out of a given ecosystem. Miners also lose liquidity when coin prices drop because their economic circumstances change, but also because of the herd mentality around attention, if I see everyone else leaving, there's a chance I'll leave too.
In this way, attracting liquidity is not something that only matters in the early stages, it is always a prerequisite for the continued existence of the network, although this becomes less and less important after the community attracts enough local supply and demand to the network. Being able to consistently attract liquidity to your project is no trivial task, and the pressure it puts on cryptocurrency founding teams is similar to the ordeal experienced by creators on large social platforms, where even taking a day off at the wrong time can be Disastrous effects on your growth.
However, there are crypto founders who are both brilliant technologists and crypto Degens, with a keen understanding of attention flows and how best to ride these waves to continue creating value for their ecosystems. They keep their users (token holders) engaged in the long-term vision of the project by consistently delivering on their promises to community members, creating self-reinforcing positive feedback loops, and striving to continually innovate on the product.
From a practical perspective, the art of attracting liquidity often takes many forms. For most founders, the process begins with raising some small seed funding from friends and family, followed by larger rounds from institutional investors. Funding (whether explicit or implicit future tokens), followed by additional pre-release token transactions, official launches, bounty campaigns for token distribution, working with exchanges and market makers to provide liquidity for the tokens , as well as increasing the project’s visibility in the cryptocurrency attention space through a range of other marketing techniques. Importantly, they work with a growing network of people who believe in their mission and join their community to help support their mission, due to their inherent belief in the existing network, and the tokens for early joiners With generous rewards on offer, they are motivated to contribute to the network. Ideally, the people you sell your tokens to should be the first people to actually use the network itself, or at least to loudly promote the network to their audience.
Importantly, they work with a growing network of people who believe in their mission and join their community to help build it — people who are motivated by an inherent belief in the existing network and a code that offers generous rewards for joining early. coins and be incentivized to contribute to it. Ideally, the person you're selling your tokens to should be the first to actually use the network itself, or at least promote it loudly to their audience.
Ultimately, most cases come down to selling tokens to as many new buyers as possible while doing everything possible to prevent existing token holders from dumping their tokens. Sometimes by locking up investment or staking tokens, sometimes by using memes. Regardless, the best tokenized communities are adept at playing infinite games in an adversarial game, where strangers coordinate with each other to keep the game going (i.e., bid on token dumps) when the token gets stuck. Ultimately they have to compete with each other to exit at a higher price later.
Tokens are an extremely powerful coordination tool, and over the next decade we will see an explosion of tokenized networks that will seriously challenge the institutions that still wield enormous power today. Tokens can also allow companies in commoditized markets to build attention and goodwill to spend during periods of intense competition, thus preventing them from losing their moat entirely. This presents a huge opportunity for founders who are savvy in technology and creative pursuits (software and memes) and are brave enough to compete with large existing organizations.
The fact that this playbook has become so clear, understandable, and repeatable means that utility token networks will continue to attract significant amounts of early-stage investment capital from investors who see the need to be early and right when betting on founders. Gain potential benefits. As this market matures, I also expect that we will see competition for liquidity concerns become more intense (as we are already seeing within the utility token market in the blockchain space).
We're excited about the upcoming tokenized network, and we think recent advancements in wallet and blockchain technology, coupled with the popularity of secure block spaces, create the perfect conditions for a whole new set of applications and users to join the cryptocurrency.
