Original author: Lianyanshe (X: @lianyanshe)
At the time of Bitcoin's ATH, the meme craze, and the value coins playing dead, Binance has continuously listed the spot trading of Pnut and Act, which have low market capitalization and small selling pressure, providing ample space for secondary market profits and further igniting the meme track's enthusiasm. Binance's choice of listed coins has always been a market barometer. After a long six-month questioning of VC coin listings, Binance has finally learned its lesson, avoiding coins that cannot bring positive trading value and placing more emphasis on community effects and secondary market potential. From the overall market heat, the market value of memecoins has already exceeded 120 billion, dominating the market every quarter. Wherever the market trades, that is where the action is. So where did other coins go wrong?
Previously, people would distinguish the business areas of the crypto industry by tracks, such as L2, LSD, Depin, AI, etc. After enduring a continuous six-month "bear market," they realized that the entire crypto industry actually only has two categories: meme coins or VC coins. VC coins are known for their value, but their prices have continuously dropped to zero, while meme coins, which claim to be useless, have repeatedly reached ATH. Where exactly is the problem?
In Binance's report from May, it pointed out that the trend of low circulating supply and high fully diluted valuation (FDV) tokens in the crypto market has attracted widespread attention. This phenomenon mainly stems from the influx of capital from the private placement market, aggressive valuations, and optimistic market sentiment. It is expected that approximately $155 billion worth of tokens will be unlocked between 2024 and 2030, which may exert selling pressure on the market. Investors should focus on fundamentals when choosing projects, while project teams need to consider long-term impacts to ensure reasonable token economic design. Overall, market participants need to be cautious to avoid potential risks arising from token unlocks.
Clearly, the essence of so-called VC coins is low circulating supply and high diluted valuation. In this contradiction, investors need to consider many factors, such as whether to evaluate coin prices based on current supply market value or FDV valuation? How will future dilution affect current investments? Is the unlocking a release of value or a slow suicide? Can the growth potential of the entire crypto industry's market value accommodate massive releases over the next five years? In the face of so many uncertainties, the requirements for investors have gradually shifted away from the fundamental value of tokens towards their complex token economic designs, and the multi-party interest distribution and game of the tokens themselves have already been reflected in the coin prices. Therefore, rather than studying tracks, technology, and token economics, it is better to directly engage in mindless speculation on memes.
So what is the essence of memes? What distinguishes them from VC coins? The answer is fair launch. Although this fairness is relative, the conspiracy is clearly superior to the overt scheme of team/VC/CEX joint harvesting. For any VC-supported token, fair issuance is impossible because VCs have already bought in at a lower price before the token generation event (TGE).
Is there a better solution? After discussing with @Dr. Daoist (@Dr_Daoist) / X, we reached a common consensus that the timed unlock of VC coins is actually the root cause of the superficial problem of "low circulation, high fully diluted valuation (FDV)." An economically reasonable approach is to abandon time-based token issuance and instead release based on market demand.
Their thoughts on tokens are profound, and 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 version of fair release because each round of release will effectively dilute the community's share in the circulating supply. 2.0 fixes the issues in the Ponzi version because token unlocks only occur in the inflation portion of each round of release, but the impact on token prices remains neutral. The 3.0 version introduces a positive feedback loop that drives continuous growth in token prices: in each round of fair release, a portion of the income is injected into the liquidity pool to enhance token prices, further incentivizing community holding and participation.
1.0 Ponzi Version (No Income): Each time circulating tokens are consumed and destroyed, an equal amount of new tokens (allocated to the team/VC/community/fund pool, etc.) is released proportionally, keeping the circulating supply constant;
2.0 HODL Version (With Income): Similar to the Ponzi version, but releases a certain amount of inflation tokens and uses income for buybacks and destruction to offset the inflation amount, keeping the circulating supply stable;
3.0 Moonshot Version (With Income): Similar to the HODL version, but a portion of the income will be used to enhance token prices, rather than just buying back inflation releases, thus creating a potential of "only rising, not falling."
This version seems to respond to Litecoin's aspirations; colliding with memecoins is not difficult, provided that a fair release is well designed: including setting the optimal inflation rate and ideal income distribution—ensuring a portion of income is used to cover inflation buybacks, while the remaining part effectively enhances token prices. Aside from these calculations, the rest is careful execution.
While this may be the fairest and most sustainable token economic model for any VC-supported token, for many battered old coins, it may be too late. The new project Gabby World has quietly implemented fair release 3.0 (Moonshot version) in its decentralized exchange (DEX) token generation event (TGE), and everyone can look forward to whether this new token model can create a price flywheel for memecoins. If feasible, this will also provide a great opportunity for economic correction for other tokens awaiting TGE!
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