Original author: Chain Research Society (X: @lianyanshe)
During the peak of Bitcoin, the meme frenzy, and the value coins pretending to be dead, Binance consecutively launched the spot trading for pnut and act, with a low enough market cap and minimal selling pressure, providing ample space for secondary market profits, further igniting the frenzy in the meme sector. Binance's coin listing choices have always been a market barometer, and after half a year of questioning VC coin listings, Binance has finally learned its lesson, avoiding coins that cannot bring positive trading value and paying more attention to community effects and secondary market potential. From the overall market heat, the market value of memecoins has already exceeded $120 billion and has dominated the market every quarter. Wherever the market trades is where it exists; so where do other coins go wrong?
Previously, people would distinguish business areas in the crypto industry based on sectors such as L2, LSD, Depin, AI, etc. After enduring a continuous 'bear market' for half a year, it became clear 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 continuously dropped to zero, while meme coins, though often touted as useless, have repeatedly reached all-time highs. Where exactly is the problem?
Binance pointed this out in its May report: 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 private market capital, aggressive valuations, and optimistic market sentiment. It is expected that around $155 billion worth of tokens will be unlocked between 2024 and 2030, which could exert selling pressure on the market. Investors should focus on fundamentals when selecting projects, while project teams need to consider long-term impacts to ensure reasonable token economic design. Overall, market participants need to exercise caution 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 assess the coin price based on current supply market value or FDV valuation? How will future dilution affect current investments? Is the unlocking release a release of value or a slow suicide? Will the growth potential of the entire crypto industry's market value over the next five years accommodate massive releases? With so many uncertainties, the demands on investors have gradually shifted away from the fundamental value of tokens, turning instead to their complex token economic designs, while the multi-party interest distribution and game of tokens have already been reflected in the token price. Therefore, rather than studying sectors, technology, or token economics, it might be better to directly engage in mindless speculation on memecoins.
And what is the essence of memecoins? How do they differ from VC coins? The answer is fair launch; although this fairness is relative, the conspiracy is clearly distinguishable compared to the overt collaboration of teams/VCs/CEXs. For any token supported by venture capital, a fair issuance is impossible, as VCs have already purchased at a lower price before the Token Generation Event (TGE).
So, is there a better solution? After communicating with @Dr. Daoist (@Dr_Daoist) / X, we reached a general consensus that the timed unlocking of VC coins is actually the culprit causing the superficial problem of 'low circulation and high fully diluted valuation (FDV)'. A financially reasonable approach is to abandon the time-based issuance of tokens and instead release them based on market demand.
Their thoughts on the token are very profound; you can check out their written ideas on three versions of token fair release: https://x.com/Dr_Daoist/status/1847937835653099726
The fair release has three versions. Version 1.0 is essentially a flawed version of fair release, as each round of release effectively dilutes the community's share in the circulating supply. Version 2.0 fixes the issues present in the Ponzi version, as token unlocking only occurs in the inflation portion of each round of release, but its impact on token price remains neutral. Meanwhile, version 3.0 introduces a positive feedback loop that drives continuous growth in token price: during each round of fair release, a portion of the income is injected into the liquidity pool to enhance token price, further incentivizing community holding and participation.
1.0 Ponzi version (no income): Every time circulating tokens are consumed and destroyed, an equal amount of new tokens will be released proportionately (allocated to teams/VCs/community/funds, etc.), keeping the circulating supply constant;
2.0 HODL version (with income): Similar to the Ponzi version, but a certain amount of inflation tokens will be released, and income will be used 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 part of the income will be used to enhance token price, not just for buybacks of inflation releases, thus creating a potential for 'only rising and not falling'.
This version seems to respond to Litecoin's aspirations. It’s not hard to capitalize on memecoins, provided that the design is well done based on fair release: including setting the optimal inflation rate and ideal distribution of income—ensuring part of the income is used to cover inflation buybacks, while the remaining portion effectively boosts token price. Aside from these calculations, the rest is careful execution.
Although this might be the fairest and most sustainable token economic model for any VC-supported token, for many battered old coins, it is already a difficult situation. The new project Gabby World has quietly implemented the fair release 3.0 (Moonshot version) in its decentralized exchange (DEX) Token Generation Event (TGE), and everyone can look forward to whether the new token model can create a price flywheel for memecoins. If feasible, this will also provide a great economic correction opportunity for other tokens awaiting TGE!
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