At the peak of Bitcoin's all-time high, amidst the meme craze and the value coins playing dead, Binance consecutively listed pnut and act in the spot market. With a low market capitalization and small selling pressure, it provided enough space for secondary profits and further ignited the enthusiasm in the meme track. Binance's coin listing choices have always been a market barometer. After half a year of questioning VC coin listings, Binance has finally learned to avoid coins that cannot bring positive trading value, placing more emphasis on community effects and secondary space. From the perspective of overall market heat, the market value of memecoins has already exceeded $120 billion, dominating the market each quarter. Where the market trades, there it is; so where do the other coins go wrong?
Previously, people would distinguish the business sectors of the crypto industry according to tracks, such as L2, LSD, Depin, AI, etc. After experiencing a continuous six-month 'bear market,' they realized that the entire crypto industry actually has only two classifications: meme coins or VC coins. VC coins are known for their value, but their prices have consistently fallen to zero, while meme coins, which claim to be useless, have repeatedly reached all-time highs. 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 of tokens will be unlocked between 2024 and 2030, which may put selling pressure on the market. Investors should focus on fundamentals when selecting projects, while project teams need to consider long-term impacts, ensuring reasonable token economic design. Overall, market participants should be cautious to avoid potential risks arising from token unlocking.
Clearly, the essence of so-called VC coins is low circulating supply and high fully diluted valuation. In this contradiction, investors need to consider many factors, such as whether to evaluate the coin price based on the current supply market value or FDV valuation? How will future dilution affect current investments? Is unlocking a release a release of value or a chronic suicide? Can the growth potential of the entire crypto industry's market value accommodate a massive release over the next five years? With so much uncertainty, the requirements for investors have gradually shifted away from the fundamental value of tokens to their complex token economics design, and the distribution and game of interests among multiple parties in the token itself have already been reflected in the coin price. Therefore, rather than studying tracks, technology, or token economics, it is better to directly speculate on memes without thinking.
What is the essence of memes? What distinguishes them from VC coins? The answer is fair launch; although this fairness is relative, the conspiracy compared to the open conspiracy of team/venture capital/CEX joint harvesting is still evident. For any token supported by venture capital, fair issuance is impossible because venture capital has already bought in 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 generally agreed that the timed unlocking of VC coins is actually the culprit of the apparent problem of 'low circulation, high fully diluted valuation (FDV).' An economically reasonable approach is to abandon time-based token issuance and instead release according to market demand.
There are three versions of fair release. Version 1.0 is actually a flawed version of fair release because each round of release effectively dilutes the community's share in circulating supply. Version 2.0 addresses the issues in the Ponzi version because token unlocking only occurs in the inflation portion of each round of release, but its impact on token prices remains neutral. Version 3.0 introduces a positive feedback loop that promotes continuous growth in token prices: in each round of fair release, a portion of the income is injected into liquidity pools to enhance the token price, thereby further incentivizing the community to hold and participate.
Version 1.0 Ponzi version (no income): Each time tokens in circulation are consumed and destroyed, an equal amount of new tokens will be released proportionally (allocated to teams/venture capital/community/funds, etc.), keeping circulating supply constant;
Version 2.0 HODL version (with income): Similar to the Ponzi version, but it releases a certain amount of inflationary tokens and uses income for buybacks and destruction to offset the inflation amount, keeping circulating supply stable;
Version 3.0 Moonshot version (with income): Similar to the HODL version, but some income will be used to enhance the token price, rather than just buying back inflation releases, thus creating a potential of 'only rising and not falling.'
This version seems to respond to Litecoin's aspirations. It's not hard to engage with memecoins, provided that a fair release is well designed: including setting the optimal inflation rate and ideal income distribution—ensuring that part of the income is used to cover inflation buybacks, while the remaining part effectively enhances the token price. Apart from these calculations, the rest is careful execution.
While this may be the fairest and most sustainable token economic model for any token supported by venture capital, many old coins in dire straits find it hard to recover. The new project Gabby World has quietly implemented fair release 3.0 (Moonshot version) during its token generation event (TGE) on decentralized exchanges (DEX). 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 opportunity for economic correction for other tokens awaiting TGE!
