Research shows that 91% of coins that crashed in 2014 are now dead.
It is estimated that 9 out of 10 blockchain projects fail, and the average lifespan of a token is just 15 months.
With success rates so low, I wanted to share my thoughts on which projects will survive and thrive.
Coinkickoff Research
The problem is - there are too many projects, but our time and energy are limited. It would be great if we could spend a few days researching a coin, but cryptocurrencies move very fast, so it's better to save some energy for decision making.
That’s why I focus on the most important part of tokenomics, which is what really matters.
Start with “Why”
According to Sink, "few people or companies can clearly articulate why they do what they do."
This applies even more to cryptocurrency projects and their tokens. It seems like every day there are projects popping up based on the prevailing narrative of the time.
I believe that before investing in a token, it is important to take the time to understand why a project needs a token in the first place.
This can be broken down into three questions:
Why do projects need tokens?
How does it work?
What does it do?
Finding the real reason for the token’s existence
In fact, I think most projects don’t even need a token to run. Think about the following projects. Do they really need a token to run?
DEX and DEX Aggregator
Collateralized Stablecoins
Loan Agreement
Revenue Summary
wallet
For example, the Sushiswap vampire attack could force Uniswap to issue its own token. $UNI has been a bit of a hassle for a while now, but now that potential revenue sharing is finally kicking in, UNI is starting to make sense.
Most projects will issue tokens anyway. The reasons are obvious:
Raising funds
Building Community
Leading liquidity
Many protocols use tokens simply as a fundraising tool (obviously, they don’t say that publicly).
But great projects exist for a reason. These are well-thought-out features that aren’t immediately obvious:
Distributing ownership and power (who decides which tokens are listed on Aave or where/how rewards are distributed?)
Risk management (who will assess the risks and take responsibility if the protocol fails?)
Future utility options (launched as a community/fundraising tool first, but with features added to decentralize the protocol and systematically transition ownership to the community).
Understand the real reasons why a project is issuing tokens before investing, which goes beyond fundraising goals.
Analyzing how the token ecosystem works
The “how” part can be complex, especially for projects using innovative game theory.
Every project has tokenomics explained in their documentation section. It's easy to find "how it works". Getting a deep understanding is more challenging.
I believe that the best token designs create a flywheel effect — a virtuous cycle that drives adoption, usage, and appreciation of the token.
This creates a positive feedback loop that strengthens the token’s ecosystem.
Curve’s veTokenomics is probably the most copied design: veCRV encourages long-term holding, incentivizes liquidity, and attracts other protocols to build on Curve.
However, keep in mind that token designs vary in sophistication, with some being intentionally complex to deceive investors and others offering unique innovation and creating value.
Your challenge is to differentiate between the two.
After all, "if you don't understand where the income comes from, you are the income."
Staking is probably the simplest and arguably most useful function of a token. If a project can reward users by airdropping tokens into the ecosystem, it has a strong value proposition. Think Celestia’s TIA or Cosmos’ ATOM.
However, occasionally a unique and different token emerges that changes the trajectory of an entire industry. The ingenuity of token economics can propel an entire industry forward and kick-start a new bull run.
Finding tokens that bring value to holders
After understanding the fundamental reason why a token exists and how it works, it’s time to understand how it creates value for investors. We don’t want a token without any use case.
For example
Pay Fees
Revenue Sharing
Fee discounts
Administration of the Protocol
For liquidity/risk management
Be wary of projects that raise funds but then ignore token holders.
The most common example is sharing revenue from protocol fees, or some projects integrate tokens into the core functionality of the protocol.
For example, Pendle, which is designed using vePendle, is a great example. vePENDLE rewards users by increasing LP APY and protocol revenue share. As Pendle successfully positions itself as a yield/points farming hub for DeFi, the token will benefit from increased adoption/TVL and other metrics.
vePENDLE also grants voting rights for incentive allocation. Overall, vePENDLE token economics are simple and value accumulation is straightforward.
Assessing demand and supply mechanisms
Evaluates the ratio of market capitalization (MC) to fully diluted valuation (FDV).
A low MC/FDV ratio means more tokens will be released to the market, putting downward pressure on prices.
Think about who will buy these newly issued tokens!
I agree with this qw that FDV is just a memo in the short term. Just look at how much Worldcoin has been pumped recently!
However, you may not want to hold these tokens when a bear market comes. Eventually, actual demand should offset the increase in supply.
My current view on this cycle is short to medium term: as long as the major unlock is 6 months or more away, market cap is more important than FDV.
Evaluate token distribution
Assess the long-term potential of a token by understanding its distribution. There is no simple answer to what distribution ratio is best. The dominant narrative is different for every project and every period.
Remember the “fair launch” tokens with 0% allocation to the team?
Everyone is focusing on the fact that too much allocation to a team can lead to a sell-off.
However, giving teams too little funding is also a problem: too little can weaken the financial incentive to build teams.
Andre Cronje once wrote in his blog post “Building Companies in DeFi Sucks (Part 2)” that giving 100% of tokens to the community is a mistake.
DeFi is poorly architected
I still have all the responsibilities and expectations, I just don't get any of the rewards or benefits. Come on, I'm an idiot. - Andre Cronje
Now it seems that the trend of "fair launches" is outdated. The last attempt was the BRC20 token, but 99% of the tokens were quickly inflated...
Long-term and short-term holding methods
I focus on medium to long term holding, so I look for tokens with long-term linear unlocking schedules (no big cliff unlocking) and MC/FDV ratios above 0.8. Team and venture capital are around 30%.
If your focus is on short-term trading, you should master the symbolic analysis tools:
(Example: Top 100 holders collectively own 89% of SNX, but 32% is actually locked in staking)
Dune is suitable for dedicated project dashboards or community built dashboards like the one designed by DeFi Mochi.
Nansen: Find out who holds the tokens and where they are going.
Assess actual liquidity
See if there is real demand for the token and whether you can buy it.
Don’t rely solely on volume, as cryptocurrency exchanges are notorious for “wash trading” — creating the illusion of demand by buying and selling their own tokens.
Check liquidity depth on Coingecko or Coinmarketcap to assess true liquidity.
Sometimes there are unique token designs but low liquidity, which means they fail to attract big investors who could drive up the price.
Features of Tokens
The “what” part is simple — it’s the functionality of the token, such as voting, staking, VIP access, in-app payments, or a burn per transaction.
In my experience, projects that don’t know “why they’re doing this” often focus on providing as many features as possible. The website is filled with complex graphics and designs that entice you to buy immediately.
It's too late to regret.
But don’t be fooled by simple marketing — see how these features support the growth of the protocol and create real value for token holders.
I like Crypto Linn’s simple approach of investing in protocols that make their users rich. A simple yet powerful framework.
All it takes is one to three killer use cases.
Keep it simple
Finding the next gem coin can be a challenging task, especially with so many new ones coming out every day.
It’s difficult to keep up with all the new projects and do in-depth research on each one.
That’s why I’ve kept this guide short and sweet – it can be boiled down to 6 actionable points:
Purpose: Understand why the token exists and whether it’s worth your time.
Function: Examine the flywheel effect and potential for long-term success.
Value: Look beyond flashy features and focus on actual value to token holders.
Dynamics: Consider token distribution, MC/FDV ratio, unlocking, and buying pressure.
Liquidity: Check the depth of liquidity and demand to assess the value and growth of the token.
Analytics: Gain the tools to make informed decisions about investing and selling.
