The future of crypto markets: Tokens first

Author: Mark Source: Mirror Translation: Shan Oppa, Golden Finance

There is an old saying in the venture capital world: "The first time founders focus on product, the second time founders focus on distribution." This describes how product builders often expect that they can grow purely on the quality of their product, rather than by putting effort into creating repeatable patterns that help them continue to attract attention and user attention to their product.

However, there is another element that I believe many cryptocurrency founders are missing, and that is tokens. Cryptocurrency founders have long overestimated the launch of their products and underestimated the launch 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 crypto, your first goal should be to fund your token Attract permanent attention and liquidity, that is, sell it to anyone willing to hold it for the long term.

Anyone with eyes can see that the main use case of blockchain to date is the purchase, transfer and sale of 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 crypto, every hoop we jump through, every seed word we write, is ultimately for an interaction, and that interaction starts with us buying a few tokens into the ecosystem.

While there are a handful of successful crypto projects that have achieved widespread and durable distribution of their software without the help of tokens, they exist as outliers. If you were to compile a list of crypto products or protocols with over 100,000 monthly active users, you would notice that the vast majority of them either already own a token or have clear plans to eventually launch one. 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.

Uniswap is an example of a company that has been able to maintain its dominance for many years thanks to its strong brand and high-quality technology. Even they were eventually forced to add tokens as a response to competitors like Sushi that offered value to users via tokens beyond just the functionality of the product. 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 pushed out to competitors that launch the token and build the token Defeat. Create stronger lasting network effects for yourself and your community.

This may eventually apply to businesses outside of cryptocurrencies as well, in response to increasingly efficient markets driven by the proliferation of networks and artificial intelligence. It's worth noting that this is closely related to how airlines currently operate in the real world - because they operate on razor-thin margins and derive most of their value from loyalty programs. Delta's primary product is no longer flights; it's Delta points.

Looking back at cryptocurrencies, the evidence seems to suggest that highly successful crypto projects can be built by:

1. Attract attention and capital to yourself (and your tokens) in an ongoing manner, and

2. < p style="text-align: left;">Convert flowing attention into products of value to users.

Justin Sun and the TRON network are the best evidence that successful crypto products can be built in this specific order - despite years of People have thrown all kinds of shade at their antics, but it's hard not to be impressed by the real utility the network offers (as a behemoth in the stablecoin payments ecosystem). He has proven himself to be very capable of drawing attention to himself and turning it into a real network that has created value for millions of people. The evidence clearly shows that tokens can act as self-fulfilling prophecies of their own value, where price increases can precede value creation itself. This is directly opposite to how traditional company building/valuation works, which is why cryptocurrencies remain dumbfounding to anyone not used to this new paradigm.

When the price of any asset surges, people pay more attention to it - this is true for cryptocurrencies as well as any other asset. However, cryptoassets appear to be particularly good at converting increased attention into increases in the intrinsic value of the underlying network. This is because crypto networks welcome skilled contributors to their communities regardless of their professional background, whereas traditional organizations are walled gardens with sparse entrances. There are few non-cryptocurrency organizations set up to capitalize on the massive amount of attention that can be gained during periods of reflexive price action. Therefore, we not only need to evaluate crypto assets based on the current and future value that the network is creating, but we also need to consider the impact of subsequent liquidity flows on the future trajectory of the network.

People enter this ecosystem to make money through this novel business model that offers those who can predict future liquidity and value creation as early as possible prosperous profits. Rather than turning a blind eye to this fact, the best founders in crypto have found a way to weaponize this inherent desire in order to build valuable networks where participants can all monetize their existence.

A classic example is the Helium network - they are able to attract enough liquidity (via their HNT token) into their ecosystem for selfish reasons of strangers buying mining rigs and starting providing themselves with a steady incentive to make real profits. Through the power of token liquidity, they were able to bootstrap 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 it, no matter how impressive their hardware or software is, they won't be able to attract and maintain enough attention to reach necessary critical mass. Challenge large enterprises.

In a tokenized product like Helium, the price of the token is the lowest common denominator of attention flowing into/out of a given ecosystem. When coin prices drop, miners churn not only because their economics change, but also because of the herd mentality that exists around attention—if I see everyone else leaving the party, I'm more likely to leave too.

In this way, attracting liquidity is not a one-time thing that only matters in the early stages - it remains a prerequisite for the continued existence of the entire network, Although this becomes less and less important as the community provides sufficient local supply/demand. to the network. Being able to attract sustained liquidity attention for your project is no trivial task - the pressure it puts on a cryptocurrency's founding team reflects the grueling experience of being a creator on a large social platform, even after taking a day off at the wrong time It can also be disastrous for your growth.

Despite this, there are some cryptocurrency founders who are both brilliant technologists and fearsome meme lords who have a keen understanding of how attention flows. and how best to ride these waves to continually bring value to the ecosystem. They create self-reinforcing positive feedback loops by consistently delivering on the promises they make to community members and continually drive product innovation to keep users (token holders) aligned with the community’s long-term vision. project.

In practice, the art of attracting liquidity often takes many forms—for most founders, the process begins with raising some from friends and family Small seed capital, then raising more funds from institutional investors (explicitly or implicitly mentioning future tokens), and then through other pre-release token deals, the launch itself, bounty campaigns that distribute the tokens, and Events where exchanges and market makers collaborate to provide liquidity for tokens, as well as countless other marketing techniques to raise a project’s profile in the cryptocurrency spotlight. Importantly, they work with a growing network of people who believe in their mission and join their community to help make it happen – something they are motivated to do because of their inherent belief in the existing network Contributions, as well as generous token rewards for early joining. In an ideal world, the people you sell tokens to would be the first people to actually use the network itself, or at least promote it loudly to the audience.

Ultimately, most of the art comes down to the simple math of selling your tokens to as many new buyers as possible while doing everything possible to prevent existing tokens from being sold Holders dump their tokens. Sometimes this is done through token locking around investments or staking tokens, sometimes through memes. Regardless of how they do it, the best tokenized communities excel at playing infinite games in adversarial games, where strangers coordinate to keep the game going when tokens get stuck (i.e. during token dumps bid), although ultimately competing with each other and exiting later at a higher price. Founders in these ecosystems tend to be highly skilled individuals who have gained enough comfort that they don’t need to be taken seriously,

Tokens are a Extremely powerful tools for coordination, over the next decade we will see an explosion of tokenized networks that will seriously challenge the institutions that still hold enormous power in our lives 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 huge opportunities for founders who are savvy in technology and creative pursuits (software and memes), who are brave enough to compete with large incumbents, and brave enough to weather the inevitable liquidity drought. .

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 that From investors who see the potential gains when betting on founders early and right. Working on suitable memes. As this market matures, I also expect that we will see competition for liquidity concerns become more intense (as we have already seen with the blockspace utility token market).

Despite this, we at Boost are still excited about the tokenized network that is still on the way, and we believe that the latest advancements in wallet and zk technology, coupled with ubiquity 's secure block space creates the perfect recipe for a whole new group of applications. Users join cryptocurrencies.