VC currency airdrop and a gorgeous technical dream

Source: X,Rui@YeruiZhang

In the cycle from 2022 to the first half of 2024, the model of strong VC endorsement + large airdrops to the “community” + first-issue coins has become the mainstream trend in the market. The ultra-high premium of terminal exchanges on TGE has determined their preferences. is the most reasonable path. The focus of the bear market cycle on the PVP model makes the release of large projects suck blood from the entire market. From APT to SUI to OP to ARB, they are all terrifying monsters that have come out of this path. For these projects, they gain short-term publicity by throwing money into the community. This is a kind of path dependence, so the way to do ecology is to throw money at projects that hope to bring traffic (because they lack direct and the ability to communicate with the community/traffic). Therefore, we can see that in the past two years, some applications invested by celebrity VCs have gained sufficient popularity in these ecosystems.

Originally, this game of deceiving others would slowly fade away, and altcoins would complete a dark level reshuffle like the 18-20 year cycle. However, with the passage of spot ETFs, the money-making effect of the market has returned. These projects continue to pursue their own comfort zones, and the market will continue to foot the bill. The two most interesting examples are Sei and Pyth. The runtime of these two projects before going online should not exceed 6 months. After going online, good investment institutions + strong benchmarking on the track + airdrop effect = big first launch + super high Initial FDV. The former went crazy with OTC shipments after it went online, and the latter hit a new high after landing on Binance from OK. Essentially, the market continues to strengthen its logic under the original valuation model, which results in pushing them to higher levels than they should be.

So the bear market came in April. In fact, the market had already had signs before the bear market. Starknet became the last "king-level project" to go online and maintain its market value. ZRO and Zksync became victims of the collapse of expectations and valuation models. Not only was the opening performance poor, but airdrops were also countered. Essentially, the project team saw the declining trend of this gameplay and did not dare to give so many airdrops (buying orders on the terminal exchange are limited). As a result, negative feedback continues to strengthen, and a vicious cycle begins.

What's the problem? The two shallow reasons are that with the emergence of MEME, retail investors cannot focus on VC coins; and the number and expectations of short-seller hunters are getting higher and higher, causing everyone to obtain initial coins through airdrops, and no one If you buy at the opening, the good news from the project side will not get the feedback from the buyers, and it becomes a game for everyone to compete with others to sell faster. But the underlying reason is that the terminal exchange found that it was unable to acquire enough new users through strong VC-backed projects + large-scale airdrop activities. The existing situation was unable to provide sufficient trading volume.

As a result, very few VC projects performed well at the second level from May to September. However, with Trump’s victory, things took a turn for the better.

There are two types of projects coming back into view here. One type is project parties that still use traditional logic to do things. We have seen that APT and STX are still struggling on this path. Since November, they have pushed hard to push benefits, move closer to the mainstream, and spend a lot of money to stimulate the ecosystem (APT’s TVL income leads the market, and STX gives a lot of new BTC Incentive), it is essentially the cycle of traditional news-market buying-valuation benchmarking-currency price rise, but unfortunately the market does not buy it. In fact, it’s not that they didn’t do a good job. The same idea was very effective at the beginning of the year, but now the version is wrong.

The other type is project parties that combine work with market making. Sui and ENA are the representatives. From 1U to 5U, no one knows what Sui has done, but the increase reminds everyone that Sui has done so many things. Ena is a bright brand that attracts goods at the bottom of 0.2, and then issues second quarter rewards. The bull market has come, and both the funding rate and the currency price have increased, which has led to the establishment of Pendle YT-PT's points pricing model. The expectations for the third quarter have increased - TVL has increased. -The cycle of rising currency prices begins. This may be the current version of the mainstream.

Back to the perspective of new projects, when currency issuance channels become more diversified and exchanges are no longer absolute terminals, users’ mental models have become the new terminal. How to invade users’ mental models to construct buying orders has become a project. Things that Fang needs to think about. There is no standard answer to this question yet. The most direct solution is of course to build a community, but this is very difficult. Only a few projects such as Monad, Bera, and Megaeth have achieved it. More advanced ones are realized through third-party tools such as Kaito and Echo or direct KOL rounds. Kaito is the embodiment of the attention economy, while Echo gives retail investors a hope of early participation. The KOL round uses the simplest and most direct content. Feed it to retail investors. We have seen Megaeth build an extremely strong community through the Megamafia+Echo round, and we have also seen Fogo, as a core circle project (the founder of Crocswap), transfer more shares to the Echo round, and a large number of Pre TGE projects have chosen to airdrop to Yap. Before there is a standard answer, everyone is trying.

From 21 to 23, technology is the primary productive force. Strong VC endorsement-good technology-legitimacy is the answer (this is also the path dependence of the 21-year bull market cycle). But now with the change of wind direction, the relationship between technology and attention is deconstructed, and the proportion of technology in users' mental models is getting lower and lower (of course, from the VC perspective, this is another issue, and this can be written in another article) , the product is greater than the technology, the community is greater than the technology, the early stakes are greater than the technology, and the technology-led narrative has become a gorgeous dream.

But is technology really useless? In fact, technology has always been the most important thing in the blockchain. Technology determines decentralization, and decentralization determines the existence foundation of the blockchain industry. In the changes in the mental model from the last cycle to this cycle, the market has abandoned micro-innovation and small technology upgrades, and abandoned VC coins that only talk about technology and do not care about the market, but they are still looking forward to the Fundamental- level innovation brought by technology. Always have hope for Crypto.