When even the token farmers start to dislike VC projects: How to break the deadlock

Original author: haotian, encryption researcher

In the past two days, some new coins in the secondary market have collectively retreated, which seems to reflect the market's unveiling of the VC industrial minting path of "narrative first, refinancing, and then TGE" in the current cycle. It's worth thinking about why retail investors would rather participate in high-risk PVP conspiracy coin games on-chain, and stay away from VC-backed new coins. Next, let me talk about my thoughts:

1) First of all, it must be acknowledged that the previous round of VC-led industry innovation-driven models has evolved into an "industrial assembly line of financing, issuing tokens, and launching products." For some time now, the glamorous narrative of white papers + top-tier luxury investment lineup + seemingly impressive large financing numbers + expectations of major profits have become liquidity harvesting weapons launched into the market, seriously overdrawing the trust of the market.

Although it cannot be generalized, when a pile of projects that rarely fulfill their promises and have no wealth effect is pushed to the market, it leads to the market irrationally categorizing them as VC scams.

2. The main fatal problem of VC coin is its pricing mechanism, **When the project completes multiple rounds of financing, the valuation of TGE has been raised layer by layer, which leads to two inevitable results: first, the cost of retail investors is too high; Second, early investors have a strong incentive to sell. In fact, this undoubtedly designs a "death trap" for the new coin, according to this logic, some projects will have a greater probability of downside after TGE, and the unilateral downside will envelop the negative sentiment of the market shorting, which will form a vicious circle.

In contrast, although the community tokens that start with zero on-chain and have low market values carry significant unknown risks, many retail investors are still reluctant to touch those VC tokens that have high downward expectations and certainty.

3) A market environment with depleted liquidity will deal a more fatal blow to VC tokens. Imagine that when all participants know that selling first after the TGE is the optimal strategy, and everyone thinks shorting is a rational choice, all VC tokens will face a significant market sell-off dilemma. In the case of overall market liquidity depletion, it is highly likely that VC tokens will also become the "sacrificial" objects.

This is similar to a "prisoner's dilemma"; if the project team generously airdrops, it will face selling pressure, while if they hold back and do not release tokens, they will be criticized by public opinion. Either way, it leads to one outcome: a lack of sufficient buying support.

4) The problem is clear to everyone, how can we break the trust crisis of VC coins? The core issue lies in how to reconstruct the balance of interests among project parties, VCs, and the community, for example:

1. Start with a low valuation, leaving room for growth: Project teams and VCs should accept a lower initial valuation, making the TGE the true starting point of the project's value rather than its peak, providing the market with sufficient growth expectations; (Recently, I've seen quite a lot of fundraising still being substantial, indicating that the problem is far from exacerbated).

2. De-VC in some links: Introduce community participation in some special links, and reduce the dominance of VC in token distribution and increase community weight through DAO governance, IDO, fair issuance, etc.;

3. Differentiated incentive mechanisms: Additional incentives should be designed for long-term holders to truly return value to participants and builders of the project ecosystem, rather than short-term speculators. This requires further upgrades and modifications to the airdrop mechanism.

4. Transparent Operations: Project teams should adopt a transparent accountability mechanism that regularly discloses development progress and fund usage, rather than solely engaging in unilateral market promotion before and after the TGE.

Above.

In fact, VC has made outstanding contributions to the maturation process of the Crypto industry. The fear of VC does not mean that we must completely eliminate VC; an industry without VC could also fall victim to the conspiratorial groups behind it, which would be another catastrophe that the industry cannot bear.

At present, the financing ecology of the Crypto market still needs to be reconstructed, and VC should transform from a passive "arbitrage intermediary" to an active "value enabler".

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