VC Coin Airdrop and a Brilliant Technological Dream

Source: X, Rui@YeruiZhang During the 2022 to 2024 first half cycle, the mainstream trend in the market was the model of strong VC endorsement + large airdrops to the "community" + early token issuance projects. The extremely high premium of terminal exchanges during TGE made their preference the most reasonable path. The attention PVP model in the bear market cycle allowed large projects to bleed the entire market, with APT-SUI-OP-ARB all emerging from this path as terrifying monsters. For these projects, they gained short-term visibility by airdropping coins to the community, which is a path-dependent approach, so the way to build an ecosystem is also to distribute money, distribute money to those projects that are expected to bring traffic (because they lack the ability to communicate directly with the community/traffic). Originally, this game of deceiving people would have gradually declined, and Altcoins would have gone through a cycle of the darkest level of reshuffling like in 2018-2020. But with the approval of spot ETFs, the money-making effect of the market has returned, and these projects are constantly exploring their comfort zone, and the market will continue to buy in. The two most interesting examples are Sei and Pyth, whose Runway before launch should not have exceeded 6 months, but after launch, good investment institutions + strong track record + airdrop effect = huge initial listing + super high initial FDV. The former went crazy with OTC outflows after launch, and the latter even set new highs after listing on OK and Binance. Essentially, the market is constantly reinforcing the logic under the original valuation model, resulting in them being pushed to heights they shouldn't have reached. So the bear market came in April, and in fact, there were signs of it before the bear market, with Starknet becoming the last "top-tier project" to launch and maintain its market value, and ZRO and Zksync becoming the sacrifices of the collapse of expectations and valuation models. Not only did they perform poorly on launch, but the airdrops were also massively dumped. Essentially, the project parties saw the declining trend of this playbook and did not dare to offer so many airdrops (the buying power of the terminal exchanges was limited). So the negative feedback kept getting stronger, and a vicious cycle began. Where's the problem? Two shallow-level reasons are that with the emergence of MEME, retail investors' attention could not be concentrated on VC coins; and the increasing number and expectations of short hunters led everyone to acquire the initial state of the coin through airdrops, with no one buying on launch, and the good news released by the project parties not getting any buying feedback, becoming a game of who can dump faster. But the deeper reason is that the terminal exchanges found that they could not acquire enough new users through projects backed by strong VCs + large-scale airdrop activities, as they were all existing users, unable to provide sufficient trading volume. As a result, very few VC projects had good secondary market performance in May-September, but with Trump's victory, things took a turn. There are two types of projects that have returned to the spotlight. One is the project parties that are still doing things with traditional logic. We see that APT and STX are still struggling on this path, from November onwards they are desperately pushing positive news, converging towards the mainstream, and spending a lot of money to incentivize the ecosystem (APT's TVL yield leading the market, STX giving a lot of incentives to new BTC), essentially the traditional cycle of news-market buying-valuation benchmarking-coin price rise, but unfortunately the market is not buying it. In fact, they are not doing badly, the same approach was very effective at the beginning of the year, but the version is now wrong. The other type is the project parties that combine doing things with market making, Sui and ENA are representatives, from 1U to 5U, no one knows what Sui has actually done, but the surge has made everyone remember that Sui has done so much. ENA openly bought at the 0.2 bottom, then issued the second season rewards, and when the bull market came, the funding rate and coin price both rose, causing the Pendle YT-PT integral pricing model to be established, and the cycle of rising third-season expectations-TVL-coin price was triggered. This may be the mainstream version now. From the perspective of new projects, when the channels for issuing coins become more diversified and exchanges are no longer the absolute terminal, user mindset has become the new ultimate terminal, and how to invade the user's mindset to build buying power has become something the project parties need to think about. There is no standard answer to this problem yet, the most direct of course is to build a community, but this is very difficult, and only a few projects like Monad, Bera, and Megaeth have achieved this. More advanced is to achieve this through third-party tools like Kaito and Echo, or directly through KOL rounds, Kaito is the materialization of the attention economy, Echo gives retail investors the hope of early participation, and KOL rounds use the simplest and most direct content to indoctrinate retail investors. We have seen Megaeth build an extremely powerful community through Megamafia+Echo rounds, and we have also seen Fogo, as a core circle project (Crocswap founder), give up more shares to the Echo round, and a large number of Pre TGE projects choose to airdrop to Yap. In the absence of a standard answer, everyone is trying. From 2021 to 2023, technology is the primary productive force, strong VC endorsement-good technology-legitimacy is the version answer (this is also the path dependence of the 2021 bull market cycle). But now with the change of wind direction, the relationship between technology and attention has been deconstructed, the proportion of technology in the user's mindset is getting lower and lower (of course, this is another issue from the VC perspective, which can be written in another article), product is greater than technology, community is greater than technology, early token ownership is greater than technology, the narrative of technology dominance has become a brilliant dream. But is technology really useless? In fact, technology has always been the most important thing in the blockchain, as technology determines decentralization, and decentralization determines the fundamental existence of the blockchain industry. In the change of mindset from the last cycle to this cycle, the market has rejected micro-innovations and small technical upgrades, and has rejected VC coins that only talk about technology and do not care about the market, but it is still expecting fundamental-level innovations brought by technology. Forever hopeful about Crypto.