Tokens as Products
Original author: Boost VC Associate Mark Beylin
Translator: Odaily Azuma
There is an old saying in the venture capital world: First-time entrepreneurs pay more attention to the product itself, while second-time entrepreneurs pay more attention to distribution. This shows that developers who focus on products often believe that as long as the product is good enough, it can be achieved To grow, there is no need to invest energy in establishing a sustainable mechanism that can steadily attract attention and acquire customers.
However, I think many entrepreneurs in the cryptocurrency space overlook another key factor - tokens.Entrepreneurs in the cryptocurrency space tend to overestimate the entry strategy for their products and underestimate the entry strategy for their tokens.When I came to the conclusion that “the token is the product” I wasn’t kidding, I sincerely believed thatFor those who are trying to build a valuable business/project in the cryptocurrency space, the first and most basic thing should be to attract stable attention and liquidity for your token., in other words, you need to sell the token to those who are willing to hold it for the long term.
As perceptive observers see,The main use case of blockchain so far is still the purchase, transfer and sale of tokens. Some applications add some additional design to these basic interactions, allowing users to create new value in more complex ways through the tokens they hold. However, in the field of cryptocurrency, everything we do, every link we operate, and even every mnemonic we record, in the final analysis, serves the purpose of purchasing a certain token. interaction.
Although there are a very small number of projects that have successfully achieved widespread and sustainable diffusion of their products without relying on tokens, they are more like the exception than the rule. If you count the list of cryptocurrency products or protocols with more than 100,000 monthly users, you will find that most of them have either issued coins or have announced plans to launch tokens. The cryptocurrency market provides users with a more efficient and fair trading environment, so it is particularly difficult to prevent new entrants from cutting into your profit margins and thereby establish a sustainable competitive advantage.
Take Uniswap as an example. Thanks to its brand and technological advantages, it has successfully maintained its market dominance for several years. However, even Uniswap has had to choose to launch its own tokens when facing competitors such as Sushi, rather than compete solely with products. Similar cases lead me to believe thatIf a successful cryptocurrency product does not launch a token, its profit margins will be gradually eroded in the long term, or overtaken by issued token competitors who can build network effects around the community.
This phenomenon may even apply to companies outside the crypto space as a response to the increased market efficiency driven by the spread of the Internet and artificial intelligence. It is worth mentioning that this is very similar to the operating model of airlines in the real world - because airlines profit margins are extremely low, most of their value comes from their loyalty programs, such as for Delta Air Lines (Delta) , their main product is no longer the flight itself, but Delta points.
Looking back at the history of the cryptocurrency space, the evidence seems to suggest that you can help build a highly successful project by:
One is to attract continuous attention and liquidity to your token;
The second is to convert this attention and liquidity into products that are valuable to users.
The best example here is Justin Sun and TRON - although many people have scoffed at Suns outrageous operations for years, you cant deny TRONs market in the stablecoin payment ecosystem share. Justin Sun is very good at attracting attention and converting that attention into products. There is significant evidence that tokens can be viewed as self-fulfilling prophecies of the project’s own value,In other words, Prices may rise before value is created., which is very different from how traditional companies are built and valued, which is why the cryptocurrency space can be very confusing to those unfamiliar with this new paradigm.
When the price of any asset soars, so does its attention, whether in the cryptocurrency space or other assets, this statement applies. However, crypto-assets seem to be particularly good at converting this new attention into new value for the underlying network. Therefore, when we value crypto-assets, in addition to evaluating the value that the network has created currently and can create in the future, It is also necessary to consider what impact the subsequent influx of liquidity will have on the future development trajectory of the network.
Generally speaking, the original intention of people entering the cryptocurrency field is to make money through this new business model. For those pioneers who can recognize this and can foresee and seize future liquidity and value creation opportunities, The market often rewards them with generous value. The best founders in crypto know this and can find ways to turn this collective appeal into design advantages, thereby building value networks in which all participants can earn benefits.
Helium is a good example - they have successfully attracted enough liquidity to their ecosystem through the HNT token to establish a stable reward mechanism. The core mechanism of Helium is to encourage profit-seeking users to purchase mining machines and then profit from tokens. Taking advantage of the potential revenue expected from the tokens, Helium eventually sold a large number of mining machines to challenge the outdated mobile broadband market. Without tokens, coordinating nearly 400,000 users to join such a new network would undoubtedly be a huge challenge.Therefore, the most important product for Helium to promote is not the mining machine, but the token., without tokens, no matter how advanced their hardware or software is, it is impossible to attract enough attention, let alone challenge industry giants.
For tokenized products like Helium, the token price is the universal standard for measuring the inflow and outflow of attention. When currency prices fall, miners will gradually disengage due to declining economic benefits or a herd mentality.
therefore,Attracting attention and liquidity is not only an important matter in the initial stage of the project, it is also a continuous requirement of the project throughout the entire operation cycle., although as the supply and demand of the community itself gradually increases, the importance of these matters will decrease relatively. Attracting sustained attention and liquidity is not easy. The challenges faced by the founding teams of crypto projects are no less than those faced by various creators on social media platforms.Because even one day off at the wrong moment can have a disastrous impact on project growth.
However, there are also founders who combine outstanding technical skills with strong charisma. They clearly know how to harness the flow of attention and skillfully ride the wave to continuously inject value into their ecosystem. By continually fulfilling their commitments to the community, they establish a positive feedback loop and can continuously innovate their products to ensure that users (token holders) always have confidence in the long-term vision of the project.
In practice, there are many ways to attract liquidity - for most founders, the process starts with raising a small amount of seed funding from friends and family, followed by more funding from institutional investors (which often involves commitment to future tokens), followed by the completion of other pre-sales, and the subsequent official launch of the project. The project team will also launch a bounty program to distribute tokens, work with exchanges and market makers to ensure sufficient liquidity of the tokens, and use a series of marketing strategies to increase the projects visibility in the crypto world. They also work with a broad base of people who believe in their vision and are willing to join the community to help build it—people who truly believe in the network and are given the incentive to join early and reap huge rewards. Ideally, the people who buy your tokens should be people who will actually use the network, or at least who will enthusiastically promote the network to others.
Overall, this gameplay actually boils down to a simple strategy—Selling tokens to as many new buyers as possible while doing everything possible to retain existing token holders and prevent them from selling their tokens.Sometimes this can be achieved through staking or staking, and sometimes by leveraging various meme cultures. No matter which approach is taken, the best tokenization communities are good at playing the “infinite game” of this game, and they can work together when the token faces difficulties, even if everyone ultimately hopes to sell at a higher price. Keep the game going (e.g. buy when the token price plummets).
Tokens are powerful orchestration tools, and over the next decade we will see an explosion of tokenized networks and challenge traditional institutions that currently still have a huge amount of influence in our lives. Tokens can also help companies in the commoditized market stabilize their market advantages and gain advantages in fierce market competition by accumulating attention and favor. This opens up endless opportunities for founders who are both tech-savvy and creative (good at software and memes) and dare to challenge the old paradigm.
