Token is no longer the product. An industry split or "this time is different" (truly).
In 2019, almost every VC said "F*ck tokens, we want equity. Tokens were a mistake!" A year later, they were buying every series A. Is this time different, truly? Let's see.
Everybody sees the problems in crypto capital markets (context-tweet at the bottom), but blaming the game or the players doesn’t help anymore. We need solutions. We can’t keep going as a self-policing communist alignment circle.
So today, instead of crying, I want to dig into what solutions could look like.
First, we need to understand the problems and whether they’re temporary or part of a structural shift. These issues feed into each other:
A lack of new talent entering crypto because many are captivated by AI. They believe more in the idea of AI overlords than in “self-executing contracts onchain.” Why? Maybe too much noise and falling prices in crypto.
Many projects are being launched by third-time founders focused mostly on making money. They get funded more easily because they have connections; newcomers can’t get in.
Some categories are overfunded, which leads to forking and replaying the same growth tactics. This dilutes attention and makes adoption in general very stale.
Overfunded chains go for high FDV launches, which then push retail into memecoins. Maybe oversaturation of dumb forks isn’t helping.
Grift shows up at every layer of this cycle, reinforcing the loops above.
"Show me the incentives, I’ll show you the outcome."
That’s nihilistic, sure - but also real.
Let’s go beyond this easy escape route.
Token is no longer the product (for now)
I don’t like this or believe it is forever, but it is true, for now. And before you close the tab, I’m not going to sell you equity; that isn’t the idea here. I am not crying against tokens as a concept. Previously, it was short cycles of “tokens bad, we don’t touch them”. This time, it’s structural disillusionment against empty, useless tokens.
I believe the crypto industry has already split into two: tokens vs products. It used to be that token *was* the product. You’d focus on both equally. If your product did even remotely okay and you paired it with incentives or token games, you could boost attention and valuation. The two would support each other. Token <> product reinforced each other! That worked during the Chainlink growth phase, with aggressive oracle tweeting and “community” (paid armies) rallying. It worked for L1s. But I don’t think it works anymore. Shenanigans have been very short-lived.
Why not? Well, we need to admit that the venture cycle since 2022 has been bad. Not just in crypto - web2, PE. Returns have been so-so, illiquid rekt. Or they were good (memecoins, AI memes, etc.) but very, very short-lived. Whether that’s due to rates, tariffs, or deglobalization, we won’t dig into macro today.
The point is: the environment changed, for now.
There’s a clearer divide between tokens and products today. On the token side, there’s barely any belief left. Narratives are recycled. New users aren’t coming in. Some projects are trying to wait for a better cycle, but that’s just kicking the can. The old playbook - token bribes, MM deals, geographic marketing pushes - has been exhausted, for now. It still works for large chains with capital who can pay for listings, use OTC relationships, or bribe their way into attention. But for most projects, especially already-listed ones, it’s not feasible anymore.
VCs, HNIs, family offices, even major founders - aren’t buying many tokens right now. Except, occasionally, 100x meme coins or their own fundamental biases on PA. I don’t want to spend too much time on memecoins today, because I believe those are very volatile and very short-lived grifts (that will exterminate each other very soon and that would be great, sorry CT). And what about fundamentals?
Why fundamentals still don’t move the price
People talk about them more these days, but even there, the numbers aren’t that convincing. In the S&P, a 15-25x multiple is already not low. In crypto, projects with earnings often trade at 100xs. Even if you find something at 30 - 40x, which is rare but possible, it’s not compelling unless it’s defensible and recurring. Many teams still inflate their numbers with short-term plays. Token inflation isn’t accounted for. Temporary flows are treated like sustainable revenue. Those are not real Xs.
So if most of the price is driven by narrative anyway, the fact that a project has some earnings doesn’t matter. You’re still mostly buying a story. And that’s why even some “strong” assets are barely bought today. Is it bad? No. We just have to work harder.
Maybe fundamentals are still weak? Yes!
This is pushing many teams toward real company-building. In the past, it wasn’t even feasible. Crypto didn’t have enough consistent usage. Onchain volume wasn’t strong. Lending was limited. But now? Swaps, stablecoins, chain abstraction - these things are growing, partially thanks to memecoins and retail interest, but also because of actual product-market fit. The move toward onchain finance (not even DeFi anymore, because it’s more centralized) is accelerating, creating better fundamentals.
It just needs to get even better. Don’t expect this shift right away.
That means today, for the first time in a while, you can build an actual business in crypto. And that’s leading to many teams abandoning their tokens, at least temporarily. Some delay token launches. Others just let them die, hoping to maybe revive them later. That’s an issue in itself; let’s quickly touch upon it:
Equity-Token alignment issues
Teams usually hold equity. Tokens become neglected. In some cases, teams even treat the token like a budget for metrics - they use it to juice numbers to raise equity. That’s a bad incentive, but in many cases, that’s the only tool they have left.
Sometimes this works out. Remember POA and STAKE (xDAI)? The POA situation didn’t allow for ways to salvage the token, but they launched xDAI, grew it, and eventually got acquired by Gnosis. POA holders got full redemption at the levels back then. It wasn’t at big mutiples, but it was genuine and amazing. So yes, there’s precedent for rebuilding something new and trying to come back for old holders.
Today’s teams are considering the same. If you can’t save both the token and the product, you focus on what you can save first. Buying back the token might not make sense if the fundamentals aren’t ready. So teams shift to business-building. Will they remember about us, token holders? Who knows… UNI holders are hoping about that since a while ago, but that ship isn’t sailing yet.
The industry split: tokens vs products
To build a real business, you need recurring flows that aren’t reliant on token incentives. In DeFi, that’s possible - swaps, lending, trading - these all have legacy parallels in web2, and now we’re seeing more institutional adoption.
For chains, though, it’s much harder. You have to bootstrap the entire ecosystem. The activity, the value per transaction, the retention - it’s all harder. Which is why chain projects still rely on narratives. It’s a vaporware-heavy market. That’s not a criticism - it’s just the game. So the split in the industry becomes deeper.
Product builders and token players are not just operating differently - they attract different capital and operate under different expectations. Previously, the same pool of investors might have played both sides. Not anymore:
ETF funds are not doing meme coin tranches (right?!). And meme buyers aren’t interested in staking dashboards. It’s become multiple asset classes inside one industry. So when builders complain about narrative players (or vice versa), they’re often just missing the fact that the capital has already separated. That’s why you see serious product teams avoiding most events. They don’t chase every VC. They talk to investors when necessary - early feedback or capital - but otherwise, they’re heads down. It’s a different game. And honestly, that’s probably a good thing.
Acknowledging the biases
Still, cycles exist. When things flip, green candles will return, and we will forget about fundamentals. Everyone wants to win fast. As that famous Silicon Valley scene said: "I don’t want a little every day. I want a lot all at once."
Radio on the internet, baby!
Real-world staples and commodities aren’t sexy either - but they’re stable. In crypto, nothing is fully stable. Multiples are still inflated, and everything’s interconnected. But as the space matures, that’s improving. Slowly.
I’ve been midcurve too often. I don’t like falling back into “show me the incentives,” but large-scale self-policing doesn’t work. In tight communities, maybe. But at scale? You need aligned incentives. Otherwise, it’s theory cosplay.
If you don’t have insider access, don’t fake it. Build a business. But be honest that the tools that worked for token growth won’t work here. If you’re from Web2, maybe it’s familiar. You’ve done it before. And I get why some teams now aim for IPOs or pure equity rounds. The token might come later - or not.
For narrative-based ecosystems, the options are more limited. You need to keep pushing community, DevRel, grants, and open-source traction. The seven-year-old playbook hasn’t changed much. You can execute better, but it’s kinda the same.
“We can’t escape this”. - can’t agree.
Last cycles, decent VCs and angels didn’t touch scammy launchpad projects. They had their own good gains without having to resort to scamming. This cycle, the grift muscle grew too big, but it doesn’t have to. Simply abstain from this noise.
It’s too late to cure that part of the body, so just cut it off.
Solution: play in a different league
Embrace the split. Realize these are two different worlds now. I am talking to myself now too. It’s hard to process this! We’ve been in the same pit for 8 years!
See a hot girl at the bar making out with 3 dudes at a time? I am not shaming her, we’ve all been in that age, but maybe that ain't your wife today. She might be in a few months, but timing is crucial. Today, that’s not for you.
I hope this gets me cancelled.
Some projects are realizing they’ve gotten big - and they need to verticalize. You see it with wallets, exchanges, and larger DeFi apps. Smaller teams? They’re exploring M&A. But M&A in crypto is hard. You get acquired for stock, and sometimes that stock crashes. Look at OpenSea’s acquisitions… I bet those are mad!
And let’s be honest: most communities and social traction aren’t assets. They’re baggage. Token holders can be liabilities. Unless your early community is aligned and smart, what’s being bought is the team. It’s an acquihire, not a brand buy.
More founders will quietly become C-level in larger companies. They’ll get hired for equity and leave tokens behind. Token holders will eat shit, me and you sers. That’s just reality. Those of us who’ve been in the space - myself included - understand that now. We didn’t before. Now we do. High risk, high reward. That’s the game.
In the next piece, we’ll talk specifically about Gearbox and where we see lending evolving. But to preview, lending can go a few ways:
Infra layer for wallets shifting from swaps (volume) to credit (recurring revenue). Wrote a big post about it in Notion, check here.
Tools for asset issuers building lending books for tokenized real-world assets.
A platform for HNWIs and funds to earn better yield (the de facto of today).
Other interesting ideas we’ll write about.
Also, while chain grants are still usually inefficient, they sometimes inject just enough capital and attention to keep things alive. They’re not amazing, but they’re not useless either. So yeah. You either become part of someone bigger or build something self-sustaining. Wallets, lending, stablecoins - they’re all different categories with different rules. If you want to build a full vertical, you’ll need top-tier team integration, not just tech. Most crypto founders aren’t built for that. They’re anarchist engineers, not managers of 100-person orgs.
But that’s where we’re going. Execution now matters more than narrative.
And that’s what we’ll explore in more depth next.
If, after reading this, you think that:
I am now gonna start shilling STOs;
Or that narratives are dead forever, while fundamentals will win.
No to both. You have different realities depending on which market side you want to be in or even can play within. It depends on that, kinda your choice.
If you want to play token games, then do that. If you want to build a real product, do that. It’s a split now where you have capital willing to distinguish these, and not one-sided narratives like before. It’s now possible to distance yourself from noise.
Regulation, while a terrible word, would speed up the industry split and make capital formation more streamlined. I am not naive though that bankers would then turn crypto into the same insider games as IPOs today.
Some trading thoughts, because we all love a tad of macro larping:
You can buy staples or commodities before/during a recession. You will be right and will not drawdown as much as QQQ. But as soon as the market restarts (be it 1 month or 1 year, or even 2 years), QQQ will obliterate you being “right” in a week. This goldbug-like disease will evaporate immediately. Why? Money go brrrr. Unless fiat starts working differently, this is what I believe in. People need a brighter future, a better story. Money brrr makes sure those get more flows. If I am wrong about this fundamental flow thesis, then GG to my family, see you in the fields.
But while you can sit and wait out a market as an investor, as a team and as a company, you need to make proactive steps and execute. And that means you have to pick a lane, even if temporarily. What’s your pick, Asian conference KTVs or user acquisition? In the end of the day, both will lead you to a yacht in Ibiza. But your self-consciousness might be gone by then if you care…
Context-tweet, because I sometimes cleanse twitter to not be farmed by AI overlords.
Did you know that the majority, almost every project, especially L1s/L2s - are not made by real teams this cycle? They are fake teams installed by incubators 🥶 Zero passion, zero desire to make things work. Just first month pump&dump for the chosen maliciously unlocked holders and foundation - and then slow rug by paying to random hired members.
Here is how this works:
1. A VC incubator (or a founder-incubator like Neel Salami with VC connections, many such cases) sees a narrative. They make a pitch deck and install a couple of initial team members to make it look real;
2. A silly VC agrees to lead and/or be part of the grift and/or the initial grifters just semi-lie about soft commits to get a lead. This depends on the market fomo and the grifters’ reputation. This is the hardest step.
3. As the round gets confirmed, they hire a devshop to make ui/docs/app and some more real team members. Usually the working team has 0 clue about the grifting plans. See Movement.
4. Raise more, bump social metrics… then either the initial parties start OTCing before TGE and/or they get a piece of the foundation selling at TGE (since investors should be locked technically). The initial grifters share parts of the foundation sales.
5. After this, the token remains as a free option to bull market: the project lives, some updates continue, maybe even something happens with new hired real devs figuring out some innovative things - but usually unlikely as there is no “soul”.
This was kinda done last cycle too, but the number of such projects was much much lower. This cycle nothing is investable because the majority of stuff is done this way. And it keeps happening.
In fact, last cycle it was much less grifty. There were more “advisors” around (some were useful, some not) but founders were real and actually had control over such parties. Advisors had unlocks changed, weren’t liquid on day 1, etc. This cycle, public founders and team are often totally clueless in such setups and have no control over anything.
PS:
The comparison with last cycles and the issues here: it’s not like advisors with 0.1-1% of vested tokens. It’s grifters with direct or indirect control over the foundation with 3-5% ownership each. Quite literally never ending sales in every shape & form with no remorse.
Oh and a cherry on top: external investors participating in this early on can still make $$? Doubt it. They would likely get their OTCs blocked - and if they wait for unlocks, the price would be shattered to 0 by then as it’s all an extraction game. Constant vesting delays...
This creates subsequent problems for projects which don’t do this: since grifts set up are short-term, they don’t mind paying almost all their money & tokens to exchanges. 10%? Whatever. So they always outbid bribes and listing fees over projects who think about spending limits.
This includes user attention too.About lobsterdao 🦞
As mentioned before, we are mostly Telegram deep-sea dwellers, so find us there.
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