Dovey Wan’s new article: Tokens are a financialized belief system

Original title: "Tokens is a Financialized Belief System"

Author: Dovey Wan

Compiled by: Deep Wave TechFlow

Tokens represent a financialized belief system where the volatility of the token is the most powerful market entry strategy. Many first-time cryptocurrency founders adopt a bottom-up, milestone-based mentality, similar to tech startup founders, believing that as long as meaningful value is created, prices will eventually improve. However, the growth trajectory of a successful crypto project often follows a different sequence:

1. Price leads emotion.

2. Emotion guides the narrative.

3. Narrative guides cognition.

4. Cognitive Guidance Community.

5. Community guides adoption and protocol market fit (PMF).

Barbell Distribution and the Sunk Cost Fallacy

Cryptocurrencies embody the intersection of financial populism and techno-libertarianism . The best distribution strategy for tokens is "barbell distribution", that is, targeting both poles of users at the same time - core users and edge users, from IQ 150 to IQ 50. This approach forms the upper funnel of the belief formation process. Many founders try to limit the initial token supply to avoid “selling pressure,” but often fail to achieve upper-funnel growth. It's crucial to successfully engage users at one end first and then widen the bar.

In its early days, Bitcoin served either core users (cypherpunks, miners, and billionaires who wanted to avoid wealth redistribution) or fringe users (ordinary people after the collapse of their local currency system or who wanted to circumvent sanctions or capital controls). Early DeFi also reflects this model, which is best suited for crypto-native core users (self-custody enthusiasts, large investors who want transparent transactions, huge long-tail asset issuance) or edge users (those without good access to centralized exchanges or financial institutions). infrastructure people, driven by the “price hike” narrative). Most intermediate users remain apathetic or undermotivated due to high psychological and product switching costs.

For core users, the opportunity cost of not adopting cryptocurrency is too high. For edge users, the opportunity cost is low, so they are more likely to try.

Most "miners" in the token economic environment are highly mercenary in nature and are affected by their level of sunk costs. The higher the sunk costs, the closer they are to core users. Pre-ASIC Bitcoin miners rarely kept coins because there were no substantial sunk costs to recover. Post-ASIC miners retain coins to cover their sunk costs and operating expenses. PoS stakers hold coins at the opportunity cost of capital. The less productive a PoS coin is, the harder it is to build a strong core user base. Staking (including TVL staking) and airdrop farming are the worst forms of token distribution. The sunk costs of these behaviors are often evidence of meaningless work, making it difficult to assess the "cost" and attracting core or marginal users.

Active circulation through volatility

Changing hands in the market cycle is about cultivating a belief system The best greenhouse is also a touchstone to test the founder’s adaptability and commitment. In the cryptocurrency space, these cycles are significantly accelerated, five times faster than in traditional finance. This dynamic acts like a natural selection process, with passionate advocates holding early tokens amplifying the message and spreading like an idea virus. This shift changes the environment from player versus player (PvP) to player versus environment (PvE).

The key to this transformation is strong leadership, a positive feedback loop that delivers on promises, and healthy interactions with key members of the upper funnel. This effectively transforms the funnel within the crypto space. Certain areas, such as memes and NFTs, require a higher intensity of focus and mental agility, reaching speeds up to five times faster than the already accelerated crypto cycle, with overall speeds reaching 25 times.

For meme coin founders, this is a statistical game with extremely low hit rates, akin to a wildly spinning roulette wheel. Meme coins have played a role in the history of financial populism: They are not the product of financial nihilism, but financial absurdism and populist movements. Camus said this out loud 100 years ago. Cultural mobility, identity crisis, the twin deaths of traditionalism and modern liberalism, all contribute to a vast void in the modern autistic monkey sense. From consumerism to internet tribalism, trends, narratives and products are emerging to fill this void.

So the narrative and identity coherence within each coin now serves as a new means of expressing meaning and connecting with like-minded people - as in the early days of the internet, often introverts , unsociable cat owners finally found an outlet to post photos of their beloved cats. Meme coins are different from big corporate or venture capital coins, which may adhere to some grand vision and brand legitimacy, but meme coins provide a roof over heels for everyone who doesn't care about "what makes sense long-term." Only the most absurd, short-lived, yet most intense dopamine rush can keep this group of warriors who have no other war to fight (but who must unleash the power of their ADHD somewhere). This is a great PMF in cryptocurrencies and is perfect for a corruption-centric culture.

This environment is characterized by the most extreme survivor bias and power laws, and users and traders are inherently fickle. This is why most tokens only have a 1-3 month lifespan in terms of liquidity and volatility, with very few able to remain relevant after a cycle. When there is no liquidity, the token dies. Information is entropy and attention is currency. Liquidity is the HRV of a token.

Make Diamond Hands Rich

Give generous rewards to early loyalists and build a motivation-driven system to reinforce commitment in this belief system funnel. Imagine a pyramid, the width of the base determines its height; the diamond hands form the base base, determining the height of the FDV. Price will always dominate the narrative.

Failure to make the diamond hand rich will naturally invalidate the conversion path of this belief funnel, and then it will become PvP instead of PvE. Rewards go beyond financial gains; they also serve as status recognition and boost self-esteem. As a token community rooted in a belief system, you can provide social and psychological value by fostering a sense of shared identity among holders. The decline of traditionalism and modern liberalism has left a huge void for today’s keyboard apes. Trends, narratives, and tokens have emerged to fill this void, providing people with a sense of purpose and connection: Just like in the early days of the internet, often introverted and unsociable cat owners finally found a way to post photos of their cats. channel.

Diamond hands exist not only for the wealth effect, but also for the alignment of culture and beliefs. Wealthy diamond hands will further enhance the overall cultural impact of the token, strengthening the belief system and making it more self-fulfilling.

Ultimately, tokens represent a financialized belief system where market dynamics, human nature, and psychological biases are not only obstacles to overcome, but also to growth and adoption Basic components. Understanding and leveraging this belief system is critical to navigating and succeeding in the crypto ecosystem. I’m always looking for founders who have both solid technical skills and a deep understanding of human nature. Cryptocurrency entrepreneurship is a process that requires a full grasp of the rules of the capital market game, cultural development, and technological progress.

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