Tokens is a Financialized Belief System
Posted it in last few cycles resurfaced this again if you are new to this cycle or a first time token founder
Tokens represent a financialized belief system, where the volatility of the token serves as the most powerful GTM strategy. Many first-time crypto founders adopt a bottom-up, milestone-based mentality similar to that of tech startup founders, believing that the price will eventually rise as long as meaningful value is created.However, the growth trajectory of a successful crypto project often follows a different order:
- Price leads sentiment.
- Sentiment leads to the narrative.
- Narrative leads to awareness.
- Awareness leads to community.
- Community leads to adoption and protocol market fit (PMF).
Barbell Distribution & Sunk Cost Fallacy
Crypto embodies the intersection of financial populism and techno-libertarianism. The optimal distribution strategy for a token is a Barbell Distribution, targeting both extremes of the user spectrum — POWER users and MARGINAL users, from IQ 150 to IQ 50. This approach forms the upper funnel for belief formation. Many founders who attempt to restrict the initial token supply to avoid “sell pressure” often fail in achieving upper funnel growth. It’s essential to first successfully engage one end of the spectrum before broadening the barbell.
In its early days, Bitcoin served either POWER users (cypherpunks, miners, and billionaires seeking to avoid wealth redistribution due to local political tensions) or MARGINAL users (average people in broken local currency regimes or those wanting to circumvent sanctions or capital controls). Early DeFi mirrored this pattern, catering best to crypto-native POWER users (self-custody enthusiasts, whales seeking transparent trading, massive long tail assets issuance) or MARGINAL users (those without good access to centralized exchanges or financial infrastructure, motivated by “price goes up” narratives). The large middle segment remains indifferent or insufficiently incentivized due to high mental & product switch costs.
For POWER users, the opportunity cost of not adopting crypto is too high. For MARGINAL users, the opportunity cost is minimal, so they are more likely to give it a try.
Most “miners” in a token’s economic landscape are highly mercenary, influenced by their level of sunk costs. The higher the sunk cost, the closer they are to POWER users. Pre-ASIC Bitcoin miners rarely retained coins because there was no substantial sunk cost to recover. Post-ASIC miners retain coins to cover their sunk costs and operational expenses. PoS stakers hold coins at the opportunity cost of capital. The less productive a PoS coin is, the harder it is to establish a strong base of POWER users. Lock drops (including TVL lock drops) and airdrop farming are the worst forms of token distribution. The sunk costs for these behaviors are often proof of meaningless work, making it hard to value the “cost” and failing to attract either POWER users or MARGINAL users.
Active Circulation through Volatility
Rounds of changing hands through market cycles are the best greenhouse to cultivate a belief system and serve as the litmus test for a founder’s adaptability and commitment. In crypto, these cycles are accelerated significantly, moving five times faster than in traditional finance. This dynamic acts as a natural selection process, with passionate advocates who hold early tokens amplifying the message and spreading it like a mind virus. This transformation shifts the environment from player versus player (PvP) to player versus environment (PvE).
The key to this transformation is strong leadership, a positive feedback loop from delivering on promises, and healthy engagement with upper funnel key members. This converts the funnel effectively within the crypto sphere. Certain sectors, like memes and NFTs, demand even more intense attention and mental agility, moving at a pace five times faster than the already accelerated crypto cycle, resulting in a 25x faster pace overall.
For meme coin founders, it’s a statistical game with a very low hit rate, akin to a crazily spinning wheel. Meme coin dose serve its purpose in the history of financial populism: they are not results of financial nihilism, but financial absurdism & populism movement. Camus said it out loud 100 years ago. Cultural fluidity, identity crisis, death of both traditionalism and modern liberalism, all these led to a substantial void of meaning for modern day autistic monkeys. Trends, narratives and products, ranging from consumerism to internet tribalism, emerge to fill in that void.
So the narrative and identity alignment within each coin now serve as a novel means of expressing meaning and connecting with like-minded individuals — similar to the early days of the internet when cat person, usually introvert and socially quiet, finally found an outlet for posting pictures of their beloved cats. Meme coins, unlike majors or VC coins which may hold onto some grandiose vision and brand legitimacy, offer a land to shelter all those who couldn’t care less of “what’s a long term meaning”. Only the most absurd the most short lived but the most hardest dopamine hits that will retain this group of warriors who have no other war to fight (but have to release their ADHD power somewhere) It’s a great PMF in crypto and fits its degeneracy centric culture so well.
This environment is characterized by survivorship bias and power law at its most extreme, users and traders are fickle in nature. That’s why most coins have only 1–3 months life cycle in terms of liquidity and volatility, very few can stay relavent after 1 cycle. A coin die when there is no liqiudty. information is entropy, and attention is currency. Liqudiuty is the HRV of a coin.
Make Diamond Hands Filthy Rich
Reward early loyalty generously and establish a momentum-driven system to reinforce commitment within this belief system funnel. Imagine a pyramid where the width of the base determines its height; diamond hands form the foundational base for how high the FDV can be built up to. Price always leads the narrative.
Failing to enrich your diamond hands invalidates the conversion path of this belief funnel naturally, then it becomes PvP than PvE. The reward also extends beyond financial gain; it also serves as a identity recognition that boosts self-esteem. As a token community rooted in belief systems, you provide social and psychological value by fostering a shared identity among holders. The decline of both traditionalism and modern liberalism has left a significant existential void for today’s keyboard monkeys. Trends, narratives, and tokens emerge as vehicles to fill this void, offering a sense of purpose and connection: similar to the early days of the internet when cat person, usually introvert and socially quiet, finally found an outlet for posting pictures of their beloved cats.
Diamond hands are the one who are in not just for the wealth effect, but also cultural and belief alignment. Rich diamond hands will further elevate the overall cultural influences of the token, reinforcing the belief system and making it more self-fulfilling
Ultimately, tokens represent a financialized belief system where market dynamics, human natures& mental biases, are not just obstacles to overcome but essential components of growth and adoption. Understanding and leveraging this belief system is crucial for navigating and succeeding in the crypto ecosystem. I am always looking for founders with solid technical skills and a deep understanding of human nature. Crypto entrepreneurship is a process that requires mastering the capital market game, cultural development, and technological advancement all to the fullest.
