Written by:@0xBenniee

Original title: The Next Step for Tokens: Does a Project with Cash Flow Really Need to Issue Its Own Token?

Issuing tokens is no longer the only solution: For teams with clear cash flow, distribution channels, and compliance paths, TGE is not a must-have option.

In the short to medium term, prices are mainly driven by three factors: liquidity, attention, and shareholding structure.

The long-term value of a token depends on value capture, and how value is captured is crucial to the long-term value of a token.

The next stage for tokens may be the "machine economy": inter-agent payments and native protocols like x402, which will drive settlement based on usage and profit sharing based on contribution.

This article's insights stem from @DrPayFi's (Huma.Finance Co-founder) response to a question about the author:

Q:

Over the past year, Huma has built a complete Payfi infrastructure network. However, tokens in the ecosystem often limit the development of projects. For example, the tokens issued are essentially issued as liabilities and are counterparties to retail investors. It is impossible for all stakeholders to benefit. The team needs to spend a lot of energy on market value management or token allocation.

Of course, when it came to TGE, it didn't shortchange any early adopters, which made it seem somewhat out of place in a market where "no one was looking at the long term".

detailedreplyas follows;

Firstly, TGE can be a harvesting tool for some unprofitable projects, but for long-term projects, it may act as an "accelerator."

This is also a question that everyone discussed repeatedly at Consensus: for the vast majority of projects that already have stable cash flow, issuing tokens may not be a more profitable option, and in many cases, it may even do more harm than good.

Once TGE begins, the team must not only advance the product and refine its growth, but also take on a series of uncertain external variables such as managing coin price expectations, liquidity structure and market-making arrangements, complex communication with exchanges, and market sentiment fluctuations. These uncertainties will continuously consume the organization's attention and may even affect the product's pace and strategic decisions.

- What is an "accelerator"?

In the Payfi network, compared to the growth path of traditional Fintech, which often relies more on licenses, channels and regional networks, it usually takes longer to scale up liquidity and quickly convert it into TAL (Total Active Liquidity) that can be used in a very short period of time.

TGE offers a more efficient "global distribution and attention aggregation" mechanism: compared to the barriers and geographical restrictions of stock market listings, tokens allow users around the world to participate, hold, and trade through DEX/CEX with low barriers to entry, thus binding with network growth. This provides additional momentum for ecosystem collaboration and the growth flywheel, and to some extent helps projects gain user attention in a shorter time and improve the real user growth of the product.

- What is a "sickle"?

Conversely, for some projects that have no products or users, selling TGE tokens becomes the only way to exit or profit. By constantly pumping and dumping tokens, one can simply withdraw liquidity from the market and leave.

Even more brutally, this is not an isolated case, but the norm in the current market. Over the past year, the vast majority of newly issued tokens have experienced significant pullbacks, with 97% of tokens seeing an average price decline of 78%. As market liquidity thins and exits become increasingly reliant on secondary markets, this "vampire" secondary market strategy becomes more frequent, more effective, and more irreversible.

Factors determining the future price of TGE and potential external benefits.

Currently, Crypto projects still have some structural problems, namely a long-term mismatch between "exit channels" and "external growth".

On the one hand, the supply of public blockchains and projects has been "over-issued" for a long time, but the market capital volume and the intensity of real on-chain transactions are insufficient to support the continuously rising FDV/market capitalization. Most projects find it difficult to generate stable and scalable protocol revenue solely based on the product itself, let alone use this cash flow to absorb the pressure of large unlocks in the future.

Taking DeFiLlama's statistics as an example, only 6 protocols had revenue exceeding $1 million in the past 24 hours, and only 49 protocols had revenue exceeding $5 million in the past 30 days. This means that protocol revenue alone is often insufficient to support excessively high valuations, let alone absorb the supply shocks from subsequent token unlocking cycles.

On the other hand, the coordination of multiple factors, including market makers, exchanges, and users, also plays a highly uncertain role in cryptocurrency prices. As early-stage capital exits increasingly rely on the secondary market, prices will naturally be dominated by stakeholders.

Besides early-stage VCs who can exit partially through mergers and acquisitions or subsequent financing, many projects, before cash flow is formed and with increasingly tight financing windows, tend to shift their financing function to the secondary market: through phased unlocking and so-called "reasonable reduction of holdings," they "transfer" the already limited market liquidity from retail investors to the project side.

In the short term, this may prolong the life of the project, but in the long term, it will push the market into a negative cycle, eventually evolving into an irreversible development of "bad money driving out good money".

This also corresponds to what @ChaseWang mentioned in the interview: in the current environment, the short-to-medium-term trends of many targets often cannot avoid the following three variables:

- Liquidity: Whether people have money in their pockets, the strength of their willingness to buy/risk appetite, and the existence of more attractive alternative assets determine the upper limit of price increases.

- Traffic (attention): The spread of top KOLs, the deployment of agencies and channel resources, and the concentration of retail investors' attention often determine the magnitude of short-term fluctuations.

- Chip structure: the size of the circulating supply after TGE, the distribution of chips and the unlocking and release rhythm of token economics, as well as arrangements around liquidity.

The thinner the liquidity, the more the market relies on narratives and prices; the more it relies on prices, the more it damages the confidence of users and long-term funds, ultimately evolving into a game of chips where project teams and retail investors confront each other.

However, project teams, retail investors, and exchanges are not inherently adversaries. The real common interest of all three parties is to expand the "upper limit & imagination" of leading companies and attract incremental funds and real-world usage scenarios from outside the market, rather than repeatedly engaging in PvP within existing funds and treating the secondary market as a continuous cash withdrawal machine.

The flowing water doesn't compete to be first; it competes to flow endlessly.

Product value and value capture

Many projects do have "product value," but the value is not reflected in the token.

Returning to today's topic, you'll discover an even more counterintuitive fact: a project not issuing its own token doesn't mean it's not great. For example, @Pumpfun proved that "product value" itself can hold true in Web3, but whether a project's token can maintain its price in the long term depends on value capture: without a clear return mechanism, the token's value often relies solely on sentiment and the token's underlying asset structure.

A prime example is Hyperliquid. Its "token value capture" mechanism is widely recognized in the market: real revenue generated by the protocol → creates a continuous inflow of buy orders (such as a buyback mechanism) → directly links the token's value to trading activity. The more active the trading and the more revenue generated, the stronger the token's support and the clearer the pricing anchor.

Conversely, common counterexamples usually fall into three structures:

1. The product generates revenue, but the token price doesn't reflect it: the money earned by the protocol stays with the team/company/channel, and the token itself is only used for "governance voting" or "narrative performance." There is a lack of value return, and in the long run, pricing can only rely on sentiment.

2. The token has incentives, but no real demand/users: the data is boosted by high inflation subsidies (TVL/trading volume looks good), but the data drops instantly when the incentives are removed, leaving only unlocking and selling pressure.

3. Using the secondary market as a financing and exit channel: When a project has not yet secured cash flow, it chooses to use the secondary market to absorb financing pressure. The token becomes the project's "liability," and the pricing logic gradually degenerates into a game of tokens.

So, where does the road ahead lie?

If we understand the traditional payment system as a major breakthrough, it solved geographical barriers, enabling trusted settlements between people and merchants, and between banks, even when separated by thousands of miles, under unified rules. Then, in the next twenty years, the real focus may shift from "people paying people" to "programs paying programs," with agents using crypto for payments becoming a new form of high-frequency transaction.

If we turn back the clock to 2006, Mastercard completed its IPO on May 24, 2006, at $39.00 per share. At that time, it was more regarded as a traditional financial infrastructure of "bank card network/clearing processing".

Today, Mastercard's network covers more than 210 countries and regions, with over 150 million merchant acceptances and over 3.5 billion cards in circulation. In January 2014, Mastercard conducted a 10:1 stock split. Based on the current share price of approximately $521.93, investors holding Mastercard stock have seen their investment grow 134 times over the past 20 years.

What about encryption? Blockchain may not just be a tool for transferring money between humans; it's more like a settlement language prepared for the next generation of automation.

In the future agent economy, payment for API calls is likely to become a new high-frequency scenario: agents will not only exchange information and tasks, but also conduct "pay-per-use, instant settlement" for data, models, computing power, and service calls. Experiments like Clawbot, which allow agents to transfer money to each other to "earn money," are, to some extent, already validating the feasibility of this path.

This is precisely why blockchain's 24/7 efficient settlement, programmable funds, and traceable ledger have the potential to become a more universal payment platform in the future robotic society.

In the next phase, retail investors shouldn't place all their hopes on TGE. Stricter regulation isn't necessarily the end for tokens; rather, it's forcing the industry to separate two things: financing and exit, returning to the more replicable path of equity/IPO; and tokens should return to their proper functions (on-chain incentives, node collaboration, and resource allocation).

Meanwhile, TGE may coexist, but it should be more of a "lubricant" for the network. Especially in the future agent economy, tokens combined with protocols like x402 that write payment into HTTP may become the infrastructure for settlement based on calls and profit sharing based on contributions.

In conclusion

Undeniably, we are in the midst of a colder/more brutal four-year cycle, and growing pains are inevitable. Just as the body's self-protection process is expelling toxins, the industry also needs to squeeze out the toxins from its system (bubbles, scams, and substandard projects). Without expelling the bad apples, true infrastructure will remain elusive. Currently, we are more like passengers on a high-speed train; the scenery outside the window changes, the people around us may change, but our direction remains constant.

In closing, I'd like to borrow a quote from Richard: "The current winter is like the bursting of the dot-com bubble in 2000; it empties out a bunch of unreliable .com companies, leaving behind Amazon and Google. Regulation will squeeze out scams, and the blockchain protocols that truly solve problems will reshape the global financial infrastructure in the next 5 years."

If given the chance to go back to those days, would we still have the courage and understanding to capture unicorns like Amazon and Google? If the next cycle is an institutional game, then all past positions will be reshuffled. Hopefully, we'll still be on the table when the new order arrives.