Authored by Mark Beylin from Boost VC, translated by Yangz from Techub News, the article summarizes how startups can find the intersection of product and market by creating something people want, as outlined in Paul Graham’s “Be Good” essay. If we consider tokens as products, the question we face is: how can we create tokens that people want? Paul’s first suggestion is not to worry too much about the business model initially, although he acknowledges that creating value without worrying about capturing value is something only charities do. In the cryptocurrency field, we see the opposite situation: value is captured before creation through the issuance of practical tokens that people must purchase before use (sometimes years in advance). This may be why many successful cryptocurrency ecosystems in the early stages appear more like scams than charities, especially for those well-versed in traditional startup construction models.
To find cryptocurrency startups that match the token market, is it possible, like Paul’s initial suggestion, not to worry about creating direct value for token holders and instead focus on capturing value first through token sales? Tokens – tools for narrative discovery. For early-stage startups that have not yet found the product-market fit, one of the most challenging aspects is continuous communication with customers to understand their interest in new products or features. Founders need to develop relationships with various stakeholders in the ecosystem, establish a tight feedback loop, and design solutions that fully meet market demands. The tighter these feedback loops, the faster the team can iterate to find the best solutions and test them in the market. However, scaling is not possible through direct customer communication alone, as there are only so many people willing to meet or talk with you… How can you connect with other customers?
Observing existing token projects, it is easy to see the feedback loop between token price and market expectations of future value creation in the token ecosystem. Whether Uniswap raises token prices in response to its fee conversion proposal, Vitalik sells MKR in response to Maker’s launch of its own chain, or DEGEN raises prices in response to the launch of L3, we can see that token prices are quite sensitive to news about specific project future plans.
Tokens serve as a prediction market, predicting the collective interest of individuals in a project heading in a specific direction and the likelihood of achieving that goal. The efficiency of this feedback loop depends on the liquidity of the token, with tokens with higher liquidity (such as BTC and ETH) responding immediately to news events, while smaller projects attracting fewer speculators (trading based on news events). However, if new buyers are interested in the narrative the project is building, i.e., if they believe the solution outlined by the project is valuable to a future audience, even tokens with lower liquidity will attract new buyers. The significant increase in the valuation of AI tokens over the past six months is evidence: although only a few tokens currently provide value to token holders, based on the enormous value traditional AI startups have already created, the market has revalued these ecosystems’ future potential value.
The interesting part of this process is that by launching tokens and attracting enough liquidity attention (to make people spend time/money trading on your news), teams may establish an extremely tight feedback loop for their future product releases. While conversing with users, cryptocurrency product builders can temperature-check their product decisions through iterative cycles until they find decisions that matter to the market (i.e., decisions that significantly increase your token value). Once this scenario occurs, you will know you are heading in a direction that the market finds meaningful, allowing you to use the token price mechanism as a tool to discover mass market demand without needing to build anything in advance.
Tokens – Efficient Venture Capital Mechanism, allowing people to buy tokens based on their belief in the project’s ability to meet future needs, is at the core of venture capital. It usually relies on the premise of value creation described by Paul Graham, which is why founders have been following this approach from a technical perspective.
In general, startups raise venture capital because they have specific goals or plans that require new funds. This also provides founders with a feedback loop (if venture capitalists are not interested in your new plan, they will not invest), but this feedback loop is both exclusive and opaque, appearing only about every 18 months.
The emergence of tokens allows anyone to participate freely in funding new projects at any time, increasing the supply of funds available for early projects in the market and thereby increasing the proportion of project funding. If a new proposal expands the market opportunity of the token by offering new use cases, the market will assign higher value to the project and the scale of token diversity will increase. With tokens, the market becomes a direct financing mechanism for innovation, which is the core reason why tokens are a powerful tool for expanding human potential.
Although venture capitalists like to express their love for tokens in lengthy discussions, it is overlooked that tokens and venture capital compete directly, as they are alternative products. As a former founder turned venture capitalist, I believe that venture capital has a moderate amount of money that is useful and necessary for all founders. The appropriate amount of funding depends on the team itself and the market in which they operate, but I believe it is not zero for any project. During times of depletion in the public token market, venture capitalists play an important role in continuing to provide funding for early projects, often reaping huge returns by taking on this risk.
Surviving in Market Cyclic Fluctuations. One drawback of tokens is that capital will flow with the attention in a particular ecosystem. Market participants are not identical, and the attention of specific investors is related to their own beliefs. People will adjust their investment portfolios continuously based on their latest views, so the intensity of the token cycle depends on its ability to sustain the attention of market participants.
One way for founding teams to address this issue is “narrative surfing,” continually linking their project with the latest hot value propositions in cryptocurrency that attract liquidity, hoping to maximize the value of the token by continuously expanding the goals the token can achieve. Another way for teams to stay fresh is by using memes: excellent memes will generate responses in the community, creating a snowball effect, and the current “meme wars” in the community are quite intense. Communities with a cycle of excellent meme creation can ensure that a significant amount of content about the project is created/shared in social channels, making their token the focus of attention. This is why memes are a necessary factor in maintaining sufficient token liquidity and one of the reasons why memecoins can continue to attract and retain liquidity. By getting the right people to join the ecosystem early, they will have the intrinsic motivation to talk about the project and help it grow. If too many tokens are airdropped to those unwilling to continue sharing the project, it is challenging to maintain long-term attention.
Avoiding Overly Financialized Decisions. Imagine a world where the market is entirely efficient, and the price of project tokens is like a perfect oracle that can predict the optimal course of action. Perhaps the market is filled with numerous AI agents that can trade tokens based on updates from various projects and predict whether a project will succeed. Additionally, project teams solely take actions perceived as valuable by external market participants. If someone asks, “Who calls the shots here?” the correct answer should be the entire market (through token prices), with others in the token ecosystem acting as managers or custodians to help achieve market goals. But would this organizational governance system actually achieve greater success than other models?
I believe the answer is no. First, the best founders in specific industries often dislike being told what to do. They have a deep understanding of their market and have their ideas about the best course of action. Second, the best founders are usually willing to accept opinions that deviate from mainstream consensus, often taking pride in doing so. Importantly, these deviations are often why they created such successful companies: every market misconception is an arbitrage opportunity, a reward for the first person to dare to voice dissent. The most successful companies of our time have gone through long periods of market devaluation of their work, and it is their ability to resist this force that allows them to maintain value over the long term.
Great founders are visionaries who do not optimize around local minima like others but explore new areas, hoping to discover opportunities that others believe do not exist. To do this, they ask questions that others have never thought of and, with little data, quickly switch between different concepts based on intuition. This helps them achieve product-market fit faster than their competitors, win the market, and create valuable ecosystems out of thin air.
If a team collects valuable new data on untapped markets, the last thing they want to do is share this data openly. However, the most exceptional founders will find it challenging to attract public market attention if they keep their cards close to their chest. Nevertheless, they will benefit from attracting funds through private placements (participants in private placements are screened and trustworthy) and from finding crazy investors who share their vision and think intuitively like them.
How can we truly find the intersection of tokens and the market? Going back to our initial question, we believe that tokens are a powerful tool that teams can use to discover market demand and the narrative that suits them. Like previous product founders, token founders can iterate their value proposition quickly based on the significant feedback provided by the token.
To keep this feedback loop vibrant, teams should strive to continuously attract investors’ attention on social platforms. They should have a deep understanding of various narratives around them and understand why the market values each narrative. By consistently appearing in people’s focus with content and memes, people will not lose interest and rebalance their investment portfolios. Most importantly, teams should focus on attracting high-value contributors who believe in the project’s vision and are willing to provide funds and support. If the team can do this well, they can build a Hodl army that will not sell tokens and will promote tokens to new audiences.
