Dovey Wan's new article: Tokens are a financialized belief system
Price is always the dominant narrative.Original Title: 《Tokens is a Financialized Belief System》
Author: Dovey Wan
Compilation: Deep Tide TechFlow
Tokens represent a financialized belief system, where the volatility of tokens is the most powerful market entry strategy. Many founders entering the cryptocurrency space for the first time adopt a bottom-up, milestone-based mindset, similar to founders of tech startups, believing that as long as meaningful value is created, the price will eventually rise. However, the growth trajectory of a successful crypto project typically follows a different order:
Price guides sentiment.
Sentiment guides narrative.
Narrative guides cognition.
Cognition guides community.
Community guides adoption and product-market fit ( PMF ).
Barbell Distribution and the Sunk Cost Fallacy
Cryptocurrency embodies the intersection of financial populism and technological libertarianism. The optimal distribution strategy for tokens is a "barbell distribution," targeting both ends of the user spectrum—core users and fringe users, from IQ 150 to IQ 50. This approach forms the upper funnel of the belief formation process. Many founders attempt to limit the initial token supply to avoid "selling pressure," but often fail to achieve growth in the upper funnel. It is crucial to successfully attract users from one end before broadening the barbell.
In the early days, Bitcoin served core users (cypherpunks, miners, and billionaires hoping to avoid wealth redistribution) or fringe users (ordinary people in local currency systems collapsing or those seeking to evade sanctions or capital controls). Early DeFi also reflected this pattern, being most suitable for crypto-native core users (self-custody enthusiasts, large holders wanting transparent transactions, and a vast long-tail of asset issuance) or fringe users (those unable to access centralized exchanges or financial infrastructure well, driven by the narrative of "price appreciation"). Due to high psychological and product switching costs, most intermediate users remain indifferent or insufficiently incentivized.
For core users, the opportunity cost of not adopting cryptocurrency is too high. For fringe users, the opportunity cost is low, making them more likely to try.
Most "miners" in token economies are highly mercenary in nature, influenced by their level of sunk costs. The higher the sunk costs, the closer they are to core users. Bitcoin miners before ASICs rarely retained coins because there were no substantial sunk costs to recover. Miners after ASICs retain coins to cover their sunk costs and operational expenses. PoS stakers hold coins based on the opportunity cost of capital. The less productive PoS coins are, the harder it is to build a strong core user base. Locking (including TVL locking) and airdrop farming are the worst forms of token distribution. The sunk costs of these actions often serve as proof of meaningless work, making it difficult to assess "costs" and attract core or fringe users.
Achieving Active Circulation Through Volatility
Several rounds of turnover in market cycles are the best greenhouse for cultivating belief systems and serve as a litmus test for founders' adaptability and commitment. In the cryptocurrency space, these cycles are noticeably accelerated, at a speed five times that of traditional finance. This dynamic resembles a natural selection process, where early token holders amplify information and spread it like a thought virus. This shift transforms the environment from player versus player (PvP) to player versus environment (PvE).
The key to this shift is strong leadership, a positive feedback loop of fulfilling commitments, 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 attention and psychological agility, with a speed five times faster than the already accelerated crypto cycles, resulting in an overall speed of 25 times.
For meme coin founders, this is a statistical game with a very low hit rate, akin to a wildly spinning roulette wheel. Meme coins have played a role in the history of financial populism: they are not products of financial nihilism but rather of financial absurdism and populist movements. Camus articulated this point a century ago. Cultural liquidity, identity crises, and the dual death of traditionalism and modern liberalism have all led to a profound emptiness in the sense of modern autistic monkeys. From consumerism to internet tribalism, trends, narratives, and products continuously emerge to fill this void.
Thus, the narrative and identity consistency within each coin have now become a new means of expressing meaning and connecting with like-minded individuals—much like how introverted cat owners found an outlet to share photos of their beloved cats at the dawn of the internet. Meme coins differ from corporate or venture capital coins, which may adhere to grand visions and brand legitimacy, but meme coins provide a refuge for those who do not care about "what long-term meaning is." Only the most absurd, fleeting, yet intense dopamine hits can retain this group of warriors who have no other battles to fight (but must release their hyperactive energy somewhere). This represents a great PMF in cryptocurrency, well-suited for a culture centered around decadence.
This environment is characterized by extreme survivor bias and power laws, where users and traders are essentially fickle. This is why most tokens have a lifecycle of only 1-3 months in terms of liquidity and volatility, with very few able to maintain relevance after one cycle. When there is no liquidity, tokens die. Information is entropy, attention is currency. Liquidity is the HRV of tokens.
Making Diamond Hands Rich
Reward early loyalists generously and establish a motivation-driven system that reinforces commitment within this belief system funnel. Imagine a pyramid, where the width of the base determines its height; diamond hands form the foundational base that determines the height of FDV. Price is always the dominant narrative.
Failing to make diamond hands rich will naturally render the conversion path of this belief funnel ineffective, turning it into PvP rather than PvE. Rewards extend beyond economic gains; they also serve as a form of identity recognition, enhancing 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 significant survival void for today's keyboard warriors. The emergence of trends, narratives, and tokens fills this void, providing people with a sense of purpose and connection: just like how introverted cat owners found a channel to share photos of their cats in the early days of the internet.
Diamond hands exist not only for wealth effects but also for cultural and belief alignment. 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 just obstacles to overcome but fundamental components of growth and adoption. Understanding and leveraging this belief system is crucial for navigating and succeeding in the crypto ecosystem. I have been looking for founders who possess solid technical skills and a deep understanding of human nature. Starting a cryptocurrency venture is a process that requires a thorough grasp of the rules of capital market games, cultural development, and technological advancement.
