原文作者： Yash Agarwal
Source: Medium
原文标题：Memecoins > Governance Tokens
编译：TechFlow， 深潮
Talk and insights on how and why Meme offers a fairer issuance compared to VC-backed governance tokens and TradFi — a lesson for crypto founders.
A16z's CTO recently argued that the Meme coin is "not attractive to builders" and "could even be net negative if external influences are taken into account."
- "A series of false promises to cover up the casino"
- "Changed the way the public, regulators, and entrepreneurs think about cryptocurrency"
- "Not technically attractive"
Wait a minute.
At the same time, Chris Dixon published a more sober article highlighting the systemic absurdity of the U.S. securities legal system – highlighting how the best projects are stuck in regulatory trouble, while Meme coins are able to stand out because they don't "pretend that Meme coin investors are dependent on anyone's management efforts." This indirectly acknowledges the camouflage (pretense) of the rest of the cryptocurrency — the governance efforts of various teams that we call governance tokens.
Our goal is neither to defend or diminish the importance of the Meme coin (or governance token), but simply to advocate for a fairer token issuance.
Governance tokens are memes with extra steps
In my opinion, all governance tokens are essentially memes, and their value depends on the meme origin of the protocol. In other words, a governance token is a meme in a suit. Why?
In general, governance tokens don't provide any revenue distribution (due to securities laws), and they don't perform very well as community-oriented decision-making frameworks (holdings tend to be concentrated, participation is not enthusiastic, or DAOs are generally dysfunctional), which makes them work like memes, just with a few extra steps. Whether it's ARB (Arbitrum's governance token) or WLD (Worldcoin's token), they're essentially meme coins attached to these projects.
That's not to say that governance tokens aren't useful. At the end of the day, their existence is a constant reminder of why the law needs to be updated. That being said, governance tokens can cause as much harm as memes in many cases:
- For builders: Many well-known VC-backed governance tokens are issued before the product is launched, causing a serious sense of disillusionment. This directly undermines the credibility of founders who have worked hard for years to gain adoption. Zeus Network, for example, launched with $1 billion in FDV even before releasing its product, and many founders struggle to reach such valuations even after making significant progress.
- For the community: Most governance tokens are VC-backed, starting at high valuations and gradually moving into the hands of retail investors.
Studying ICP, XCH, Apecoin, DFINITY, etc., even the 2017 ICOs were better than the current VC-backed low circulation tokens because most of their supply was unlocked at launch.
Take the case of A16Z as an example, but look at any large VC with more than $300 million in funds
Let's take a look at the case of EigenLayer:
EigenLayer, arguably the largest Ethereum protocol in this cycle, is a classic example. Insiders (VCs and teams) hold a sizable portion at 55%, compared to the initial community airdrop of just 5%. It's a typical low-liquidity, high-FDV game, backed by a 29.5% stake. Last cycle, we blamed FTX/Alameda, but this cycle is no better.
EIGENDAO, which is governed by EIGEN, is now just like any Web2 governance board, as insiders control most of the supply (initially the community supply was only 5%). Don't forget that the whole concept of EigenLayer is re-collateralization (leveraged yield farming), making financial engineering as much like a Ponzi scheme for memes.
If a group of insiders makes up more than half of the supply (55% in this case), we will severely hamper the redistributive effect of the cryptocurrency, making a handful of insiders extremely wealthy through low-liquidity, high-FDV issuances. If insiders really believe that, given the astronomical valuation of the token offering, they would do well to reduce the allocation.
Please the real cabal come forward
Given the absurdity of the capital formation process – we will end up seeing VCs blame memes and meme makers blame VCs for causing regulatory chaos and reputational crises in the space.
But why is VC so harmful to tokens?
There are structural reasons for VCs to inflate FDV. For example, a large venture capital fund invests $4 million in exchange for 20% of the shares, valuing it at $20 million; Logically, they would have to raise the FDV to at least $400 million at TGE (Token Offering Event) in order to generate profits for LPs. The protocol is pushed to list at the highest possible FDV to boost yields for seed/pre-seed investors.
In the process, they constantly encourage projects to raise funds at higher valuations. The larger the fund, the more likely it is to give the project a ridiculously high private valuation, build a strong narrative, and eventually go public at a higher valuation, forcing a sell-off to retail investors at the time of the token offering.
- The initiation of a high FDV will only lead to a downward spiral and zero attention. Refer to the case of Starkware.
- The launch of low FDV allows retail investors to profit from the repricing and helps form a community and share of thought. Refer to Celestia's case.
Retail investors are more sensitive to unlocking than ever before. In May alone, $1.25 billion worth of Pyth will be unlocked, plus hundreds of millions from Avalanche, Aptos, Arbitrum, and more.
Some unlocked data
Memes are a product of the collapse of the financial system
Arguably, Bitcoin is the largest and oldest meme coin, having been born after the 2008 financial crisis. Negative/zero real interest rates (interest rates - inflation) force every saver to speculate on new shiny asset classes (e.g., Meme coins). The zero-interest rate environment creates a market environment full of outlaws who live on cheap capital. Even top indices like the S&P 500 have about 5% of zombie companies, and as interest rates rise, their condition is about to get worse, making them no different from memes. To make matters worse, they are marketed by fund managers, and retail investors keep buying every month.
There's a reason speculation never dies, and they're memes in this cycle.
FRED via Kana和Katana
On top of that, the term 'financial nihilism' has been getting a lot of attention lately. It encapsulates the idea that the cost of living is killing most Americans, that upward mobility is increasingly out of reach, that the American dream is essentially a thing of the past, and that the median ratio of home prices to income is completely unsustainable. The fundamental driver of financial nihilism is the same as populism, which is a political approach that appeals to ordinary people who are fed up with the elite groups they have built – 'this system doesn't work for me, so I want to try something very different' (e.g., buy BODEN instead of voting for Biden).
Meme is testing the infrastructure
Meme is not only a great tool to get started with cryptocurrency, but also a great way to test your infrastructure. Contrary to A16z's stance, we believe that memes have a net positive impact on any ecosystem. Without Meme coins, chains like Solana wouldn't face network congestion and all network/economic vulnerabilities wouldn't surface. The Meme coin on Solana had a net positive impact:
- Not only did all DEXs handle the highest transaction volume ever, but they also surpassed their Ethereum counterparts.
- Money Market Integrates Memes to Increase TVL.
- Consumer apps integrate memes to gain attention or for marketing purposes.
- Thanks to priority fees and MEV, validators can earn huge fees.
- Network effects in DeFi are more effective due to increased liquidity and activity.
There's a reason why the Solana wallet Phantom has 7 million monthly active devices, as it's powered by memecoins that can put the average person on board, which is probably one of the most used apps in cryptocurrency right now.
For true RWAs, trading on-chain requires infrastructure with sufficient liquidity (look at the top memes, which have the deepest liquidity apart from L1 tokens/stablecoins), stress-tested DEXs, and DeFi more broadly. Memes don't distract people; They are just another asset class that exists on a shared ledger.
Meme as a funding mechanism
Memes have now proven to be an effective means of capital coordination. Research Pump.fun, it has facilitated the issuance of nearly millions of memes and created billions of dollars in value for memes. Why? Because for the first time in human history, anyone can create a financial asset for less than $2 and in less than 2 minutes!
Memes can serve as an excellent fundraising mechanism and go-to-market strategy. Traditionally, projects raise a lot of money by allocating 15-20% to VCs, develop products, and then issue tokens while building a community through memes and marketing. However, this often results in communities eventually being abandoned by VCs.
In the era of memes, people could raise money by launching their own memes (no roadmap, just for fun) and forming tribal communities early on. They can then proceed to build the application/infrastructure that keeps adding utility to the meme without making false promises or providing a roadmap. This approach taps into the tribalism of the meme community (e.g. holder bias), ensuring high engagement from community members who become your BD/marketers. It also ensures a fairer distribution of tokens, countering the pumping and dumping strategies of low liquidity and high FDV employed by VCs.
This is already happening
- BONKBot, a Telegram bot (up to $250 million in daily trading volume), originated from BONK Meme, which buys and burns BONK with a 10% transaction fee. It has cumulatively burned about $7 million in BONK through fees, thus aligning its economy with that of its holders.
- Degen, a meme in the Farcaster ecosystem that enables contributors to reward/tip others for posting premium content with DEGEN. In addition, they have built an L3 chain for degen. Similarly, one of the most popular memes in the last cycle, Shibatoken, is now building an L2.
This trend will eventually lead to the convergence of memes and governance tokens. It's important to note that not all memes are created equal; Scams are common, but they are much easier to expose than those carried out quietly by VCs.
Looking to the future
Everyone wants to get a head start on the next big thing, and memes are one of the few areas where retail investors can get in earlier than most institutions. With limited access to VC private deals, Meme provides Sand Lake Capital with a better latent market fit. While Meme does make crypto look like a casino, it does put the community back in power.
So, what's the solution?
Ventures like A16Z should syndicate their deals and make it accessible to anyone. Platforms like Echo are a great fit.
For VCs, put your deal on Echo, engage the community in joint deals, and witness the meme-like magic of early community rallying for projects.
To be clear, we are not against VC/private funding, we advocate for more equitable distribution and a level playing field where everyone has the opportunity to achieve financial sovereignty. VCs should be rewarded for their early risk-taking. Cryptocurrencies are not only about open and permissionless technology, but also about the openness of early-stage funding, which is currently as opaque as traditional start-ups.
All in all:
- Everything is a meme.
- Investigate memes as fundraising and community-building mechanisms.
- Projects should tend to be more equitable in their start-ups.