GuShiio.com Projects should focus on the long-term healthy development of the agreement, be consistent with the core community, and avoid focusing too much on “gamification” or transactions that only attract speculative capital in the short term after launch.
Original: Yogita Khatri, The Block
Compiled by: Yuliya, PANews
Berachain’s BERA token launched last week has once again sparked the debate over VCcoins, or tokens held by early venture capitalists in large amounts. Critics question the proportion of BERA’s token supply controlled by investors and insiders, and the impact of this allocation on its long-term prices. Similar concerns have surfaced in other venture capital-backed projects such as Aptos, Sei Network and Starknet.The cryptocurrency community is evaluating whether these token allocation structures can drive long-term growth or simply benefit early investors.
BERA arouses negative emotions
Many industry investors have expressed their opinions on the reasons why these projects continue to face controversy. Rob Hadick, general partner at Dragonfly, said the level of criticism such projects have received“It’s always directly related to whether airdrop recipients and early users are profitable”。He pointed out that"If the token performed better, the mood on Twitter could be completely different. 34;
Currently, with the poor performance of tokens supported by multiple VCs, the market’s concerns about their allocation methods have become increasingly obvious. Many traders point to the low liquidity (or small circulation supply) and high fully diluted valuation (FDV) of these tokens as key issues. Zaheer Ebtikar, founder and chief investment officer of crypto hedge fund Split Capital, said excessive venture capital funds have driven up valuations, resulting in high FDV because the fund has to deploy limited partner funds. However, he expects that as VC financing slows, the scale of financing will shrink, bids for early projects will decrease, and valuation methods will be reevaluated.
Regarding the FDV controversy, Hadick put forward different views. he believesFDV is not the best way to assess the valuation of crypto projects, because future offerings are not guarantees and any new supply may dilute market value.He also noted that many liquidity providers and foundations receive incentives after unlocking tokens, but when those incentives end, they may not continue to hold tokens, exacerbating potential selling pressure.
During the discussion, Ed Roman, co-founder and managing partner of Hack VC(Berachain Investors), added that the FDV is actually determined by the market rather than the project, which means the team has no control over the level of the FDV-but they do control the supply of tokens at the time of issuance. He pointed out that Berachain’s 21% circulation is significantly higher than other blockchain projects such as Starkware (7.28%) and Sui (5%).
Still, Roman acknowledges that there is still room for improvement in how the Web3 project handles long-term incentives. He said many Web2 companies offer new stock awards after the employee ownership period to keep employees engaged. Similarly, he believesCrypto projects can introduce token-based incentives to “be more likely to create lasting value.”
Project development should be consistent with core communities
HYPE tokens from non-VC coin project Hyperliquid have increased by 140% since its release in November and have been widely praised. But Hadick said this model is difficult to replicate.Hyperliquid’s success stems from its highly differentiated products and loyal communities, as well as millions of dollars in self-owned development funding-not something that most projects can easily replicate.
Hyperliquid allocates 31% of its total supply to users, increasing circulation through airdrops. Boris Revsin, general partner and managing director of Tribe Capital, points out that this high liquidity supply is not achievable for all projects because they require retaining treasury funds for continued ecosystem development. He pointed out that even Ethereum, the Layer 1 project that is often considered the fairest, allocates 10% of its supply to teams and foundations, with the other 40% for ecosystem growth and early miners.
Hadick saidProjects should focus on the long-term healthy development of the agreement, be consistent with the core community, and avoid focusing too much on “gamification” or transactions that only attract speculative capital in the short term after launch.He emphasized that such transactions cannot bring real value to the agreement and will only lead to short-term fluctuations in the token rather than long-term growth.
Although some VC-backed tokens fade away after initial hype, some maintain long-term value. Investors believe that this difference often depends onFundamentals, real applications and market needs.
Roman emphasized that the true appeal of blockchain projects in the early stages of launch should be reflected through their early ecosystem. As for valuation, the market ultimately determines its height because investors consider future expectations.。&# 34; The market is a voting machine in the short term and a weighing machine in the long term. If the team is strong enough, they are likely to build an agreement with a significantly attractive and vibrant ecosystem. 34;
Smokey the Bera, Berachain’s anonymous co-founder, revealed that Berachain’s early ecosystem has grown significantly, with projects built on its blockchain raising more than $100 million in venture capital to create a series of “zero-to-one applications, which are novel and excellent both financially and culturally.” He said the apps span “all types of industries, including large Web2 companies such as sports franchises, media groups, and even the payment tier (for example, the PYUSD that PayPal deployed on Berachain via BYUSD).”
However, kar believes thatMarket demand for tokens often exceeds their fundamentals.He said that while some Layer 1 tokens are unattractive, they can reach multi-billion dollar valuations, while other projects with strong adoption rates have difficulty gaining support. He believes that the key to ultimately determining the performance of a token lies in “who is willing to bid for Token A or Token B.” Although the fit of a product to the market is important, it is not the only determinant of success.
