The Complexity of Tokenomics and the Revaluation of On-chain Value

Recently, the cryptocurrency market has been experiencing constant fluctuations, and retail investors are facing numerous challenges. From the listing turmoil of a certain project to a certain trading platform's strict crackdown on market makers, these events reflect the complex landscape of the current market.

In the current situation, some project parties and investment institutions are using the concept of value coins to cash out. They often quickly complete operations such as establishing foundations, releasing airdrop plans, and listing for trading during periods of market turbulence to maximize their benefits.

It is expected that some emerging projects will replicate a similar model in the future. Looking back, the abnormal trends of certain projects after their listing are not highly correlated with their own performance, but rather positively correlated with the purchasing power of investors in specific regions. This may involve joint operations among market makers, project parties, and trading platforms.

In contrast, some emerging projects have taken a different approach. For example, strategies such as no external investment, not relying on large exchanges, and maintaining aligned interests seek to balance between the project team and early users. These projects use all protocol revenue to support their own Token, in order to meet the value preservation needs of later investors.

From the actual performance, the unity and willingness to empower among the project team can, to some extent, suppress the concentration of coin holdings and selling behaviors by exchanges and investment institutions.

As a large trading platform brings market makers to the forefront, its own industry barriers are rapidly collapsing.

The Dilemma of Trading Platforms

For a long time, trading platforms have become the main venues for Token trading due to their traffic advantages and liquidity. On the surface, this model creates a win-win situation for both the trading platform and the users - the platform attracts more users, while users have the opportunity to access new assets and gain potential returns.

However, since 2021, the involvement of large investment institutions has driven up the initial valuations in the industry. Taking the cross-chain bridge sector as an example, the valuations of several projects far exceed their current market values. Each time a well-known institution endorses a project, it is effectively at the expense of retail investors.

From the turmoil of investment institution tokens in mid-2024 to the high-level executive incident of a certain trading platform in early 2025, the relationship between trading platforms and investment institutions has become difficult to maintain on the surface. In a frenzied market environment, the endorsement and listing support from investment institutions have significantly diminished in effect, with their main role reduced to providing funds. Driven by return rates, token investments have effectively replaced product investments.

At this point, cryptocurrency investment institutions are at a loss, traditional investment institutions find it difficult to enter the emerging AI field, and cryptocurrency investment institutions are also unable to participate in certain popular projects. An era has officially come to an end.

After the decline of the influence of investment institutions, trading platforms can only rely on market makers as a buffer when facing retail investors. Users speculate on small coins on decentralized platforms, while market makers are responsible for the market-making of certain listed Tokens.

For market makers and trading platforms, the current popular meme coins and the token pricing supported by investment institutions are equally inflated. If even value coins lack real value, then purely speculative coins are obviously even harder to price rationally. Quick in and out has become a common choice for most market makers.

When the entire industry falls into a vicious cycle, it is no longer the fault of market makers that certain Tokens can land on major trading platforms in a short period of time, but rather a crisis faced by the entire industry. As the last link of liquidity, major trading platforms have found it difficult to discover Tokens that truly have long-term value.

Although a certain large trading platform has made exceptions for some individual projects this time while severely punishing certain market makers, the overall industry model is difficult to change, and there will still be overvalued Tokens waiting to be listed.

The trend of complexity highlights the industry's dilemmas

The number of Ethereum Layer 2 networks is continuously increasing, and many decentralized applications are trending towards becoming independent blockchains.

At the same time, the tokenomics model and airdrop schemes are becoming increasingly complex, from Bitcoin as fuel to intricate locking mechanisms, which far exceed the understanding capacity of average users.

Since a certain decentralized exchange has occupied the market by airdropping tokens to competitors' users, airdrops have become an effective means to stimulate early users. However, under the scrutiny of on-chain data analysis tools for anti-witch hunting, airdrops have evolved into a game between professional "wool-harvesting" teams and project parties, while ordinary users are instead excluded.

The game of interests among all parties ultimately falls on retail investors, leaving behind only a continuously declining market and the helplessness of retail investors.

Shifting to meme coins is just the beginning; more seriously, retail investors across the entire industry are reassessing their interests and losses. If trading is not done on traditional platforms, but rather on other platforms or decentralized protocols, what are the potential gains?

Currently, the daily trading volume of on-chain contracts has reached about 15% of a large trading platform. Among them, a certain emerging platform accounts for 10%. This is not the end, but the true beginning of the on-chain process. Coincidentally, the trading volume ratio of decentralized exchanges to centralized exchanges is also around 15%, highlighting the rise of certain public chain DeFi ecosystems.

However, the number of users on large centralized trading platforms has reached 250 million, while the active users on major decentralized platforms range only from several hundred thousand to a million. Overall estimates suggest that the on-chain user base is around 1 million, still in the very early adoption stage.

But now, not only are there more layer two networks, but the tokenomics of decentralized applications are also becoming increasingly complex, reflecting the difficulty for project parties to strike a balance between their own interests and those of retail investors. Without the support of investment institutions and exchanges, projects struggle to launch; yet accepting their profit distribution inevitably harms the interests of retail investors.

The evolutionary history of biology indicates that when a certain species becomes enormous and structurally complex, it often means it is heading towards extinction. Today, the ones that ultimately dominate the skies are the more adaptable birds.

Conclusion

The regulation of market makers by trading platforms is essentially a form of encroachment under the existing competitive landscape. Retail investors still face the siege from project parties and investment institutions, and the situation has not fundamentally improved. The migration to on-chain is still ongoing, and even leading decentralized platforms are not yet ready for hundreds of millions of users.

The fluctuations of value and price, along with the game of interests and distribution, will continue to play out in each cycle, constituting the investment journey of retail investors.