Evaluating Cryptocurrency Project Success: Beyond Token Prices

Why is 2025 described as a year of "listing and selling"? Because in the business plans of top-tier projects, there is never a section on "profiting from technical services"; selling tokens is the only business model. When Token = Product = Sole Revenue, this industry is destined to be a game of musical chairs, not a value-creating BUIDL. The period from 2023 to 2025 will be a pivotal period of structural transformation in the history of the cryptocurrency industry, marking a fundamental decoupling between protocol utility and asset valuation. Even traditional "Fujianese businessmen" would find this incredibly challenging. (Jia lat) Introduction: The Ruins of Ukraine and the Abacus of the Fujianese In the business world, Fujianese merchants are known for their keen business acumen: wherever there is a price difference, there is business; wherever there is chaos, there is arbitrage. Even amidst the war in Ukraine, Fujianese people sought opportunities to make a fortune through risk. The Fujian merchants ("Minshang") understood a principle well: during the gold rush, the most certain path to wealth was not speculative gold mining, but providing speculators with the necessary production tools (shovels) and logistical support. In the context of the crypto economy, "selling shovels" theoretically corresponds to providing blockchain infrastructure (L1, L2, cross-chain bridges), and its revenue should come from gas fees and transaction throughput ("tolls"). However, from 2023 to 2025, with the upgrading of technologies such as EIP-4844 and the oversupply of L2/L3 infrastructure, the narrative of the commercial viability of "selling shovels" as an independent source of income began to crumble. As a result, the industry shifted to a distorted "global arbitrage" model. Project teams no longer focused on selling infrastructure services to users, but instead began selling the financial rights (tokens) of the infrastructure itself as the core commodity to retail investors. The "shovel" then became a tool for attracting users/marketing, its sole purpose being to justify the issuance of overvalued tokens. This article will dissect the mechanisms of this shift in detail—particularly the “low liquidity, high FDV” phenomenon, the predatory market-making structure, and the industrialization of airdrops—and conclude that the main commercial output of the 2023-2025 infrastructure cycle will not be technological utility, but rather the systemic exit of venture capital into retail liquidity. Chapter 1: The Prototype of Fujian Merchants: Commercial Pragmatism and Global Arbitrage Networks 1.1 The Wisdom of Secondary Markets: From California to the World The adage "selling shovels during the gold rush" is generally attributed to the California Gold Rush of 1849. At that time, merchants like Samuel Brannan didn't amass wealth by panning for gold in riverbeds, but rather by monopolizing the supply chain of tools needed by miners. In the Chinese business context, particularly for the Fujianese merchants, this philosophy transcended simple supply and demand; it evolved into a complex system of "global arbitrage." Fujian, a mountainous province with limited arable land and facing the sea, historically forced its merchant class to rely on the coast. This geographical environment fostered a unique commercial DNA, primarily comprised of two core tenets: I. Risk Transfer: Gold prospectors bear the entire risk of "not finding gold," while merchants lock in profits in advance by selling tools. Regardless of whether the prospectors succeed or not, the value of the shovel is realized at the moment of the transaction. II. Networked Arbitrage: This involves using close-knit networks based on clan and kinship to move capital and goods between markets with different jurisdictions and levels of economic development. For example, sourcing goods from coastal China where production costs are low and selling them to more profitable markets in Africa or South America, profiting from information asymmetry and regulatory gaps. This spirit of Fujian merchants—daring to take risks, believing that "only by striving can one win," and being adept at arbitrage using rules—has found a perfect modern reflection in the borderless digital ocean of cryptocurrencies, where regulation is still imperfect. 1.2 Parallel Mappings in the Crypto World: From Gas to Governance In the early days of the crypto industry (2017-2021), the "shovel seller" analogy was largely accurate. Exchanges (such as Binance and Coinbase), mining equipment manufacturers (such as Bitmain), and Ethereum miners amassed huge cash flows by catering to the speculative frenzy of retail investors. They strictly followed a merchant model: taking a commission (gas fee or transaction fee) from every transaction. However, as we entered the 2023-2025 cycle, the market underwent a fundamental divergence. The impoverishment of “gold diggers”: Retail investors interacting on the blockchain are becoming cash-strapped and more savvy, no longer readily paying exorbitant tolls. The inflation of "shovel vendors": Infrastructure projects are growing exponentially. The supply of "shovels" such as Layer 2, Layer 3, modular blockchains, and cross-chain bridges far exceeds the actual demand for "gold mining" (real transactions). Faced with the compression of profit margins in core services (block space), infrastructure projects have begun to emulate the "intertemporal arbitrage" strategy of Fujianese merchants, but have transformed it with financial engineering: instead of exchanging goods on this side for currency on the other side, they exchange "expectations" (narratives) on this side for "liquidity" (USD/stablecoins) on the other side. Cryptocurrency VCs and market makers have industrialized the arbitrage concept of Fujianese merchants: Regulatory arbitrage: The foundation is registered in the Cayman Islands or Panama, the development team is in Silicon Valley or Europe, and the marketing target is retail investors in Asia and Eastern Europe. Liquidity arbitrage: Acquiring shares in the primary market at extremely low valuations (seed round) and dumping them in the secondary market at extremely high valuations (high FDV) through market makers. Information arbitrage: Profiting from the significant information gap between the public narrative of "community governance" and the private terms of "insider unlocking". Chapter Two: The Sudden Change in Business Models: Infrastructure as a "Loss-Making Driver" 2.1 The Collapse of Agreement Revenue and the Technological Paradox By 2025, the traditional "shovel-selling" revenue model for Layer 2 scaling solutions faced an existential crisis. The technical success of the Ethereum scaling roadmap, particularly the implementation of EIP-4844 (Proto-Danksharding), introduced "Blob" data storage space, which significantly reduced the cost of submitting data from L2 to L1. From a technical perspective, this is a huge victory, with user transaction costs dropping by over 90%; but from a business perspective, it destroys L2's profit margins. Previously, L2 could earn substantial profits by reselling expensive Ethereum block space. Now, with data costs approaching zero, L2 is forced into a "race to the bottom." According to reports from 1kx and Token Terminal, although the average daily transaction volume in the first half of 2025 increased by 2.7 times compared to 2021, the total gas fee revenue of blockchain networks decreased by 86%. This means that the price of "shovels" has become so cheap that it can no longer support the valuation of shovel manufacturing plants, and miners can no longer afford the startup costs. 2.2 ZkSync Era: The Shattering of the Income Illusion ZkSync Era provides a stark example of the true nature of revenue. Prior to the Token Generation Event (TGE) in June 2024, the ZkSync network generated massive daily sorter revenue, peaking at over $740,000 per day. On the surface, it was a thriving "shovel shop." However, this is actually a false boom driven by "airdrop expectations." Users pay gas fees not to use the network (mining utility), but to buy a lottery ticket that might win (airdrop). As we all know, after the airdrop took place in June 2024, ZkSync's daily revenue immediately plummeted to approximately $6,800, a drop of 99%. If a physical store experiences a sudden drop in customer traffic after it stops offering coupons, it indicates that there is no real demand for its core products. 2.3 Starknet: An extreme mismatch between valuation and revenue Starknet also demonstrates the absurdity of this valuation logic. Despite its leading position in zero-knowledge proof technology, its financial data cannot support its pricing in the primary market. In early 2024, Starknet (STRK)’s fully diluted valuation (FDV) once exceeded $7 billion, and even reached $20 billion in the over-the-counter futures market. Meanwhile, its annualized contract revenue after EIP-4844 was only in the tens of millions of dollars. This means its price-to-sales ratio is as high as 500 to 700 times. In contrast, NVIDIA, the real "shovel seller" in the AI field, typically has a price-to-sales ratio between 30 and 40 times. Investors did not buy STRK based on the discounted value of its future cash flows (the traditional logic of equity investment), but rather on a game theory logic: they believed that there would be buyers who "believe more in the narrative" to take over at a high price. The traditional Fujianese business model of "small profits but quick turnover and stable cash flow" has been abandoned in the cryptocurrency world. In its place is a model based on financial alchemy: by creating technological barriers and narratives, an overvalued financial asset is created out of thin air and sold to retail investors who lack the ability to discern its value. Chapter 3: The Mechanism of Financialization: The "Low Liquidity, High FDV" Trap In order to maintain the “selling tokens” business model in the absence of real revenue, the industry popularized a specific market structure between 2023 and 2025, namely “low float, high FDV”. 3.1 Binance Research's Warning In May 2024, Binance Research released a major report titled "Low Circulation and High FDV: How Did We Get Here?", which systematically criticized this phenomenon. The report pointed out that this distorted circulation structure has become the industry standard for infrastructure token issuance. (https://www.binance.com/en/research/analysis/low-float-and-high-fdv-how-did-we-get-here) Operational mechanism: Primary market pricing: Venture capital firms (VCs) enter the seed round with valuations of $50 million to $100 million. Artificial scarcity: When a project is listed on an exchange, only 5%-10% of the total supply is released. Market makers exploit this extremely thin liquidity, using only a small amount of capital to drive up the token price. Market Cap Illusion: A token with a circulating supply of 100 million and a price of $1 has a "circulating market capitalization" of $100 million, which seems cheap (Small Cap). However, if the total supply is 10 billion, its FDV is as high as $10 billion. Systemic dumping: Over the next 3-5 years, the remaining 95% of tokens will continue to unlock. To maintain a price of $1, the market would need to absorb $9.5 billion in new funds. In a zero-sum game market, this is mathematically nearly impossible, and a price collapse is inevitable. 3.2 Psychological Anchoring for Retail Investors This structure precisely exploits the cognitive biases of retail investors. Retail investors often focus only on "unit bias" (the perception that $0.10 is cheaper than $100) or "market capitalization," while ignoring the inflationary pressures represented by FDV. For shrewd VCs and project owners like Fujianese businessmen, this is a perfect opportunity for intertemporal arbitrage: They locked in a huge return on paper (a hundredfold increase from seed round to FDV). b. Utilize retail investors' pursuit of short-term price increases caused by "low circulation" as a source of liquidity for exit. c. By gradually releasing liquidity over several years, the selling pressure is dispersed, reaping market liquidity like a frog being slowly boiled in water. 3.3 Data Comparison: Valuation Gap in 2025 By 2025, this valuation bubble had become extremely distorted. According to a 1kx report, the median price-to-sales ratio (P/F ratio) of Layer 1 blockchains was as high as 7,300, while the P/F ratio of DeFi protocols that generate actual cash flow was only 17. (https://1kx.network/writing/2025-onchain-revenue-report) This huge valuation gap reveals an obvious market truth—the valuation logic for infrastructure projects is not based on their profitability as "shovels," but on their marketability as "financial assets." The project owners are essentially running a money printing factory, not a technology company. Chapter 4: The Evolution of the Cryptocurrency Industry from the Perspective of Fujian Businessmen: From "Selling Services" to "Selling Goods" 4.1 The traditional logic of "selling shovels" (2017-2021) In the early days of ICOs or the DeFi Summer, the logic was similar to traditional Fujian business practices: Scenario: Individual investors want to strike it rich (trading/speculation). Shovel: Exchanges, public blockchain gas, lending protocols. Logic: You use my shovel to dig for gold, and I charge you rent (handling fee). Token: Similar to a "pre-sale service voucher" or "membership card", it represents the right to use the shovel in the future or the right to receive dividends. 4.2 The Distortion from 2023 to 2025: "Token as Product" By 2025, with an overabundance of infrastructure (L2 proliferation), "collecting tolls" will no longer be profitable (gas fees will be negligible). Project teams and investors will realize that instead of painstakingly making a good shovel and earning meager rent, it will be more profitable to sell "shovel company stock" (tokens) directly to retail investors as commodities. In this new model: The real product is the token. This is the only product that can generate sales revenue (USDT/USDC). Marketing materials: These include public blockchains, games, and tools. Their sole purpose is to provide a narrative context for the token, increasing the credibility of the "goods." Business model: Selling tokens = sales revenue. This is an extremely tragic regression—the industry no longer pursues profit through technical services, but instead uses financial means to price and sell "air". 4.3 Production and Packaging: Overvaluation Endorsement and the "Credibility" Game If tokens are goods, then top-notch packaging is needed in order to sell these goods at a high price (ship them out). Institutional endorsement: not for investment, but for "branding". In the 2023-2025 cycle, the role of VCs changed from "venture capitalists" to "brand franchisees". The truth behind massive funding rounds: Starknet's valuation reached $8 billion, and LayerZero's valuation reached $3 billion. These astronomical valuations were not based on future transaction fee revenue (Starknet's annual revenue wasn't even enough to cover team salaries), but rather on expectations of "how many coins could be sold to retail investors in the future." The names of top-tier venture capital firms like a16z and Paradigm are like Nike labels affixed to shoe factories in Fujian. Their purpose is to tell retail investors: "This token is genuine and worth buying at a high price." Interestingly, why can VCs offer such high valuations? Because retail investors believe that their purchase price is the same as, or even lower than, that of top VCs, unaware that valuations can only go lower, with no lowest possible value. 4.4 KOL Recommendations: More Than Just Promotion, They're "Distributors" In this chain, KOLs no longer provide value analysis, but rather act as distributors at various levels. "Selling immediately after order placement": Project teams or market makers will offer KOLs (Key Opinion Leaders) low-priced tokens or "rebates." The KOL's task is to create FOMO (Fear of Missing Out), maintain the hype surrounding the "goods," and ensure sufficient retail liquidity to absorb selling pressure during the VC unlocking period. Chapter 5: Market Maker Industrial Complex: The Invisible Middleman If tokens are commodities, then market makers (aka "wild dealers") are distributors. Between 2023 and 2025, the relationship between project teams and market makers transformed from service provision to predatory collusion. This is similar to the strategy of Fujian merchants using clan networks to control channels, but the purpose is no longer to circulate commodities, but to harvest the profits of their counterparts. 5.1 Loan + Call Option Model During this period, the standard contract between project teams and market makers was a "borrowing + call option" model. Transaction Structure: The project lends tens of millions of tokens (e.g., 2%-5% of the circulating supply) to the market maker interest-free as "inventory." Simultaneously, the market maker is granted a call option, with the strike price typically set at or slightly higher than the initial listing price. Incentive misalignment: If the price of the token rises above the strike price, the market maker exercises the option, buys the tokens at a low price, and then sells them to retail investors at a high price on the market to profit from the price difference. If the price of the coin falls, the market maker only needs to return the borrowed tokens to the project team without incurring any capital loss. Even more extreme, some market makers distribute as many tokens as possible to those with a good chance of being listed in the early stages. Market makers are no longer neutral liquidity providers, but have become speculators who bullish on volatility. They have a strong incentive to push prices above the strike price by creating sharp fluctuations in order to complete their distribution. This model mathematically dictates that market makers must be at odds with retail investors. For details, please see: https://x.com/agintender/status/1946429507046645988?s=20 5.2 Contract Short Squeeze: The Most Efficient Way to "Find a Buyer" "Contract mechanisms are the vehicle for unloading shares," which is the most ruthless manipulation tactic in this cycle, and has even spawned narratives such as "delisting narratives" and "pre-market trading hedging narratives." What to do when no one is buying the spot goods (retail investors are not taking over)? Create people who have no choice but to buy. Setting up a scheme and controlling the flow of funds: On the eve of negative news or the unlocking of funds, the market is generally bearish and the funding rate is negative. 2. Price Pump: Market makers use their concentrated holdings of spot shares (low liquidity) to drive up prices with only a small amount of capital. 3. Short squeeze: Short sellers in the contract market are forced to buy at market price to close their positions after being liquidated. 4. Distribution: Taking advantage of the huge passive buying caused by the short sellers' liquidation, the project team and market makers sell their spot goods at high prices to these "forced to take over" short sellers. Specific examples: https://x.com/agintender/status/1954160744678699396?s=20 https://x.com/agintender/status/1960713257225785516?s=20 This is like a Fujian businessman spreading the word in the market that "shovels will be cheaper," and then, when everyone is shorting shovels, he suddenly monopolizes the supply and raises prices, forcing those who shorted the shovels to buy them at a high price as compensation. 5.3 Movement Labs Scandal: "Stock Manipulation" Written into Contracts The Movement Labs (MOVE) scandal that broke out in 2025 completely tore away the fig leaf covering this gray industry chain. Coindesk's investigation revealed that Movement Labs signed a secret agreement with a mysterious intermediary called Rentech (allegedly linked to market maker Web3Port) to hand over control of approximately 10% of the token supply (66 million tokens). The contract surprisingly includes clauses incentivizing market makers to push FDV to $5 billion. Once this target is achieved, both parties will split the profits from the token sale. When Rentech began massively dumping its tokens on the market, Binance detected the anomaly and suspended the relevant market maker accounts, and Coinbase subsequently suspended MOVE trading as well. This incident proves that so-called "market capitalization management" is often just "pump and dump" as written in legal contracts. This is exactly the same as the operations of Fujian businessmen in the gray areas of global trade in the early days—using complex networks of intermediaries and multiple shell companies to circumvent regulations and control pricing power. However, in the crypto field, this operation directly plunders the principal of retail investors. in conclusion: If these projects were truly in the "shovel business," they would be desperately optimizing gas revenue and daily active users. But they seem unconcerned, simply building castles in the air. Because their real business model is: produce tokens at extremely low cost -> price them at extremely high valuations -> sell them on the secondary market through contracts and market makers -> exchange them for USDT/USDC (real money). This is why the crypto world in 2025 will look like a casino, because no one is doing business; everyone is trading. Chapter Six: The New Market Landscape in 2025: The Application Layer's Counterattack As we move into 2025, market fatigue with the "infrastructure casino" model has reached a critical point. Data shows that funding and attention are shifting from the "shovel-selling" infrastructure layer to the "application layer" where real profits can be made. 6.1 The Shift from Public Blockchain Narrative to DApp Cash Flow The "On-Chain Revenue Report" (https://1kx.network/writing/2025-onchain-revenue-report) released by venture capital firm 1kx at the end of 2025 illustrates this phenomenon. Revenue Reversal: In the first half of 2025, DeFi, consumer applications, and wallet applications contributed 63% of total on-chain fees, while the fee share of Layer 1 and Layer 2 infrastructure shrank to 22%. Growth Comparison: Application layer revenue increased by 126% year-on-year, while infrastructure layer revenue growth stagnated or even declined. A Return to Business Logic: This data marks the end of the era of monopolistic profits by "shovel vendors." As infrastructure becomes extremely cheap (and commoditized), the ability to capture value shifts to user-facing applications. DApps that can truly generate user stickiness and cash flow (such as HyperLiquid and Pump.fun) are beginning to replace L2 public chains as the darlings of the market. 6.2 Revaluation of Tokens as Customer Acquisition Costs The industry is beginning to re-examine the economic nature of "airdrops." In 2025, tokens will no longer be seen as symbols of governance rights/dividend rights/identity, but rather as negative news related to customer acquisition costs (CAC) and market crashes. Data from Blockchain Ads shows that the cost for Web3 projects to acquire a real user through token incentives is as high as $85-$100 or even more, far exceeding the standard in the Web2 industry. This is a result of path dependence. (https://www.blockchain-ads.com/post/user-acquisition-trends-report) Projects like ZkSync, which have spent hundreds of millions of dollars (in token terms) on incentives, have found that these users are "mercenaries"—the liquidity is withdrawn as soon as the incentives stop. This has forced project teams to shift from a crude "money-spraying" model to a more refined "points system" and "real profit sharing" model. Chapter Seven: Conclusion: The Merchants' Festival is Over The cryptocurrency market from 2023 to 2025 witnessed a grand spectacle of primitive capital accumulation disguised as "technological innovation." The ancient wisdom of Fujian merchants—"selling shovels during the gold rush"—was distorted to the extreme. Free shovels: In order to attract traffic, the real shovels (block space) are constantly being reduced in price, even below cost (through token subsidies). Factory securitization: Merchants no longer make money by selling shovels, but by selling "stocks of the shovel factory" (high FDV tokens) to retail investors who believe the factory has a monopoly on gold mines. Arbitrage institutionalization: Market makers, venture capitalists, and exchanges form a close-knit community of interests, using complex financial instruments (options, lending, contracts) to transfer retail wealth. If we re-examine the cryptocurrency market in 2025 from the perspective of Fujian businessmen, we will see the following picture: This group (project team + VC) originally claimed they wanted to build houses (Web3 ecosystem) in Ukraine (high-risk new area), but they didn't really care whether the houses were habitable. What they were actually doing was: First, they put up a sign on that piece of land, and then used that as a reason to print a bunch of "brick tickets" (tokens). They brought in big names from Wall Street (VC firms) to endorse them, saying that these brick-like tickets could be exchanged for gold in the future. They brought in the village's loudspeaker (KOL) to announce that the price of brick tickets was going to increase. Finally, by using the contract mechanism, they crushed those who wanted to short the tokens, and took the opportunity to exchange their worthless tokens for real money. This is why people say "listing a token is all about selling it off." Because in their business plans, there is never a section on "profiting from technology services"; selling tokens is their only business model. When tokens are equated with products, this industry is destined to be a game of musical chairs, not a business that creates value. This may be the biggest tragedy for the cryptocurrency world in 2025. It's not that knock-offs don't have bull markets, but rather that bull markets can't accommodate knock-offs without cash flow. Finally, we must ask: Who exactly has contributed to today's high FDV and low circulation? Who has transformed the token into the ultimate commodity/service? Is it the launch pad? The meme? The exchange? The VC? The media? The trader? The analyst? The project team? — Or all of us?

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