<style> <!-- limit height of graphviz diagrams --> .graphviz svg { height: 300px } </style> # The Phenomenology of Token Games [Towards Crypto's Absolute Geist] *apriori* --- ## tl;dr - VCs and founders systematically extract value through low float/high FDV token launches, with data showing retail loses to insiders most of the time. - The solution: kill the misaligned incentives, create direct builder-trader connections, and return to building products people actually use. Hyperliquid proves it works. - The existential question is: will we choose extraction or value creation? --- ## TOC - [Intro/Philosophy] - [Game Players] - [VC mechanics] - [Crime data] - [Solutions/Examples] - [Conclusion] --- ## Culture Wars - Online culture wars have been around for some time, arguably since the inception of the internet. Some may conjecture that culture wars began with Gamergate. --- ## Many Culture Wars in crypto - Cypherpunk v. VC - My coin v. Your coin - Trader v. Builder --- ## Culture Wars contd... Simply put, each smaller culture war sets the stage for the next one which is often higher stakes. [You mean to tell me that the conflict between perceived good and evil just becomes ground for the next higher order conflict between good and evil?] **Yes, exactly this** --- ## [Dialectic: Master <> Slave] <a href="https://ibb.co/N6smbBfP"><img src="https://i.ibb.co/KjXLSvBk/Untitled-95.png" alt="Untitled-95" border="0"></a> --- ## A word of Caution <a href="https://ibb.co/ZpdgjwK8"><img src="https://i.ibb.co/xthgkcGj/Untitled-97.png" alt="Untitled-97" border="0"></a> --- ## Popper's Strawman *Hegel’s fame was made by those who prefer a quick initiation into the deeper secrets of this world to the laborious technicalities of science which, after all, may only disappoint them by its lack of power to unveil all mysteries.* --- ## Sublation - ~~Thesis-Antithesis Synthesis~~ - Triads - aufhebung [ - to raise up - one contradiction is undermined by its antithesis and turned into a third thing that collapses holding onto what is true in the early ideas is called sublation. ] --- ## Geist - The Spirit [ - self-developing whole that manifests as nature - realizes itself through consciousness (subjective, objective, and absolute), - achieves self-knowledge through historical development ] --- ## The Phenomenology of Crypto --- ## [Cypherpunk Idealism to... - 2009: Bitcoin emerges during financial crisis ("Chancellor on brink of second bailout") as liferaft for those distrusting traditional finance - 2015: Ethereum unlocks general-purpose compute after Bitcoin maxis resist change - 2017-2018: ICO era promises to fund the future but delivers mostly grift --- ## Financial Nihilism] - 2020-2021: DeFi Summer asks "where's the yield coming from?" while everyone gets rich - 2022-2023: FTX, Terra, 3AC collapse ("basically risk-free") UST destroys retail savings - 2024: Solana's rise from the ashes, Pump.fun enables anyone to "become a dev," reducing crypto to 5-minute meme cycles --- <a href='https://postimg.cc/TK7FVsRp' target='_blank'><img src='https://i.postimg.cc/PqTHjG9z/image.png' border='0' alt='image'/></a> --- ## Multi-player Dialectic [Players] <a href='https://postimages.org/' target='_blank'><img src='https://i.postimg.cc/TPFZ3ZH4/image.png' border='0' alt='image'/></a> --- ## Builders - Builders [engineers, researchers, product designers, and go-to-market teams] - Motivations: intellectual stimulation, mission alignment, make money, refuge - Daily reality: debugging code, synthesizing research, product - Accountability: colleagues, investors, community, & vision - Constant tradeoffs: passion project vs. steady salary building someone else's vision - Success KPIs: actual usage, open-source contributions, and sustainable ecosystems --- ## Founders - Founders are the "techno priests" of crypto—keynote speakers, podcast guests, thought leaders - Internal/external pressure: everyone evaluates the project through the founder's lens - The marshmallow experiment at scale: $10M now or grind 10 years for potential $100M+ - Secondary market OTC sales allow quiet exits while maintaining public commitment - Post-TGE founder departures: Movement, Aleo, Aptos...token launch becomes finish line --- <a href='https://postimg.cc/BjrfKyZ4' target='_blank'><img src='https://i.postimg.cc/FKRr252d/Untitled-103.png' border='0' alt='Untitled-103'/></a> --- ## Traders - Wake up asking "How am I going to make money today?" or "What opportunities will find me?" - Lifestyle and money motivations, but deeper: seeking autonomy from traditional systems - Risk management is survival: cut losers fast, understand liquidity, avoid manipulation --- ## Crypto Traders - Crypto trading requires narrative awareness, supply/demand dynamics, and technical risk assessment - The good ones develop specific edges: 50% Fibonacci retracements, MEV strategies, narrative front-running - ***Represent crypto's atomic units of cultural autonomy, self-custody, self-directed, self-sovereign*** --- <a href='https://postimg.cc/9Rt2VphV' target='_blank'><img src='https://i.postimg.cc/d1gV2HN7/Untitled-102.png' border='0' alt='Untitled-102'/></a> --- ## Favorite Traders [Voltaire] - Voltaire (1729): Heard mathematician explain lottery flaw, went all-in with consortium, won 1M livres - Used winnings to publish controversial philosophy including Candide - Got booted from Paris anyway, [such is life] --- ## Favorite Traders [Soros] - George Soros (1992): Applied reflexivity theory (Popper student ironically using "unscientific" method) - Made $1B breaking Bank of England - Founded Open Society with $5.27B endowment --- ## VCs [Last but not least?] - VCs invest in highest-risk entrepreneurs building unprecedented businesses - Structure: Limited Partners (capital) + General Partners (decisions) - 75% of venture-backed businesses fail completely --- ## Power Laws Fuck - Power law salvation: One investment can return 5-10x the entire fund - Must beat public market returns + fees to justify existence - Example: $100M fund needs that one $2B exit from remaining $20M after failures --- ## Who Funds the VCs? - Pension funds (public & private) - largest source University endowments (Harvard, MIT) - highest risk tolerance - Sovereign wealth funds (Temasek, Mubadala, PIF) Foundations, insurance companies, family offices - Major Key: LPs need returns to fund retirements, education, and public services [When VCs fail, teachers' pensions and university scholarships suffer]... and their wallets --- <a href='https://postimg.cc/rDfXhm9y' target='_blank'><img src='https://i.postimg.cc/R0BSZJ6t/image.png' border='0' alt='image'/></a> --- <a href='https://postimg.cc/bdWgpjmy' target='_blank'><img src='https://i.postimg.cc/8PP0dpW6/Untitled-105.png' border='0' alt='Untitled-105'/></a> --- ## VC Performance <a href='https://postimg.cc/Nyd8Vhyw' target='_blank'><img src='https://i.postimg.cc/fLNHVDDk/Untitled-106.png' border='0' alt='Untitled-106'/></a> --- ## IRR Rules Everything Around Me IRR (Internal Rate of Return): - In lehman's terms IRR shows the speed of value creation. It is the annual growth rate of your investment. - It accounts for both the amount of money made and how quickly it was made. With a higher IRR you're getting better returns faster. - Can be manipulated with aggressive markups on illiquid holdings --- <a href='https://postimages.org/' target='_blank'><img src='https://i.postimg.cc/NfSkyBxY/image.png' border='0' alt='image'/></a> --- ## TVPI - Total value to paid-in (TVPI) measures the total value of realized and unrealized investments in a fund in proportion to the total contributions, the paid-in capital. - Realized investments represent the capital returned to LPs and unrealized investments have yet to be distributed. --- <a href='https://postimages.org/' target='_blank'><img src='https://i.postimg.cc/3xGCmVLG/image.png' border='0' alt='image'/></a> --- ## DPI - DPI, or distribution to paid-in capital, measures the return multiple on the money paid into a VC or PE fund. - DPI is a measure of the actual cash that a Limited Partner (LP) has received back from a fund relative to the capital they have contributed. --- <a href='https://postimg.cc/5HrYLfYj' target='_blank'><img src='https://i.postimg.cc/DZvrVZ7Q/image.png' border='0' alt='image'/></a> --- ## Recap - IRR shows the speed and efficiency of value creation (time-weighted returns) - TVPI shows the total multiple on invested capital (including paper values) - DPI shows how much cash has actually been returned to investors --- ## You Can't Eat IRR <a href='https://postimages.org/' target='_blank'><img src='https://i.postimg.cc/rmMJ8jNr/image.png' border='0' alt='image'/></a> --- <a href='https://postimg.cc/FdW47K7n' target='_blank'><img src='https://i.postimg.cc/prxXchxx/image.png' border='0' alt='image'/></a> --- ## An Inconvenient truth - 2017 Vintage Funds (7 years old) [ - 75th percentile DPI: 0.64x (haven't returned initial capital) - 50th percentile DPI: ~0.40x (lost 60% so far)] - Implication: Great IRR/TVPI metrics mask inability to generate real exits - Cascade effect: No returns → No new LP capital → Smaller funds → Less innovation funding --- <a href='https://postimg.cc/p9kN6dYX' target='_blank'><img src='https://i.postimg.cc/76rxbG57/Untitled-116.png' border='0' alt='Untitled-116'/></a> --- ## The game is out there, and it's either play or get played - The game: Keep marking up portfolios [Paper gains to raise new funds and collect management fees] while searching for greater fools to dump on [DPI] <a href='https://postimg.cc/Dm9N5skP' target='_blank'><img src='https://i.postimg.cc/X7q0jcsm/Untitled-117.png' border='0' alt='Untitled-117'/></a> --- *There is no fast term accountability in venture capital. Sometimes you have momentum and the valuations go up and that does give you a feel that things are working but in practice, five to ten years later you get liquidity on these businesses or even longer. It takes incredibly long and so people tend to over-index on these sociological factors, and what's popular.* -Peter Thiel- --- ## Crypto VCs play the game 1. Invest in both equity and tokens 2. Clear, fast exit path via token launches (no IPO needed) 3. Different LP composition (more family offices, fewer institutions) 4. Act as proxy underwriters without SEC oversight 5. Can manufacture exits by pushing token launches 6. Shorter fund life (3-5 years) vs traditional VC (7-10 years) --- <a href='https://postimg.cc/rR1NfDxf' target='_blank'><img src='https://i.postimg.cc/vTj2H9Bw/image.png' border='0' alt='image'/></a> --- ## OOO Its a Crime --- <a href='https://postimg.cc/bsPTsRfW' target='_blank'><img src='https://i.postimg.cc/X7GD12Hj/image.png' border='0' alt='image'/></a> --- ## Crime Scene <a href='https://postimg.cc/nXcG1cz1' target='_blank'><img src='https://i.postimg.cc/NjRCBKvZ/image.png' border='0' alt='image'/></a> --- <a href='https://postimg.cc/rdDGvn50' target='_blank'><img src='https://i.postimg.cc/LsTygGXT/image.png' border='0' alt='image'/></a> --- <a href='https://postimg.cc/YLzQ1JBV' target='_blank'><img src='https://i.postimg.cc/x8WgS2x0/image.png' border='0' alt='image'/></a> --- ## VCs win 97% of the time in 2024 <a href='https://postimages.org/' target='_blank'><img src='https://i.postimg.cc/pXFqJmry/image.png' border='0' alt='image'/></a> --- <a href='https://postimg.cc/hX5TbLNS' target='_blank'><img src='https://i.postimg.cc/6Q9cKz0G/Untitled-124.png' border='0' alt='Untitled-124'/></a> --- ## Investment Patterns reveal priorites [Low float High FDV Infra coins] <a href='https://postimg.cc/KR9JwgCW' target='_blank'><img src='https://i.postimg.cc/jSTmWHcR/image.png' border='0' alt='image'/></a> --- <a href='https://postimg.cc/vc800v29' target='_blank'><img src='https://i.postimg.cc/NfmZfJ1N/image.png' border='0' alt='image'/></a> --- ## Funding Infra for Users? - Breakdown [ - Infrastructure: $74.2B (65.2%) - CeFi & CEX: $20.7B (18.2%) - Applications: $18.9B (16.6%) ] - The Ratio: $3.98 infrastructure per $1 in actual applications - By Era: 2020-2022 saw $63.4B (mostly infrastructure)—peak euphoria funding ## Everyone Wants What Everyone Else Wants [Mimetic Desire] *Man does not know what to desire, and turns to others* - René Girard --- ## VC Pasta [many such cases] - Pattern matching replaces first principles thinking - 2018: "Ethereum Killer" (every pitch deck) - 2021: "Modular blockchain" (rollup mania) - 2023: "ZK-everything" (ZK-ML, ZK-EVM, ZK-bridges) - 2024: "AI agents" (pivot or perish) - Billions $ chasing the same narrow narratives --- ## Scapegoats *Girard saw that for thousands of years humans have had a specific way of protecting themselves in a mimetic crisis: they converge, mimetically, on one person or group, whom they expel or eliminate. This has the effect of uniting them while providing an outlet for their violence. They protect themselves by directing their desire to vanquish their rivals to a single fixed point: someone that has become a proxy for all of their enemies. Someone who is unable to fight back. A scapegoat.* -Luke Burgis- --- <a href='https://postimages.org/' target='_blank'><img src='https://i.postimg.cc/ZR6DK0NW/image.png' border='0' alt='image'/></a> --- ## Is there a way forward? --- ## Hyperliquid. - Self-funded: No VC cap table pollution - Product-first: Built what traders actually wanted (good perps DEX) - Fair launch: 31% airdropped to genuine users - Value accrual: Token captures real protocol revenues - Community love: Users end every tweet with Hyperliquid. - Ongoing development: HyperEVM for composable DeFi --- <a href='https://postimg.cc/SXb8vSQ5' target='_blank'><img src='https://i.postimg.cc/W4hntzB2/image.png' border='0' alt='image'/></a> --- <a href='https://postimages.org/' target='_blank'><img src='https://i.postimg.cc/4yZVvxSH/Untitled-128.png' border='0' alt='Untitled-128'/></a> --- ## What Else does success look like? - Crowd Funding - Echo - Legion - Return to ICOs - Hybrid Models - VC Signal --- ## What not to Do [What Ethereum Did] - Make Promises you can't keep - Shit on DeFi - Ignore application developers and end users - Build Ivory towers --- <a href='https://postimg.cc/2LLSYW2x' target='_blank'><img src='https://i.postimg.cc/0jcMpdSh/Untitled-129.png' border='0' alt='Untitled-129'/></a><br /><a href='https://postimages.org/de/'></a><br /> --- <a href='https://postimg.cc/87mPTNBx' target='_blank'><img src='https://i.postimg.cc/FH2fgKfF/Untitled-130.png' border='0' alt='Untitled-130'/></a> --- <a href='https://postimg.cc/p9VVT4sr' target='_blank'><img src='https://i.postimg.cc/wBL1WdJX/Untitled-131.png' border='0' alt='Untitled-131'/></a> --- <a href='https://postimg.cc/34dKjp5H' target='_blank'><img src='https://i.postimg.cc/j5hLbQMC/Untitled-132.png' border='0' alt='Untitled-132'/></a> --- ## Ivory Tower of Babel - 2021 Promise: "10x scaling every year for next 4 years" - 2021 Reality: Pushed scaling to L2s, created fragmentation - Result: ETH/BTC down 60%, users fled to Solana - The pivot no one calls a pivot: Now frantically raising L1 gas limit - Lost focus: DeFi (payments, swaps, yield, leverage) IS the use case --- ## Build Products for Traders  --- ## Stop Doing Crime a priori *There is only a single categorical imperative and it is this: act only in accordance with that maxim through which you can at the same time will that it become a universal law…* -- I. Kant