Provide a clearer perspective and learn to distinguish between narrative and reality.
**Written by: @**VannaCharmer
Compiled by: Ismay, BlockBeats
Editor’s Note: Amid the continuous expansion of narratives in the cryptocurrency market, tokens have long ceased to be mere carriers of technological or financial innovation, but have become chips in a structural game. From exchanges, VCs, KOLs, to communities, airdrop players, and retail investors, everyone has been caught up in a game of "who is the last holder." This article does not attempt to deny the potential of cryptocurrency technology itself, but rather reveals the hidden truths within the current token issuance and circulation mechanisms: how it operates like a multi-level marketing scheme and systematically concentrates benefits upward. We hope this article can provide you with a clearer perspective, helping you to distinguish between narrative and reality in a market intertwined with illusion and hope.
The following is the original content:
Cryptocurrency has replayed the worst aspects of pyramid schemes—only this time it's an internet-native version, with higher marketing efficiency but lower transparency. Most tokens have evolved into a sophisticated pyramid game: those at the top extract the maximum profit, while retail investors are left with a pile of worthless "air coins."
This is not a coincidence, but a structural issue.
In traditional pyramid schemes, such as Herbalife or Mary Kay, products are often overpriced, and their effectiveness is worse than that of alternatives available in the market. The core difference lies not in the products themselves, but in the sales method: instead of through retail stores, individual agents purchase products upfront and then seek out customers willing to take them over.
The result quickly shifted from "selling products" to "recruiting people." Everyone's motivation for buying products was not to use them, but to be able to sell them at a high price to others in the future. Ultimately, when there were only "speculators" left in the market and no real users, the pyramid could no longer sustain itself. Those at the top took away all the asymmetric profits, while the participants at the bottom could only stare blankly at a pile of unsold inventory.
Token Pyramid
The operating logic of cryptocurrencies is similar to that of multi-level marketing. The token itself is the "product" - a digital asset with an inflated price and almost no practicality apart from speculation. Just like distributors in a multi-level marketing system, token holders do not buy tokens for use, but rather to sell them to the next person at a higher price later.
This pyramid structure is similar to traditional MLM, but cryptocurrencies have their own unique ecosystem of participants that make up different tiers. Compared to traditional MLM products, tokens are more ideal carriers: they can make more efficient use of the Internet and social networks, are easier to trade and acquire, and spread faster and more widely. The operating logic is roughly as follows:
In traditional pyramid schemes, if you recruit downlines and they sell products or continue to purchase, you can profit from it. The mechanics of tokens are the same: you get others to take your "goods" and then recruit some newcomers who join later than you. This benefits both you and those above you, as the newcomers provide "exit liquidity," leading to a price increase. At the same time, newcomers will also start promoting actively because they now have tokens too! Early holders can cash out at a higher price (the profit multiples have increased!). This mechanism is very similar to a pyramid scheme, but with even more power.
The higher you are in the pyramid, the more motivated you are to continuously issue new coins and keep pushing this gameplay.
Divine Existence: Exchange
At the top of the crypto pyramid are those true "deities" — the exchanges. Almost all "successful" tokens are inextricably linked to the deep manipulation of exchanges and their associated market makers. They control the distribution and liquidity of tokens, and if project teams want to access the platform and obtain distribution resources, they often must "tribute" — that is, surrender a portion of their tokens for free.
If you don't follow their rules, your tokens won't go live, or can only remain in a "hell" of extremely poor liquidity, ultimately dying silently. Exchanges can kick market makers out at any time, require project parties to provide token lending for their employees to cash out, and even unilaterally change service terms at the last minute. This hegemony is well understood by everyone, but they can only endure it in silence—because this is the price for "liquidity" and "distribution."
For entrepreneurs, exchanges are an insurmountable barrier. Whether or not a project can be listed on a top exchange often depends on the "network of relationships" rather than the quality of the project itself. This explains why so many projects today have emerged with "invisible co-founders" or "former exchange employees" who are responsible for networking and opening channels. Without experience or connections, it is almost impossible to successfully navigate the process of getting a token listed.
Demigod: Market Maker
Market makers theoretically play the role of providing liquidity to the market, but in reality, they often help project parties secretly sell through OTC transactions while using their information advantage to reap profits from ordinary users. They typically hold a considerable portion of the total token supply (sometimes up to several percent), and use this to manipulate trades and gain asymmetric arbitrage opportunities. For tokens with a very small circulation, this influence is greatly amplified, putting them in an extremely advantageous position during trading.
The money earned purely by "providing liquidity" is extremely limited, but through reverse trading against uninformed users, one can earn a fortune. Among all market participants, market makers have the clearest understanding of the circulation of tokens—because they know both the real market fluctuations and hold a large amount of tokens. They are at the pinnacle of informational advantage.
It is also very difficult for the project team to evaluate the "quotation" of the market maker. Unlike haircuts, which have a clear price, the price of a market-making service varies from person to person. As a start-up project, you have no idea which terms are reasonable and which are inflated, which has given rise to another gray phenomenon: the proliferation of invisible co-founders and "market making consultants". In the name of consultants, they match you with each other, but they further increase the complexity and cost of issuing coins.
King: VC and Project Party
Beneath the exchange are the project teams and VCs, who captured most of the value during the private placement stage. Before the public has even heard of a project, they acquire tokens at a very low price, and then weave narratives to create a "liquidity exit" for the tokens.
The business model of crypto VCs has become extremely distorted. Compared to traditional venture capital, obtaining a "liquidity event" in the crypto industry is much easier, so they do not truly encourage long-term builders. In fact, the opposite is true—VCs can completely turn a blind eye and tacitly allow predatory token economic models as long as it benefits them. Many VCs have long stopped pretending they are supporting sustainable businesses and are systematically participating in and supporting various "pump-and-dump" speculative behaviors.
Tokens have also given rise to a peculiar incentive: VCs have an incentive to artificially inflate the valuation of their portfolios (effectively "harvesting" their own LPs) in order to raise fund management fees. This is especially common with low-circulating tokens – they can use FDV to mark the book capitalization, thereby inflating the project's valuation. This practice is extremely unethical, because once the tokens are fully unlocked, it is simply impossible to exit at that price. This is one of the key reasons why many VCs will struggle to raise new funds in the future.
Although platforms like Echo have slightly improved this reality, there are still a large number of black box operations behind the scenes in the cryptocurrency industry that ordinary investors cannot see.
Key Opinion Leader: KOL
Next level down is KOLs, who usually receive tokens for free when a project launches in exchange for promotional content. The "KOL financing round" has become the norm in the industry—KOLs participate in investment and receive full returns after TGE. They use their communication channels to exchange for free chips, and then brainwash their fans, who ultimately become their "exit liquidity."
Soldiers: Community members and the Wool-Pulling Party
The "community" and airdrop players make up the bottom layer of the pyramid's workforce. They undertake the most basic tasks: testing products, generating content, and creating activity in exchange for token distribution. However, even these activities have now been "industrialized": rewards are decreasing, while the work put in is increasing.
Most community members often realize after a long time of working for the project for free that they are actually just an outsourced marketing department for the project team—only to see the project start to crash mercilessly after the TGE. Once they become aware of this, anger spreads, and they "pick up arms." This "angry community" is extremely detrimental to projects that genuinely want to create products, as it creates additional disruption and noise.
Leeks: Retail Investors
The bottom layer of the pyramid is the ideal retail investor – the "exit channel" for everyone above them. They are fed various narratives and stories, granting a certain asset a "meme premium" to attract more buyers, allowing upper players such as foundations to smoothly offload their assets.
However, this cycle is different from the previous ones; retail investors have not really entered the market. Today's retail investors are more cautious and skeptical, which leaves community members holding a bunch of worthless airdrop tokens, while insiders have long cashed out through over-the-counter transactions. I suspect this is also one of the reasons why you often see people on the timeline angrily complaining about token crashes or worthless airdrops: because in this cycle, retail investors haven't really taken the bait, while the founders are still making a fortune.
Consequences
In the current cryptocurrency industry, the core is not about making products, but about telling stories—narrating a "high illusion yield" to entice others to buy a certain token. Focusing on product development has instead become an unencouraged behavior (although this is slowly changing).
The entire token valuation system has completely distorted, no longer based on fundamentals, but reliant on "market cap benchmarking" for horizontal comparisons. The core question of the project has shifted from "What problem does this token solve?" to "How much can it rise at most?" In this environment, projects can hardly be reasonably priced or evaluated. What you are buying is not a company that is being built, but a lottery ticket; this must be recognized when investing in cryptocurrencies.
Selling a narrative script is very simple: you just need to come up with a "story that sounds reasonable but is actually impossible to price," such as:
"This is a stablecoin project backed by Peter Thiel, and its tokens can be seen as an indirect exposure to Tether equity. The optimism for this token stems from Circle's market capitalization of $27 billion, while Tether's revenue and profits far exceed those of Circle, with lower operational costs. Currently, there are no products in the market that allow you to invest directly in Tether, and this token perfectly fills that gap! They are also building an infrastructure similar to Circle's payment network and planning to introduce privacy features. This is the future of finance, with a market cap projected at $100 billion!"
If you want your friends to buy a token, this type of narrative is very useful. The key is: the story needs to be told "clearly enough," but also "leave enough room for imagination," so that they can envision a future with a high valuation.
What should be done next? Fix the market structure of the tokens
I still firmly believe that the crypto industry is one of the few fields that can bring tremendous asymmetric returns to ordinary people, but this advantage is gradually disappearing. Speculation is the core product-market fit (PMF) of crypto and was the initial "hook" that attracted market participants' attention to everything we are building. For this reason, we urgently need to repair the entire market structure.
The second part of this article will explore how platforms like Hyperliquid could potentially change the rules of the game.
The content is for reference only, not a solicitation or offer. No investment, tax, or legal advice provided. See Disclaimer for more risks disclosure.
Overview of roles in the encryption dark forest
**Written by: @**VannaCharmer
Compiled by: Ismay, BlockBeats
Editor’s Note: Amid the continuous expansion of narratives in the cryptocurrency market, tokens have long ceased to be mere carriers of technological or financial innovation, but have become chips in a structural game. From exchanges, VCs, KOLs, to communities, airdrop players, and retail investors, everyone has been caught up in a game of "who is the last holder." This article does not attempt to deny the potential of cryptocurrency technology itself, but rather reveals the hidden truths within the current token issuance and circulation mechanisms: how it operates like a multi-level marketing scheme and systematically concentrates benefits upward. We hope this article can provide you with a clearer perspective, helping you to distinguish between narrative and reality in a market intertwined with illusion and hope.
The following is the original content:
Cryptocurrency has replayed the worst aspects of pyramid schemes—only this time it's an internet-native version, with higher marketing efficiency but lower transparency. Most tokens have evolved into a sophisticated pyramid game: those at the top extract the maximum profit, while retail investors are left with a pile of worthless "air coins."
This is not a coincidence, but a structural issue.
In traditional pyramid schemes, such as Herbalife or Mary Kay, products are often overpriced, and their effectiveness is worse than that of alternatives available in the market. The core difference lies not in the products themselves, but in the sales method: instead of through retail stores, individual agents purchase products upfront and then seek out customers willing to take them over.
The result quickly shifted from "selling products" to "recruiting people." Everyone's motivation for buying products was not to use them, but to be able to sell them at a high price to others in the future. Ultimately, when there were only "speculators" left in the market and no real users, the pyramid could no longer sustain itself. Those at the top took away all the asymmetric profits, while the participants at the bottom could only stare blankly at a pile of unsold inventory.
Token Pyramid
The operating logic of cryptocurrencies is similar to that of multi-level marketing. The token itself is the "product" - a digital asset with an inflated price and almost no practicality apart from speculation. Just like distributors in a multi-level marketing system, token holders do not buy tokens for use, but rather to sell them to the next person at a higher price later.
This pyramid structure is similar to traditional MLM, but cryptocurrencies have their own unique ecosystem of participants that make up different tiers. Compared to traditional MLM products, tokens are more ideal carriers: they can make more efficient use of the Internet and social networks, are easier to trade and acquire, and spread faster and more widely. The operating logic is roughly as follows:
In traditional pyramid schemes, if you recruit downlines and they sell products or continue to purchase, you can profit from it. The mechanics of tokens are the same: you get others to take your "goods" and then recruit some newcomers who join later than you. This benefits both you and those above you, as the newcomers provide "exit liquidity," leading to a price increase. At the same time, newcomers will also start promoting actively because they now have tokens too! Early holders can cash out at a higher price (the profit multiples have increased!). This mechanism is very similar to a pyramid scheme, but with even more power.
The higher you are in the pyramid, the more motivated you are to continuously issue new coins and keep pushing this gameplay.
Divine Existence: Exchange
At the top of the crypto pyramid are those true "deities" — the exchanges. Almost all "successful" tokens are inextricably linked to the deep manipulation of exchanges and their associated market makers. They control the distribution and liquidity of tokens, and if project teams want to access the platform and obtain distribution resources, they often must "tribute" — that is, surrender a portion of their tokens for free.
If you don't follow their rules, your tokens won't go live, or can only remain in a "hell" of extremely poor liquidity, ultimately dying silently. Exchanges can kick market makers out at any time, require project parties to provide token lending for their employees to cash out, and even unilaterally change service terms at the last minute. This hegemony is well understood by everyone, but they can only endure it in silence—because this is the price for "liquidity" and "distribution."
For entrepreneurs, exchanges are an insurmountable barrier. Whether or not a project can be listed on a top exchange often depends on the "network of relationships" rather than the quality of the project itself. This explains why so many projects today have emerged with "invisible co-founders" or "former exchange employees" who are responsible for networking and opening channels. Without experience or connections, it is almost impossible to successfully navigate the process of getting a token listed.
Demigod: Market Maker
Market makers theoretically play the role of providing liquidity to the market, but in reality, they often help project parties secretly sell through OTC transactions while using their information advantage to reap profits from ordinary users. They typically hold a considerable portion of the total token supply (sometimes up to several percent), and use this to manipulate trades and gain asymmetric arbitrage opportunities. For tokens with a very small circulation, this influence is greatly amplified, putting them in an extremely advantageous position during trading.
The money earned purely by "providing liquidity" is extremely limited, but through reverse trading against uninformed users, one can earn a fortune. Among all market participants, market makers have the clearest understanding of the circulation of tokens—because they know both the real market fluctuations and hold a large amount of tokens. They are at the pinnacle of informational advantage.
It is also very difficult for the project team to evaluate the "quotation" of the market maker. Unlike haircuts, which have a clear price, the price of a market-making service varies from person to person. As a start-up project, you have no idea which terms are reasonable and which are inflated, which has given rise to another gray phenomenon: the proliferation of invisible co-founders and "market making consultants". In the name of consultants, they match you with each other, but they further increase the complexity and cost of issuing coins.
King: VC and Project Party
Beneath the exchange are the project teams and VCs, who captured most of the value during the private placement stage. Before the public has even heard of a project, they acquire tokens at a very low price, and then weave narratives to create a "liquidity exit" for the tokens.
The business model of crypto VCs has become extremely distorted. Compared to traditional venture capital, obtaining a "liquidity event" in the crypto industry is much easier, so they do not truly encourage long-term builders. In fact, the opposite is true—VCs can completely turn a blind eye and tacitly allow predatory token economic models as long as it benefits them. Many VCs have long stopped pretending they are supporting sustainable businesses and are systematically participating in and supporting various "pump-and-dump" speculative behaviors.
Tokens have also given rise to a peculiar incentive: VCs have an incentive to artificially inflate the valuation of their portfolios (effectively "harvesting" their own LPs) in order to raise fund management fees. This is especially common with low-circulating tokens – they can use FDV to mark the book capitalization, thereby inflating the project's valuation. This practice is extremely unethical, because once the tokens are fully unlocked, it is simply impossible to exit at that price. This is one of the key reasons why many VCs will struggle to raise new funds in the future.
Although platforms like Echo have slightly improved this reality, there are still a large number of black box operations behind the scenes in the cryptocurrency industry that ordinary investors cannot see.
Key Opinion Leader: KOL
Next level down is KOLs, who usually receive tokens for free when a project launches in exchange for promotional content. The "KOL financing round" has become the norm in the industry—KOLs participate in investment and receive full returns after TGE. They use their communication channels to exchange for free chips, and then brainwash their fans, who ultimately become their "exit liquidity."
Soldiers: Community members and the Wool-Pulling Party
The "community" and airdrop players make up the bottom layer of the pyramid's workforce. They undertake the most basic tasks: testing products, generating content, and creating activity in exchange for token distribution. However, even these activities have now been "industrialized": rewards are decreasing, while the work put in is increasing.
Most community members often realize after a long time of working for the project for free that they are actually just an outsourced marketing department for the project team—only to see the project start to crash mercilessly after the TGE. Once they become aware of this, anger spreads, and they "pick up arms." This "angry community" is extremely detrimental to projects that genuinely want to create products, as it creates additional disruption and noise.
Leeks: Retail Investors
The bottom layer of the pyramid is the ideal retail investor – the "exit channel" for everyone above them. They are fed various narratives and stories, granting a certain asset a "meme premium" to attract more buyers, allowing upper players such as foundations to smoothly offload their assets.
However, this cycle is different from the previous ones; retail investors have not really entered the market. Today's retail investors are more cautious and skeptical, which leaves community members holding a bunch of worthless airdrop tokens, while insiders have long cashed out through over-the-counter transactions. I suspect this is also one of the reasons why you often see people on the timeline angrily complaining about token crashes or worthless airdrops: because in this cycle, retail investors haven't really taken the bait, while the founders are still making a fortune.
Consequences
In the current cryptocurrency industry, the core is not about making products, but about telling stories—narrating a "high illusion yield" to entice others to buy a certain token. Focusing on product development has instead become an unencouraged behavior (although this is slowly changing).
The entire token valuation system has completely distorted, no longer based on fundamentals, but reliant on "market cap benchmarking" for horizontal comparisons. The core question of the project has shifted from "What problem does this token solve?" to "How much can it rise at most?" In this environment, projects can hardly be reasonably priced or evaluated. What you are buying is not a company that is being built, but a lottery ticket; this must be recognized when investing in cryptocurrencies.
Selling a narrative script is very simple: you just need to come up with a "story that sounds reasonable but is actually impossible to price," such as:
"This is a stablecoin project backed by Peter Thiel, and its tokens can be seen as an indirect exposure to Tether equity. The optimism for this token stems from Circle's market capitalization of $27 billion, while Tether's revenue and profits far exceed those of Circle, with lower operational costs. Currently, there are no products in the market that allow you to invest directly in Tether, and this token perfectly fills that gap! They are also building an infrastructure similar to Circle's payment network and planning to introduce privacy features. This is the future of finance, with a market cap projected at $100 billion!"
If you want your friends to buy a token, this type of narrative is very useful. The key is: the story needs to be told "clearly enough," but also "leave enough room for imagination," so that they can envision a future with a high valuation.
What should be done next? Fix the market structure of the tokens
I still firmly believe that the crypto industry is one of the few fields that can bring tremendous asymmetric returns to ordinary people, but this advantage is gradually disappearing. Speculation is the core product-market fit (PMF) of crypto and was the initial "hook" that attracted market participants' attention to everything we are building. For this reason, we urgently need to repair the entire market structure.
The second part of this article will explore how platforms like Hyperliquid could potentially change the rules of the game.