By Fu Shaoqing, SatoshiLab, Wanwu Island BTC Studio

1. Prelude The phenomena of VC coins and meme coins have sparked more reflections, and many well-known figures in the industry have raised similar questions, all trying to find solutions. For example, during He Yi's Twitter Space event on "Gossip Coins," Jason (Chen Jian) asked whether there is a mechanism to prevent project teams from selling their coins and then lying down after listing on Binance. Recently, CZ published "A Crazy Idea for Token Issuance," also attempting to find a solution to related issues.

   All teams that are truly working on projects hope that the market rewards real contributors, rather than allowing Ponzi schemes, scammers, and speculators to take the industry's dividends and disrupt its development.

   Since VC coins and meme coins provide excellent case studies, this article will analyze them.

2. The Past and Present of VC Coins VC coins did not appear out of thin air; their emergence has historical reasons. Although VC coins may seem imperfect now, they played a significant role initially, and important projects in the industry have VC involvement.

   2.1. The Chaos of 2017 ICOs - A Time of Madness 2017 was a key year for the explosion of Initial Coin Offerings (ICOs) in the blockchain field. It is estimated that the ICO financing volume exceeded 5 billion US dollars that year. In addition to the classic ICO projects introduced below, the author also participated in some small project ICOs, fully experiencing the madness of the time. It is not an exaggeration to describe it as a time of madness. At that time, as long as a project's token was going to be ICOed, with someone to stand behind it, a well-written white paper, and thrown into some groups, it would be snapped up immediately. People were crazily irrational. To exaggerate, even if a pile of feces was thrown into the group, it would be snapped up. (This also reflects the powerful influence of ICOs)

   For the reasons behind the explosion, through exchanges with DeepSeek and Chatgpt, as well as my own understanding, I summarize as follows:

   (1) Mature Token Issuance Technology: Especially with the launch of Ethereum, developers could easily create smart contracts and decentralized applications (DApps), which promoted the rise of ICOs.

   (2) Other Reasons: Market demand, the initial popularity of the decentralized concept, giving people beautiful expectations, low-threshold investment, etc.

   During this period, several classic cases emerged:

   (1) Ethereum (ETH): Although Ethereum's ICO was in 2014, in 2017, Ethereum's smart contract platform was widely used for many new project ICOs. This project is still very good and has grown to be the second in the Crypto world.

   (2) EOS: EOS raised nearly 4.3 billion US dollars through a year-long, staged ICO in 2017, becoming one of the largest ICOs of that year. This project has almost disappeared now, partly because the technical route was not correct, and partly because it did not grasp market demand well.

   (3) TRON: TRON's ICO in 2017 also raised a lot of funds. During the coin exchange with other projects, there were many rumors of plagiarism, but its subsequent development was rapid and attracted a lot of attention. Compared with those who ran away, didn't Sun do quite well? His grasp of market demand is very accurate, such as the income of Tron stable coins. The development results of Tron are quite good. If the HSR (Hshare, nicknamed Red Burnt Meat) that was exchanged for Tron at the beginning had kept the share of Tron, the income would be higher than his own project.

   (4) Filecoin: Filecoin successfully raised more than 250 million US dollars in 2017. Its distributed storage concept was widely concerned, and the founding team, including Juan Benet, was quite luxurious. This project cannot be said to be successful or unsuccessful, but whether it can develop healthily is a question.

   Personally, I feel that there are more non-classic cases, and their impact is greater. This is also a significant historical reason for the emergence of VC coins.

   Problems Exposed:

   (1) Lack of Regulation: Due to the rapid development of the ICO market, many projects lacked regulation or had no regulation at all, exposing investors to high risks. There were many scams and Ponzi schemes, and almost 99% of the projects had exaggeration and fraud.

   (2) Market Bubble: A large number of projects raised huge funds in a short period (these funds were not well managed), but many of them lacked actual value or the described scenarios were completely impossible, which led to even projects that did not want to defraud running away or failing.

   (3) Lack of Investor Education, Hard to Judge: Many ordinary investors lack understanding of blockchain and cryptocurrencies, making them easily misled and leading to investment decision mistakes. Or investors have no way to measure the project or supervise the project's progress事后.

2.2. VC's Entry and Credibility Endorsement From the above description, we see the chaos after ICO. At this time, venture capital (VC) first stood out to solve the problem. VC provided more reliable support for projects through its own credibility and resources, helping to reduce many of the problems brought about by early ICOs. At the same time, it played an additional role in helping the majority of users to screen.

VC's Role:

(1) Replacing the Defects of Grassroots Financing in ICOs

Reducing fraud risk: VC filters "air projects" through "strict due diligence" (team background, technical feasibility, economic model), avoiding the rampant forgery of white papers in the ICO era.

Standardizing fund management: Using staged investment (funding according to milestones) and token lock-up terms to prevent team cash-out and running away.

Long-term value binding: VC usually holds project equity or long-term locked tokens, deeply binding with project development, reducing short-term speculation.

(2) Empowering Project Ecology

Resource导入: For projects,对接 exchanges, developer communities, compliance consultants, and other key resources (such as Coinbase Ventures helping projects go public).

Strategic guidance: Assist in designing token economic models (such as token release mechanisms) and governance structures to avoid economic system collapse.

Credibility endorsement: The brand effect of well-known VCs (such as a16z, Paradigm) can enhance the market's trust in projects.

(3) Promoting Industry Compliance

VC promotes projects to actively comply with securities law (such as the US Howey Test), using SAFT (Simple Agreement for Future Tokens) and other compliant financing frameworks to reduce legal risks.

VC's involvement is the most direct solution to the problems of the early ICO model. Overall, VC has played a crucial role in the success of Web3 projects. Through funds, resources, credibility, and strategic guidance, it has helped projects overcome many challenges faced in the early days of ICOs, and indirectly helped the public complete the initial screening.

2.3. Problems with VC Coins New things appear to solve some old problems, but when this new thing develops to a certain stage, it also begins to show a series of problems. VC coins are such a case, and later they showed many limitations.

Mainly reflected in:

(1) Conflict of Interest

VC is an investment institution that profits from investments. It may push projects to over-tokenize (such as high解锁 pressure) or prioritize its own investment portfolio (such as exchange VCs supporting "own child" projects).

(2) Inability to solve subsequent project development problems.

(3) Conspiring with project parties to deceive retail investors (some project parties and VCs do this, and big-brand VCs are relatively better).

VC institutions only complete the early investment and profit exit环节. On the one hand, they have no obligation, and on the other hand, they have no ability and no willingness to do so for the later development of the project. (If the VC's ultra-long解锁 period is restricted, will it be better?)

The main problem with VC coins is that after the project's coin is listed, there is a lack of continuous construction motivation. Both VC and project parties will cash out and run away after listing. This phenomenon makes retail investors very resentful of VC coins, but the essential reason is still the lack of effective supervision and management of the project, especially the matching of funds and results.

1. Inscriptions' Fairlanunch and Meme Coin Phenomenon The outbreak of inscriptions and Fairlanunch in 2023, and the pumpfun mode of memecoin in 2024, all reveal some phenomena and expose some problems.

   3.1. Outbreak of Inscriptions and Fairlanunch In 2023, two significant trends emerged in the blockchain field: the outbreak of Inscriptions (Inscriptions) technology and the widespread adoption of Fair Launch (Fair Launch) model. Both phenomena originated from a reflection on early financing models (such as ICOs and VC monopolies). In the inscription field, most VCs generally反映 that they have no opportunity to participate in the primary market, and even in the secondary market, they dare not invest too much. This reflects the pursuit of decentralization and fairness by users and the community.

   Inscriptions first broke out on the Bitcoin blockchain, represented by BRC20, and produced important inscriptions such asORDI and SATS. The outbreak of inscriptions has some reasons: the need for innovation in the Bitcoin ecosystem; users' needs for censorship resistance and decentralization; low threshold and wealth effect; resistance to VC coins; and the attractiveness of fair launch.

   Inscriptions also created some problems:

   Pseudo-fairness: In fact, many participating addresses may also be disguised by a few institutions or big players;

   Liquidity dilemma: Inscriptions on the Bitcoin mainnet have high transaction costs and time costs;

   Value loss: The huge mining fees generated by creating inscriptions are taken away by miners (loss of pegged assets), and do not empower the closed loop of the Token's ecosystem;

   Application scenario problem: Inscriptions have not solved the continuous development problem of a Token, and these inscriptions do not have "useful" application scenarios.

   3.2. Outbreak of Pumpfun and Meme Coin Phenomenon The origin of Meme is relatively early and was originally a cultural phenomenon. The real world regards Hal Finney's NFT concept proposed in 1993 as the earliest origin. The emergence of NFT was promoted by Counterparty, which was established in 2014. Based on it, Rare Pepes turned the popular meme Sad Frog into an NFT application. Meme is translated as meme, which is equivalent to an emoticon, a sentence, or even a video, GIF.

   Since Meme has emerged in the NFT field and with the maturity of some technologies, it has begun to form memecoin. In 2024, the Pump.fun platform based on the Solana chain quickly rose and became the core place for memecoin issuance. The platform, through a simple and complete token service process (ICO + LP + DEX) and speculative炒作 mechanism, has had a significant impact on memecoin in 2024. The author believes that the important contribution of Pumpfun is that the platform has combined three separate services into a complete closed loop: token issuance, liquidity pool construction, and decentralized exchange Dex.