In an era of manipulated indicators, how can we see through the narrative fog of token economics? Taking $HYPE as an example.

The success of tokens depends on the three elements of storytelling, product-market fit, and value capture, but most projects encounter bottlenecks in the most critical value capture process. This article is based on an article written by Ponyo and compiled, compiled and contributed by Foresight News. (Synopsis: 200% burst in five minutes!) Hyperliquid staged XPL bloody empty, how do giant whales hunt the market? (Background added: Conversation with Hyperliquid founder Jeff: How 11 people built “On-Chain Binance”) Core Takeaways The success of tokens depends on three elements: narrative, product-market fit (PMF), and value capture. Most tokens stop at the “two-thirds” stage: the narrative is easy to build, and the product-market fit is challenging, but it is either success or failure; Value capture is more complex – stakeholder games, legal compliance requirements, and market-level considerations can make the design and timing of value capture mechanisms tricky. Only a few tokens ( such as HYPE), can meet all three elements at once. Many protocols that are otherwise strong will still encounter bottlenecks in value capture, even if the fundamentals are solid, which will limit the upside of the token; In some cases, there will even be a phenomenon where the fundamentals are weak but the token behaves the opposite. The investment triangle model is easy to understand, but difficult to put into practice. Indicators can be manipulated, protocol documents often obscure key details, and token economy mechanisms may be temporarily changed as the project progresses; Market narratives iterate quickly, and tokens that are not up to par or fully compliant on the three major elements today may move very differently in the future. In the early days of cryptocurrency, narrative alone could send token prices soaring, but that's long gone. Today, the success of tokens depends on three dimensions: 1) a strong narrative; 2) product-market fit; 3) Robust token value capture mechanism. A project that is excellent in all three dimensions is considered “excellent”, if two are satisfied, it is considered “good”, and if only one or none is satisfied, it is “bad”. This is the core thinking framework I use to evaluate tokens. Analysis of three dimensions 1. Narrative is the “story” recognized by market participants. Without a narrative, it's hard for a project to get attention. 2. Product and market fit (PMF) The core is real users, real fee income and real demand. Metrics vary from product to product, but the key is “paying users” – revenue and retention are top priorities. It should be noted that most indicators such as total lock-up value (TVL), number of wallets, number of transactions, and original transaction volume are easily manipulated, so multiple data dimensions must be cross-validated. For example, for perpetual contract decentralized exchanges, it is necessary to pay attention to both trading volume and open interest volume: if the open interest volume is low and the trading volume is high, it usually means that there is a false trading behavior. 3. Token value accumulation If the token cannot actually capture the value of the protocol, it is worthless. Common value accumulation mechanisms include fee sharing, token buyback, buyback burning, and mandatory usage scenarios. For me personally, buyback is the best choice ( reasons are detailed in the ) of Revenue Sharing is Dead, Buyback and Destruction. However, value accumulation is inseparable from protocol revenue: even if the accumulation mechanism is well designed, if the protocol itself has weak revenue, the token will still not pass the value verification. These truths seem obvious, and most people think they have already mastered them, but they will still fall into the misunderstanding of “narrative + user adoption = token rise”. Lifecycle characteristics The investment triangle is not a static model, and the three dimensions have different influences at different stages of the token life cycle: Narrative ( short-term ): In the early stage of the project, the team needs to rely on the narrative to attract liquidity, attention and user base. Product and market fit ( medium- and long-term ): Narrative can buy time and money for projects, but it cannot lead to user retention - only products that truly meet market needs can achieve long-term development. Value capture ( medium- to long-term ): If the token is not related to the cash flow of the protocol, even if the number of product users continues to grow, insiders may still sell the token, resulting in losses for holders. Why is “triple A” so difficult? Most tokens can only satisfy at most two of the three dimensions. Among them, narrative construction is relatively simple; Product and market fit is challenging, but the criteria are clear – either they solve market pain points or they don't. Value capture is the most underestimated link, as it quickly becomes a “game war” between all stakeholders: Project founder: pursue capital reserves and liquidity; Users: want lower fees and more incentives; Token holders: only focus on the increase in token prices; Market makers: need higher market-making financial support; Exchange: pursue low risk and good compliance image; Lawyer: I want to reduce legal disputes. These demands are often contradictory. When the team tries to balance the interests of all parties, it will eventually reduce the token to “mediocrity” - this is not the team's lack of ability, but the inevitable result of the interest incentive mechanism. Case Study HYPE: Three Straight-A Narrative: As a unique “Binance-level” decentralized exchange, its cumulative trading volume has exceeded $2.4 trillion, and it is positioned as “Layer 1 ( underlying blockchain ) that can carry all categories of financial business in the future”. Product and market fit: The average daily liquidation volume is $10-20 billion, and the open interest is about $15 billion, accounting for more than 60% of the decentralized perpetual contract market, with 640,000+ users and an average daily revenue of millions of dollars. Value capture: 99% of the commission (1% goes to the HLP fund ) which is used to buy back HYPE, and the proceeds of each transaction are returned to the token value system. Hyperliquid (HYPE) is the epitome of the “trinity”, perfectly covering three dimensions. LDO: Two Targets Narrative: As Ethereum's largest staking agreement, with a staking scale of about $40 billion, it is synonymous with “liquidity staking”. Ethereum staking is one of the strongest narratives in crypto today, and Lido is a central player in that narrative. Product and market fit: significant advantages —— The liquidity staking token issued by stETH (Lido ) has penetrated into the entire DeFi ecosystem, Lido has a near-monopoly market share, mature product experience and high user trust. Value capture: Completely missing. Although Lido charges a 10% fee for staking earnings, it is all owned by the node operator and the protocol treasury, and LDO holders have no income - the token only has governance functions. Lido, for example, generated more than $100 million in revenue last year, but LDO holders didn't receive a penny. Although Lido is the industry's leading protocol, its token has been reduced to a “bystander” and is a typical case of “two standards”. PENDLE: Two Targets Narrative: Occupy the core position of the “yield trading” track - users can split interest-bearing assets into PT ( principal tokens ) ( with YT ) yield tokens, and trade income rights on the Pendle platform. As a pioneer and head project on the track, Pendle deeply benefits from the market boom of “DeFi + liquidity staking”. Product and market fit: total lock-up value exceeds $10 billion, cumulative trading volume exceeds $50 billion, supports multi-chain deployment, and its Boros products open up new markets, which are recognized by income traders and liquidity providers. Value capture: There are shortcomings. Pendle to…