The dilemma of token design and solutions, from incentive mechanisms to demand-driven transformation.

This article analyzes the main issues of current Token design, including Liquidity Mining, threshold-less Airdrop, high FDV and low circulation, as well as the lack of income sharing or value accumulation mechanisms.

Original title: “Your token sucks (and everybody cares)”

Written by: @CaesarJulius0, Co-founder of StableJack xyz

Compiled by: zhouzhou, BlockBeats

Editorial Note: This article analyzes the main issues in current Token design, including Liquidity Mining, no-threshold Airdrop, high FDV and low circulation, as well as the lack of income sharing or value accumulation mechanisms. Excessive incentives and unreasonable Token releases have led to market dilution and price declines, lacking long-term value creation. To address these issues, a demand-based unlocking plan is proposed, emphasizing that Tokens should be sold at a discount to genuinely committed users, and ensuring the long-term value and market demand of Tokens through income sharing and value accumulation.

The following is the original text (for ease of reading and understanding, the original content has been slightly reorganized):

This round of cycles is frustrating, the old tricks no longer work. Your favorite coin is no longer increasing 10 times within a month, and is even lagging behind every day (ETH, you know what I mean).

If you are a project team, it’s even harder. You put your heart and soul into building the product, the testnet user feedback is fantastic, but after the TGE… no one cares anymore. Why? Because the token hasn’t increased in value.

Macroeconomics and marketing are indeed important, but we have to face the reality: does your Token really have a reason to rise? Is your token economic model reliable, or is it repeating those patterns that have already been proven ineffective? When everyone would rather hold meme coins than touch your altcoin, should we rethink token design?

This article will analyze the main issues in current token design and propose a new approach.

Inherent Issues in Token Design

• Token Inflation - Liquidity Mining
• Continuous selling pressure - no threshold Airdrop
• High FDV Low Liquidity
• No profit distribution or value return mechanism

To put it bluntly, most investors care about the token price, not the technology. They invest money in the project party in the hope that these technical giants will realize their vision. At the end of the day, both parties should be winners – the investor will at least get a reasonable return, and the project party can focus on development.

Next, we will break down these issues separately:

Liquidity Mining

No legitimate project should issue tokens in unlimited quantities without a plan. You won’t see Tesla giving away stocks to people who buy cars, so why do some DeFi protocols treat tokens as free giveaways?

Tokens are supposed to have value, but many teams abuse “incentives”, leading to the market being infinitely diluted. If the project party themselves do not cherish the tokens, how can investors possibly have confidence in them? This creates a vicious cycle: those who receive the tokens will only sell them off, rather than hold them long-term.

Liquidity Mining is one of the main reasons for the collapse of altcoins. When designed poorly, it can trigger a “race to the bottom”: new users come in to mine, cash out their rewards, and then move on to the next project, leaving behind only the old users who are at a loss. If there is no mechanism to ensure long-term value creation, this situation will not change.

No Threshold Airdrop

Airdrops themselves are not an issue, but most airdrops fail to bring in long-term users. The problem is not only that the recipients will sell off, but also that many airdrop models only reward short-term “task-oriented” behavior rather than genuine user participation.

The usual process is as follows:

• Participants (usually bots) complete some basic tasks to qualify for the airdrop.
• The protocol distributes tokens at TGE.
• Many recipients cash out immediately.
• Token plummets, making it difficult for the protocol to retain users.

Does it sound familiar? The real issue lies in the misalignment of the incentive mechanism—the airdrop recipients have no reason to stay, not because the product lacks value, but because the airdrop itself does not consider long-term participation.

Not all projects should conduct airdrops, and for those that do, the airdrop should reward truly active users, not just those who complete one-time tasks.

Hyperliquid and Kaito are great examples. Their airdrops do not encourage artificial manipulation but rather align with the behaviors that users already exhibit—Hyperliquid rewards active traders, while Kaito rewards authors who consistently contribute high-quality content. This not only promotes genuine participation but also increases long-term holding rates, rather than allowing funds to flow towards short-term arbitrageurs.

High FDV, Low Liquidity

Many projects raise huge sums of money for development in the early stages, while early investors want to recoup their capital as quickly as possible. This results in a high FDV (fully diluted valuation) but a low circulating supply, making the token heavily inflated at the time of listing.

The problem is that a high FDV will limit the profit potential for early retail investors, as most tokens are locked up in the hands of institutional investors, whose costs are much lower than the market price. Once the unlocking begins, these early investors often cash out under market demand, leading to a continuous decrease in price. Ultimately, the token price falls, and everyone starts to care.

There is no perfect solution, but for projects with high FDV, there must be strong fundamentals and real market demand; otherwise, they will only become the “exit liquidity” for early investors.

There is no revenue share or value accumulation

Now, let’s talk about the most important question: why should your Token exist?

If it has no revenue sharing, no value accumulation, and no actual utility, then why would anyone hold it long-term? If your token is just a speculative substitute, then its eventual tendency towards zero is only a matter of time.

Many founders avoid revenue sharing to maintain full control over profits, which is understandable, but if there is no good reason for users to hold it, the market will price the token accordingly. At the end of the day, value accumulation is not optional. Whether it’s through revenue share, real earnings, or meaningful in-protocol utility, tokens must justify their existence.

Relying solely on “governance” cannot solve the problem. Most governance Tokens lack real power, and even if investors decide to adopt a certain model, it is almost always related to turning on a fee switch—this is still related to revenue sharing.

The MetaDEX model performs quite well by distributing revenue to token stakers (such as Aerodrome, Pharaoh, and Shadow Exchange). This allows them to create demand for the tokens and increase the staking ratio.

What is the solution? My solution is simple: a demand-based unlocking plan.

Tokens should not be released according to a fixed schedule, but should only enter circulation when there is actual demand from active users of the protocol. Additionally, tokens should not be distributed for free through Liquidity Mining rewards, but should be sold to users at a discounted price, ensuring that only those who are truly invested in the protocol can become holders. Here are three industry leaders proposing similar solutions:

Luigi DeMeo shares a similar view, emphasizing that most Token models face uncontrollable inflation issues, leading to weakened value accumulation. He points out that Liquidity Mining usually attracts short-term participants who immediately sell off Tokens, depleting the protocol’s resources, yet failing to ensure long-term engagement. Without market-driven demand and revenue sharing, Token holders can hardly see any real value.

Vitalik Buterin tweeted that the protocol should consider discounted sales rather than giving away tokens for free, which also supports the main point of the article.

Andre Cronje directly raised this issue. He believes that Liquidity Mining attracts temporary participants who mine for rewards and exit after the incentives disappear, causing ongoing selling pressure. As a solution, he proposed “option rewards”—that is, Liquidity providers can purchase Tokens at a discounted price after a set period instead of being directly given Tokens. This mechanism ties their incentives to the long-term success of the project, as their rewards will only appreciate when the protocol thrives.

At Stable Jack, we are implementing a solution called Discount Tickets—a system designed to make Token distribution sustainable, demand-driven, and resistant to hired capital.

How it works:

Only active users can obtain discount tickets, granting them the right to purchase $JACK at a market price discount.

The protocol will not give away tokens for free—they are sold at a discounted price to ensure that committed users can accumulate meaningful holdings.

Unless there is real demand for $JACK, no new tokens will enter circulation—this is demand-based unlocking.

There is no unnecessary supply pressure - loyal users will not be shaken off by short-term participants.

What is the result? Believers, not mercenaries, become holders. There is no uncontrolled inflation. No free giveaways. There is only a model that prioritizes user and protocol alignment for the long term. In addition, the protocol can also accumulate its own Liquidity, alleviating sell-off pressure and continuing product development.

Conclusion

For years, altcoins have struggled under imperfect token models—unsustainable liquidity mining, poorly structured airdrops, and rampant inflation have consumed value without creating it. The solution is not to remove incentives, but to align incentives with long-term participation and actual value accumulation.

We need to shift from time-based unlocking to demand-based unlocking, ensuring that tokens only enter circulation when there is real market demand. Projects should not give away tokens for free, but should sell them at a discounted price to committed users, while incorporating a revenue-sharing mechanism that gives holders substantial benefits in the success of the protocol.