Author:iwillpat
Compiled by: Jiahuan, ChainCatcher
Since the era of "Rollup as a Service" (RaaS) began, the outcome was already predetermined. This is the precursor to the execution layer entering a death spiral and commoditization.
What I mean is, general-purpose L1 tokens will continue to trend towards zero, and likely no exceptions. I will try to explain why, and what I would do differently if I were an L1 operator.
The main drivers of L1 failure are as follows: linear token releases, failed value propositions, poor governance, and industry "leadership".
I will briefly elaborate on these points—these are just personal views, not definitive conclusions.
Linear staking releases in their current form have some benefits, namely distribution through liquid staking ("My 7% APY!"), but they fail in several key aspects.
Delegated Proof of Stake (DPoS) makes it easy for armchair "decentralization fundamentalists" to participate in network security, but it does not properly incentivize insiders, users, and developers. At best, it incentivizes people to hold tokens, doing nothing to create any real value.
The most classic argument I've heard about PoS is: large validators have an economic incentive not to dump on you. But that hasn't stopped them from selling every possible allocation and block reward.
This leads to my next point: they sell because L1 tokens have no long-term value proposition.
Tissue Paper Thin
The "gas token" and "governance" narratives are tired and unconvincing—like two-ply Bounty paper towels that disintegrate when wet. The value of a network token depends on what you can buy with it.
So the goal of all blockchain teams should be to push their token as a currency as widely as possible. In the pursuit of higher TPS and lower block times, the industry's vision of "peer-to-peer electronic cash" seems to have been lost.
Let's be brutally honest: throughput, TVL, and low latency give the token no value. Liquidity and usage rate do.
This next point is the most substantial and painful: blockchain "Labs". (And various foundations.)
Selling at unlock, large-discount OTC deals, eye-watering operational expenses, incentive programs to attract hot money, hiring "KOLs"... we can all name a few.
Ultimately, every dollar spent by Labs is a tax on token holders. Unless that Labs generates revenue through some service, first-party wallet, or application, it is surviving by selling tokens.
This in itself is not bad—they provide valuable services through engineering resources, explorers, and APIs. But if Labs does not bring net new buy pressure to the token, and expenses are climbing unsustainably, it is slowly bleeding to death.
One of the primary goals of Labs should be to build the network into a permissionless, self-sustaining system that passes the "hands-off test". Eventually, business development should be community-driven, and the network should have its own spiritual "CTO".
This doesn't require 400 employees; 30-40 excellent people are enough, plus those developing first-party apps and services.
Finally—after this I'll share my "solution"—cryptocurrency has been led astray by many large capital allocators and advisors.
Putting aside FTX, Celsius, and Luna, we have been force-fed by the industry's biggest players: short-term narratives, excessive leverage, "maximal extractable value", like stuffing a pathetic, bloated retail turkey.
Promoting TPS over smart contract security, investing in the 10th general-purpose blockchain, raising funds at outrageous valuations, raising far more capital than needed, claiming security advantages that simply don't exist... these are all classic symptoms of severe crypto brain rot.
Placing bold bets on the direction of the industry is one thing—privacy coins, MoveVM, tokenized IP, decentralized social.
But burning money into another idiotic hype cycle or short-term cash grab is another matter entirely: RaaS, data availability, any L1 that tokens at a product with a multi-unicorn valuation before having a product, infrastructure solutions for crypto problems that don't exist or generate revenue...
(Full disclosure: I don't claim to be an investment genius, but I can do basic math. Buy pressure must exceed sell pressure.)
Where to Next?
Next, I will briefly talk about where the industry should go.
We need new L1 token models and a completely different way for crypto VCs to play. The current "low float, high FDV" paradigm works when valuations are lower and there is incremental capital flowing in.
But retail is no longer willing to pay for seed-round valuations that are 1000x at TGE, nor withstand the selling pressure from massive unlocks and insider staking rewards 12 months later.
L1s simply don't need hundreds of millions to launch a mainnet—unless I'm missing something. Raise enough to build the platform and go to market, then raise more later; everyone will be better off.
Token unlocks should be tied to milestones like CEX liquidity, payments, and DeFi lending, and on-chain governance should be given higher priority. Foundations should maintain at least some transparency regarding their balance sheets, expenses, and investments.
Retail doesn't want to pay for network security (i.e., validator rewards). Eventually, the network should be able to sustain itself without any staking rewards.
Maybe staking rewards shouldn't have existed from the start, and network or Labs revenue should go directly to validators. Then, see how hard validators would work.
Less and less value is flowing to the base layer, and we shouldn't be investing so much in their development. Gas fees on all chains are trending towards zero, successful applications are migrating to their own chains, and cross-chain bridging has never been easier.
So you can draw this conclusion: it's better to build an application (or appchain) first and then vertically integrate—Hyperliquid, Pump, etc. have done this.
I'm not saying to stop investing in general-purpose blockchains, but I do believe the core function of a network token should ultimately be a truly useful medium of exchange—permissionless L1s should be liquidity hubs for DeFi and testing grounds for new applications.
These are not new ideas. I think many L1 teams have realized: to survive, they need to build their own applications and services. The treadmill of foundations surviving by selling tokens is slowing down.
If you work in these teams on something that doesn't generate revenue, you might want to start thinking about what value you can create.
Interestingly, mass adoption by retail or institutions seems far less important than building a strong holder community and keeping them happy. When in doubt, ask the community.
Even if their advice is terrible, at least ask them who their favorite and least favorite person on your team is.
I hesitated for weeks about posting this. This is not a well-structured thought piece; it's more like a bunch of shower thoughts.
My point is: all L1s are making the same serious mistakes, differing only in luck and timing. The best-performing projects survive, usually due to stronger leadership and faster delivery, but the question of a sustainable value proposition remains unanswered.
We can continue down this long and painful path of value extraction, watching BTC maxis and sats stackers continue to outperform; or, we admit the problems with the current L1 model and start building for a slightly fairer outcome.
