Another Perspective on High FDV Tokens Declining: The False Prosperity Brought by Excessive Points Mining
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Another Perspective on High FDV Tokens Declining: The False Prosperity Brought by Excessive Points Mining
Neither project teams nor users should be blamed. As long as it's profitable, they will always show up.
Navigating Web3 tides with focused insightsAuthor: dingaling
Compiled by: TechFlow
In recent years, discussions about high FDV (Fully Diluted Valuation) and low circulating supply projects have been rampant, yet these debates often overlook a core issue. The persistent post-TGE (Token Generation Event) decline in token markets isn't limited to Binance—it's also affecting exchanges like OKX and Bybit. We've seen launches of high-FDV/low-circulation projects before, but this time feels different. Here’s my take on the current situation.
Over the past few years, top-tier exchanges began imposing strict requirements for project listings prior to token launch, such as requiring large user bases (e.g., over 500,000 monthly active users) or high TVL (Total Value Locked, exceeding $1 billion). These projects are only listed at TGE, meaning they get just one shot at listing. For top-tier projects like Arbitrum and Optimism, meeting these criteria wasn’t an issue—speculation around airdrops alone was enough to drive massive user engagement. They could reliably generate buzz on Binance and Coinbase from day one, even when it wasn’t yet confirmed whether tokens would actually be issued.
However, for projects without similar venture backing or well-known founders, fulfilling these requirements has become extremely difficult. Without a liquid token to incentivize users, potential airdrop rewards alone aren't sufficient motivation for participation. To address this, projects began launching points programs based on on-chain activity, TVL, or NFT holdings, essentially guaranteeing future token airdrops as rewards for early user engagement.
If you were new to the space, many past projects conducted their TGE on the same day as product launch, using tokens to incentivize dapp usage. If there was no product-market fit, both the token and the project would fade away. If the project gained traction, exchanges would monitor metrics and list based on organic demand.
The main problem today is that points distributed by projects are being speculated upon long before the actual token launch, causing retail participants to enter at high FDVs with limited returns. Only those who farm points more efficiently than others receive larger airdrop allocations. In other words, it’s a PVP game (player versus player). Do they genuinely care about these protocols? Most of the time, no. Will they continue supporting the project after the airdrop? Likely not, because efficient farming is exhausting.
Project teams, leveraging aggressive incentives, can easily attract “millions” of users and trading volume—even though much of it is bot-driven. Unfortunately, for some time now, top exchanges have shown little concern for the authenticity of these metrics, choosing to list questionable projects anyway. This has led to a surge of new projects adopting point systems purely to inflate token distribution and TVL. These projects do nearly identical things, each offering slightly different token incentives.
While points programs were somewhat effective in driving initial dapp or chain engagement, today every project runs some form of points-based airdrop, while liquidity and opportunity costs across the market reach all-time highs. Consider this example: You deposit $10,000 into a protocol, complete daily tasks for three months, and eventually receive a $5,000 airdrop at TGE. You find out the FDV is already $1 billion, despite everyone expecting $500 million. In the current environment, the rational move is to sell the airdropped tokens and redeploy capital into the next promising protocol.
This results in inflated FDVs at listing, as exchanges and VCs believe these projects hold massive future potential—when in reality, the valuation is largely driven by coordinated speculation among users and their networks. Now imagine achieving the same airdrop value simply by posting code snippets repeatedly on Twitter every day. Even though all your friends have muted you, you still succeed. You realize your actions contributed almost nothing to the actual success of the project, so you decide to sell immediately.
Overall, market expectations have shifted to assume that every project must fully compensate users for all efforts made pre-TGE—with substantial returns. If a project fails its airdrop (token price drops or farmers receive minimal allocation), it will struggle to retain quality users in subsequent cycles.
This vicious cycle leads to increasing numbers of people dumping airdropped tokens on listing day, further deteriorating performance of newly launched tokens, destroying any natural demand that might have existed, and negatively impacting other projects planning future airdrops.
How can we fix this?
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First, I don’t think VCs (venture capitalists) should be blamed. While they may contribute to higher FDVs, they typically have one-year lock-up periods. We need to ask why FDVs are being inflated in the first place. Top VCs look for strong teams, solid user traction/TVL, and compelling narratives.
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Neither projects nor users should be blamed. As long as it's profitable, they will keep showing up. That’s a feature of crypto, not a bug.
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Therefore, CEXs (centralized exchanges) currently hold significant power. Whether you like it or not, getting listed on Binance today automatically inflates a project’s FDV at TGE.
Hence, I suggest top exchanges take the following steps:
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List more tokens that have already traded on secondary markets and demonstrated strong organic demand. While self-hosted launches generate fees, forcing all projects to adopt points systems pre-TGE is ultimately harmful to the ecosystem.
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Identify projects with genuine organic users and product-market fit, ensuring tokens are naturally integrated into incentive structures.
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Avoid listing tokens with extremely low circulating supplies (below 5%).
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Don’t be fooled by fake metrics.
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Reward teams that build real, loyal communities, rather than those solely chasing airdrop farmers.
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Hire analysts who understand how to evaluate the quality of token airdrops at TGE, including post-launch token utility plans.
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Consider whether airdrop recipients are likely to dump or hold, and use the former as a criterion for rejecting listings.
This is just the tip of the iceberg—many other factors are at play, and others have already explored them in depth. So I’ll stop here.
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