The evolution of token design in the blockchain space has been anything but smooth. From the speculative frenzy of 1COs to the hype-driven liquidity mining era, and now to a more mature phase emphasizing sustainable economics, the industry is undergoing a critical reevaluation of what makes a token truly valuable.
Drawing insights from Binance Research’s 2025 report on token model evolution—and synthesized by Stacy Muur—this article explores ten pivotal observations that reveal deep structural flaws in current tokenomics: failed governance, inefficient airdrops, misaligned incentives, and artificial supply dynamics. More importantly, it highlights a growing market shift toward tokens with real demand and revenue-backed value.
As the hype fades, projects are being judged not by their marketing, but by their economic integrity. In this environment, only those with clear utility, fair distribution, and sustainable models will survive.
👉 Discover how leading platforms are redefining token value in real time.
The Rise and Fall of Early Token Models
1. The 1CO Bubble: A Market Flooded with Fraud
Back in the initial coin offering (ICO) boom, promises were abundant—but results were scarce. According to data, only 15% of 1CO projects ever made it to a major exchange listing. The rest? A staggering 78% were outright scams, while the remainder either failed silently or faded into obscurity.
This era was defined by short-term speculation, minimal accountability, and little regard for long-term utility. Investors bought into whitepapers with grand visions, only to be left holding worthless tokens when development stalled or teams disappeared.
The lesson is clear: without real product-market fit or transparent roadmaps, tokens become nothing more than speculative instruments with no foundation.
2. Governance Tokens: Power Without Participation
One of the most promoted use cases for tokens has been decentralized governance. Projects like Uniswap distributed governance rights via airdrops, aiming to decentralize control and empower communities.
But reality paints a different picture.
After Uniswap’s UNI airdrop, only 1% of wallets increased their holdings, and 98% never participated in a single vote. This lack of engagement isn’t unique—it’s systemic.
Why? Because for most users, governance is neither rewarding nor accessible. Voting requires time, knowledge, and skin in the game—yet offers no direct financial incentive. As a result, governance often becomes symbolic, with decisions made by a small group of whales while the majority simply exit liquidity or sell immediately after receiving tokens.
In practice, "governance" has become less about community empowerment and more about justifying token distribution.
3. Liquidity Mining: A Short-Lived Incentive
Liquidity mining gained traction in 2019 with Synthetix and exploded during the DeFi summer of 2020. The idea was simple: reward users for providing liquidity to bootstrap decentralized exchanges.
Initially successful, these programs attracted massive capital—but retention was nearly nonexistent.
Data shows that 98% of airdrop recipients never engaged in governance, and most dumped their tokens as soon as vesting ended. The influx of liquidity was temporary, driven by yield chasers rather than loyal users.
This revealed a fundamental flaw: incentives based solely on rewards attract mercenaries, not builders.
4. Multi-Token Models: Complexity That Didn’t Pay Off
Projects like Axie Infinity and Helium experimented with multi-token systems—separating “utility” tokens from “value-capture” tokens in an attempt to balance usage and investment.
Axie used AXS for governance and staking, while SLP powered gameplay. Helium split HNT (network rewards) from IOT (data transactions).
But complexity bred confusion. Speculators flooded into utility tokens, driving up costs for actual users. Incentives became misaligned: players had to earn SLP but sell it instantly to cover expenses, undermining long-term sustainability.
Eventually, both projects moved toward simplified, single-token architectures—acknowledging that simplicity often wins over theoretical elegance.
Shifting Trends in Token Distribution and Valuation
5. The Peak of Private Funding
Between 2021 and 2022, private fundraising reached unprecedented levels:
- $41.46 billion raised in 2021
- $40.12 billion in 2022
That’s over twice the total capital raised from 2017 to 2020 combined. While this influx enabled rapid development, it also led to bloated valuations, excessive token allocations to insiders, and delayed public access.
When markets turned bearish, many of these projects collapsed under the weight of unsustainable economics.
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6. Airdrop Farming: Fake Activity Masquerading as Adoption
Layer 2 airdrops—like those from Arbitrum, Optimism, and zkSync—created massive spikes in cross-chain bridge usage. But once snapshot dates passed, activity plummeted.
Why? Because most users weren’t using the networks—they were farming for future token rewards.
This “sybil farming” created artificial engagement metrics, leading teams to mistake temporary traffic for genuine product-market fit. Worse, post-airdrop sell-offs destabilized token prices and eroded trust.
The takeaway: user behavior driven by speculation ≠ organic demand.
7. A New Era of Token Launches: Transparency Over Hype
By 2025, market expectations had shifted dramatically:
- Higher initial circulating supply
- Average FDV dropped from $5.5B to $1.94B
Tokens launched with greater transparency, lower valuations, and broader distribution consistently outperformed their overhyped counterparts.
Markets now reward honesty. Projects that avoid massive insider allocations and prioritize early community access are seeing stronger retention and price stability.
This signals a maturing ecosystem—one where real adoption beats artificial scarcity.
Emerging Solutions: From Buybacks to Real Yield
8. The Return of Buyback Mechanisms
In response to weak intrinsic utility, protocols like Aave, dYdX, Hyperliquid, and Jupiter have introduced structured buyback-and-burn programs funded by protocol revenues.
These mechanisms aim to reduce supply over time, creating artificial scarcity and supporting price floors.
While not a substitute for true utility, buybacks signal financial health and commitment to value accrual—a step forward in responsible tokenomics.
9. The Case of Hyperliquid: Buybacks Without Dividends
Hyperliquid has bought back and burned over $8 million worth of HYPE tokens, funded by 54% of its trading fee revenue.
However, critics argue this capital could be better used. Instead of returning profits directly to holders (e.g., via staking rewards or dividends), the protocol opts for deflationary pressure alone.
This raises an important question: Should tokens capture value through scarcity—or through income?
Protocols with real yield distribution may ultimately offer better alignment between users, investors, and builders.
10. Believe App: Democratizing Token Creation
A new trend is emerging with tools like Believe App, which enables anyone to launch a token instantly on Solana by tweeting a specific format—like “$TICKER + @launchcoin”—on X (formerly Twitter).
Using bonding curves for automated price discovery and liquidity deployment, it allows communities to create tradable assets without coding or centralized approval.
While empowering, this ease of creation also risks flooding the market with meme-driven tokens lacking substance—highlighting the ongoing tension between accessibility and responsibility.
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Frequently Asked Questions (FAQ)
Q: Why do most governance tokens fail to engage users?
A: Governance requires effort without immediate reward. Most users lack incentives to vote or hold long-term, especially when there's no direct financial benefit tied to participation.
Q: Are airdrops still effective for user acquisition?
A: Only if paired with long-term engagement strategies. Pure airdrops attract farmers who leave after claiming—true adoption comes from sustained interaction with the product.
Q: Is burning tokens better than paying dividends?
A: It depends on goals. Burning creates scarcity and can support price, but dividends provide direct income—often more attractive to long-term holders seeking yield.
Q: Can multi-token models work?
A: Rarely. They add complexity that often misaligns incentives. Simpler models with unified utility tend to perform better in practice.
Q: What defines a healthy token economy?
A: Fair distribution, clear utility, sustainable supply mechanics, and alignment between stakeholders—all backed by real product usage.
Q: Will instant token creation platforms harm the ecosystem?
A: They lower barriers to innovation but increase noise. Without filters for quality, they risk enabling scams and speculative bubbles unless paired with accountability mechanisms.
Final Thoughts: Toward Tokens with Real Purpose
Despite years of experimentation, the core question remains unanswered: what should a token actually do?
Governance has failed to engage users. Buybacks are stopgaps. Airdrops attract mercenaries. And while innovation continues—from bonding curves to instant launches—the industry still lacks widespread models where tokens represent real ownership, access, or income.
The future belongs to projects that move beyond speculation and build tokens rooted in real demand, revenue sharing, and genuine utility. Only then can crypto fulfill its promise as a new paradigm for digital ownership and decentralized economies.