This episode reveals the harsh new reality of launching token-based ventures, exposing how the traditional crypto playbook of hype-driven fundraising is now a liability for founders.
The Fading Value of Token-Based Ventures
- Past Advantage #1: Unprecedented Fundraising: Tokens allowed projects to raise massive capital—Sandeep cites an example of a project raising $80-100 million based on a whitepaper and hype. This level of funding is unheard of in the traditional Web2 world without substantial revenue and user traction, which typically requires years of development.
- Past Advantage #2: Early Founder Liquidity: Unlike the decade-long grind often required in Web2 for a founder to see a financial return, crypto tokens offered the possibility of personal financial security within a year of listing. This was a major incentive for builders entering the space.
The "Net Negative" Reality of Tokens Today
- Sandeep contends that these two primary benefits have largely evaporated, leaving founders with the downsides. He points out that airdrops—a marketing tactic where free tokens are distributed to generate awareness—bring in some initial users, but he estimates that “only 10% of that is real.” Beyond this superficial engagement, the token becomes a source of immense pressure and public scrutiny.
- “But apart from that like token is token adds net negative value to you right like you are constantly being ridiculed if the token price is not doing well.”
- Strategic Implication for Investors: The ability of a project, particularly in the AI space, to raise enormous sums pre-product should now be viewed with skepticism, not admiration. It signals a reliance on an outdated, hype-driven model. Due diligence must shift to focus on projects with clear, non-speculative utility for their token, independent of market sentiment.
- Consideration for Researchers: This market shift demands new thinking in tokenomics, especially for resource-intensive AI models. Researchers should focus on designing systems where tokens grant tangible rights—like access to decentralized compute, governance over model updates, or rewards for verifiable data contributions—rather than simply acting as a speculative fundraising instrument.
Conclusion
Sandeep's analysis confirms that the value proposition for crypto tokens has fundamentally changed, shifting from a fundraising tool to a potential liability. Crypto AI investors and researchers must now prioritize projects where the token provides undeniable, long-term utility, as the market no longer rewards speculation alone.
