This article is translated from the article by Chari, the founder of TaleX. The original link is: https://x.com/TaleX_chain/status/1849936180894453913
Introduction
When ICO was popular in 2015, many friends suggested that I issue a coin. I didn't seriously consider this option at the time, but this question triggered some thoughts in me. I thought about it for a long time - what is a coin? If it is a kind of equity, should I give my users "equity"? They have received the product or service, but they have not paid for any "equity". How does this help the business? If it just attracts a group of speculators, isn't it self-destructive?
This question has troubled me for a long time, but I don't have an answer. I couldn't figure it out, so I decided to put it aside. But when I finally decided to enter the encryption field, this question could no longer be avoided.
1
At that time, startups based on business models relied heavily on venture capital to survive the early stages without supply chain advantages. Just like an atomic bomb needs to reach critical mass, supply chain advantages need to survive the early infrastructure stage. Startups must build supply advantages through subsidies and investment, and eventually gain market and user recognition through network/scale/brand effects. For example, online car-hailing platforms. In the early days, companies subsidized drivers and passengers to help them survive the stage when there were too few passengers or drivers. Eventually, when the supply exceeded the critical point, drivers and passengers could be matched quickly and services were delivered smoothly.
This entrepreneurial approach seems simple: invest a lot of money, quickly build supply advantages, achieve network effects, and then start making money. But in fact, if it's simple for you, it's simple for others. In China, competition between online car-hailing platforms is very cruel - Didi, Kuaidi, Uber, etc. have burned billions of investors' money. But neither investors nor entrepreneurs are too worried. Those who win users win the market. They know clearly that every dollar spent today will translate into a larger share when the acquisition occurs.
In this process, drivers and passengers are happy — orders keep coming, rewards keep coming, coupons keep coming. They don’t understand who is losing out, just like players at the poker table don’t know who is the weakest player. As mergers occur and monopolies emerge, network effects begin to work their negative magic. Drivers soon realize that their peers are increasing, working longer hours, but earning less. Passengers realize that cars are divided into different tiers, and faster, higher-tier cars cost extra. If you choose the cheapest tier, you have to wait a few minutes and then be matched with a driver with a lower rating.
“User First” exists because users are chips, and chips are money. People love chips, love money, and even more than they love themselves. But do people respect chips or money? Do they give chips and money rights? “He who wins the hearts of the people wins the world” is a phrase that ordinary people often use to describe their importance. But this phrase is actually about the distribution of power. The people do not own the world; those who win the support of the people own the world. So what is “the world”? The world is the people, and the people are the plate.
If we change the topic to something like "He who wins the heart of the cow gets the steak", or "He who wins the heart of the fish gets the sashimi", it is easy to understand that those so-called "fast, good and cheap" options are actually just bait and traps.
2
Some people may think that in the end, the evil capitalists are the ones who profit the most. But this is not the case. Most investors may still be losing money.
For various reasons, Didi's stock has a very short life in the US stock market and has always been at risk of delisting. Even when Didi's business is doing well, its stock price has been falling. The stock price seems to have lost touch with the business and is closely tied to liquidity.
Yes. That's it.
Since technology companies began to flourish in the early 21st century, their founders have gradually gotten rid of the control of capital. On the one hand, while traditional investors like Warren Buffett criticize the dual-class share structure, most capital bows to the founder's "super voting rights". In fact, even Buffett himself has bought a lot of such stocks. On the other hand, these tech founders have a firm grip on the company's free cash flow and have not paid dividends for decades. Buffett has no complaints about this, because he himself is also a founder who has never paid dividends (unless the founder really retires or dies, don't expect dividends).
Buying and selling such stocks is essentially a bet against the market, and whether you make a profit or a loss has little to do with the company itself. Google, Facebook, Amazon, Netflix, even Berkshire Hathaway, and the aforementioned Didi - their stock prices are not determined by their business, but by whether someone is willing to take over. At this point, liquidity becomes crucial. Once delisted, it is unknown when you can cash out.
By the way, stocks with no governance rights and no dividends - what is the difference between them and meme coins?
3
There is a difference.
The Bitcoin network is a product with no investors and no management team. It only has users, including miners who provide computing power and users who use the Bitcoin network for accounting.
Bitcoin (BTC) is a token designed to reward miners, ensuring that the Bitcoin network remains decentralized and trustworthy. Although this token has no governance rights and no dividends, it has a use case - it can be used to pay for the use of the Bitcoin network for accounting. If you want to use the Bitcoin network, you inevitably need to hold Bitcoin because it is the only currency accepted by the network.
Binance Coin (BNB) goes a step further in its use case. Originally issued by the Binance exchange, BNB is a token that allows users to pay for services at a 10% discount. This use case is similar to a company buying back its own shares at a premium. Compared to the stocks mentioned in the previous section, this design is significant. These companies only need to conduct a simple buyback and their stock prices will rise significantly.
In addition, due to the ease of use and independence of these tokens, companies no longer need to hold large fiat currency reserves, or even at all (like Bitcoin). They can convert all their revenue into their own tokens as reserves. These tokens act as a reserve of value and a means of value circulation in the ecosystem. Their income is their tokens, and their expenditure is their tokens, keeping the value in the ecosystem. This not only effectively fights the inflation of fiat currencies, but as the use cases expand and the number of token holders increases, the increase in token prices directly benefits all token holders.
This is a revolutionary innovation, marking the first time in history that a company's free cash flow is directly linked to its equity certificate.
Because the true value of a company is never in its equity certificate (stock or token), but in its free cash flow.
In the early business era, major shareholders took the free cash flow generated by the company's growth. In the technology era, founders took all the free cash flow. In the blockchain era, the company's free cash flow finally has the opportunity to benefit the masses.
Because these tokens are non-inflationary, the value of each token directly appreciates as the company's revenue increases.
Users purchase tokens through consumption or receive tokens as rewards. As the company's network/brand/scale effect grows, the company becomes larger, free cash flow increases, and the use value of the token increases.
Creators get tokens through incentives and rewards, and holders get tokens through purchases. Both can share the wealth brought by the growth of free cash flow.
In a world where the traditional equity structure seriously undermines the win-win situation between creators and shareholders, companies can achieve complete alignment and synchronization of interests between users, creators and shareholders through token mechanisms.
If there is a concern that token price fluctuations will affect the company's cash reserves, the company can use its own tokens to purchase other tokens (such as stablecoins or Bitcoin backed by fiat currencies, or even tokens of upstream and downstream companies) as reserve tokens. These tokens can be added to the liquidity pool to help stabilize the exchange rate of tokens.
Both small companies and large countries can benefit from this mechanism.
4
In the traditional equity cooperation model, creators and shareholders have long parted ways. But another crucial part of the company's economic ecosystem - users who directly provide free cash flow to the company - has not even been invited to the negotiation table for equity distribution.
The technical conditions for welcoming the new era are already in place.
Recently, I saw a friend in my circle of friends share Murad’s speech “The Super Cycle of Memecoins” at Token2049 this year, calling for attention to memecoins. The first image that came to my mind was the Parisian citizens’ storming of the Bastille in 1789. The second image was Gustave Le Bon’s “The Crowd”. The third image was Louis XVI being sent to the guillotine.
Yes, this is real chaos, and the emotions are real.
But the fall of the king is also real.
Author: Chari, Founder and CEO of TaleX
(Disclosure: The author of this article holds BTC/BNB, and this article does not constitute investment advice, DYOR)
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