The Dark Side of Altcoins

Author: Crypto Dan

Translation: Saoirse, Foresight News

People always ask why nearly all tokens go to zero, with only rare exceptions like Hyperliquid.

It all comes down to one thing nobody talks about honestly: the structural game between company equity and token holders.

Let me explain it simply.

Most crypto projects are just companies that happen to have a token

They have these characteristics:

• A real company

• Founders who hold equity

• Venture investors with board seats

• CEO, CTO, CFO

• Profit goals

• Expectation of a future exit (cash-out)

Then, they casually launch a token on the side.

Where's the problem?

Only one party can capture value—and equity almost always wins.

Why dual financing (equity + token) doesn't work

If a project raises via equity and also sells tokens, conflicting incentives emerge immediately:

Equity holders want:

• Revenue → flows to the company

• Profits → flow to the company

• Value → accrues to shareholders

• Control → held by the board

Token holders want:

• Revenue → flows to the protocol

• Token buybacks / burns

• Governance rights

• Value appreciation

These two systems will forever be in conflict.

Most founders ultimately choose the path that pleases VCs, while the token steadily loses value.

This is why even when many projects "succeed on paper," their tokens still end up at zero.

Why Hyperliquid succeeds where 99.9% of projects fail

Besides being the highest-fee-generating protocol in crypto, it avoids the biggest killer of tokens—VC equity funding rounds.

Hyperliquid has never sold its equity, has no VC-dominated board, and thus faces no pressure to route value to the corporate entity.

This allows it to do what most projects cannot: direct all economic value to the protocol, not the company.

This is precisely why its token stands out as an exception.

Why tokens can't function legally like stocks

People often ask: "Why can't we just make tokens equivalent to company stock?"

Because if a token has any of the following features, it becomes an "unregistered security":

• Dividends

• Ownership

• Voting rights in the company

• Legal claim to profits

At that point, the entire U.S. regulatory apparatus would crack down overnight: exchanges couldn't list it, holders would need KYC, and global distribution would become illegal.

So the crypto industry chose a different path.

The optimal legal structure (used by successful protocols)

Today, the "ideal" model looks like this:

1. The company takes no revenue—all fees go to the protocol;

2. Token holders gain value through protocol mechanisms (e.g., buybacks, burns, staking rewards);

3. Founders gain value through tokens, not dividends;

4. No VC equity exists;

5. Economic control lies with a DAO, not the company;

6. Smart contracts automatically distribute value on-chain;

7. Equity becomes a "cost center," not a "profit center."

This structure allows tokens to function economically like stocks without triggering securities laws. Hyperliquid is currently the clearest example of this success.

But even the best structure can't fully eliminate conflict

As long as a real company exists, potential conflicts remain.

The only true path to "conflict-free" design is reaching the ultimate state of Bitcoin or Ethereum:

• No corporate entity

• No equity

• Protocol runs autonomously

• Development funded by DAO

• Neutral infrastructure status

• No legal entity to attack

Reaching this state is extremely difficult, but the most competitive projects are moving in this direction.

Core reality

Most tokens fail not due to "bad marketing" or "bear markets," but because of structural flaws in design.

If a project has any of the following, then mathematically speaking, its token cannot sustainably appreciate—it's doomed from the start:

• VC equity funding round

• Private token sale

• Investor token unlock schedule

• Company retains revenue

• Tokens used as marketing coupons

In contrast, projects with these traits achieve fundamentally different outcomes:

• Direct value flows to the protocol

• No VC equity fundraising

• No investor token unlocks

• Founders aligned with token holders

• Company becomes economically irrelevant

Hyperliquid’s success isn’t luck—it stems from deliberate design, sound tokenomics, and strong alignment of incentives.

So next time you think you’ve "found the next 100x token," maybe you have—but unless the project adopts tokenomics like those pioneered by Hyperliquid, its endgame will still be a slow decline to zero.

Solution

Only when investors stop funding structurally flawed projects will teams improve tokenomics. Teams won't change because you complain—they'll only change when you stop giving them money.

This is why projects like MetaDAO and Street matter so much—they're setting new standards for token structures and demanding accountability from teams.

The future of the industry is in your hands—so allocate your capital wisely.