Original text: The Rollup
Compiled/Organized by: Yuliya, PANews
"The era of worthless tokens is about to end; real revenue models are the future." In the latest episode of The Rollup podcast, Mike Dudas, the general partner of 6th Man Ventures, shared the reasons for Pump.Fun's success, the buyback mechanism of Hyperliquid, the decline of pure meme coins, and the lessons learned in his VC career. PANews has compiled the text of this dialogue.
Introduction to 6th Man Ventures
Mike: I am currently a general partner at 6th Man Ventures, a venture fund focused on early-stage crypto investments. Our main focus is on the application layer rather than the infrastructure layer.
If you imagine a typical venture fund, they usually invest in some large L1 or L2 chains, but that’s not our strategy, nor is it our area of expertise. I am in my forties, and before entering the crypto industry, I had extensive experience in the traditional business world; we understand the underlying logic of 'building businesses'.
We focus on how founders leverage the capabilities brought by public chains to build businesses that cannot be established in the Web2 world. This can include DeFi, DePIN, stablecoins, payments, and even speculative entertainment projects or trading applications, etc.
About the Pump.Fun craze
Host: How is the competition between Pump.Fun and these new platforms recently?
Mike: The success of Pump.Fun illustrates the market's extremely strong demand for tokenized assets. Users want to easily tokenize various things and issue new assets for different application scenarios. Its revenue scale has become the most explosive revenue event on-chain besides traditional perpetual contracts and spot markets that have existed for 10 years.
We can say that Pump.Fun is an 'innovation from 0 to 1' in this cycle.
This mechanism has birthed many new assets on Solana, just as Bitcoin and Ethereum initially created crypto assets for the crypto ecosystem. Now we have meme coins and instantly issuable tokens, which represent a whole new structure of primitive assets.
To be frank, no platform has been able to truly capture market share from Pump over the past year, which surprises me. Now finally, there are a few platforms starting to challenge Pump.Fun, which I think is also reasonable.
Host: What do you think about the innovations of challengers like Bonk?
Mike: Some imitators have indeed proposed interesting new models, such as allowing token holders to capture platform value. The token economics of these projects are more complex. For example, Bonk has recently done quite well.
But to be honest, most challengers are either not well-designed or raise concerns. What I care about are those platforms that claim their issued tokens are 'related to' a certain business or company.
I won't name these platforms because I know many founders are still rapidly experimenting and iterating. But the problem is: you cannot control the expectations of token buyers.
For example: Some platforms allow users to issue a token and then promote that this token is related to a certain business, such as a company's revenue or operations. This is extremely dangerous.
Even if you state in your white paper or disclaimer that 'this token has no direct connection to the business', users' perceptions do not follow legal texts but are selectively interpreted. We have seen such misunderstandings during the NFT bubble, where users would assume that buying a certain NFT 'equals holding the project's future profit rights'.
I once worked on a golf NFT project, and I deeply felt this gap. The market is full of misunderstandings regarding the value binding between 'tokens and businesses', and these misunderstandings are disastrous.
In contrast, Pump.Fun clearly emphasizes that these tokens are 'worthless meme coins'. Of course, some ecosystems may spontaneously form around these coins, such as communities and trading activities, but the platform itself has never claimed that these tokens have any legal or economic value.
Those platforms that promote saying 'buying this token early means participating in a big project' may write disclaimers, but they imply some kind of economic benefit in their marketing, which constitutes what I see as 'implicit misleading'.
Even though I am already a high-risk tolerance investor, I still feel uneasy about these plays. If I feel uncomfortable, ordinary users should be even more cautious.
I take a wait-and-see attitude towards applications that combine tokens with 'vibe coding'. These projects typically overstate the financial value associated with the token and provide more of an open experimental field. I haven't seen any excessive market hype around this type of token project. I see this as a low-risk, low-expectation positive attempt.
At the same time, the market is gradually optimistic about the instant-use token issuance model, with platforms like Pump.Fun establishing a clear token issuance and price growth mechanism through 'bonding curves', and these tokens have locked liquidity, making it more difficult to 'run away' than before. This model is much safer compared to the past practice of directly sending funds to addresses and expecting token issuance.
Why are 'pure meme coins' heading towards extinction?
Host: I think you mentioned an important point: that the value of tokens comes from product revenue, and is returned to holders through buybacks or dividends. This has been rare in the past crypto world, but now Hyperliquid and other teams are exploring this path. What do you think of this trend?
Mike: If you had asked me three months ago, I might have given a completely different answer. At that time, I still thought meme coins could exist long-term based on consensus or maintain popularity through community-driven narratives.
But now it's different. I believe that in the future, it will become increasingly difficult, if not unsustainable, to issue a purely meme token with no revenue.
Now there are countless 'pure Meme' tokens launched in the market every day, with too much information noise, and users are becoming increasingly skeptical. To stand out, you must provide a mechanism for capturing income. I firmly believe we are moving away from newly launched pure Meme coins; I am quite skilled in this area — I helped launch Bonk, and we invested in Pump. Although occasionally some meme coins grow rapidly without real value, this is just an exception. The current market focus has shifted to tokens issued by projects, protocols, or companies that claim to have real value.
With the gradual clarification of regulatory and legal frameworks, teams that cannot see the market changes in the next 3 to 12 months will no longer be favored by investors.
Currently, the two most common models in the crypto market are:
Buyback
Fee-sharing
Among them, the buyback model is popular because it directly returns project value to token holders. For example, projects like Binance and Hyperliquid have already demonstrated their sustainability and market appeal through the buyback model. Especially Hyperliquid, which, through its growing user base and market share, directly uses business revenue for token buybacks, providing actual value support to token holders.
Of course, whether this mechanism can constitute a 'security' is still a legal controversy, especially in the United States. But from the perspective of market expectations, users have already accepted: for a token to have value, it must capture protocol revenue.
You can't say: 'We have an annual revenue of $700 million, but our token is still a meme.' — No one will buy that. In other words, a 'high market cap, low circulation, no value support' token project is now a dead end.
Token value backflow mechanism: Hyperliquid case study
Host: Hyperliquid is a recent example; what do you think about their buyback mechanism?
Mike: A colleague of mine at the fund, William, has specifically modeled this area. The initial question was: 'Is the buyback a waste of capital if done at a high position?'
But when we calculated, the result was exactly the opposite. As long as the revenue is real and sustainable, investing the profits into buybacks will build very strong market confidence.
Hyperliquid is a typical case. Users love using this product, trading volume continues to rise, and market share keeps expanding. At this point, they repurchase and directly feed the revenue back to token holders. This has a strong supporting effect on the token's price and will create a positive cycle.
In traditional finance, if you keep using profits to buy back continuously rising stocks, eventually you will be buying at a high position — this is not recommended financially.
But in crypto, market psychology is different. Buybacks are no longer just 'rational dividends'; they also carry a signaling effect regarding token economics. They tell you: 'We really return business revenue to the community.' Although we currently lack sufficient historical cases, the experiences of Hyperliquid and Binance have proven that this model is feasible.
Host: We are no longer in an era where 'anything can rise'. If you lack revenue capacity and do not have a token buyback mechanism, you will be eliminated. This year (2025) may become a turning point. When we look back, we will find that this is the inaugural year of the 'value-driven crypto market'.
Mike: Previously, the crypto industry was in 'Easy Mode': you had a brand, some community heat, and found some bots to brush data, and you could pull up the price. But that’s no longer the case. Now it's 'Hard Mode': you need to truly have a product, revenue, and users to build token value.
In addition, the market's capital is also clearly increasing now. We have seen Bitcoin reaching new highs, Ethereum reviving, the Solana network stabilizing, and the overall market entering a high-quality development cycle.
Changes in crypto investment pace and new investment logic
Host: What is the recent strategy for venture capital?
Mike: Our recent investment pace has indeed slowed down, which is part of the cyclical characteristics of the crypto industry. We are an early-stage fund, and the current funding activity focus in the entire market is in the later stages, such as Series A, B, or even some growth rounds. I've observed that many large funds are now more willing to bet on protocols that already show a clear growth trend.
We closely cooperate with accelerators like Alliance and have invested in many companies they incubate. They also say that early-stage rounds are currently more difficult to raise. But this isn’t necessarily due to a lack of outstanding founders or projects, but rather the overall market's risk appetite has decreased.
For us, the slowdown in pace is also related to structural factors. Many crypto VC funds are currently in a new fundraising round, and the fundraising market has finally improved a bit compared to the past two years. Our 6MV fund has not raised much in 2023 or 2024; we only started this year. However, many institutional LPs are now more focused on actual dividends (DPI). The problem is that from 2021 to 2022, most projects could not provide much actual returns, so many funds are currently in a tight funding situation.
But the good news is: as the market warms up, we expect to see capital flow back in 2025, and those funds that can achieve monetization results will naturally be able to raise funds smoothly.
We are now seeing Bitcoin reaching new highs, Ethereum reviving, Solana data being very healthy, and new public chains like Sui gradually gaining organic activity.
So I believe: now you can confidently support those early founders who genuinely want to achieve great things over the next two to three years, rather than just play short-term quick money projects.
Stablecoins, DeFi, on-chain economic flywheel
We have observed that there is now a batch of new projects that are 'really doing things', including stablecoins, DeFi, consumer wallets, etc., and the structure is much more complete than in the past.
Stablecoins are a very typical example. For instance, I just attended a stablecoin-related meeting this morning, and their data is astonishing — in the past 12 months, the supply of on-chain stablecoins has increased by nearly $100 billion.
People are actually using these things, not just as the basic trading pairs of centralized exchanges; stablecoins are being used as real payment and business operation tools, such as cross-border settlements, payroll payments, international collections, etc. Traditional financial giants like Stripe, Visa, and Mastercard are also participating.
This indicates that an on-chain economy is gradually forming and is superior to the traditional improvements in the fintech sector over the past 15 years. Companies related to stablecoins are becoming active in fundraising, providing bank services based on stablecoins, akin to services like Stripe or Dakota, attracting capital into the decentralized finance (DeFi) market and thereby driving growth in the on-chain economy.
At present, DeFi-native companies and real asset companies are bringing different types of assets and revenues on-chain, forming a developing flywheel effect.
Many front-end companies, such as commercial bank service companies, consumer stablecoins, and self-custody companies, are starting to offer dollar accounts globally, while allowing users to transact in the real world through debit cards and other means. In addition, these applications have also integrated features that allow participation in decentralized finance (DeFi) yields, and have built-in browsers similar to Coinbase Wallet, MetaMask, or Phantom, making it convenient for users to enter the decentralized economic ecosystem.
On the other hand, the strategy to attract users also includes using 'moonshot' or high-return projects like 'Trump coin' to draw traffic and gradually introduce users to more products. Currently, more and more users are starting to use self-custody accounts and deposit funds, while various applications are also working hard to improve user stickiness. The previous NFT boom has retreated, but the industry is looking for the next growth point.
The return of consumer-grade crypto applications and investment logic
To this end, we are now actively betting on consumer-grade applications again. For example, we invested in a project called Football.fun, which can be imagined as 'SoRare with liquid player cards'. This model is closely tied to the real-world interests of users — people who love watching football are inherently willing to participate.
We also invested in Worm, which is a prediction market. We searched for a good team for prediction markets for a long time, and now we have finally found a well-designed and strong-execution team.
The common point of these projects is that they allow users to stay on-chain, not just to grab airdrops or play for a while, but to be willing to continue using and willing to establish their own asset sovereignty. This is what we value most.
Critique of 'only investing in infrastructure'
Host: Then why don't you invest in those 'infrastructure' projects? It sounds like there is a lot of money and quick exits?
Mike: These funds that 'only invest in infrastructure' often treat infrastructure merely as an arbitrage tool, selling SAFTs in advance and finding a way to exit before the token goes live. The money they take is the same LP money I have. But I can say without exaggeration: the users I brought into the crypto industry are 10 to 100 times what they have.
For example, look at the Cap Table of Movement Labs; I won't name names, you can check it yourself. These funds are just waiting for the token to go live and then cash out. This behavior not only does not bring value to the industry but is also destructive in the long run.
Moreover, the most terrifying thing about them is that they put all the risks on retail investors. They make money, while retail investors become the ones who take over.
If we don’t speak out now, this kind of thing will continue to happen over and over again. The last bull market was bad enough; we cannot repeat that.
We previously said we wouldn't do this anymore, but it happened again. For these funds and founders, it makes economic sense, but this is a misallocation of capital because no long-term value is created; in fact, long-term value is destroyed. A select group of venture capitalists, founders, and their limited partners will make a lot of money, and this money is taken directly from the pockets of the deceived.
Lessons learned from the venture capital career
Host: What have you learned through your venture capital career that has changed your current investment approach?
Mike: The first point is that in the crypto space, the individual’s role is more important than anywhere else. Although the project's initial intention or idea may change over time, the abilities and cooperation of the team and individuals often determine the project's success or failure.
For example, Magic Eden. We invested in them early in 2021 when they were just an NFT trading market on Solana. Now? They have transformed into a cross-chain wallet + NFT platform, providing full-chain integration services. This was not the direction we could have predicted when we invested, but their team's execution ability is extremely strong, which is key to the project's continuous transformation and success.
Another example is Tensor. They were also an NFT trading platform, but now they have developed the Vector app and other integrated products. Although we didn’t invest in them (which is considered our anti-portfolio), they have also broken through through team capability and extremely fast adjustment speed.
But this also highlights a pain point — the overall respect for the spirit of contracts among crypto founders is much lower than in traditional industries.
They are more rebellious, more free, but also more 'unruly'. You will find that even if you signed legal contracts, Safe agreements, or Token rights agreements, once the project succeeds, they might come to change the terms, re-sign the contract, or even pressure you to give concessions. Once the project takes off, they say: 'We need to modify the token release schedule.' What can you do? They know you won’t sue, and they bet you won’t trigger a public relations incident. So you can only renegotiate or swallow your anger. Therefore, you will find that no matter how well you sign, the market is chaotic, founder behavior is unpredictable, and the legal structure often becomes ineffective in the face of moral reality.
Another point is that the crypto market has high volatility and unpredictability; you can form small groups and then achieve huge returns. For example: we only invested $100,000 in StepN — with a valuation of $15 million at entry, and ultimately the market cap reached tens of billions. You wouldn’t see such extreme profit paths in traditional SaaS or AI. Of course, there is also a lot of chaos and failure in between. So this leads to my third understanding: you must learn 'emotional regulation' and 'time extension'.
