This article is translated from an article by Chari, the founder of TaleX. Original link: https://x.com/TaleX_chain/status/1849936180894453913

Introduction

When ICOs rose in 2015, many friends suggested I issue a coin. At that time, I didn't seriously consider this option, but this question sparked some thoughts. I thought for a long time — what is a coin? If it's a form of equity, should I give my users 'equity'? They have already received products or services without paying for any 'equity.' How does this help the business? If it just attracts a group of speculators, isn't that self-destruction?

This question troubled me for a long time, but I had no answers. I couldn't understand, so I decided to set it aside. But when I ultimately decided to enter the crypto space, this question became unavoidable.

1

At that time, entrepreneurship based on business models heavily relied on venture capital to survive the early stages without supply chain advantages. Just as an atomic bomb needs to reach critical mass, supply chain advantages need to survive in the early infrastructure phase. Startups must establish supply advantages through subsidies and investments and ultimately gain market and user recognition through network/scale/brand effects. For example, ride-hailing platforms. Initially, companies subsidize drivers and passengers to help them through the stage where there are too few passengers or drivers. Eventually, when supply exceeds the critical point, drivers and passengers can match quickly, and services are delivered smoothly.

This entrepreneurial approach seems simple: invest a lot of money, quickly establish supply advantages, achieve network effects, and then start making money. But in reality, if it's easy for you, it's also easy for others. In China, the competition among ride-hailing platforms is extremely fierce — Didi, Kuaidi, Uber, etc., have burned billions of investors' money. But neither investors nor entrepreneurs seem too worried. Those who win users win the market. They clearly know that every dollar spent today will translate into a larger share when acquisitions occur.

In this process, both drivers and passengers are happy — orders keep coming, rewards keep flowing, coupons keep arriving. They don't understand who is losing, just as players at a card table do not know who the weakest player is. As mergers occur and monopolies emerge, network effects start to exert their negative magic. Drivers soon realize that their peers are increasing, working hours are lengthening, but income is decreasing. Passengers realize that cars are divided into different tiers, and faster, higher-tier cars require extra payment. If you choose the cheapest tier, you have to wait a few minutes and then be matched with a lower-rated driver.

"User first" exists because users are chips, and chips are money. People love chips, love money, even more than themselves. But do people respect chips or money? Do they grant rights to chips and money? "He who wins the hearts of the people wins the world" is a common saying among the people to express their importance. But this saying is actually about the distribution of rights. 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, for example, to 'He who gets the ox's heart gets the steak' or 'He who gets the fish's heart gets sashimi,' it's easy to understand that those so-called 'fast, good, and cheap' choices are actually just bait and traps.

2

Some may think that in the end, the evil capitalists are the ones making the most profit. But that's not the case. Most investors may still be in a state of loss.

For various reasons, Didi's stock had a very short life on the U.S. stock market and has always faced delisting risks. Even if Didi's business is doing well, its stock price has been continuously falling. The stock price seems to have lost contact with the business and is closely tied to liquidity.

Yes. That's it.

Since the early 21st century when technology companies began to thrive, their founders have gradually freed themselves from the control of capital. On one hand, while traditional investors like Warren Buffett criticize dual-class share structures, most capital bends to the founders' "super voting rights." In fact, even Buffett himself has bought many such stocks. On the other hand, these tech founders firmly control the company's free cash flow, not distributing dividends for decades. Buffett has no complaints about this because he himself is also a founder who has never distributed dividends (unless the founder actually retires or passes away, don't expect dividends).

Buying and selling such stocks is essentially betting against the market; whether you profit or lose has little to do with the company itself. Google, Facebook, Amazon, Netflix, and even Berkshire Hathaway, as well as 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 uncertain when one can liquidate.

By the way, stocks without governance rights or dividends — what is the difference between them and meme coins?

3

There is a difference.

The Bitcoin network is a product without investors or a management team. It only has users, including miners who provide computing power and users who use the Bitcoin network for bookkeeping.

Bitcoin (BTC) is a token designed to reward miners and ensure that the Bitcoin network remains decentralized and trustworthy. Although this token has no governance rights or dividends, it has a use case — it can be used to pay fees for bookkeeping on the Bitcoin network. If you want to use the Bitcoin network, you inevitably need to hold Bitcoin, as it is the only currency accepted by the network.

Binance Coin (BNB) goes further with its use case. Initially issued by the Binance exchange, BNB is a token that allows users to pay service fees with a 10% discount. This use case is similar to a company repurchasing its own stock at a premium. This design is significant compared to the stocks mentioned in the previous section. These companies can see their stock prices significantly rise with simple buybacks.

Moreover, due to the usability and independence of these tokens, companies no longer need to hold large reserves of fiat currency, or even need to at all (just like Bitcoin). They can convert all their revenue into their own tokens as reserves. These tokens serve as value reserves and value circulation tools within the ecosystem. Their revenue is their tokens, and their expenditure is their tokens, keeping value within the ecosystem. This not only effectively counters the inflation of fiat currency but also directly benefits all token holders as the use cases expand and the number of token holders increases.

This is a revolutionary innovation that marks the first time in history that a company's free cash flow is directly linked to equity certificates.

Because the true value of a company is never in its equity certificates (stocks or tokens) but in its free cash flow.

In the early commercial era, major shareholders took away the free cash flow brought by company growth. In the tech era, founders took all the free cash flow. In the blockchain era, free cash flow from companies finally has a chance to benefit the public.

Because these tokens are non-inflationary, as the company's revenue increases, the value of each token appreciates directly.

Users acquire tokens through consumption or as rewards. As the company's network/brand/scale effects grow, the company becomes larger, free cash flow increases, and the utility of the tokens rises.

Creators earn tokens through incentives and rewards, while holders acquire tokens through purchases. Both can share the wealth generated by the growth of free cash flow.

In a world where traditional equity structures severely undermine the win-win situation between creators and shareholders, companies can achieve complete alignment and synchronization of interests among users, creators, and shareholders through token mechanisms.

If worried that token price fluctuations affect company cash reserves, companies can use their own tokens to purchase other tokens (such as fiat-backed stablecoins or Bitcoin, or even tokens from upstream and downstream companies) as reserve tokens. These tokens can be added to liquidity pools to help stabilize the token exchange rate.

Both small companies and large nations can benefit from this mechanism.

4

In traditional equity cooperation models, creators and shareholders have long parted ways. But another crucial part of the company's economic ecosystem — users who directly provide free cash flow for the company — have not even been invited to the negotiation table for equity distribution.

The technological conditions for ushering in a new era are already in place.

Recently, I saw a friend share Murad's speech 'Meme Coin Supercycle' at Token2049 this year, calling for attention to meme coins. The first image that came to mind was the 1789 storming of the Bastille by Parisians. 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 holds BTC/BNB, and this article does not constitute investment advice, DYOR)