Original Author: The Rollup

Compiled/Organized by: Yuliya, PANews

"The era of worthless tokens is coming to an end; real revenue models are the future." In the latest episode of The Rollup, Mike Dudas, a general partner at 6th Man Ventures, shared insights on the success of Pump.Fun, the buyback mechanism of Hyperliquid, the decline of pure Meme coins, and lessons learned throughout his VC career. PANews has compiled a text version 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 is not our strategy or area of expertise. I am in my 40s and have extensive experience in the traditional business world before entering the crypto industry; we understand the underlying logic of "building a business."

We focus on how founders can 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, as well as speculative entertainment projects or even trading applications, etc.

About the Pump.Fun Craze

Host: How is Pump.Fun competing with these new platforms recently?

Mike: The success of Pump.Fun demonstrates the extremely strong demand in the market for tokenized assets. Users want to easily tokenize various things and issue new assets for different application scenarios. Its revenue scale has become one of the most explosive revenue events on-chain, aside from traditional perpetual contracts and spot markets that have existed for 10 years.

We can say that Pump.Fun is the "0 to 1" innovation of this cycle.

This mechanism has given birth to many brand 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 brand new primitive asset structure.

To be honest, no platform has been able to truly capture Pump's market share in the past year, which surprises me. Now, finally, a few platforms are starting to challenge Pump.Fun, which I think is reasonable.

Host: What do you think about the innovations from challengers like Bonk?

Mike: Some imitators have indeed proposed interesting new models, such as allowing token holders to capture platform value. The token economics design of these projects is more complex. For example, Bonk has been doing quite well recently.

However, 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 enterprise.

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 the white paper or disclaimer that "this token has no direct connection to the enterprise," users' perceptions will not follow legal texts but will be selectively interpreted. We have seen this misunderstanding during the NFT bubble, where users would assume that buying a certain NFT "equals holding the future revenue rights of that project."

I once worked on a golf NFT project and deeply experienced this gap. The market is filled with misunderstandings about the value binding between "tokens and enterprises," and this misunderstanding is catastrophic.

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 "buying this token early equals participating in a big project," although they have disclaimers, imply some kind of economic benefit in their marketing, which constitutes what I consider "implicit misleading."

Even as a highly risk-tolerant investor, I feel uneasy about these plays. If I feel uncomfortable, then ordinary users should be even more cautious.

I take a wait-and-see attitude towards "vibe coding" applications that combine tokens; these projects often over-promote the financial value linked to the application, providing more of an open experimental space. I also haven't seen this type of Token project engage in excessive market speculation. I believe this is a low-risk, low-expectation positive attempt.

At the same time, the market is becoming increasingly optimistic about the instant-use token issuance model. Platforms like Pump.Fun have established a clear token issuance and price growth mechanism through "bonding curves," and these tokens have locked liquidity, making "running away" more difficult than before. This model is safer compared to the past method of directly sending funds to an address and expecting token issuance.

Why is the "pure Meme coin" era coming to an end?

Host: I think you mentioned an important point: 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 believed that Meme coins could exist long-term based on consensus or maintain their popularity through community-driven narratives.

But now it's different. I believe that in the future, it will become increasingly difficult, even unsustainable, to issue a purely meme, non-revenue token.

Every day, countless "pure Meme" tokens are launched in the market, creating too much information noise, and users are becoming more skeptical. To stand out, you must provide a mechanism for capturing revenue. 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 there may occasionally be meme coins that grow rapidly without actual value, this is an exception. The current market focus has shifted to tokens issued by projects, protocols, or companies that claim to have real value.

As regulatory and legal frameworks gradually become clearer, teams that cannot foresee 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

The buyback model is particularly popular because it directly returns project value to token holders. For example, projects like Binance and Hyperliquid have proven their sustainability and market appeal through the buyback model. Especially Hyperliquid, which uses its growing user base and market share to directly use business revenue for token buybacks, providing actual value support for token holders.

Of course, whether this mechanism can constitute "securities" is still legally controversial, especially in the U.S. But from the perspective of market expectations, users have already accepted that for a token to have value, it must capture protocol revenue.

You cannot say, "We have $700 million in annual revenue, but our token is still a Meme."—No one will buy that. In other words, a "high market cap, low circulation, and no value support" token project is now a dead end.

Token Value Reflow Mechanism: Hyperliquid Case Analysis

Host: Hyperliquid is a recent example; what are your thoughts on their buyback mechanism?

Mike: A colleague of ours at the fund, William, has specifically modeled this area. The initial question was: "Is buyback at high levels a waste of capital?"

But we calculated, and the result was just the opposite. As long as the revenue is real and sustainable, investing 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 use buybacks to directly return revenue to token holders. This has a strong supporting effect on the price of the token itself and will create a positive cycle.

In traditional finance, if you keep using profits to buy back continuously rising stocks, eventually, you will buy at a very high price—which is not recommended financially.

But in crypto, the market psychology is different. Buybacks are no longer just "rational dividends"; they also carry a signaling effect in token economics. It tells you: "We are really returning business revenue to the community." Although we currently lack sufficient historical cases, the experiences of Hyperliquid and Binance have already proven that this model is feasible.

Host: We are no longer in an era where "anything can rise." If you lack revenue capability and 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: In the past, the crypto industry was in "Easy Mode": you had a brand, some community heat, and a few bots to inflate data, and you could pump it up. But that’s not the case anymore. Now it’s "Hard Mode": you need to have a real product, revenue, and users to build token value.

Moreover, the market's capital is also clearly increasing. We have already seen Bitcoin hitting new highs, Ethereum reviving, and the Solana network stabilizing, with the overall market entering a high-quality development cycle.

Changes in Crypto Investment Rhythm and New Investment Logic

Host: What is the recent strategy in venture capital?

Mike: Our recent investment pace has indeed slowed down, which is actually part of the cyclical characteristics of the crypto industry. We are an early-stage fund, and the current focus of capital activity in the entire market is in the later stages, such as Series A, B, or even some growth rounds. I have observed that many large funds are now more willing to bet on protocols that already show clear growth trends.

We work closely with accelerators like Alliance and have invested in many companies they have incubated. They also say that early rounds are currently more difficult to finance. But this is not necessarily due to a lack of excellent founders or projects, but rather a general decline in market risk appetite.

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 is finally a bit better than the past two years. Our 6MV fund hasn't raised much in 2023 and 2024; we just started this year. However, many institutional LPs are now more focused on actual distributions (DPI). The problem is that from 2021 to 2022, most projects couldn't provide much in terms of actual returns, so many funds are now cash-strapped.

The good news is that with the market warming up, we expect to see capital flowing back in 2025, and those funds that can deliver monetization results will naturally be able to raise funds smoothly.

We are now seeing Bitcoin hitting new highs, Ethereum recovering, Solana showing very healthy data, 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 significant things over the next two to three years, rather than just playing short-term quick money projects.

Stablecoins, DeFi, and the 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 their structures are much more refined than in the past.

Stablecoins are a typical example. For instance, I just attended a stablecoin-related conference this morning, and their data is astonishing—over the past 12 months, the on-chain supply of stablecoins has increased by nearly $100 billion.

People are actually using these things, not just as basic trading pairs on 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 all participating.

This indicates that the on-chain economy is gradually taking shape and is superior to the traditional improvements in the fintech sector over the past 15 years. Companies related to stablecoins are starting to actively raise funds, attracting capital into the decentralized finance (DeFi) market by providing stablecoin-based banking services, similar to those offered by Stripe or Dakota, thereby driving the growth of the on-chain economy.

Currently, DeFi-native companies and real asset companies are bringing different types of assets and yields on-chain, creating a developing flywheel effect.

Many front-end enterprises, such as commercial banking service companies, consumer stablecoins, and self-custody companies, are beginning to offer dollar accounts globally while allowing users to transact in the real world through debit cards and other means. Additionally, these applications have integrated features for participating in DeFi yields and built-in browsers similar to Coinbase Wallet, MetaMask, or Phantom, making it easier for users to enter the decentralized economic ecosystem.

On the other hand, strategies to attract users also include driving traffic through "moonshot" or high-yield projects like "Trump coin," gradually introducing users to more products. Currently, more and more users are starting to use self-custody accounts and deposit funds, while various applications are striving to improve user stickiness. The previous NFT craze has receded, but the industry is looking for the next growth point.

The Return of Consumer-Level Crypto Applications and Investment Logic

For this reason, we are now actively betting on consumer-level applications again. For example, we invested in a project called Football.fun, which can be imagined as "SoRare with liquidity player cards." This model is closely tied to the interests of real-world users—people who love watching football are inherently willing to participate.

We also invested in Worm, which is a prediction market. We have been looking for a good team in the prediction market for a long time, and we finally found a well-designed and highly executable team.

The commonality among these projects is that they can keep users on-chain, not just to grab airdrops or play once and leave, but rather they are willing to continue using the platform and establish their own asset sovereignty. This is what we value the most.

Criticism of "Only Investing in Infrastructure"

Host: So why don't you invest in those "infrastructure" projects? It sounds like there’s a lot of money and quick exits?

Mike: Many of these "only invest in infrastructure" funds treat infrastructure merely as an arbitrage tool, selling SAFTs early and finding ways to exit before the tokens go live. They are using the same LP money that I am. But I can say without exaggeration: the users I bring into the crypto industry are 10 to 100 times more than theirs.

For example, if you look at the Cap Table of Movement Labs, I won't name names, but you can check it yourself. These funds are just waiting for the tokens to go live and then cashing out. This behavior not only fails to bring value to the industry but is also destructive in the long run.

Moreover, the most frightening aspect is that they make retail investors bear all the risks. They profit while retail investors become the bag holders.

If we don't speak out about this now, it will continue to happen over and over again. The last bull market was already a mess; we cannot repeat that.

We previously said we wouldn't do this again, but it happened again. For these funds and founders, this is an economically rational thing to do, but it is a misallocation of capital because no long-term value is created, and 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 those who have been deceived.

Lessons Learned from My Venture Capital Career

Host: What have you learned through your venture capital career that has changed your current investment approach?

Mike: The first lesson is that in the crypto space, the role of individuals is more important than anywhere else. Although the original intentions or ideas of projects may change over time, the capabilities and collaboration of the team and individuals often determine the success or failure of a project.

• For example, Magic Eden. We invested in them very early in 2021 when they were just an NFT marketplace on Solana. Now? They have transformed into a cross-chain wallet + NFT platform, providing full-chain integration services. This was not the direction we anticipated when we invested in them, but their team's strong execution is the key to the project's continued evolution and success.

• Another example is Tensor. They originally were also an NFT trading platform, and now they have developed the Vector app and other integrated products. Although we didn't invest in them (which is part of our anti-portfolio), they also broke through due to their team capabilities and rapid 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 sign legal contracts, Safe agreements, or Token rights agreements, once the project becomes popular, they may come back to modify the terms, re-sign contracts, or even pressure you to concede. After a project takes off, they might say, "We need to change the token release schedule." What can you do? They know you won't sue, and they gamble that you won't trigger a public relations incident. So you can only renegotiate or swallow your pride. Thus, you will find that no matter how well you sign, the market is chaotic, founder behavior is unpredictable, and legal structures often become ineffective in the face of moral realities.

Another lesson is that the crypto market is highly volatile and unpredictable; you can form small groups and then achieve huge returns. For example, we only invested $100,000 in StepN—entering at a valuation of $15 million, and it eventually reached a market cap of several billion dollars. You wouldn't see such extreme return paths in traditional SaaS or AI. Of course, there are also many disruptions and failures along the way. This leads to my third realization: you must learn "emotional regulation" and "time elongation."

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