Why is 2025 referred to as the year of "listing and selling"? Because in the business plans of top-tier projects, there has never been a line item for "profit from technical services"; selling tokens is the only business model.
When Token = Product = Sole Income, this industry is destined to be a capital game of passing the buck, rather than a BUIDL that creates value.
The period from 2023 to 2025 marks a significant structural transformation in the history of the cryptocurrency industry, signifying a fundamental decoupling between protocol utility and asset valuation. Traditional "Fujian merchants" would exclaim "hard work" (Jia lat) upon witnessing this.
Introduction: The Ruins of Ukraine and the Abacus of Fujian Merchants
In the business world, the Fujian merchant group ("Min merchants") is known for its keen commercial intuition: where there is a price difference, there is business; where there is chaos, there is arbitrage. Even amidst the war in Ukraine, Fujian merchants are seeking opportunities in perilous riches.
The Fujian merchant group ("Min merchants") understands a principle: in a gold rush, the most certain path to wealth is not speculative gold mining, but providing the necessary production tools (shovels) and logistical services to speculators.
In the context of the crypto economy, the "sell shovels" theory corresponds to providing blockchain infrastructure (L1, L2, cross-chain bridges), with revenue derived from gas fees and transaction throughput ("toll fees"). However, from 2023 to 2025, with technological upgrades like EIP-4844 and an oversupply of L2/L3 infrastructure, the commercial viability of "selling shovels" as an independent revenue narrative began to unravel.
As a result, the industry shifted to a distorted "global arbitrage" model. Project teams no longer focused on selling infrastructure services to users but began selling the financialized rights of the infrastructure (tokens) themselves as core commodities to retail investors. At this point, "shovels" became mere tools for traffic generation/marketing vehicles, existing solely to justify the rationale for issuing overvalued tokens.
This article will dissect the mechanisms behind this transformation—particularly the "low circulation, high FDV" phenomenon, predatory market maker structures, and the industrialization of airdrops—and conclude that the main commercial output of the infrastructure cycle from 2023 to 2025 is not technical utility, but a systematic exit of venture capital from retail liquidity.
Chapter One: The Prototype of Min Merchants: Commercial Pragmatism and Global Arbitrage Networks
1.1 Wisdom of the Secondary Market: From California to the World
The saying "sell shovels in a gold rush" is often attributed to the California Gold Rush of 1849. At that time, merchants like Samuel Brannan did not become wealthy by panning for gold but by monopolizing the supply chain of tools needed by miners. In the context of Chinese commerce, especially for Fujian merchants, this philosophy is not merely a simple supply-demand relationship; it extends into a complex "global arbitrage" system.
Fujian, a mountainous and coastal province, has historically forced its merchant class to turn to the sea for survival. This geographical environment has fostered a unique commercial DNA, primarily consisting of two core tenets:
Risk Transfer: Gold miners bear the full risk of "not finding gold," while merchants lock in profits by selling tools. Regardless of the miners' success, the value of the shovel is realized at the moment of transaction.
Networked Arbitrage: Utilizing close-knit networks based on clans and kinship to move capital and goods between markets with different jurisdictions and levels of economic development. For example, sourcing goods from the low-cost coastal areas of China and selling them in higher-margin markets in Africa or South America, profiting from information asymmetry and regulatory gaps.
This spirit of "daring to take risks," "winning through effort," and adeptly exploiting rules for arbitrage has found a perfect modern reflection in the borderless, regulatory-ambiguous digital ocean of cryptocurrency.
1.2 Parallel Mapping in the Crypto World: From Gas to Governance Rights
In the early days of the crypto industry (2017-2021), the metaphor of "selling shovels" was largely valid. Exchanges (like Binance, Coinbase), mining machine manufacturers (like Bitmain), and Ethereum miners earned substantial cash flow by servicing the speculative frenzy of retail investors. They strictly adhered to the merchant model: extracting commissions (gas fees or transaction fees) from every transaction.
However, entering the 2023-2025 cycle, the market underwent fundamental differentiation.
"The impoverishment of miners": On-chain retail investors became cash-strapped and more discerning, no longer willing to pay high toll fees.
"The inflation of shovel sellers": Infrastructure projects grew exponentially. The supply of "shovels" such as Layer 2, Layer 3, modular blockchains, and cross-chain bridges far exceeded the actual "gold mining" demand (real transactions).
Faced with compressed profit margins for core services (block space), infrastructure projects began to emulate the "cross-period arbitrage" strategy of Fujian merchants, but with a financial engineering twist: instead of exchanging goods on this side for currency on the other, they exchanged "expectations" (narratives) on this side for "liquidity" (USD/stablecoins) on the other.
Crypto VCs and market makers industrialized the arbitrage concept of Fujian merchants:
Regulatory Arbitrage: Foundations registered in the Cayman Islands or Panama, development teams in Silicon Valley or Europe, while marketing targets retail investors in Asia and Eastern Europe.
Liquidity Arbitrage: Acquiring tokens at extremely low valuations (seed rounds) in the primary market, then dumping them at extremely high valuations (high FDV) in the secondary market through market makers.
Information Arbitrage: Profiting from the significant information gap between the public narrative of "community governance" and the private terms of "insider unlocks."
Chapter Two: The Mutation of Business Models: Infrastructure as "Loss-Leading Traffic Products"
2.1 The Collapse of Protocol Revenue and the Technical Paradox
By 2025, the traditional "sell shovels" revenue model of Layer 2 scaling solutions faced an existential crisis. The technical success of Ethereum's scaling roadmap, particularly the implementation of EIP-4844 (Proto-Danksharding), introduced "Blob" data storage space, significantly reducing the cost of submitting data from L2 to L1.
From a technical perspective, this was a tremendous victory, with user transaction costs dropping by over 90%; but from a business perspective, it destroyed the profit margins of L2. Previously, L2 could earn high margins by reselling expensive Ethereum block space. Now, with data costs approaching zero, L2 was forced into a "race to the bottom" on fees.
According to reports from 1kx and Token Terminal, despite a 2.7-fold increase in daily trading volume in the first half of 2025 compared to 2021, the total gas fee revenue of blockchain networks dropped by 86%. This means the price of "shovels" has become so cheap that it can no longer support the valuation of shovel factories, and miners can no longer afford the operating costs.
2.2 ZkSync Era: The Shattering of Revenue Illusions
ZkSync Era provides a harsh case study on the nature of revenue. Before the token generation event (TGE) in June 2024, the ZkSync network generated substantial sequencer revenue, peaking at over $740,000 per day. On the surface, this appeared to be a thriving "shovel store."
However, this was actually a false prosperity driven by "airdrop expectations." Users paid gas fees not to use the network (mining utility), but to buy a lottery ticket that might win (airdrop).
As everyone knows, after the airdrop in June 2024, ZkSync's daily revenue immediately plummeted to about $6,800, a drop of 99%.
If a physical store sees its foot traffic drop to zero immediately after stopping the distribution of coupons, it indicates that its core product has no real demand.
2.3 Starknet: Extreme Mismatch of Valuation and Revenue
Starknet similarly showcases the absurdity of this valuation logic. Despite being a leader in zero-knowledge proof technology, its financial data cannot support its pricing in the primary market.
In early 2024, Starknet (STRK) had a fully diluted valuation (FDV) exceeding $7 billion, even reaching $20 billion in the over-the-counter futures market.
Meanwhile, its annual protocol revenue post-EIP-4844 was only in the tens of millions of dollars. This means its price-to-sales ratio (P/S Ratio) was as high as 500 to 700 times. In comparison, NVIDIA, a true "shovel seller" in the AI field, typically has a P/S ratio of 30-40 times.
Investors purchased STRK not based on discounted future cash flows (the traditional equity investment logic), but based on a game theory logic: believing that there would be "buyers who believe the narrative" to take over at high prices.
The traditional model of Fujian merchants—"thin profit margins and stable cash flow"—has been abandoned in the crypto space, replaced by a model based on financial alchemy: creating a highly valued financial asset out of thin air through the establishment of technical barriers and narratives, and selling it to retail investors lacking discernment.
Chapter Three: The Mechanism of Financialization: The "Low Circulation, High FDV" Trap
To maintain the "selling tokens" business model in the absence of real income, the industry popularized a specific market structure between 2023 and 2025, namely "low float, high fully diluted valuation" (Low Float, High FDV).
3.1 The Warning from Binance Research Institute
In May 2024, the Binance Research Institute released a significant report titled "Low Float and High FDV: How Did We Get Here?" systematically critiquing this phenomenon. The report pointed out that this distorted circulation structure has become the industry standard for infrastructure token issuance.
(https://www.binance.com/en/research/analysis/low-float-and-high-fdv-how-did-we-get-here)
Operational Mechanism:
Primary Market Pricing: Venture capital firms (VCs) enter seed rounds with valuations ranging from $50 million to $100 million.
Artificial Scarcity: When projects list on exchanges, they only release 5%-10% of the total supply. Market makers exploit this extremely thin liquidity, requiring only a small amount of capital to drive up the token price.
Market Capitalization Illusion: A token with a circulation of 100 million and a price of $1 has a "circulating market cap" of $100 million, appearing very cheap (Small Cap). However, if the total supply is 10 billion, its FDV reaches $10 billion.
Systematic Dumping: Over the next 3-5 years, the remaining 95% of tokens will continue to unlock. To maintain a price of $1, the market needs to absorb $9.5 billion in new funds. In a market based on existing games, this is mathematically nearly impossible, and the price is bound to collapse.
3.2 Psychological Anchoring Targeting Retail Investors
This structure precisely exploits the cognitive biases of retail investors. Retail investors often focus only on "unit price" (Unit Bias, thinking $0.1 is cheaper than $100) or "circulating market cap," while ignoring the inflationary pressure represented by FDV.
For savvy VCs and project teams, akin to Fujian merchants, this is a perfect cross-period arbitrage:
a. They lock in substantial returns on paper (from seed rounds to a hundredfold increase in FDV).
b. They leverage the short-term price increases caused by retail investors' pursuit of "low circulation" as a source of liquidity for exit.
c. Through linear unlocking over several years, they disperse selling pressure, harvesting market liquidity like boiling a frog in warm water.
3.3 Data Comparison: Valuation Discrepancy in 2025
By 2025, this valuation bubble had become extremely distorted. According to a report by 1kx, the median price-to-sales ratio (P/S Ratio) of Layer 1 blockchains reached 7,300 times, while the P/S ratio of DeFi protocols generating actual cash flow was only 17 times.
(https://1kx.network/writing/2025-onchain-revenue-report)
This enormous valuation gap reveals an obvious market truth— the valuation logic of infrastructure projects is not based on their profitability as "shovels," but rather on their ability to sell as "financial assets." Project teams are essentially running a money printing factory, not a tech company.
Chapter 4: Changes in the Crypto Space from the Perspective of Fujian Merchants: From "Selling Services" to "Selling Goods"
4.1 Traditional "Sell Shovels" Logic (2017-2021)
In the early ICO or DeFi Summer era, the logic was close to traditional Fujian business practices:
- Scenario: Retail investors want to pan for gold (trade/speculate).
- Shovel: Exchanges, public chain gas, lending protocols.
- Logic: You use my shovel to dig for gold, and I charge you rent (transaction fees).
- Token: Similar to a "pre-sale service voucher" or "membership card," representing the right to use the shovel or share in profits in the future.
4.2 Alienation from 2023 to 2025: "Token is Product"
By 2025, with an oversupply of infrastructure (flood of L2s), "collecting tolls" was no longer profitable (gas fees dropped to negligible levels). Project teams and capital realized that instead of working hard to create a good shovel and earn meager rent, it was better to sell "the stock of the shovel company" (Token) directly to retail investors.
In this new model:
Real Product: Is the Token. This is the only product that can generate sales revenue (USDT/USDC).
Marketing Material: Is the public chain, games, tools. Their only purpose is to provide a narrative background for the Token, increasing the credibility of the "goods."
Business Model: Selling Token = Sales Revenue.
This is an extremely sad regression— the industry no longer pursues profitability through technical services but instead prices and sells "air" through financial means.
4.3 Production and Packaging: High Valuation Endorsement and the "Credibility" Game
If the Token is the good, then to sell this good at a high price (to offload), top-notch packaging is required.
Institutional Endorsement: Not for investment, but for "branding."
During the 2023-2025 period, the role of VCs shifted from "venture investors" to "brand franchisees."
The truth behind high financing: Starknet's financing valuation was $8 billion, LayerZero's valuation was $3 billion. These astronomical valuations were not based on future transaction fee income (Starknet's annual revenue was even insufficient to cover team salaries) but on expectations of "how many tokens can be sold to retail investors in the future."
Names of top VCs like a16z and Paradigm are like the "Nike" labels on Fujian shoe factories. Their role is to tell retail investors: "This good (Token) is genuine and worth a high price."
Interestingly, why can VCs offer such high valuations? Because retail investors believe their purchase price is aligned with top VCs, or even lower, unaware that valuations only go lower, never higher.
4.4 KOL Promotions: Not Just Promotion, but "Distributors"
KOLs in this chain are no longer providing value analysis but are distributors at various levels.
Promoting is selling: Project teams or market makers provide KOLs with low-priced tokens or "commissions." KOLs' task is to create FOMO, maintain the "goods'" popularity, and ensure there is enough retail liquidity to absorb selling pressure during the VC unlock period.
Chapter 5: The Market Maker Industrial Complex: Invisible Intermediaries
If the Token is a commodity, then market makers (aka "wild dealers") are the distributors. Between 2023 and 2025, the relationship between project teams and market makers transformed from service provision to a predatory collusion, akin to the Fujian merchant strategy of controlling channels through clan networks, but with the goal no longer being the circulation of goods, but rather harvesting the opponent's positions.
5.1 Loan + Call Option Model
During this period, the standard contract form between project teams and market makers was the "loan of tokens + call option" model.
Trading Structure: Project teams lend market makers tens of millions of tokens (for example, 2%-5% of circulation) interest-free as "inventory." At the same time, they grant market makers a call option, with the exercise price typically set at the initial listing price or slightly higher.
Incentive Misalignment:
If the token price rises above the exercise price, market makers exercise the option to buy tokens at a low price and then sell them at a high price to retail investors, earning the difference.
If the token price falls, market makers only need to return the borrowed tokens to the project team, without bearing any capital loss. Moreover, at the initial listing, they would pour as many tokens as possible to those with connections.
Market makers are no longer neutral liquidity providers but have become speculators on bullish volatility. They have a strong incentive to create extreme volatility, pushing prices above the exercise price to facilitate selling. This model mathematically ensures that market makers must be adversarial to retail investors.
For details, see: https://x.com/agintender/status/1946429507046645988?s=20
5.2 Contract Short Squeeze: The Most Efficient Way to Find Buyers
"The contract mechanism is the vehicle for selling," is the most ruthless trading tactic of this cycle, even giving rise to narratives like "delisting coin narratives" and "pre-market trading killing hedging narratives," etc.
When there are no buyers for the spot (retail investors won't take the positions), what to do? Create people who have to buy.
Setting traps and controlling supply: Before negative news or unlocks, the market is generally bearish, and funding rates are negative.
Pumping: Market makers use their concentrated spot tokens (low circulation) to drive prices up with minimal capital.
Short Squeeze: Short positions in the contract market are forced to buy at market prices to cover.
Selling: Project teams and market makers take advantage of the massive passive buying pressure generated by short squeezes to sell their spot tokens at high prices to these "forced buyers."
Specific cases:
https://x.com/agintender/status/1954160744678699396?s=20
https://x.com/agintender/status/1960713257225785516?s=20
This is akin to Fujian merchants releasing news in the market that "shovels will drop in price," and when everyone is shorting shovels, suddenly monopolizing the supply and raising prices, forcing those shorting to buy shovels at high prices to make amends.
5.3 Movement Labs Scandal: "Sitting on the Stock" Written into Contracts
The Movement Labs (MOVE) scandal that erupted in 2025 completely tore the veil off this gray industrial chain.
Coindesk's investigation revealed that Movement Labs signed a secret agreement with a mysterious intermediary named Rentech (allegedly associated with market maker Web3Port) to control about 10% of the token supply (66 million tokens).
The contract astonishingly included clauses incentivizing market makers to push the FDV to $5 billion. Once this target was reached, both parties would share the profits from token sales.
When Rentech began to sell tokens on the market in large quantities, Binance detected anomalies and suspended the relevant market maker accounts, and Coinbase subsequently suspended MOVE trading. This incident proved that so-called "market cap management" is often just "price manipulation for selling" written into legal contracts.
This is reminiscent of how Fujian merchants operated in the gray areas of global trade—using complex networks of intermediaries and multi-layered shell companies to evade regulation and control pricing power—yet in the crypto space, this operation directly plunders retail investors' principal.
Conclusion:
If these projects were truly in the "shovel business," they would strive to optimize gas revenue and daily active users. However, they seem indifferent, merely engaging in speculative trading.
Because their real business model is: produce tokens at extremely low costs -> price them at extremely high valuations -> sell them in the secondary market through contracts and market makers -> exchange for USDT/USDC (real money).
This is why the crypto space in 2025 looks like a casino, as no one is doing business; everyone is just trading.
Chapter 6: The New Market Landscape in 2025: The Application Layer's Counterattack
As time moved into 2025, the market's fatigue with the "infrastructure casino" model reached a critical point. Data indicates that funds and attention are shifting from the "sell shovels" infrastructure layer to the "application layer," which can truly mine gold.
6.1 Shift from Public Chain Narratives to Dapp Cash Flow
The venture capital firm 1kx released a "Chain Revenue Report" at the end of 2025, illustrating this phenomenon.
Revenue Flip: In the first half of 2025, DeFi, consumer applications, and wallet applications contributed 63% of total on-chain fees, while Layer 1 and Layer 2 infrastructure fees shrank to 22%.
Growth Comparison: Application layer revenue grew by 126% year-on-year, while infrastructure layer revenue stagnated or even declined.
Return to Business Logic: This data marks the end of the era of "shovel sellers" monopolizing profits. As infrastructure becomes extremely cheap (and commoditized), the ability to capture value shifts to user-facing applications. DApps that can truly generate user stickiness and cash flow (like hyperliquid, pump.fun) begin to replace L2 public chains as the market's favorites.
6.2 Reassessment of Tokens as Customer Acquisition Costs
The industry began to reassess the economic essence of "airdrops." In 2025, tokens were no longer seen as symbols of governance rights/dividend rights/identity, but rather as customer acquisition costs (CAC) and negative news for dumping.
Blockchain ads data shows that Web3 projects spend as much as $85-100 or more to acquire a real user, far exceeding the standards of the Web2 industry, a result of path dependency. (https://www.blockchain-ads.com/post/user-acquisition-trends-report)
Projects like ZkSync that spent hundreds of millions (in token terms) on incentives found that these users were "mercenaries"—once the incentives stopped, liquidity withdrew. This forced project teams to shift from a rough "money-splashing" model to a more refined "points system" and "real profit-sharing" model.
Chapter 7: Conclusion: The Merchant's Festival is Over
From 2023 to 2025, the cryptocurrency market staged a grand drama of primitive capital accumulation cloaked in "technological innovation." The ancient wisdom of Fujian merchants—"selling shovels during a gold rush"—was distorted to the extreme:
Shovels were made free: To attract traffic, the real shovels (block space) were continuously priced down, even below cost (through Token subsidies).
Factory securitization: Merchants no longer made money by selling shovels but by selling "stocks of the shovel factory" (high FDV Tokens) to retail investors who believed the factory monopolized the gold mine.
Arbitrage institutionalization: Market makers, VCs, and exchanges formed a tight-knit interest community, transferring retail wealth through complex financial instruments (options, loans, contracts).
If we re-examine the crypto space in 2025 through the eyes of Fujian businessmen, we would see the following picture:
This group of people (project teams + VCs) originally claimed to build houses (Web3 ecosystem) in Ukraine (a high-risk new area), but they didn't care at all whether the houses could be lived in. What they were really doing was:
First, they put up a sign on that land, using it as a reason to print a bunch of "brick tickets" (Tokens).
They brought in big shots from Wall Street (VC institutions) to endorse it, claiming that these brick tickets could be exchanged for gold in the future.
They enlisted the village loudspeaker (KOL) to shout that the brick tickets were going to increase in price.
Finally, they used contract mechanisms to blow up those who wanted to short the brick tickets, seizing the opportunity to exchange their worthless paper (Tokens) for real money.
This is why it is said that "listing a token is about offloading." Because in their business plan, there was never a line item for "profit through technical services"; selling Tokens was the only business model.
When Token = Product, this industry is destined to be a game of hot potato, rather than a value-creating business. This may be the greatest tragedy of the crypto space in 2025.
It's not that the clones lack a bull market; it's that the bull market cannot accommodate clones without cash flow.
Finally, we must ask: Who exactly facilitated today's high FDV and low circulation status? Who turned tokens into the ultimate commodity/service?
Is it the launchpads? Memes? Exchanges? VCs? Media? Traders? Analysts? Project teams? — Or is it all of us?
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