Author: Curry, Deep Tide TechFlow

This year's experience in crypto is probably watching the U.S. stock market hit new highs every day, then opening your position and staying silent for three seconds before closing it again.

BTC has dropped nearly 20% since the beginning of this year, and ETH is even worse, not to mention altcoins. In this market, it’s not news if any public chain token drops by 90%. What's colder than the prices is that people have left and the tea has gone cold.

On June 19, DeFi Godfather AC and two other founding directors left the Sonic Labs board. At that time, the S token was priced at 0.028, leaving only a fraction of its high of 1.03 at the beginning of the year, and the on-chain TVL dropped from last year's peak of 1.14 billion to 20 million. According to DefiLlama's data, it evaporated by 98%.

There wasn’t much reaction in the industry about AC leaving. After all, he had already left the circle once in 2022 and then returned. His statement about leaving also sounded very standard, saying he still "remains optimistic about Sonic," but will no longer participate in business decisions.

However, the next part is hard-hitting.

He said that for the past 18 months, his main focus has been on Flying Tulip. This project raised $200 million in private funding last August, with a valuation of $1 billion, and opened for public fundraising on CoinList in February this year. The investors include names like Brevan Howard, DWF Labs, and Susquehanna.

In other words, while S dropped from 1.03 to 0.028, AC was busy setting up a brand new billion-dollar project.

What’s even more striking is the token design of Flying Tulip.

Investors in the first round receive an NFT called ftPUT, which is essentially a perpetual put option; if they incur a loss, they can destroy the token at any time and redeem the principal at the original price. CoinList's public fundraising page states clearly that FT (the split token, which is the regular token) purchased on the open market does not carry this right, only first-round participants have it.

In contrast, holders of S receive no protection in the secondary market; dropping to 0.028 just means 0.028. There’s no floor, no redemption, and no one writes you an escape route...

It’s none of my business

AC's exit statement was posted on X, brief, but every sentence seems measured.

He said that he joined Fantom as a technical advisor in 2018 and only officially became a director in December 2022. He is not the founder of Fantom, never was, but was one of the earliest technical architects. He was responsible for underlying technology, including the core system of Sonic and the cross-chain gateway later on.

Then comes the key part, the gist of which is:

“I am responsible for the technical decisions I lead, but decisions about migration, airdrops, token economics, and the disposal of the old network were not initiated or decided by me.”

With one sentence, he distanced himself from the fact that S token had dropped by 97%. The technology is mine; the technology is fine. As for why the token you bought dropped from one dollar to three cents, that’s someone else's decision.

The author does not comment on whether this statement is valid, but acknowledges that this cut is impressively clean.

Most project founders, when they flee, either play dead and say nothing, or release a vague statement full of "we" and "the team," turning accountability into a mush. AC is different; he draws the line of his responsibility extremely precisely, to the point where it is hard to refute, because he indeed does not handle token economics.

Moreover, this was not a sudden thought.

In March 2022, AC announced his exit from the crypto industry, citing regulatory pressure and burnout. At that time, Fantom’s TVL evaporated nearly a third within a week, and the community expressed a lot of dissatisfaction. A few months later, he quietly returned, focusing on the technical reconstruction of Sonic.

When leaving, he said he was tired; upon returning, he did so quietly; and when leaving again, he said, "For the past 18 months, I have actually been busy with other things."

As for Sonic, in the six months prior to his exit, the executives changed several times. The CEO, Mitchell Demeter, who was just hired in September last year, resigned in February, along with the head of operations. After the CEO left, the board managed on their own for a few months, and now the board has also stepped down, replaced by a new CEO, Matt Visser, who has never managed anything at the frontline of a public chain.

In five months, the entire management team has been entirely replaced. Sonic’s official statement did not gloss over the situation, directly stating "the coin has dropped, and community sentiment has also dropped; we will not pretend it's not this way."

This kind of "laid-back honesty" is rare in the crypto industry. But the problem is, the new team is the one speaking the truth, while the person whose name is valuable has left.

Golden Cicada Shedding Its Shell Script

Looking back at AC's trajectory over the past few years, you will notice a rhythm.

In 2020, he wrote Yearn Finance, a landmark product of DeFi Summer, with TVL peaking at tens of billions. He let it go without managing it much; later Yearn ran on its own, and did quite well, but the relationship with him was already minimal.

Then he worked on the technical architecture of Fantom, and Fantom surged. In March 2022, he announced his exit, and Fantom subsequently entered a prolonged decline. Later it was renamed Sonic and relaunched, and he returned with the title of CTO. In the early days of Sonic's launch, TVL broke a billion, then collapsed down to the present situation.

Each time, he withdraws at the peak of enthusiasm or just as it begins to cool, moving on to the next thing. Each time, the holders of the old project bear most of the drop after he leaves.

Flying Tulip is the fourth project he is currently working on. I believe that this time, he may have truly absorbed the lessons from his previous experiences and incorporated them into token design.

If you participate in the public offering of Flying Tulip on CoinList, spending $0.10 to buy one FT, you do not receive the token itself, but an NFT called ftPUT, which locks the token inside this NFT. This NFT is that perpetual put option. You have three paths to choose from.

The first path is to do nothing; keep the token in the NFT, which cannot be traded, but the redemption right remains. Whenever you want to exit, destroy the token and redeem your USDC or ETH at the original price. No matter how much the secondary market FT drops, your principal is secure.

The second path is to withdraw the token from the NFT to trade freely. However, at the moment you withdraw, the redemption right is permanently voided; whatever amount you withdraw releases corresponding principal to the protocol for buyback and destruction.

The third path is to partially withdraw and leave some tokens behind. The portion remaining in the NFT continues to enjoy protection, while the portion withdrawn is exposed.

AC mentioned something interesting during an interview with The Block, basically saying that because of the existence of the perpetual PUT, the funds raised cannot actually be spent.

The actual amount raised is zero. So, where do the operational expenses come from?

All the funds raised are thrown into lending protocols like Aave and Ethena for conservative strategies, aiming for approximately 4% annual returns. Based on a full raise of $1 billion, this would yield about $40 million in interest per year, which funds the team, development, and buybacks. The team has no initial token allocation; all FT have to be bought back from the open market through protocol revenue.

I must admit, this design is quite clever within DeFi. It addresses the smelliest problem in the crypto industry over the past few years, where project teams take the money and run or spend it recklessly, leaving investors with nothing. AC's plan essentially ties his hands; the money cannot be moved, the team does not pre-allocate tokens, and investors can exit at any time.

But clever as it is, this protection only exists in the primary market. After FT is listed on exchanges, tokens bought in the secondary market do not come with ftPUT; this statement is bolded on CoinList's page.

Buyers in the open market see the same token but enjoy entirely different treatments.

Industry Microcosm

This year, money in the crypto market is flowing out; this is no secret.

BTC has dropped nearly 20% from the beginning of the year, with altcoins seeing a median drop that far exceeds this figure. People in the circle watch the Nasdaq hit new highs and then switch back to their holdings; the feeling doesn’t need my description.

Many people’s actual operations this year are slowly shifting their positions to U.S. stocks and stablecoin investments, and the activity on-chain is visibly shrinking.

In this environment, AC’s exit from Sonic is just the tip of the iceberg. The entire L1 track is experiencing the same story: shrinking TVL, user loss, founder team turnover, or direct disappearance. Sonic is simply taken as a sample due to its fame and extreme drop.

However, AC's case has an aspect that other projects do not have.

Flying Tulip is currently valued at about $1 billion. Sonic now has a market capitalization of about $100 million. The same person, in the same period, one is a billion and the other is a hundred million, a tenfold difference. What’s the difference? The difference lies in which side AC's name is attached to.

This is a fact that very few people in the DeFi industry are willing to acknowledge.

Many projects' valuations are not based on revenue, users, or technical barriers, but on someone's name. When the name is there, the money is there. When the name leaves, the money follows.

The bear market has torn away this cover. In a bull market, all L1s rise, and it’s hard to tell whether it’s fundamentals supporting them or names. When the tide goes out, what’s left is clear.

There’s another detail that I find most interesting.

The first deployment chain of Flying Tulip is Sonic. AC has exited Sonic's board and no longer participates in any business decisions, yet his new project’s first stop is on Sonic. He leaves, but his business remains.

The captain has left the ship, but opened a new store at the dock, selling things even more expensive than those on the ship.