Table of Contents
Researcher
Key Takeaways
Token success rests on three factors: narrative, product-market fit, and value capture.
Most tokens stall at 2/3. Narratives are easy to create. PMF is brutally hard but binary. Value capture is tricky because stakeholder politics and legal or listing optics complicate design and timing.
Rare tokens like HYPE align all three factors. Many otherwise strong protocols still struggle with value capture, which limits token upside despite solid fundamentals, and in some cases the reverse is true.
The triangle is easy to grasp but difficult to apply. Metrics can be gamed, protocol documents often obscure key details, and tokenomics can change mid-flight. Narratives rotate quickly, and a token that checks none or all three boxes today may look very different tomorrow.
In the early days of crypto, narrative alone could send a token’s price to the moon. That doesn’t work anymore. Today, token success rests on three angles: 1) a strong narrative, 2) product-market fit, and 3) a robust token value capture mechanism.
A project that excels in all three is great. Two out of three, gud. One or none, bad.
This is the framework I use as a mental model for evaluating tokens.
1. The Three Angles
Narrative: The story people buy into. Without one, nobody pays attention.
Product-Market Fit: Real users, real fees, real demand. Different metrics for different products, but the key is consistent paying users. Revenue and retention matters the most. Most metrics can easily be gamed: TVL, wallet counts, tx counts, raw volume, etc. So you need to cross-check multiple data points. For example, for perp DEXes, you want to see volume and open interest together because if OI is low and volume is high, it usually means fake activity.
Token Value Accrual: A token is worthless if it doesn’t actually capture protocol value. Mechanisms can be fee sharing, buybacks, buyback & burns, or mandatory usage. Personally, I think buybacks are the best (see why: Rev Sharing is Dead. Long Live Buybacks & Burns). But this goes hand in hand with revenue. If the accrual mechanism is strong but revenue itself is weak, the token still fails this test.
This might sound obvious, and most people think they already know it. but many still fall in the trap of assuming narrative + adoption = token go up.
2. Lifecycle
The triangle isn’t static. Each angle dominates at a different stage of a token’s life.
Narrative (short term): Teams lean on them at launch because they need liquidity, attention, and distribution.
PMF (medium~long term): Narratives can buy time and capital, but they cannot buy retention.
Value accrual (medium~long term): If the token doesn’t link to cash flows, insiders dump and holders bleed even if the product keeps growing.
3. Why 3/3 is Hard
Most tokens end up 2/3 at best. Narrative is easy. PMF is really hard, but at least it’s straightforward. You either solve a problem or you don’t. Value capture is the part most people underestimate, because it quickly becomes a political fight across every stakeholder in the stack:
Founders want runway and liquidity.
Users want low fees and bigger incentives.
Tokenholders only care about price go up.
Market makers want deeper budgets.
Exchanges want low risk and friendly optics.
Lawyers want fewer headaches.
All of those demands can contradict each other. By the time you start balancing them out, you end up compromising the token into mediocrity. Not because teams are dumb; it’s just how incentives line up.
4. Simple Case Studies
Now we apply this framework to several real cases.
$HYPE: 3/3
Narrative: The one and only Binance scale DEX. Cleared over US$2.4 trillion in trading volume and positioning itself as the L1 that could one day house all of finance.
PMF: Daily volumes clearing $10~20b+, ~$15b OI, +60% market share in decentralized perps, 640k+ users, millions in daily revenue.
Value Capture: 99% of fees (1% to HLP) go to HYPE buybacks. Every trade flows back into the token.
Hyperliquid is the full package. The holy trinity.
$LDO: 2/3
Narrative: Ethereum’s #1 staking protocol. ~$40B staked, synonymous with liquid staking. The ETH staking narrative is one of the strongest in the space, and Lido sits at the center of it.
PMF: Obvious. stETH is everywhere in DeFi, and Lido has monopoly-like market share. The product works, and users trust it.
Value Capture: None. Lido takes a 10% fee on staking rewards, but that goes to node operators and treasury. LDO holders get nothing. It’s governance only. Lido made ~$100m+ in revenue last year and LDO holders saw $0 of it.
Lido is a monster business. But the token is a bystander. A textbook 2/3.
$PENDLE: 2/3
Narrative: Owns the yield trading story—you can split yield bearing assets into PT and YT tokens and trade the yield in Pendle. First and biggest in its lane, riding the Defi + LSD wave.
PMF: $10B+ TVL, $50B+ lifetime volume, integrations across chains, and Boros opening a new market. Yield traders and liquidity providers love it.
Value Capture: Pendle takes a 5% cut of yield and some swap fees, distributed to vePENDLE stakers. But the nature of yield trading means activity is low—most users just park strategies and sit. Daily fees are in the tens of thousands, modest compared to its TVL and market cap.
So two sides of the triangle are carrying PENDLE, but the missing leg is revenue. One more note: Pendle’s product is hard for normies to grasp. Yield trading is not intuitive for normies outside of CT, which limits the growth ceiling (at least in the short term).
0~1/3: 99% of Tokens
Most tokens live here. A story with no usage. A product with no accrual. A governance token nobody cares about. The greater fool model is the base case for almost every altcoin, unless you somehow built a cult strong enough to defy gravity like XRP and Cardano.
5. Looking Forward
The triangle is easy to understand, but hard to apply. Metrics can be gamed, protocol documents often obscure key details, and tokenomics can change mid-flight. Narratives rotate quickly, and even if a token checks none, or all three boxes today, tomorrow may look completely different.
Moreover, altcoin investing is difficult precisely because every case looks different. Most tokens will never outperform BTC, ETH, or SOL. But if you find the rare one that truly nails all three sides of the triangle, the payoff can be life changing. One hit can pull you out of the trenches and alter your path entirely. That is the allure of this game, and why, despite the difficulty, we keep playing it. Good luck.
