Ponzinomics as Runway to Utility

Everything is ponzinomic in DeFi in one way or another, however, we've recently been inundated with ponzinomic projects marketing utility without the tokenomics to sustain long enough for them to get there...Let's look at why they can't sustain.

Marketing is a fickle creature.  It's a necessary evil to promote and grow any DeFi project.  Why do I call it evil? Because 9 times out of 10 it's done with bloated numbers and unrealistic promises to get potential investors "hyped" for a big and fast ROI.  These projects market unsustainable apy/apr's and boast of all the "Utility" their token will have...In...the...future...


Therein lies the rub...


They are usually getting people hyped for a future the project will NEVER make it to!  But Jeremy...how can you say they will never make it?  To answer this we must look at human psychology...now...I'm no psychologist, but I do know a thing or two about humans...we are (for the most part) both greedy and selfish.  But but but Jeremy...I love people and would do anything to see everyone succeed... yeah ok..until you invest in your first moonshot with $1k and you've got $10k staring you dead in the eyes...screaming...take me now or lose me forever!


You see...projects know this and bank on it...so we also have to look at the two types of projects and founders...we have those that WANT to create something great in the space and we have those who are looking to create a straight cash grab.


Let's look at the legit founders and teams that want to build something great.  They use the ponzinomics and high yield marketing to get people interested promising that "if the investor plays their game" they will get to their utility and everyone will be rich... The problem with this is that again, they build tokenomics based on people doing what the project wants them to do...NOT what their human greed and selfishness would have them do...so they build the aggressive tokenomics knowing they need lots of investors and for investors to LEAVE FUNDS IN THE PROTOCOL so that the project can build it's utility.


However, what mosst quickly learn is that no one is there to "play their game"...what ends up happening is the project thinks they have all this hype and are prepared for success...everyone jumps in and watch the charts climb to incredible heights and then all of a sudden...bam a massive sell...someone "Took their profits"...then another...then another....allllllll the way back down to almost nothing....early investors walk off with new investor's money...new investors left upset holding their bags and the team is left with little to no funds to build their utility...ROI's now look impossible and most projects don't ever have the funds to get their utility created.


Now that's a legit project trying to build...


Let's look at a cash grab...


Wait...what?  It is the EXACT SAME THING!  They market the same way...the make all the same promises...and the net result is the same...early investors make the money and late investors get stuck holding bags...biggest difference is the project shuts down and the bag holders have ZERO hope of ROI....ever.


So all that to say...it's getting harder and harder for investors to actually know the difference between legit teams and cash grabs.  So what is the answer?


Well ideally...the answer is to raise capital outside of a liquidity pool supported token launch...NFT's are all the rage so you can raise funds with NFT's not backed by a liquidity pool.  Or you could also launch a project where you come in hot UTILITY FIRST!  NOVEL CONCEPT!  Projects like Alora Money come to mind where they are launching with all the utility they marketed.  Another project...Wolfer Finance...is selling NFT's to raise capital to then invest in Master/validator nodes and lending protocols that have been creating revenue for years...gold standard investments and acting more like an "on-chain real estate company."


But Jeremy...then people wont invest!  As I've always said 100% of nothing is still nothing....so you either don't get the investors you want and you don't launch ORRRRR you get "get rich quick hunters" and your project fails ...what looks worse being the founder/dev of a failed project...or just not launching because your marketing and message didn't entice investors?  I think that's pretty obvious.


A lot of people use the word ponzinomics as a swear word...but used correctly...it's not that bad as a fundraiser to get to utility...but there are only a few ways you can make it work considering human greed and selfishness.  If you truly want to rely on ponzinomics as a way of raising funds...you are going to have to have much lower rewards and much higher sell taxes which can be adjusted once utility is reached.  The other thing you can do is have vesting periods...I know I know...vesting is the f-word to new investors as no one wants to lock up their capital...but are they really investors if they DON'T want to leave money in the protocol?  Do you really want those people involved that will only hurt the protocol.


I believe it can be done...however, projects have to get over the "But if we have low rewards, high taxes and vesting...No one will join..." well genius...if your utility is crap and your marketing is crap then you are absolutely right...but if you offer someone something real...that they can see and get behind simply because they are tired of getting screwed...then you might just make it past the ponzi cash grab associated with most project launches.


These are just my own thoughts...others feel differently...a lot of folks have challenged me on this saying there is no room for morals in DeFi...that people come here simply to gamble and try to hit a winning lottery ticket...but the way I see it...there is a lot of room for blockchain technology projects that make the space simpler and easier to access for "outsiders"...it's quite simple...show us how you are going to make blockchains more accessible, cheaper, faster, with more utility and people will be more likely to invest without expecting an insta-return.


Anyhow...that's my ramblings for this evening...again...these are my own opinions and nothing written here is financial advice.  Always do your own research on any crypto investment and know WHAT you're investing in and WHY your investing in it before you put a penny in.


Thanks for reading,

Jeremy | ExpeditionDeFi



Expedition DeFi

2 Blog snips

Bauke K 27 w

Good article Sir. So true if you ask me. DYOR and try to find the right project with great utility. Please don't invest in meme tokens etc.
Investing early in nice projects is a hobby of mine. Try to find them and buy at the right time. Timing is everything.

ℙrotonValve 27 w