From the decline of pure meme coins to revenue capture: reviewing the Pump.Fun craze, Hyperliquid repurchase model and the new logic of crypto investment

Original article: The Rollup

Compiled/edited by Yuliya, PANews

"The era of worthless tokens is coming to an end, and real revenue models are the future." In a new podcast of The Rollup , Mike Dudas, general partner of 6th Man Ventures, shared the reasons for the success of Pump.Fun, the buyback mechanism of Hyperliquid, the decline of pure meme coins, and the lessons he learned in his VC career. PANews compiled this conversation in text.

About 6th Man Ventures

Mike: I am currently a general partner at 6th Man Ventures, a venture fund focused on early-stage crypto investments. Our primary focus is on the application layer, not the infrastructure layer.

If you imagine a typical venture fund, usually they will invest in some large L1 or L2 chain, but this is not our strategy, nor is it our 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."

What we focus on is how founders can use the capabilities brought by public chains to build businesses that cannot be established in the Web2 world. This can be DeFi, DePIN, stablecoins, payments, speculative entertainment projects, or even trading applications, etc.

About the Pump.Fun craze

Host: How is Pump.Fun's competition with these new platforms recently?

Mike: The success of Pump.Fun shows that the market has a strong demand for tokenized assets. Users hope to easily tokenize various things and issue new assets for different application scenarios. Its revenue scale has become the most explosive revenue event on the chain besides traditional perpetual contracts and spot markets, which have existed for 10 years.

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

This mechanism allows the birth of many 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 is a brand new original asset structure.

Frankly, I’m surprised that no platform has really taken away Pump’s market share over the past year, and I think it makes sense that a few platforms are finally trying to challenge Pump.Fun.

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

Mike: Some imitators do come up with interesting new models, such as allowing token holders to capture the value of the platform. The token economic design of these projects is more complex. For example, Bonk has done quite well recently.

But to be honest, most of the challengers are either poorly designed or just plain worrisome. What bothers me more are the platforms that claim that the tokens they issue are “related” to a business or enterprise.

I won’t name any of these platforms because I know many of the founders are still experimenting and iterating quickly, but here’s the thing: you can’t control the expectations of token buyers.

For example, some platforms allow users to issue a token and then advertise that the token is related to a certain business, such as a company's revenue or operations. This is extremely dangerous.

Even if you state in your white paper or disclaimer that "the token has no direct connection with the company", users will not follow the legal provisions, but interpret them selectively. We have seen this misunderstanding during the NFT bubble, when users would take it for granted that buying an NFT "is equivalent to holding the right to future income from the project."

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

In contrast, Pump.Fun clearly emphasizes that these tokens are "worthless Meme coins." Of course, some ecosystems may spontaneously form around these coins in the future, 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 claim that "buying this token first is equivalent to participating in a big project" have written disclaimers in their disclaimers, but they imply some kind of economic benefits in their marketing, which constitutes what I consider to be "implicit misleading."

Even though I am an investor with a high risk appetite, I still feel uneasy about these practices. If even I feel uncomfortable, then ordinary users should be more vigilant.

I am on the sidelines about "vibe coding" applications that combine tokens. Such projects usually over-promote the financial value of tokens and applications, and provide more of an open experimental field. I have not seen this type of token project do excessive market hype. I think this is a benign attempt with low risk and low expectations.

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

Why “Pure Meme Coin” is coming to an end

Moderator: 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 was rare in the crypto world in the past, but now Hyperliquid and other teams are exploring this path. What do you think of this trend?

Mike: If you asked me three months ago, I might have given a completely different answer. At that time, I still thought that Meme coin could rely on consensus to exist for a long time, or rely on community drive and brand narrative to maintain its popularity.

But now it’s different. I think it will become increasingly difficult and even unsustainable to issue a pure meme-free token in the future.

There are countless "pure meme" tokens coming online every day, too much information noise, and users are increasingly skeptical. To stand out, you have to provide a revenue capture mechanism. I firmly believe that we are moving away from newly launched pure meme coins, and I am good at this - I helped launch Bonk and we invested in Pump. Although there are occasional meme coins that grow rapidly without real value, this is just 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 become clearer, teams that cannot foresee market changes in the next three to twelve months will no longer be favored by investors.

Currently, the two most common models in the crypto market are:

1. Buyback (Repurchase)
2. Fee-sharing

The buyback model is popular because it directly returns project value to token holders. For example, projects such as Binance and Hyperliquid have proven their sustainability and market appeal through the buyback model. In particular, Hyperliquid, through its growing user base and market share, directly uses business proceeds to buy back tokens, providing real value support to token holders.

Of course, whether this mechanism can constitute a "security" is still controversial in law, especially in the United States. But from the perspective of market expectations, users have accepted that if tokens are to have value, they must capture protocol revenue.

You can’t say, “We have $700 million in revenue every year, but our token is still a meme.” — No one will buy it. In other words, a token project with “high market value, low circulation, and no value support” is now a dead end.

Token value return mechanism: Hyperliquid case analysis

Moderator: Taking Hyperliquid as a recent example, what do you think of their buyback mechanism?

Mike: William, a colleague in our fund, has done modeling specifically in this area. The initial question was: "Is repurchase at a high price a waste of capital?"

But when we calculated it, the result was just the opposite. As long as the income is real and sustainable, investing the income in buybacks will build very strong market confidence.

Hyperliquid is a typical example. Users like to use this product, the transaction volume continues to rise, and the market share continues to expand. At this time, they directly feed back the income to the token holders through repurchase. This has a strong support effect on the price of the token itself and will form a positive cycle.

In traditional finance, if you keep using your profits to buy back rising stocks, you’ll end up buying at very high prices — which is not recommended financially.

But in crypto, market psychology is different. Buyback is no longer just a "rational dividend", it also has a token economic signaling effect. It tells you: "We really give back business income to the community." Although we lack sufficient historical cases now, the experience of Hyperliquid and Binance has proved that this model is feasible.

Moderator: We are no longer in an era where "everything can go up". If you don't have the ability to earn income and a token repurchase mechanism, you will be eliminated. This year (2025) may be a turning point. When we look back, we will find that this is the first year of "value-led crypto market".

Mike: In the past, the crypto industry was in "Easy Mode": if you had a brand, some community popularity, and found some bots to brush data, you could pull the market. But now it's not possible. Now it's "Hard Mode": you need to have real products, income, and users to build the value of tokens.

In addition, there is now significantly more capital in the market. We have seen Bitcoin hit new highs, Ethereum regaining vitality, the Solana network stabilizing, and the overall market entering a high-quality development cycle.

Changes in the rhythm of crypto investment and new investment logic

Host: What is your recent strategy in venture capital?

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

We work closely with accelerators such as Alliance and have invested in many of their incubated companies. They also said that early-stage financing is more difficult now. But this is not necessarily due to a lack of excellent founders or projects, but rather a decline in the overall market's risk appetite.

For us, the slowdown is also related to structural factors. Many crypto VC funds are now raising new rounds of funds, and the fundraising market is finally better than the previous two years. Our 6MV fund did not raise much funds in 2023 and 2024, and only started this year. But many institutional LPs are now more concerned about actual dividends (DPI). The problem is that from 2021 to 2022, most projects cannot provide much actual returns, so many funds are now short of funds.

But the good news is: as the market recovers, we are expected to see capital inflows in 2025, and those funds that can achieve monetization results will naturally be able to raise funds smoothly.

We are now seeing Bitcoin hit new highs, Ethereum recovering, Solana data is very healthy, and new public chains like Sui are gradually gaining organic activity.

So I believe: Now you can have the confidence to support those early founders who really want to do big things in two to three years, rather than just short-term quick money projects.

Stablecoins, DeFi, and on-chain economic flywheels

We have observed that there are already a number of new projects that are "really doing things", including stablecoins, DeFi, consumer-grade wallets, etc., and their structures are much more complete than in the past.

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

People are actually using these things, not just as basic trading pairs on centralized exchanges, but stablecoins are being used as real payment and business operation tools, such as cross-border settlement, salary payment, international collection, etc. Traditional financial giants such as Stripe, Visa, and Mastercard are all involved.

This shows that the on-chain economy is gradually taking shape and is superior to the traditional improvements in the fintech field in the past 15 years. Stablecoin-related companies have begun to actively raise funds, and these companies have attracted capital into the decentralized finance (DeFi) market by providing stablecoin-based banking services, such as services similar to Stripe or Dakota, thereby driving the growth of the on-chain economy.

Currently, DeFi native companies and real-world asset companies are introducing different types of assets and returns onto the chain, forming a flywheel effect of development.

Many front-end companies, such as commercial banking service companies, consumer stablecoins, and self-custody companies, have begun to provide global US dollar accounts, while allowing users to trade in the real world through debit cards, etc. In addition, these applications have integrated the function of participating in decentralized finance (DeFi) earnings, 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 attracting users through high-yield projects such as "moonshot" or "Trump coin", and gradually introducing more products to users. Currently, more and more users are starting to use self-custody accounts and deposit funds, and various applications are also working hard to increase user stickiness. The previous NFT craze has subsided, but the industry is looking for the next growth point.

The return of consumer-grade crypto applications and investment logic

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

We also invested in Worm, which is a prediction market. We have been looking for a good team for the prediction market for a long time, and now we have finally found a team with excellent design and strong execution.

The common point of these projects is that they can make users stay on the chain, not to take advantage of airdrops or to play once and then leave, but to be willing to continue using and to establish their own asset sovereignty. This is what we value most.

Criticism of “Investing Only in Infrastructure”

Host: Then why don’t you invest in those “infrastructure” projects? It sounds like they make a lot of money and come out quickly?

Mike: Many of these "infrastructure-only" funds only use infrastructure as an arbitrage tool, sell SAFTs in advance, and find ways to exit before the token goes online. The money they get is the same LP money I get. But I can say without exaggeration: the number of users I bring into the crypto industry is 10 to 100 times theirs.

For example, if you look at the Cap Table of Movement Labs, I won’t name them, you can find out by yourself. These funds are just waiting for the token to be launched, and then liquidate and leave. This behavior not only does not bring value to the industry, but is destructive in the long run.

And the most terrifying thing about them is that they let retail investors bear all the risks. They make money, and retail investors become the ones who take the blame.

If we don't speak out now, this will continue to happen again and again. The last bull run was bad enough, we can't have it repeated again.

We said last time we would not do this again, but it's happening again. It's an economically sound thing for these funds and founders to do, but it's a misallocation of capital because no long-term value is being created, in fact long-term value is being destroyed. A select group of venture capitalists, founders, and their limited partners are going to make tons of money, directly out of the pockets of the people who were defrauded.

Lessons Learned from a Career in Venture Capital

Host: What have you learned through your venture capital career that has changed the way you invest now?

Mike: The first is that in the crypto space, the role of individuals is more important than anywhere else. Although the original intention or idea of a project may change over time, the ability and cooperation 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 trading market on Solana. What about now? They have become a cross-chain wallet + NFT platform, providing full-chain integration services. This was not the direction we could have expected when we invested in them, but their team's strong execution is the key to the project's continued transformation and success.
• Another example is Tensor. They were originally an NFT trading platform, and now they have also developed Vector app and other integrated products. Although we did not invest in them (it is considered our anti-portfolio), they also broke through through the team's ability and extremely fast adjustment speed.

But this also brings up a pain point - the overall level of respect for the spirit of contract among crypto founders is much lower than that of traditional industries.

They are more rebellious, freer, but also more "unruly". You will find that even if you have signed a legal contract, a Safe agreement, and a Token Rights Agreement, once the project becomes popular, they may come to modify the terms, re-sign the contract, or even force you to make concessions. After the project is up, they say: "We want to modify the Token release arrangement." What else can you do? They know you won't sue, and they bet you won't cause a public relations incident. So you can only renegotiate or swallow your anger. So you will find that no matter how well you sign, the market is chaotic, the founder's behavior is unpredictable, and the legal structure is often ineffective in the face of moral reality.

Another is that the crypto market is highly volatile and unpredictable, and you can form small groups and get huge returns. For example: we only invested $100,000 in StepN - the valuation was $15 million, and the final market value was billions of dollars. You won’t see this extreme return path in traditional SaaS or AI. Of course, there are also a lot of chaos and failures in the middle. So this leads to my third cognition: you must learn "emotional regulation" and "time extension".