The gambler mentality has really been one of the most destructive forces in crypto.
It's not the dishonest projects in the space, or the scammers, it's the people who demand a cheap pump and flip!
It's a vicious cycle:
📈 INVESTORS PUMP THE TOKEN
A new blockchain or project comes out, promising to do all kinds of cool things. Investors get excited for the potential, then rush to buy the shiny new token.
Guess what, it pumps to the sky! Everyone's making money, people buy more! The team has the funds to deliver on their promises, yay!
📉 INVESTORS DUMP, BAGHOLDERS REMAIN
Then after the initial god candle, early investors dump and take profits, either rotating into fiat or Bitcoin most times. Those who aren't as smart still hold on, hoping it'll pump again.
The team is still delivering on the initial promises, but since the token dumped and we have scores of angry bagholders, there's now an intense negativity associated with the project.
☠️☠️☠️ PRICE CHART DEATH SPIRAL
Now, it doesn't matter what tech is delivered and adoption is achieved. The price chart looks like hell, all the remaining community members are depressed and bitter that their heavy bags lost them a lot.
Outside of a very unlikely speculative mania coming back with a huge pump, this is likely the end. The team, if they're smart, exits and reboots the project with the same tech they've built, but under a different coin and ticker. Starting the cycle all over again.
It's a grim situation that keeps the very best and most useful tech obscure and under-funded. And, unfortunately, there's little escaping it since it's rooted in human nature. If people can pump and dump a token, they will.
💰🤑 SOLUTION: REVENUE SHARE TOKENS
The only real way I see to mitigate this long-term is to create revenue share tokens which give the holder a percentage of the network-generated fees from transactions.
Over time, this will create an incentive to hold a token whose price has precipitously dumped, or to buy a token whose one and only mega-pump is behind it. However, significant fee revenue needs to materialize before this becomes more attractive than dumping.
Even better, new projects should include a five-year minimum token lockup. This means investors can't dump until the project has already started producing meaningful revenue. Initial price mania will also have subsided, removing an incentive to dump at this point.
The gamblers will always be with us, but we can make moves to push more of the space towards sensible, long-term investing instead of the casino.