Cryptocurrency nowadays The dominant token distribution model in the field is called the "low circulation, high fully diluted valuation (FDV)" issuance model. In this model, only a small portion of the token supply is in circulation when the project is launched, while the majority of the tokens are locked and gradually unlocked, usually after a year. Such low floats are often accompanied by high fully diluted valuations and may even be designed to drive such valuations higher. According to research from CoinGecko, nearly a quarter of the top tokens in the industry today are low-circulation models. Some notable recent project releases have used this model, including Starknet, Aptos, Arbitrum, Optimism, Celestia, and Worldcoin (as of this writing, a staggering 95.7% of the supply remains locked).
This model is fundamentally wrong. Restricting the circulation of tokens distorts market signals and misleads current and potential network participants who rely on these signals to make decisions. The "low liquidity, high FDV" issuance model has led to a situation where most of the income potential of new projects is captured by private investors, while the public market has little to gain. Ultimately, this token issuance model sacrifices long-term sustainability and public trust while pursuing short-term metrics.
The fallacy of the “vesting period” of cryptocurrencies
The so-called “vesting period” in cryptocurrencies Period” bears little resemblance to the vesting mechanisms in the traditional financial world. Traditional vesting mechanisms, such as restricted stock units (RSUs), are used to align incentives and ensure that stakeholders meet their obligations. In traditional companies, vesting periods often come with specific performance expectations and the right to revoke future ownership if those expectations are not met. However, there is no equivalent mechanism for vested staking in crypto networks – tokens are simply locked for a certain period of time and then unlocked.
These so-called hedging mechanisms - which do not deserve to be called "vesting periods" at all - often distort the market by giving a false impression of demand that is far higher than actual demand. Signal. If we understand price signals as balance points between supply and demand for an asset, then the market value of these signals depends on the ability of both supply and demand parties to freely express their preferences (e.g., those who want to sell are free to sell, and those who want to buy are free to buy) . Staking limits a party’s ability to express its preferences, thereby reducing the quality of the signal. This may result in a temporary boost in market capitalization rankings or other metric benefits, but it makes the overall market quality worse because price signals convey less information.
What’s worse is that these lock-up mechanisms actually harm the public interest. Token holders who join the project after the token is issued face inaccurate price signals due to progressive unlocking, which do not reflect true market sentiment. Senior token holders with access to private markets and information have an unfair advantage and often sell locked tokens in the over-the-counter market. To get real market signals, you have to analyze the holders who want to sell but can't and speculate on the transactions going on behind the scenes. For most public market participants, this analysis is too complex and time-consuming.
The inevitable market pressure
Lock-up cannot Preventing people from selling only delays the inevitable. Vesting terms will eventually expire, and people who want to sell will eventually do so, which creates continued downward pressure on the market, often leading to a "slow bleed" in market capitalization. For me personally, I would be hesitant to hold an asset or participate in a network, especially when many holders want to exit but can't. This is also a problem for participants (such as validators) who need accurate price signals to predict revenue and operating costs.
If the goal of the crypto space is to create products that provide real, long-term value, then practices aimed at artificially boosting short-term metrics will not help achieve that goal. One goal. To accurately assess the potential of any project, one must be able to assess whether participants are truly committed to the project. This assessment is impossible if you don't know whether people are holding tokens because they truly believe in the project or because they are prohibited from selling.
With regard to the orthodox concept of "low circulation, high FDV", criticism is also accompanied by calls for "fair issuance" token distribution methods. However, many such proposals simply call for an increase in the proportion of circulating supply at launch and do not question the legality of the “vesting period” lock itself.
This is far from enough. Any form of artificial manipulation of market signals is still manipulation of market signals. We need a new set of experiments to break the vesting period orthodoxy of cryptocurrencies.
Free market issuance
The approach we call "free market issuance" has a Huge advantage, it allows everyone to freely express their preferences. If you want to sell, you can. If you want to buy it, you can buy it. Best of all, you can make these decisions with confidence because price signals are real and meaningful, and everyone is able to express their preferences transparently and in real time, right here and now.
The long-term benefits of building a community of holders who truly believe in the project far outweigh the short-term risks of providing early exit opportunities for those who do not believe in the project. We need projects that offer real practical value to the world and have staying power, and it’s clear that existing vesting orthodoxy is not delivering enough, if at all, of these projects.
Free market approaches are often limited to meme coins, which has led to the perception that they are not suitable for "serious" projects. However, it can be reasonably argued that, beyond the viral appeal of meme coins, part of the reason for their overwhelming success is the market’s realization that this model is better for token holders in the long run and often creates Create a more active and natural community.
We should try new things, even if they are risky. I hope that the discussion of free market issuance will spark more thinking about new paths forward. The current groupthink in the crypto industry — not because we have a clear idea of why we are doing it, but because everyone is doing it and it seems to be working from short-sighted metrics — is hindering innovation. Going with the crowd may be a reasonable strategy if you plan to release a project and leave after a year or two, but it's not a good strategy if you want to bring real value to the world. Now it's time for new experiments.
