TLDR
- Arthur Hayes said many crypto projects fail because protocol revenue does not reach token holders.
- Hayes argued that token prices often peak at launch due to hype and limited selling pressure.
- Hayes said unlocks, team vesting, and VC distributions add pressure after token listings.
- Hayes cited Hyperliquid as a different model because it uses revenue to buy back HYPE.
- Hayes said crypto investors now care more about cash flows and holder value.
Arthur Hayes has warned that many crypto projects have damaged token holders by keeping protocol revenue away from them.
According to Arthur Hayes, the problem starts when projects raise money, issue tokens, and fail to share economic value with holders. He said many protocols earn trading fees, lending income, and other revenue, yet token owners receive no direct benefit.
Hayes said this structure leaves tokens dependent on hype during their launch period. In his view, a token generation event often becomes the highest price point because early demand meets limited selling pressure.
After listing, Hayes said unlocks, team vesting, and investor distributions begin to add pressure on the token. He argued that many projects offer no offsetting mechanism, such as buybacks or revenue sharing.
Hayes Links Token Declines to Poor Incentives
Hayes said early investors are not acting unusually when they sell after lockups end. He said venture funds have duties to their limited partners and must return capital when tokens become liquid.
His criticism focuses on token design rather than only market sentiment. According to Hayes, many projects build tokens mainly as exit tools for early investors and teams.
Hayes said he has advised many crypto teams to return value to holders through clearer token models. He said those ideas often face resistance from venture investors on the cap table.
In his account, large funds prefer scheduled vesting and token distribution. Hayes said they do not support models that move protocol income toward token holders instead of treasuries.
He argued that this structure has pushed many tokens into long declines after listing. Hayes said projects that ignore holder value risk losing market support over time.
Hyperliquid Offers a Different Model
Hayes contrasted that model with Hyperliquid, which took a different route in its token design. He said Hyperliquid avoided a large venture capital round and reduced institutional sell pressure above the market.
According to Hayes, the project still allowed its team to hold a meaningful allocation. He said builders need compensation when they create useful products.
However, Hayes said Hyperliquid’s key difference comes from its revenue model. The protocol commits 97% of revenue to buying back HYPE from the open market.
Hayes described this as a working mechanism rather than a vague promise. He said the Assistance Fund uses trading fee revenue to buy HYPE while the exchange operates.
Because Hyperliquid earns fees from exchange activity, Hayes said its buyback model depends on real protocol use. He called exchange fees one of crypto’s strongest business models.
Hayes placed the current debate within crypto’s longer fundraising history. He said the sector has moved through ICOs, IEOs, IDOs, and venture-backed token launches since 2017.
According to Hayes, each model promised a better structure but often produced similar losses for retail buyers. He said investors have spent years learning which token models do not work.
His latest argument centers on cash flow clearly reaching holders. Hayes said crypto investors have matured and now care about how value returns to them.
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