Original Title: "From 'Air' to 'Cash Flow' - The Rise of Practical Tokens After the VC Bubble Burst"
Original Author: Yi Nan
In early 2025, as liquidity in the secondary market tightened, a large number of altcoins driven by "story + airdrop" were ruthlessly deflated.
Countless altcoins continued to decline, hitting new lows—while during the same period, Bitcoin's market cap share rose to a five-year high of 62.1%, and the Altcoin Season Index even hit a record low of 4 points in May 2023.
However, "practical tokens" like Uniswap (UNI), Aave (AAVE), Pendle (PENDLE), and Hyperliquid (HYPE) attracted funds against the trend, with both prices and on-chain revenues rising. They share a common feature: real, auditable protocol cash flow, which returns value to token holders through buybacks, profit sharing, or staking.
This article attempts to outline the logic of capital migration after the VC bubble burst and explores how the "on-chain P/E era" is reshaping the crypto valuation system using four representative projects as samples.
Market Background: When Narratives Fade, Cash Flow Becomes Scarce
· VC Slowdown: In Q2 2025, global crypto financing plummeted to $4.99 billion, a 21% quarter-over-quarter decline, marking a new low for a single quarter since 2020, as investors became cautious about "concept hype."
· Capital Flow Back to Blue-Chip DeFi: Bitcoin continued to strengthen its dominant position, but there was significant differentiation within the DeFi sector; protocols with a "revenue-distribution" closed loop saw their TVL and trading volume continue to rise. Pendle's TVL surpassed $5.59 billion in July, nearly tripling within the year.
· Valuation Anchor Shift: In a traditional risk-off cycle, investors are more willing to pay for quantifiable cash flow rather than pure narrative premiums.
What Are "Practical Tokens"?
Definition: Token holders can share protocol revenue (Fee Capture) or indirectly enhance each token's "on-chain EPS" (verifiable earnings per token) through buybacks/burns or staking profit sharing.
Typical Models
1. Fee Switch / Trading Profit Sharing: Proportionally returning or buying back protocol fees (e.g., GMX).
2. Lending Interest Spread & Liquidation Fees: Allocating interest spreads and liquidation rewards to the treasury for buybacks (AAVE, Maker).
3. Yield Tokenization: Splitting future earnings for trading, with the protocol taking a cut (Pendle).
4. Infrastructure Fuel: Instant buyback and burn of high-frequency matching engine fees (HYPE).
Four Major Case Studies
Analysis: How Cash Flow Drives Valuation Recovery?
Uniswap (UNI)
Previously, the market viewed UNI as a "pure governance token." Subsequently, the Uniswap Foundation voted to approve a massive investment plan of $165.5 million. The Uniswap Foundation proposed allocating $165.5 million to the following areas:
· $95.4 million for funding (developer programs, core contributors, validators);
· $25.1 million for operations (team expansion, governance tool development);
· $45 million for liquidity incentives.
Currently, the $UNI token has no actual token value capture or buyback plan!
Aave (AAVE)
Aave DAO approved a weekly buyback of approximately $1 million AAVE using protocol surplus, locking it into the DAO treasury:
· The first week of execution drove a 13% intraday increase, with trading volume doubling.
· The lending interest spread and liquidation fees provide stable cash flow, coupled with a 32% year-over-year increase in V3 TVL, making the buyback plan a long-term asset.
Pendle (PENDLE)
Pendle has turned the narrative of "future earnings" into a trading market:
· Extracting 5% of earnings + 5 bps trading fees generates auditable income for the protocol daily.
· High-yield strategies (e.g., stETH YT yield once >11%) are more attractive in a low-interest environment, leading to continuous capital inflow.
Hyperliquid (HYPE)
As a high-frequency matching DEX, Hyperliquid launched CoreWriter in July, allowing HyperEVM contracts to place orders, settle, and call CLOB directly, with an on-chain fee buyback and burn mechanism:
· During the upgrade week, both on-chain active addresses and trading volume hit all-time highs.
· The immediacy of value return + the scale of high-frequency trading fees makes HYPE a strong β in the "on-chain cash flow" narrative.
Three Moats to Survive the Bear Market
1. Certainty of Cash Flow: On-chain income & expenses are auditable, and DAO resolutions are transparent, reducing information asymmetry.
2. Buyback / Profit Sharing Closed Loop: Writing the "protocol revenue → token value" path into smart contracts creates effects equivalent to stock buybacks or dividends.
3. Institution-Friendly: Quantifiable earnings metrics (P/S, P/E) reduce valuation uncertainty, facilitating market making and structured product design.
Conclusion
After the tide of VC narratives recedes, the market is re-pricing "verifiable cash flow."
Practical tokens integrate on-chain income, token value, and governance rights, making them a scarce asset that can weather cycles.
As mainstream DeFi protocols gradually introduce Fee Switch, buybacks, or surplus distribution, it marks a shift in crypto market valuation logic from "narrative markets" to "cash flow markets."
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