Original Article Title: In Defense of Exponentials
Original Article Author: @hosseeb
Translation: Peggy, BlockBeats

Editor's Note: Over the past two years, the mainstream narrative in the crypto market has shifted from "financial nihilism" to "financial cynicism": not denying the existence of crypto assets, but generally believing that valuations are absurd, growth is capped, and smart contract chains have long lost the possibility of exponential expansion. The pessimism surrounding L1, collective mockery of new chains, and the "revenue logic" of measuring blockchain value through Price/Earnings (P/E) ratio have gradually become the dominant direction on social media.

The author of this article attempts to ask: if we are trying to understand an inherently exponential industry through a linear framework, could that be the greatest risk?

Looking back at the past decade of crypto development, from million-dollar TVL to a stablecoin market of hundreds of billions of dollars, from experimental DeFi to on-chain daily transaction volume in the tens of billions of dollars, the exponential curve has not disappeared but has been overshadowed by short-term fluctuations.

The author references the misjudgment in the early days of e-commerce, Amazon's long period of losses, and the rule of "openness prevails" on the Internet, attempting to establish a long-cycle perspective: when a trend is fundamentally exponential, pessimistic conclusions based on short-term revenue, P/E ratio, and early penetration rate often distort the overall picture.

In the current emotion-driven environment, this is a rare "exponentialism manifesto" that attempts to rebuild long-term confidence.

Below is the original article:

I used to tell entrepreneurs: when you launch your new chain, the outside world's reaction is not "hatred" but "apathy." By default, no one cares about your new chain.

But now I have to take that back. Monad just launched this week, and I have never seen a chain face so much attack right out of the gate. I have been in crypto investing for over 7 years. Most chains I've seen before 2023 were either warmly welcomed or completely ignored when they launched—rarely subject to such strong hostility.

Today, new chains are surrounded by boos right from birth. Projects like Monad, Tempo, MegaETH—before they even go live on the mainnet, the amount of hate I've seen is truly unprecedented.

I've been trying to figure out: why is this happening now? What kind of psychology does it reflect in this market?

The Cure Is Worse Than the Disease

Forewarning: This may be the most "ambiguous" crypto valuation post you've read. I have no refined metrics to offer, and no charts to pitch. What I want to express is opposition to the mainstream sentiment on Crypto Twitter at the moment, while I have been largely on the opposite side for the past few years.

In 2024, I find myself pushing back against what I call "Financial Nihilism." Financial Nihilism believes: none of these assets matter; they're all ultimately memes; everything we've built is essentially worthless.

Fortunately, that sentiment has now passed, and we've finally moved on from that spell.

But the current mainstream sentiment, which I refer to as "Financial Cynicism," goes something like this: well, maybe these things do have some value, maybe it's not all meme; but their valuations are absurdly high, and it's only a matter of time before Wall Street realizes this; it's not that all chains are valueless, it's just that their current valuations are probably only 1/5 to 1/10 of what they should be (have you seen those P/E ratios?)

We can only pray that Wall Street doesn't expose our façade, or else the market will be uprooted entirely.

So now, many bullish analysts are attempting to build more optimistic L1 valuation models, expanding P/E ratios, profit margins, DCF models to combat this sentiment.

At the end of last year, Solana proudly embraced the REV metric, believing it could finally justify SOL's valuation. They proudly proclaimed:

We, and only we, will no longer fall for Wall Street's charade!

However, unsurprisingly: as soon as REV was hyped, it plummeted (although $SOL's performance suggests it is more resilient than REV itself).

REV itself is not the issue. REV is a very clever metric. But the focus of this article is not really about "which metric we should choose." Next up is the launch of Hyperliquid. A DEX that truly has revenue, buybacks, and a P/E ratio.

So the chorus of comments changes to: see, I told you! Finally, for the first time, we have a token that is actually profitable, can be measured by a proper P/E ratio. (BNB? Forget it, we don't mention it.) Hyperliquid will outshine everything, because apparently Ethereum and Solana aren't profitable, and we can stop pretending to give them valuations.

Hyperliquid, Pump, Sky, these tokens with substantial buybacks are great. But the market has always been able to invest in exchanges. You could always go buy Coinbase, BNB, or something else. We hold $HYPE ourselves, and I believe it's a great product too.

However, that wasn't the initial reason people invested in ETH and SOL. L1 doesn't have the profit margin of an exchange, and that wasn't why everyone bought them in the first place—if they wanted that margin, they could have just bought Coinbase stock.

If I'm not here to criticize the financial metrics of blockchain, you might think I'm about to talk about the original sin of the "token industrial complex."

Evidently, everyone lost money on tokens in the past year, VCs included. The overall performance of altcoins has been very poor this year. So, the current mood of Crypto Twitter's other half is discussing who to blame. Who got greedy? Are VCs greedy? Is Wintermute greedy? Is Binance greedy? Are farmers greedy? Or are the founders greedy?

The answer, as always, is everyone is greedy. Every single person.

VCs, Wintermute, farmers, Binance, KOLs… everyone is greedy, and so are you. But that doesn't matter. Because no functioning market has ever demanded participants to act against their own interests.

If our assessment of the crypto industry is correct, then even with everyone pursuing their own interests, investments can still be successful. Trying to analyze a falling market by asking "who's being greedy" is as futile as launching a witch hunt. I guarantee you, no one suddenly became greedy only in 2025.

So, this is also not what I'm here to write about.

Many people want me to write an article about why $MON should be worth X, and $MEGA should be worth Y. But I have no interest in that, nor will I advocate for you to buy any specific assets.

In fact, if you didn't already believe in them, you probably shouldn't buy them.

Will the new challenger chains come out on top?

Who knows. But if it has a non-zero and significant chance of success, its pricing will be based on that probability. If Ethereum is worth 300 billion dollars, and Solana is worth 80 billion dollars, then a project with a 1–5% chance of becoming the next Ethereum or Solana will be priced by the market based on this probability.

Crypto Twitter is shocked by this. But this is no different from biotech stocks.

A drug for Alzheimer's with a success rate of less than 10% can still be priced in the billions by the market, even though it has a 90% chance of failing in Phase III clinical trials and ultimately going to zero. That's mathematics—and, as it turns out, the market is very good at doing math. Pricing binary outcomes is based on probability, not on current income or moral judgment. This is the valuation method of the "shut up and calculate" camp.

I don't think this question is worth writing about. "'Win rate is 5%? No way, obviously it's 10%!'" When it comes to individual tokens, this is something that should be decided by the market, not by articles.

So what I really want to write about is: Crypto Twitter now seems to no longer believe that the chain itself has value.

I don't think this is because they don't believe new chains can gain market share. We witnessed Solana rise rapidly from the ashes to dominate market share in less than two years ago. It's not easy, but it's definitely possible.

More people's view is: even if a new chain wins, there is no prize worth winning. If $ETH is just a meme, if it never earns "real income," then even if you win, you won't be worth $300 billion. The game itself is not worth playing because these valuations are all fake, and the entire market will collapse before you receive the trophy.

Staying optimistic about the valuation of chains has become unfashionable. It's not to say that no one is optimistic; obviously, there are still optimistic people. For every seller, there is a buyer. Although Crypto Twitter's cool kids are keen on mocking L1, people are still willing to buy SOL for $140 and ETH for $3000.

But the current market perception is: the smartest people are no longer buying smart contract chains.

Smart people know that the game is almost over. If it's not now, then very soon. Those still buying now are fools, Uber drivers, Tom Lee, and those KOLs who speak of "trillions." Maybe even the U.S. Treasury. But it won't be smart money.

This is nonsense. I don't believe it, and neither should you.

So I feel I must write a "Manifesto of the Intelligent" to explain why general-purpose blockchains have value. This article is not defending Monad or MegaETH but defending ETH and SOL. Because if you believe ETH and SOL are valuable, everything else follows suit.

Principally, advocating for the valuation of ETH and SOL is not my job as a VC. But who cares, if no one else is willing to do it, then I'll write it.

Feel the "Power Law"

My partner Bo has witnessed the explosion of the Chinese internet as a VC. He often hears others say, "Crypto is like the internet," and I'm almost numb to it now. But every time I hear him tell stories from those years, I am reminded once again: the cost of being wrong on these types of issues is enormous.

One of the most frequently told stories by him is from the early 2000s when all early-stage e-commerce VCs (the circle was small back then) gathered for coffee. They discussed: How big could the e-commerce market be in the future? Would it mainly be electronics (perhaps only tech geeks would use computers)? Would women buy things (maybe they are too reliant on touch and feel)? Could food be sold (perhaps fresh produce was impossible to manage)?

These questions were crucial for early-stage VCs — determining what to invest in and how much they were willing to pay.

The answer, of course, was: Every single person got it completely wrong.

E-commerce eventually sold everything, targeting users worldwide.

But at that time, no one truly believed this. Even if someone did, it was too absurd to say out loud.

You just had to wait long enough for the exponential curve to tell you the answer.

Even among the "believers" at that time, only a tiny few believed that e-commerce could be so massive. And those very few individuals, just because they didn't sell out, almost all became billionaires.

All the other VCs, as Bo put it, because he was one of them, sold out too early.

In the crypto world, "believing in the exponential curve" has become unfashionable.

But I believe in the crypto exponential curve. Because I have witnessed it firsthand.

When I first entered crypto, no one was using these things. It was tiny, broken, and terrible. The total value locked (TVL) on-chain was only a few million dollars.

We invested in the first generation of DeFi, MakerDAO, Compound, 1inch, when they were still just scientific experiments. I remember playing on EtherDelta, where a DEX daily trading volume of a few million dollars was considered a "huge success." It was simply garbage.

Nowadays, we effortlessly trade tens of billions of dollars on-chain every day.

I remember the absurdity of back then: Tether's total supply surpassing $1 billion was reported by The New York Times as nearing a Ponzi scheme collapse.

Now stablecoins exceed $300 billion and are even regulated by the Federal Reserve.

I believe in the exponential curve because I have seen it happen too many times in real life.

But you might argue: "Well, stablecoins may have seen exponential growth, DeFi may have seen exponential growth, but this growth won't flow back into ETH or SOL. The value won't be captured by the chains."

My answer is: you still don't believe in the power of exponential growth.

Because the exponential curve always has only one answer: insignificance.

These things in the future will be much larger than today. So large that it's absurd, large enough to overshadow all debates.

When it reaches that immense scale, you will recoup everything in terms of magnitude.

Take a look at this chart.

This is Amazon's income statement from 1995 to 2019, spanning 24 years. The red represents revenue, and the gray represents profit. Do you see that tiny bump at the end? The point where the gray line starts to tick up? That's when Amazon, after 22 years of its founding, truly began to turn a profit.

Amazon only crossed into positive net profit territory for the first time in its 22nd year. In all the years before that, there were op-eds, critics, and short-sellers shouting: "Amazon is nothing but a perpetual Ponzi scheme that will never make money."

Ethereum has just turned 10.

And below is Amazon's stock performance in the first 10 years post IPO:

Flatlining for a decade. Throughout those ten years, Amazon was surrounded by skeptics: Wasn't e-commerce just a VC-subsidized charity project?

Were they just peddling cheap, low-quality goods attracting bargain hunters with no real meaning?

When will they ever make real money like Walmart or General Electric?

If you were discussing Amazon's P/E ratio back then, you were living in the wrong paradigm.

P/E ratios belong to a world of linear growth, whereas e-commerce is anything but linear.

Therefore, all those who argued about Amazon's P/E ratio for a full 22 years were utterly mistaken.

No matter how much you spent back then, no matter when you bought in, you weren't bullish enough.

Because that's the law of exponential technology.

Faced with a true exponential curve, no matter how high you think the scale will rise, it will continue to grow even larger.

This is something Silicon Valley has always understood deeper than Wall Street.

Silicon Valley was nurtured by an exponential curve, while Wall Street grew up in linear thinking.

Over the past few years, the center of gravity in the crypto industry has gradually shifted from Silicon Valley towards Wall Street. You can clearly feel this shift.

Indeed, the growth curve of crypto is not as smooth as e-commerce.

It is more like an explosive pulse, with surges and stagnation.

This is because the crypto world discusses "money," which is highly influenced by macro factors; and it also faces much more intense regulatory tug-of-wars compared to e-commerce.

Crypto directly challenges a nation's core power, its currency. Therefore, it is more unsettling for governments than e-commerce.

However, the inevitability of exponential growth has not diminished because of this.

This is a rough argument, but if crypto follows an exponential trend, then this rough argument holds.

Zoom out.

Financial assets inherently seek freedom. They want to be open, interconnected, and accessible anytime, anywhere.

Crypto turns financial assets into a "file format," allowing you to send a dollar or a stock just as easily as sending a PDF.
Crypto makes "everything able to talk to everything" possible, making everything 24/7, global, interconnected, and open.

This model will prevail. Openness will always prevail.

If the internet has taught me one most important lesson, it is this.

Incumbents will resist, governments will oppose, intimidate, and beat their chests—but in the end, they will all lay down their weapons in the face of the technology's adoption speed, derivativeness, and efficiency advantages.

The internet has done this to every industry.

Blockchain will consume the entire financial and monetary system in the same way.

Yes, given enough time, it will devour it all.

There is a saying: People overestimate what can be achieved in two years but underestimate what can be achieved in ten years.

If you believe in the exponential curve, if you zoom out far enough, then everything now is still ridiculously cheap.

And what you should remain humble about is: every day, holders persist longer than sellers and detractors.

Big capital's time scale is much longer than what short-term players on CT casually making long and short contracts can imagine.

Big Money has learned throughout history: do not bet against major technological trends.

Did you know? The grand narrative that initially persuaded you to buy $ETH or $SOL? Big Money still believes in it to this day, and has never stopped.

So, what am I actually arguing?

I am arguing: Applying the Price-to-Earnings (P/E) ratio to a smart contract chain (aka the so-called "revenue logic meta") is equivalent to forgoing the index curve.

This means that you are placing this industry within a framework of linear growth.

It means that you truly believe: On-chain 30 million daily active users, accounting for less than 1% of M2, that's the limit.

Crypto is just a small thing in the world, a sideshow.

It has not won, nor is it inevitable.

Most importantly, I want to argue for a certain belief—not a short-term belief, not a shallow belief, but a long-term belief.

I am arguing: This exponential growth will be the biggest trend you will ever participate in your lifetime.

This is your e-commerce era.

One day when you are older, looking back, you will tell your children: "I was there at the time. Not everyone believed this was possible. Not everyone believed the entire society would be transformed, all money and finance would be completely reshaped by programs running on a decentralized computer that we all collectively owned. But it all happened. It changed the world. And I, I was a part of it."

Disclosure: The above are all my personal views. Dragonfly has invested in $MON, $MEGA, $ETH, $SOL, $HYPE, $SKY, and many other tokens. Dragonfly believes in the index curve. This is not investment advice, but a "different kind of advice".

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