Paper: The Evolution of Tokens Over The Years
Authors: Binance Research
Date: June 2025
Estimated Reading Time: 20 minutes

This report by Binance Research examines how crypto token models have evolved over the past decade. It traces key periods like the ICO boom, DeFi Summer, and more recent trends such as buybacks and Internet Capital Markets (ICM). It highlights how each phase reflected cycles of innovation and excess, shaping how tokens are used for fundraising, governance, and incentives. The analysis underscores that despite progress, the core challenge of creating sustained token utility remains unresolved. It also explores how regulatory changes could potentially redefine token economics in the future.

Core Insights

  1. The ICO Era (2017-2018) demonstrated tokens’ potential as decentralized fundraising tools but suffered from regulatory gaps, scams (78% of ICOs), and misaligned incentives. Token holders lacked ownership rights, leading to poor alignment between token value and project success.
  2. DeFi Summer (2019-2021) brought innovations like liquidity mining and governance tokens. Protocols like Compound and Yearn Finance pioneered fair launches and retroactive airdrops, but governance alone proved insufficient for long-term token demand.
  3. Beyond DeFi (2021-2023) saw experiments with multi-token models in projects like Axie Infinity and Helium. These aimed to separate speculation from utility but struggled when growth stalled, reinforcing how fragile token ecosystems can be without hard utility.
  4. Private Funding Boom (2021-2022) shifted focus from token utility to valuation management. Massive VC inflows led to low float, high FDV launches, creating exit liquidity concerns for retail investors and undermining sustainable tokenomics.
  5. Current Trends (2024-2025) show healthier practices: higher floats, lower FDVs, and rising token buybacks (e.g., Hyperliquid). Internet Capital Markets are reintroducing ICO-like mechanisms but face challenges like speculative saturation and bot activity.
  6. Despite over a decade of experimentation, the crypto industry still grapples with designing tokens that hold intrinsic, lasting value for holders. Binance Research’s retrospective report, The Evolution of Tokens Over The Years, provides a comprehensive roadmap of tokenomics trends and highlights unresolved challenges around utility, stakeholder alignment, and regulatory adaptation.

The Initial Coin Offering (ICO) era was transformative in democratizing startup funding but deeply flawed. Tokens lacked ownership rights, leading to poor alignment between project success and token performance. Only 15% of ICO projects ever reached exchanges, with the majority ending as failures or outright scams. Despite these issues, the era educated retail investors and laid groundwork for resilient projects like Aave and Cosmos.

DeFi Summer brought a new wave of innovation. Liquidity mining, pioneered by Synthetix and popularized by Compound and Yearn Finance, rewarded users for contributing liquidity and enabled fairer token distribution. Retroactive airdrops like Uniswap’s also incentivized organic usage. However, governance tokens failed to sustain demand-most holders sold their tokens, and engagement in governance remained minimal.

Moving beyond DeFi, projects experimented with multi-token models to balance speculation and utility. Axie Infinity’s AXS and SLP tokens aimed to separate governance from in-game activity but were caught in reflexive boom-bust cycles. Helium adopted a burn-and-mint model with multiple subDAO tokens but eventually reverted to a single-token system ($HNT) after valuation imbalances and speculation disrupted its ecosystem. These cases illustrated that separating speculation from utility remains extremely challenging.

The influx of private funding in 2021-2022 brought significant capital but shifted the focus from token design to valuation games. Projects engineered low float, high FDV launches that favored early investors and often left retail participants with diminishing value post-airdrop. This period highlighted how tokenomics can be skewed by investor priorities rather than user alignment.

In 2024-2025, a partial reset is underway. Projects are launching with higher initial floats and lower FDVs to avoid alienating retail investors. Token buybacks have gained traction as a scarcity tool and community alignment mechanism, though critics question whether they represent the best use of capital. Hyperliquid’s buyback program, for instance, has burned millions worth of tokens, signaling financial strength but leaving long-term token utility unaddressed.

Internet Capital Markets (ICMs) are emerging as a new frontier, offering permissionless, democratized token launches reminiscent of ICOs. Platforms like Believe and Launchcoin simplify token creation and share trading fees with creators. While empowering, these platforms are currently overwhelmed by memecoins and bot activity, diluting investor attention for legitimate projects. Ultimately, the report concludes that sustainable token utility remains elusive. The hope lies in regulatory evolution-if tokens gain features akin to equity (ownership rights, yield generation), they could be valued through traditional financial models, encouraging projects to focus on product-market fit rather than token price engineering.

The report prompts several key questions for the future of tokenomics:

This analysis highlights that while crypto has matured in many respects, it still struggles with aligning token incentives across founders, investors, and users. The next phase of token evolution may hinge less on technical innovation and more on regulatory clarity and disciplined economic design.