The Crypto ICO Comeback Nobody Saw Coming

Recorded in the Hodl Up studio, with Matt joining remotely.

Hodl Up: Okay, today we have Matt from Legion with us.

Hodl Up: Yes, Legion. The more serious episode, because most degens don't know what ICOs, IPOs, or pre-sales are. Do you know that most of the people I follow on Twitter don't know what the ICO era was? That's how uneducated they are. I love you guys, but do your research, man. Go and look up the ICO era. I'm excited, because this is one of the very few companies that are compliant. If you think about the companies we've had on, I don't want to say anything bad, but they're not compliant. I'm just being brutally honest. So even though I hate compliance, I have huge respect for these guys for being compliant so early and taking that side of crypto seriously, because we're doomed, in case you haven't noticed. The future is going to be very dystopian.

Hodl Up: Oh, come on. I'm still bullish. I think we still have a chance, and I think even the people in power who dictate these policies, laws, and frameworks can meet some resistance to the oversight they're trying to impose on every single transaction. But I really don't want to waste any more time. Let's invite Matt, get on the call, and see what he has to say about all of this.

Hodl Up: I just hope we're not heading into a bear market, man.

Hodl Up: Hello, Matt. Thank you for joining us today. Before we get into crypto, Legion, and everything else, and this is more of a personal thing, I really want to know how founders got into crypto and what they did before, because most people I know come from a traditional background and join crypto because they either like the technology or see it as an opportunity. So what was the story for you? What's your origin story?

Matt: Good question. In my case, I really started getting interested in crypto during the 2017 ICO craze. Obviously there was the idea that you could make some money doing it, but also that these companies or projects could be formed and literally have hundreds of millions of dollars contributed permissionlessly by people around the globe overnight. That was pretty hard not to pay attention to. It was this crazy development, and that was what opened my eyes. I'd heard about Bitcoin before, written about Bitcoin as early as 2016, and started dabbling in it, but the 2017 ICO craze really opened my eyes.

My personal background before that was in the traditional finance world, as a machine learning data scientist and engineer. So the lens I broke into crypto through was parameter optimization and token design: modeling out these new economic structures and stress-testing them. That's what I found so fascinating about crypto. You can build these permissionless, autonomous systems that need algorithmic control or optimization over time.

Hodl Up: I wasn't around in 2017, during the ICO boom.

Matt: Yep.

Hodl Up: So I wanted to know what inspired you to start building Legion. Did nostalgia play a bit of a role?

Matt: Definitely. I think nostalgia played a role. Also, as I mentioned, I've worked in token design and parameter optimization roles for a number of projects, including multiple billion-dollar protocols like Stacks, the Bitcoin L2, and Status, with the SNT token, one of the very first ICOs on Ethereum. So I worked with a bunch of founders, saw a bunch of tokens launch, and kept seeing founders make the same mistakes over and over again when it came to token distribution.

I also have a background in data science, as I mentioned, and I remembered that in Web2 data science we spend so much time and effort understanding what each and every one of our customers is going to do next, modeling out their value as a customer and matching that with the advertising spend we put into them. And then in Web3, teams were handing out tens of millions of dollars of incentives and just hoping for the best. So for me it was: how do we get away from this paradigm we've fallen into, where only VCs get access and then airdrop farmers and Sybils get the rest? How do we move to a more incentive-aligned, data-driven kind of distribution, where real human beings, real end users, people who want to own the network, can get access, rather than just the bots or the VCs? That's why Legion started the way it did, focusing on token sales and on our reputation system, Legion Score, and what we call merit-based allocation. That's what led me to Legion.

Hodl Up: You mentioned bots and VCs. Personally, I think VCs are a major reason token launches in 2024 and 2025 have been quite catastrophic for many projects, and bots as well, of course, because everyone else is basically alienated from the initial launch of a coin. Either that, or people get farmed through SocialFi, this meta of "own the network because you tweet about it." No, come on. I like the concept, it sounds really nice, but I think it's just not done properly.

Matt: To be fair, it's hard to do, but I think we can all relate and see how our timelines have turned into slop. It's kind of depressing.

Hodl Up: Before the recent Twitter update, everything on my timeline was horrendous. When I went on Twitter, I wanted to go back to Instagram and LinkedIn. Imagine that. Crypto Twitter used to be...

Matt: Crypto Twitter used to be really interesting. I enjoyed my time there back in 2024. It was really nice, and then it went from really interesting insights from people to, more recently, slop shills that are obviously written by AI. It's depressing.

Hodl Up: And the em dashes. The em dashes kill me.

Matt: Yeah.

Hodl Up: What do you think about SocialFi in general? Not just the concept, but the people who engage in it, because you also have big influencers and big KOLs in crypto taking part. Some of them do a good job and provide really good value and content, some even make video content this way, and they're covering quite a lot of tokens, which is nice, because I learn about the project in a professional manner. What do you think about it? Do you think it has a future in this industry?

Matt: It's a good question. I think it definitely does. As with all things in crypto, you have to think about the incentives. The incentives at play shape the behavior. If you're incentivizing quantity of output, even if you don't say you are but the algorithm effectively does, that's what you're going to get. This might predate you guys, but Steemit was a blogging project in 2017 and 2018 with a token mechanism where the more people upvoted your post, the more tokens were emitted to you. In theory it rewards post quality, but in practice, of course, people just posted as many posts as possible, spun up accounts, and upvoted their own posts. So in practice you got quantity, spam.

I think we're seeing a similar thing with InfoFi, where part of the problem is the implementation. I don't think it's necessarily problematic conceptually. But as with a points program, the more specific and automated you make it, the more scalable it is, but also the more exploitable. So I think InfoFi done really well will look like points programs done really well, where not all the details of how everything works are disclosed and it's a bit more manual. Maybe it's the founders manually looking and saying, "Wow, this post obviously took time to understand and research our product and has a fresh take," and manually upvoting it. So I think InfoFi done really well should use AI to surface suggested posts to humans on the team, who then review them and assign boosts or points or whatever, rather than having an AI do everything, because then you're ultimately going to be rewarding spam.

So I think there's room for it, and part of it, again, is the incentives at play. If you're giving out free tokens for this, that's very different from InfoFi qualifying you to participate in a sale. For instance, we did something with Cookie for the Almanak sale, where users could qualify for a discounted tier, not free tokens, but a discounted tier, based on their snaps, based on talking about the project, and based on putting their money where their mouth is by depositing TVL. I love that blend. It's not enough to just yap and yap. You have to have an action that backs it up, and then you can buy in and get favorable terms, but you're putting skin in the game. You're not just getting something with a zero cost basis, because we've seen time and time again that there's a big psychological difference between getting something with a zero cost basis and something you paid for. So that answers a few questions there, I guess, but that's also why I'm bullish on token sales over airdrops in general.

Hodl Up: Let me say right off the bat that you're actually one of the first MiCA-compliant projects, if I may, to be on this podcast. So hats off to you for taking the regulatory aspect very seriously. We've had exchanges join us in episodes that aren't even MiCA-compliant, or that barely have any licenses to operate globally, and yet they do operate globally, which is ironic. I really like that you, like the Bitpanda guys, for example, the exchange, took a compliance-first approach before you started to expand. I see you've had a similar approach. But how do we convince people that doing KYC is actually the normal thing to do? If you ask a degen to verify their profile, they might be more reluctant to participate in the ecosystem. How do we educate them so they internalize that they need to show they don't have malicious intent? I think it's a big curve to climb in terms of education, but I want to hear your take.

Matt: I appreciate the question. This might be surprising to hear from me, but while we do focus on regulatory compliance, I still don't like KYC personally. I think it's a bad implementation of what people are trying to do. When it comes to KYC, we view it as a necessity to follow the rules, and we think being compliant is required to bring the best-quality projects to retail. If you put yourself in the shoes of a major, tier-one, tier-S, absolute top-tier project, your lawyers are going to be asking, "Why the hell are you selling tokens to people when you don't know who they are? You're raising funds from people you don't know. You could be triggering all sorts of anti-money-laundering issues. You could be creating all sorts of headaches and problems for yourselves and opening yourselves up to risk." You'd rather just raise funds only from VCs, or go a regulated route. That's why we've done it this way. We don't hold the opinion that everyone should be regulatory-compliant for its own sake, but we see it as a benefit to the business and to our users, to get the best-quality projects.

In terms of KYC specifically, I hope and believe that the rules will eventually change so that we can use more ZK technology, because KYC creates honeypots. And you can buy fake KYC documents or fake Coinbase accounts in Telegram groups, all over the place. So it's not effective at what it's trying to do, and if anything it just creates more risk for users, as we've seen, because your data can leak. We take that very seriously. We keep user data very secure, in a separate environment from the rest of our stuff. But that's also why we lean into reputation and Legion Score, because those really govern whether this person is likely to be a unique individual and what they've done. So I think it's a necessary part of getting access to the best projects, especially as traditional finance moves more on-chain and more tokens are effectively tokenized RWAs, tokenized equity, and so on. You're not realistically going to get access to those higher-quality, more revenue-generating opportunities if you blanket-exclude all KYC approaches.

Hodl Up: Before we get into the risk scoring and all of that, I want to know a bit more, as someone who might have a startup in the future and want to collaborate with you and do my on-chain IPO via Legion. From what I saw, on the MiCA side, it applies to a specific kind of token and not, for example, EMTs. Could you walk me through that? I'm really curious.

Matt: Sure. For people who aren't familiar with the terminology, MiCA stands for Markets in Crypto-Assets. It's EU regulation that, for the first time in a major jurisdiction, established across the whole EU that there are these things called crypto-assets, i.e. tokens, and that they are not always the same thing as securities. So this is the set of rules for crypto-assets, explicitly saying they're a different thing from securities, which the US still hasn't done. Europe actually beat the US on this by a few years.

MiCA has a taxonomy that says there are broadly three types of tokens. One is e-money tokens, which are effectively stablecoins. Two is asset-referenced tokens, which are very similar to stablecoins in that they track another asset: tokenized real estate, or some tokenized basket or index that tracks something else. Those two are similar. The third bucket is what you might call utility tokens or gas assets. Under MiCA they literally call it "other tokens." It's the catch-all bucket for native gas assets, utility tokens, and so on, and that's mainly where we operate. E-money tokens, stablecoins, have a lot more rules to follow under MiCA, and you're not buying stablecoins in an ICO anyway. On asset-referenced tokens, we're working with some regulators, maybe some sandboxes, to support different types in the future, but it's been difficult in practice for many teams, because regulators just aren't as warm to them. They can more easily be interpreted as securities rather than pure crypto-assets. So the third bucket is mainly where we operate: gas tokens, utility tokens, and so on, more of what most DeFi people are used to.

Hodl Up: I know you said earlier that you don't like KYC, but you have to do it, because that's how things have to go, especially with IPOs and everything. I agree. And you mentioned ZK technology. I think ZK technology is, I won't say the foundation, but one of the pillars that can take crypto to the next level, because as things stand right now, it's getting quite dystopian. New laws are being proposed where every transaction on the blockchain should be reported to the authorities, and not even banks do that. Even in banks you have privacy. Crypto was created to be traceable and transparent, but not like this, not going against the very values of privacy. So when do you think the whole ZK technology thing could materialize, and privacy-by-default blockchains become the trend, or the norm, in crypto?

Matt: Commercially, it's already viable. If you didn't care about regulatory compliance and only cared about Sybil resistance, for example, you could already use ZK technology. Someone could connect various external accounts and prove, "Yes, I'm from America, yes, I went to this school, yes, here's my credit score," all without sharing the actual underlying information. And of course that can roll up into, "This person has proven so much about themselves that they're very unlikely to be a Sybil," because getting that level of credit score, education, and everything for a thousand different accounts just isn't feasible. So for commercial purposes and certain use cases, the ZK tech is already here.

The real issue is on the regulatory side, for meeting requirements like KYC, anti-money laundering, and international rules, which, by the way, don't just carry civil penalties. You can go to prison for violating them. The rules there still say that the entity ultimately responsible has to be able to surface the actual underlying information about a person if the regulator comes and says, "Show me the details about this transaction or this person." It's similar to a bank or your stockbroker. When you sign up, you complete a form and show proof of identification. That's why, if someone is laundering money or financing terrorism, for instance, regulators want the underlying information, not just a ZK proof that he's proven he's a US citizen. That's not good enough under the current regulations.

Hodl Up: Since you mentioned the scoring system, now I have a question. When I first thought about this scoring system, I had an inclination to see it as some sort of totalitarian thing, but when you think about it, banks use credit scores. I really like that you've embedded the concept of meritocracy in what you're building, and I think that's actually the fairest thing to do, especially in an industry that's still considered the Wild West of finance. I saw that you're going to be speaking at Breakpoint this year. Solana people are all degens, and there's this constant feeling that crypto today is a casino, whatever we call it. It feels, looks, and behaves like a casino in many ways. But when I look at what you've built, you require users to be much more methodical and systematic, to do their due diligence and actually plan what they're going to do beforehand. So, given that we're living in this brain-rotted degen era, especially on Solana, how do we make sure people get back to actually doing research before they invest?

Matt: It makes sense. Good question. I think it's a dichotomy you have not just on Solana but in crypto itself. You have both ends of the curve. You have the stupidest, most degen stuff in the world happening in crypto, and at the same time some of the most sophisticated, most advanced cryptography, privacy, mathematics, and all sorts of crazy stuff. The same industry, with both extremes. I think Solana exhibits that same characteristic; maybe it's just more obvious there. You've got your memecoins and your casino, and you've also got projects like DoubleZero laying down physical infrastructure, and all sorts of projects on the cutting edge. One example is Solana setting itself up as the infrastructure for tokenized equity, for a lot of TradFi rails to move onto Solana. Of course, Ethereum might say the same thing. Both are positioning themselves in their own ways, and we'll see how it plays out, but they're definitely both leading that space and playing to those narratives.

So thinking about Legion and our industry long term: we started with crypto-native assets. It all started with Bitcoin, of course, which provides a necessary substrate: for the first time, a digital asset that isn't controlled by a government or one particular entity and that has inherent value. If you can start from that prerequisite, a digital asset that's freely divisible and tradable, can move around, can't be censored or shut down, and has value, all sorts of things can be built and extended from there. So for me it all goes back to Bitcoin. But now that we have systems with the infrastructure and rails to support the abstract concept of information and value changing hands permissionlessly at the speed of light, this is the perfect use case for TradFi to move over.

So in the future, and we started with native crypto assets, utility tokens, gas assets, and so on, it'll be tokenized assets of anything: tokenized real estate, tokenized equity, tokenized shares of MrBeast's cash flow in the future. That's the world Legion is building for. We call it ICOs now, but in the future a stock market IPO and an ICO will basically be the same thing. We might not even have different terms for them, because IPOs are becoming more on-chain and ICOs are becoming more regulated, with standardized disclosures. That's how I see it playing out. Yes, you'll always still have the degen DeFi, cypherpunk vibe, but there will be a growing part of the market that's the big financial market simply moving its tech infrastructure and the ecosystems it plays in.

Hodl Up: I've never been more excited about crypto since I joined back in 2021. Everything is just moving so fast right now. I'm mind-blown. I can't even keep up. But I want to go back to Legion now, with a really generic question: what makes Legion better than its competitors? Why should I, as a user, choose Legion?

Matt: I guess there are two ways to answer that: from the perspective of a user or investor, and from the perspective of a project. Maybe I'll answer for the project first. From a project's perspective, we have a couple of different advantages. One, again, is the regulatory compliance focus, so you can work with us without worrying about your funds getting frozen or your door getting knocked down in the middle of the night. Two is the merit-based allocation system we've been talking about. This is by far the favorite feature of every founder we work with. They can see exactly what type of user a person is: what they've done on-chain, what they've contributed to as a developer, who's in their ecosystem, whose ear they have, all the social analytics data as well. If they wanted to, they could literally go one by one through the hundreds or thousands of people who've applied to participate in their sale and hand-select the right people for their community. That's a super powerful feature that virtually every founder we work with loves, and you can't find it elsewhere.

The third thing is mass distribution. You might have seen our recent partnership announcement with Kraken, and a few other exchange partnerships are in the works and will roll out soon, where we as Legion play an underwriter role. We help you as a project find the right retail buyers, but also get listed on the right exchanges, get the right terms from market makers, and get in front of the liquid funds that will be buyers after TGE. So we're playing this underwriter role, doing everything an IPO underwriter would do other than taking on the pricing risk. I'm sure the model will evolve in the future, but we do all the services an IPO underwriter does, in the context of an ICO.

Then, circling back to an end user who's looking at these platforms and wants to know why to participate on Legion: it all comes down to the quality of the projects. Because we've positioned ourselves this way, with merit-based allocation, regulatory compliance, and mass distribution and partnerships, the best projects can come to Legion, and you get early access to those projects. You get merit-based access to them. So even if you're not the richest person out there, if you've been hustling and grinding, you can get access. It all comes down to that, plus the community: building up your score, working with other people in the community to track and improve it over time, and learning more about ways to make money. There have been many different perks to having a Legion Score, whether that's participating in very exclusive airdrops where your Legion Score qualifies you, or participating in sales. Again, to circle back to the main point, the biggest impact is the quality of the sales you get access to. Yield Basis, for instance, was our latest big sale, the new project from Michael of Curve. That was an obvious one that people were sad to miss out on, but that happens when a sale is 100x oversubscribed. Everyone who got in was very happy, and you could only do that on Legion.

Hodl Up: First of all, thanks for answering from both the business and the user perspective. Because of that, I now have two questions. The first is from the user's perspective. The sub-scores of the scoring system are clout, development, chain interaction, and endorsement. If I mess up, say I dump on my very first participation and end up with a very low score, can I redeem myself in the future? Is it more difficult to redeem myself? And do all the sub-scores carry the same weight, or are some prioritized more in the scoring system?

Matt: That's a really good question about how Legion Score works. The sub-components are something we spent a lot of time designing and co-designing with our users. We do have an overall score, Legion Score, which combines all those sub-components, and it weights certain ones that are more Sybil-resistant higher than others. But the important point is that every project cares about different things and can choose different criteria. No project is just going in and saying, "Rank everybody by Legion Score, and those people get allocations." Otherwise it would be the same people getting allocations every time. Some projects care most about developers at their stage. Some care most about people who provide TVL in the Solana ecosystem. Some care about people with a big social following on Ethereum. So projects can choose their criteria ahead of the sale, and they have full customization over who gets in and who gets what allocation. It's less about Legion saying, "This is how everything combines into one score, and you have to pick people based on that," and more about Legion giving all this information to teams and making it easy for them to cut through the noise and find the best value-add investors for their project, which differs from project to project based on what they're building and the type of people applying.

In the specific example you mentioned, where someone participates in one sale and immediately dumps the tokens: yes, projects would be able to see that in future sales. "This person might be good, but they sold all the tokens we sold them immediately, so maybe we'll give them a smaller allocation, or skip them this time." So it's up to you to keep getting allocations by increasing your scores in other ways, not dumping, or reacquiring some tokens to improve your score. That's the beauty of it: everyone is accountable. There's no hidden bias. Everyone's on the same level playing field, and the same scoring system is applied to everyone. Even if you're not rich enough to be an accredited investor, even if you didn't go to some fancy school, you can still get access if you've been hustling and contributing code, or grinding on crypto Twitter all these years, whatever that is.

Hodl Up: You practically answered my second question, which was from the business perspective, because I was going to ask whether projects have a say in which sub-scores or user behaviors matter more. But can you walk me through the process if I have a business that wants to do an on-chain IPO via Legion? I'm assuming you'd require a lot of legal documentation, which makes sense, but what else do I, or other businesses watching this episode, need to know?

Matt: Good question. From a project's point of view, we meet with them. By design, we're not a permissionless system, so we like to look at the project, meet the team, and understand what they're building. If both parties want to work together, there's some boring stuff to knock out, KYB and signing a services agreement, but then we really get into the meat and potatoes of planning the sale: what exact mechanism makes sense for their objectives, what the date is, and whether they're a fit for any of our distribution partners, like Kraken, to co-host the sale so they get even bigger reach. Once we've planned that, we start marketing the sale and making people aware of it.

Then the sale goes live. If it's a partnership sale, users can participate on Kraken's front end, for instance, if they already have a Kraken account, or directly on-chain on Legion. Both pools add up to the same pool. Users contribute funds, and at a certain point the deposit period ends. Projects then review all the applications and assign allocations. Once everyone's been granted their allocation, people who weren't fully approved can withdraw, or get refunded, any unfilled portion. Then, when TGE happens, the project deposits the tokens it sold into that same smart contract, so the users who bought them can claim their tokens according to any associated vesting logic. So it pretty much all happens on-chain. It's a very organic, native experience for projects once you get into it, but there are some chores up front, like signing contracts and that sort of thing.

Hodl Up: I was going to dive into the UX of everything, but you just mentioned that normies can use the Kraken front end.

Matt: Well, not every sale is hosted on Kraken. There are pre-token sales and early-stage startup sales where people get access to early, higher-opportunity things. Not all of those are on Kraken, but the big sales will be. I don't know if you've used the platform, but at Legion we definitely started out very crypto-native, and we need to smooth out the UX a bit for normies. Our core focus was, and at least for now still is, natively on-chain activity. But I'm curious to hear your thoughts if you've tried it out.

Hodl Up: Personally, I think that if you start natively in Web3, that's how you have to keep your core. But if we want mass adoption and want people to participate in crypto IPOs, pre-sales, ICOs, everything, as insiders and get these gains, then as an industry, and I'm not talking about Legion specifically, just in general, we should aim for as much account abstraction as possible. As simple as it gets. But I don't know how hard that would be for a platform like Legion, because, and I'm going to say this because that's how I see it, I don't like numbers that much, this is probably one of the most complicated sectors of crypto: taking part in these sales. Even using decentralized exchanges nowadays, which is just trading in Web3. I understand how to do it because I've been here five years and I've been a daily user, but a friend who just joined would get lost.

Matt: 100%. That's always been crypto's biggest challenge to mass adoption: the unfriendliness of the user experience, especially the fact that if you do the wrong thing with a little string of text, there goes your life savings. It's pretty crazy when you think about it. This isn't really specific to Legion, but I do think that for true mass adoption of on-chain technology, we need more MPC network-type systems, like Lit, for instance, where your keys are managed securely because it's decentralized and no one can reconstruct the key by themselves, and they combine a lot of physical security in the real world with software security, rather than relying only on TEEs, for instance. Whether it's Lit or not, I think these kinds of social recovery platforms are a necessary component of going mainstream. We currently use Dynamic for embedded wallets, but maybe in the future we could use even more powerful solutions where you as an end user don't even necessarily know it's crypto and don't have to worry about your private key. You just log in with information familiar to you, you send fiat and it's automatically on-ramped behind the scenes, and you get fiat back and it's automatically off-ramped. It's something everyone in the industry is struggling with at the moment: building that out and figuring out the best way to bring this to normies.

Hodl Up: In terms of institutions and governments, I think we've established that they want to be part of the crypto journey. But I think most of the big projects working in different sectors of crypto right now will be the foundation that everything is built on, because I don't think people can keep onboarding new normies in 10 or 15 years with the same UX. So I think everything will be built on top of, let's say, Legion. Legion would be on the back end of every single IPO, ICO, and pre-sale that happens in crypto. I'm just assuming; I hope that happens. And different projects build on top of that. Take Polymarket as an example. They have a good interface, but there are 10 or 20 different apps building on top of them. They get the data and the technology from Polymarket and just build a new interface, if you know what I mean. I'm not a technical person, by the way. I'm just seeing this as a normal user, trying to think like a normie, one who understands how things work to a certain degree.

Matt: I think you're 100% on track. Take Uniswap, for instance. They have the protocol and their own front end, but anyone can build a front end. You can definitely imagine people building normie-friendly front ends that just give people two options: "You have USD. Do you want Bitcoin or Ethereum? Select, swap." They don't even know they're using Uniswap under the hood.

Hodl Up: I saw that you also wrote a book on token design, tokenomics for builders. I'd be lying if I said I read it, but I did skim through it, and I saw the good, the bad, and the aligned in terms of what good tokenomics is and isn't. Could you walk me through it a bit, and then tell me: is there one principle from the book that you had to break when you started Legion, because real markets don't always cooperate with the theory?

Matt: That's a really good question. I appreciate it. Some context on the book: I wrote it after working in the industry with a bunch of founders, designing their tokens and seeing their launches. So it doesn't all come from theory. It comes from a lot of painfully learned mistakes along the way. The book is broken into two sections. The first is more background information; we go through a whole chronology from Bitcoin to now. The second is more of a step-by-step guide for founders on how best to design their token. And this isn't shilling: it's free and open source. Anyone can access it. It's a public good. It's been reviewed by people like Keone at Monad, ilmoi, the founder of Tensor, Chris Burniske at Placeholder, and a few others, so it's gotten a pretty good reception from some serious founders.

I would say one of the biggest mistakes teams make is launching a token too soon, before they have a product or product-market fit, before they really know what they're doing. Because once you have a token live, you almost have two products: your actual product and your token, and they split your time, effort, and resources. I think that principle has survived, from what I've seen.

I'm trying to think of a principle that sounds right in theory but hasn't always worked out in practice, or that my experience with Legion invalidated. I guess it comes down to this, as sad as it might sound: fundamentals are not the only thing that matters. You can put in all the time and effort and design a really well-designed token with beautiful mechanisms. The supply charts look amazing, there are no spikes in inflation, there should in theory be a good balance of supply and demand, and all the variables are calibrated correctly, so it's not going to explode in any market conditions. But so much of this industry is still about optics, narrative, and brand. Founders need to design a token, but too many of them rely on a well-designed token to save a bad product, or to just get discovered on its own. One principle I've really seen play out with Legion in particular is that even the best founders, with the best tokens, can still mess up the go-to-market steps. Those are really important too, beyond designing your token: working with the right market makers, signing the right terms with them and making sure they're not ripping you off, getting the right listings on exchanges, all the things that also go into it. Most people probably aren't thinking about those. They're thinking about buybacks, inflation, and supply, but all these other aspects matter just as much, I would say.

Hodl Up: I like that, and it makes sense, because the token doesn't have to be the end product. It shouldn't be the end product. It's merely a tool to do something else. Atis always uses the example of Polymarket, which doesn't even have a token yet but onboards more users than projects with a lot more brains behind them. If you weren't building Legion and had to design a token from scratch today, which vertical would you avoid, and which would you prioritize?

Matt: I would definitely avoid gaming. I think gaming tokens are just dead.

Hodl Up: We are gamers, man.

Matt: I'm sorry to say it, but it's tough out there for Web3 games especially. You can have games that are cash-flowing, that have revenue, and if there's a strong, real tie between that revenue and the token, that's one thing. But in-game tokens are rough, especially with play-to-earn dynamics. So I would personally avoid that, at least. Sorry for your bags.

What's most interesting to me as a vertical is prediction markets. I think they're super fascinating. I was thinking about this the other day. Polymarket has built out the substrate, but think about the tooling and features on top of it. To give a simple example: if you wanted to slowly acquire exposure, say, $10 a day on Donald Trump winning the 2028 election, you can't do that on Polymarket right now. I'm sure a lot of apps will come along and do that. That's just one super simple example, but the vertical that's interesting to me is end-user apps that leverage existing distribution channels, take the Polymarket or prediction market infrastructure, and bring it to Web2 audiences. I think we're just starting to tap into the full set of users. I hone in on this because sports betting is such a big market outside of crypto, and I think prediction markets are the Trojan horse to get sports betting into crypto, even if users don't know they're using it.

Hodl Up: In terms of consumer apps and onboarding, I think Polymarket is the best example of a consumer app doing onboarding nowadays. You're right. When I heard about Polymarket last year, I didn't know it was Web3. I literally thought of it as an app that lets you bet on anything. Then a few months ago, I was writing an article about Polygon and its ecosystem, and I thought, "Wait, the names sound similar." I was looking at apps on Polygon and saw Polymarket there, the biggest one. It's crazy. But do these kinds of projects need a token? As you said yourself, not every project needs a token, and if they already have a product, why have two products if you don't need them? Do consumer apps need a token when you're targeting Web2 audiences who basically don't care whether you have a token? They just want a good product.

Matt: It's a really good question, because I think you need a good product regardless of whether you have a token. Having a token cannot save a bad product that no one wants to use. But if you have a product people want to use, a token used wisely can help accelerate it. The analogy I like to use is that a token is not a match. It doesn't start the fire, but it's gasoline. It can accelerate the fire.

To put that into an example, in Polymarket's case, they have all these incentives they're paying out, like liquidity rewards. They're spending all this money and cash, raising again and again from VCs to fund growth, users, trading volume, and liquidity. That's a perfect example of where a token could subsidize some of those costs. You could reward people with a token instead of cash, reserving your cash for growing or investing in other parts of the business. Of course, it has to come full circle. There has to be a strong value accrual driver for the token. I think one of the biggest mistakes, probably not in this cycle but the one before, was that people said, "A token helps us bootstrap liquidity," or "It helps us get this," and only thought about the supply side. You need to think about both the supply side and the demand side. The supply side for Polymarket is really interesting, because they could use it to reward certain behaviors and get users to do certain things, like provide liquidity, without having to keep raising VC funding and diluting equity. Then, obviously, the demand side has to come in, where those tokens eventually need something similar to Hyperliquid: protocol buybacks, revenue share, or some other very strong demand generator that balances it out. I'm super bullish on Polymarket eventually having a token, and I think it will be as popular as HYPE is now, if not more.

Hodl Up: I have one more question related to the scoring system. I know I keep going back to it, but it sounds fascinating to me. Is there a risk of bots?

Matt: I think it's important to keep in mind that in crypto there are always Sybils and always bots. What the scoring does is provide another layer of Sybil resistance. Let's say you have a good GitHub account that has contributed to a lot of public repos that high-profile people like Vitalik have worked on. Great. You could fake that account, sure. But combine it with a Twitter account that's up to date and has followers, and it's getting a bit harder. Combine that with wallets that have a long history, have made a lot of transactions, and have consistently used the chain, and it becomes increasingly harder and more expensive to do mass botting and Sybil attacks than it would be without this. You're never going to fully eliminate bots and Sybils; that's just the cold, hard truth. But it's all about making it a level playing field for real humans and real users to get access, and making it less cost-efficient for people to abuse the system, which gives more access to real people. That's what Legion Score is all about.

Hodl Up: Let's say, and I hope this doesn't happen, but inevitably a project using Legion fails, or rugs, or implodes. What would you owe investors at that point, morally and reputationally? Or would it all boil down to what the company that actually rugged owes them? I don't know if that made sense.

Matt: Sorry, can you ask again, the part about rugging?

Hodl Up: Say I have a project and I do my on-chain IPO via Legion, and after a while the project just fails, a Luna-type failure, something just doesn't work out. Would Legion owe investors anything at that point, morally or reputationally?

Matt: Reputationally, yes. We take finding the best opportunities seriously, but of course even the world's best investors don't have a 100% hit rate. There will be projects that aren't successes. So I think a lot of it comes down to user education: making sure users understand the risks they're getting into, that the right disclosures are being made, and that they have all the information they need to make an informed decision. That's another feature of Legion Score, really: understanding, "Okay, this is a crypto veteran. They know what they're doing. They use the type of protocols this project is building. They'd be a good fit for this project." Whereas someone who's an NFT collector might not be the best fit for a new, super-leveraged, delta-neutral synthetic stablecoin, but someone who does a lot of that stuff would be. So it's all about matching the right investors with the right projects, which reduces misaligned expectations, because there's always a risk of losing your money. The problem really happens when people feel blindsided or don't realize what they're getting into. So everything we do, from compliance to disclosures to Legion Score, aims to get real people more access and help them understand the proportionate risks they're taking on.

Hodl Up: I just want to stop on the NFT part, because everyone we've had on the podcast just doesn't like NFTs, or at least...

Matt: Yeah. NFT collectors might be a good fit for a certain collectible, or for a protocol that does tokenized Pokémon cards, for instance. But they wouldn't necessarily be the best fit for the delta-neutral stablecoin.

Hodl Up: I have another question, and I apologize in advance, because I understand some of my questions might seem very random, but these are things I'm very curious about. Have there been cases where a user or supporter is valuable in terms of adding liquidity and attention to the system, but is toxic and politically radioactive? Let's say Kanye West uses Legion. He provides liquidity, but he's Kanye West. You never know. How do you handle that?

Matt: It's a really good question. I don't think we've had Kanye West himself use the platform yet, but we've certainly had founders say, "Oh my God, this guy is one of our biggest whales, he provides TVL, but he's kind of annoying." There are ways to handle that, through the value-add sub-component score. There are ways for founders to say, "This person went above and beyond. I highly recommend other teams work with them and raise from them," so their score gets boosted. And there are ways for founders to say the opposite: "Even though this person brings these benefits, they aren't worth working with." So what you do to support projects, including whether you dump the tokens or support the founders, makes its way into the score through the value-add sub-component, and people are incentivized to behave their best and act in the long-term interest.

Hodl Up: Whales get it easy, man. They get away with everything. To wrap it up, my question is: what's the current state of the market? Are we finally in a bear market? I think this has been one of the longest bull runs. I've checked the charts, and since about mid-2023 Bitcoin has been going up. I'd say that's when the recovery started, and then the bull phase began. So are we actually in a bear market? Is the bull over, or are we going to see an altcoin season? I've been waiting for an altcoin season since 2022.

Matt: I don't know. I think I'm in a middle-ground camp, or a third camp, where I think the cycle is going to be different, but concentrated. It'll follow a power-law curve. Bitcoin will survive. There'll be a bit of a correction, as there always is. But with all this institutional buying pressure, with the ETFs and so on, I think the cycle is fundamentally different now. Of course, digital asset treasuries might blow up or become forced sellers and add temporary volatility, but overall I think the four-year cycle of a couple of years of bull and a couple of years of bear will change into something with more temporary volatility, arguably more risk of a systemic crash, ironically, but also a more permanent bid for Bitcoin.

Beyond Bitcoin, it gets really interesting, because beyond a handful of tokens that have a lot of mindshare, revenue, and buybacks, there isn't much buying pressure for these things. That's why at Legion we're super focused on finding the best projects, the ones generating revenue, with paths to strong value accrual for the token. I think you'll increasingly see that. There won't be what there used to be in other cycles, an altcoin season where literally everything goes up 20x or more. I think those days are largely behind us. There will be an altcoin season, but it'll be concentrated in the subset of the market that's already outperforming, where there's revenue, growth, and mindshare. That's what market cycles will look like going forward. That's my two cents. I think we're in a temporary correction. It could be a somewhat sustained one, but I don't think it'll be a standard two-year bear market.

Hodl Up: Back in 2021, I thought I was the best value investor in the world. Everything I bought did 10x, man. It was crazy. But then came 2022 and 2024, and I kept buying things, and out of 20 buys, hardly any went up. The rest just kept falling. Matt, thank you very much for joining us today. It was a super valuable episode, with super valuable insights, and we look forward to meeting you at Breakpoint in Abu Dhabi and maybe recording an episode there, if you're up for it.

Matt: That'd be awesome. Let's do it. I look forward to meeting you there. Thank you guys for having me.

Hodl Up: Thank you, buddy. Cheers.

Hodl Up: Thank you for joining this episode. Make sure to follow us on all our socials, and see you in the next one.