Author: STi, Silver Moon, Nahida
When the blockchain industry entered the high-speed cycle from 2020 to 2026, its core contradiction remained unchanged: cutting-edge technology follows strong cycles and early-stage speculation; genuine long-term value creation remains rare and difficult to quantify, or the concept of value is understood differently. This closely resembles the early stage of tech stocks in the last century and directly contrasts with the investment framework consistently upheld by Munger and Buffett for decades. Although Buffett and Munger have consistently publicly opposed BTC—or perhaps it's a secret they won't admit—on one hand, it may stem from a long-standing habit of the Old Money model, and on the other hand, they oppose 'high premium expectations under extreme uncertainty' and 'valuation logic without cash flow support.' This perspective holds significant reference value for the long-term healthy development of the blockchain industry, particularly for project ecosystems.
A. The most essential insight of long-term thinking for Web3: value must return to 'sustainable output'
Munger and Buffett repeatedly emphasized:
A company's value stems from the discounted future free cash flows it can generate sustainably, rather than market sentiment, narrative storytelling, or temporary price anomalies driven by consensus. Although the valuation logic and risk profiles of the tech industry differ significantly from those of traditional sales sectors, the fundamental core remains the same. When this long-term framework is mapped onto Web3, three critical evaluation criteria emerge:
1. Does this blockchain/application have long-term real demand?$BNB $ETH $BTC
Around 2026, many new projects fell into a trap—allocating most of their budgets to marketing just to generate short-term excitement through airdrop tasks. Coupled with exchanges using platforms like Twitter as key listing criteria and the cycle driven by certain meme coins, even some blockchain projects began adopting short-term TVL-driven marketing strategies that were not aligned with long-term platform development. Many projects appeared prosperous before launch but vanished completely three months after going live, with almost no real human trading—only bots remained. For long-term value, the focus should not be on TVL boosted by short-term incentives or artificial prosperity from miner rewards, but on core functionality that people continue to use even without subsidies.
For example:
Gas fees for Ethereum and mainstream blockchains in normal use are direct economic outputs of real activity.
Some Rollups are gradually shifting revenue toward real user transactions, not just airdrop 'sheep' hunters.
Some AI × Web3 projects show quantifiable revenue or clear potential when computing demand grows rapidly.
The metaverse may one day replicate real-world economic models directly.
Revenue from paid features in social software and similar platforms
These criteria are closer to the 'fundamental output' of value investing, and can also better promote development motivation and long-term growth logic for blockchain foundational projects.
2. Does this project have a compounding business model or long-term network effect growth potential?
Many Web3 projects look impressive during bull markets but decay sharply in bear markets. Projects that can survive both bull and bear cycles often exhibit 'compound effect' and long-term development potential.
Typical characteristics include:
The larger the ecosystem, the lower the unit cost (economies of scale)
The more concentrated data, assets, and liquidity become, the harder it is for competitors to challenge (network effects)
The higher the user switching cost (moat)
This aligns fundamentally with Munger’s emphasis: 'Seek excellent companies, not cheap ones.' You need strong compounding, not just low valuation. Good companies may experience periods of long-term undervaluation due to market policies or exchange strategies, but only if they are fundamentally solid projects. 🚀🚀🚀
3. Can the token system carry value rather than erode it?
This touches on the core issue of Tokenomics:
Does the token feature a value loop such as 'revenue distribution,' 'fee buyback,' and 'governance voting'?
Is the token supply curve reasonable, avoiding long-term dilution?
Does the token appear decentralized on the surface but is actually highly concentrated in reality?
Is there quantifiable future cash flow?
Buffett once said 'Bitcoin does not create value,' just as he felt gold has no value. But the definition of value differs for everyone, and the same asset can have vastly different values across time cycles and external environments. Storing value is itself a form of value—perhaps it doesn't fit the cash flow growth criteria of traditional value investing. As BTC's blockchain develops, along with other digital currencies, if certain chains or protocols can generate stable income and ownership distribution for tokens in the future, their valuation models will become significantly closer to those of traditional enterprises—or even give rise to entirely new valuation models.
Thus, value investing logic does not reject Web3; it rejects hollow Tokenomics.
B. The immense reference value of Munger's 'reverse thinking' for Web3
Web3 participants often get lost in technical jargon—zero-knowledge proofs, account abstraction, sharding technologies—while overlooking the underlying economic principles and human nature. Munger's mental models emphasize interdisciplinary integration, advocating for systems thinking from psychology, physiology, mathematics, engineering, biology, physics, and more. The absence of this multidimensional perspective is precisely what led to the death spiral of Terra (LUNA), the collapse of the FTX empire, and countless DeFi protocols being hacked. One of Munger's most important and valuable mental models is: avoid areas you don't understand; never bet outside your circle of competence. Most losses in Web3, aside from macro bear market trends beyond control, actually stem from:
1. Information asymmetry, deliberately manipulated by those with information advantages 2. Overconfidence, believing oneself a genius after making a few lucky bets 3. FOMO-driven emotional decisions 4. Not understanding mechanisms, only following short-term price charts and news 5. Lack of awareness regarding protocol risk, governance risk, and token inflation risk
Munger's circle of competence framework can be broken down into three long-term evaluation criteria for Web3:
1. Do you truly understand how the protocol creates value?
Architectural logic
Technology roadmap
User demand
Cost structure
Competitor model
Token incentives and fee model
If you don't understand even one aspect, it means you're betting outside your circle of competence.
2. Have you assessed the most fatal systemic risks?
For example, the following dimensions:
Changes in Layer1 unlocking mechanisms, major changes in the core executive team
CEX assets are opaque, with risks of user fund misappropriation (e.g., FTX incident)
Whether there is a death spiral mechanism (e.g., the algorithmic stablecoin UST-LUNA pegging ratio that caused LUNA's collapse)
DAO governance hijacked by a few large holders
Mandatory unlock period for staked assets (if the protocol collapses, can the unlocked asset returns retain value?)
Token incentive decay leading to ecosystem collapse (is the token value merely a game of short-term incentives?)
Long-term infeasibility of the technology roadmap (does the team have the technical capability and vision for sustainability?)
Munger emphasized that 'avoiding foolish mistakes is more important than doing smart things.' In our terms: prepare in advance, or you will fail. Know yourself and your opponent, and you will win every battle. When you can accept the worst-case scenario and do your utmost to avoid it, your relative chance of success increases. This mindset is especially valuable in the Web3 market, where alpha is higher, bubbles form more easily, and volatility is more extreme.
3. Can it survive bull and bear cycles?
Munger’s investment principles clearly state: excellent assets get better over the long term, while poor assets deteriorate.
The blockchain industry has repeatedly validated this in each cycle:
Chains with increasingly robust technical foundations have greater long-term growth potential, and real-world outcomes confirm this.
Chains with hollow narratives and lacking strong resources or backing have a very high probability of going to zero during bear markets.
Applications with genuine user demand will gradually achieve stable revenue, usage frequency, and smooth user experience.
Meme-driven strategies that are self-destructive only worsen the mainstream market and further drain liquidity.
Hype-driven fake prosperity will be cleansed after listing or FOMO cycles end, eventually fading into obscurity.
Long-termism is actually the most fair screening mechanism offered to everyone, allowing investors to more easily access high-quality projects and management teams that have survived multiple severe bubbles and bull-bear cycles.
