The cryptocurrency market continues to evolve, with new protocols emerging and seasoned investors refining their strategies. Among them, Arthur Hayes, co-founder of the prominent crypto derivatives exchange BitMEX, stands out for his sharp insights and disciplined investment philosophy. In a recent interview, Hayes revealed the two critical criteria he uses when evaluating digital asset protocols for potential investment—offering valuable guidance for both new and experienced market participants.
Key Investment Criteria: Real Usage and Tokenholder Value
Hayes emphasizes that he focuses on protocols demonstrating genuine economic activity—specifically, those where users are spending their own capital, not just incentivized token emissions, to access services. This distinction is crucial in a space often flooded with short-lived, incentive-driven projects that collapse once rewards dry up.
“They’re not spending token emissions, they’re spending their own stables or other crypto to use as a product or service.”
This real-world usage indicates sustainable demand. When users voluntarily pay fees in stablecoins or major cryptocurrencies like ETH or BTC, it reflects confidence in the protocol’s utility and long-term viability. Hayes views this as a strong signal of product-market fit—a rare but essential quality in decentralized finance (DeFi).
The second pillar of his investment thesis centers on how protocols reward their token holders. Hayes is clear: he wants to see tangible returns from holding a project’s native token.
“I want to see how I’m getting paid. Is it a token buyback, is it an emission, what’s the scheme? ... I buy a token, I want some sort of APY, and then I can take that APY and run some sort of financial analysis.”
This focus on yield mechanisms—such as buybacks, staking rewards, or fee-sharing models—aligns with traditional financial principles, where asset ownership should generate income or appreciation. For Hayes, tokenomics aren’t just theoretical; they must deliver measurable value.
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A Case Study: Hyperliquid as a Model Protocol
One project that fits Hayes’ framework is Hyperliquid, a layer-1 blockchain built specifically for high-performance decentralized trading. Despite launching less than two years ago, Hyperliquid has rapidly gained traction, particularly in the decentralized exchange (DEX) space.
What sets Hyperliquid apart is its growing user base actively trading with real capital—primarily stablecoins and major cryptocurrencies—rather than being lured by short-term liquidity mining incentives. This organic growth signals strong product appeal and user retention, two metrics Hayes prioritizes.
Additionally, Hyperliquid’s token model includes mechanisms designed to return value to holders, such as fee-sharing and governance rights. While still evolving, these features align with Hayes’ demand for transparent and rewarding tokenomics.
Critique of Uniswap: Innovation Without Incentives
Hayes doesn’t shy away from criticizing even the most established protocols. He singles out Uniswap, one of the most successful decentralized exchanges in history, for failing to adequately reward its token holders.
While acknowledging Uniswap’s technical excellence and dominant market position, Hayes argues that UNI token holders receive little to no direct financial benefit from the protocol’s massive fee generation. Despite billions in trading volume and substantial fee accruals, the UNI token lacks a formal mechanism for distributing those revenues to investors.
This disconnect between protocol performance and token utility is a red flag for Hayes. He believes that even the most innovative infrastructure must eventually align economic incentives to sustain long-term value.
“Just because a protocol works well doesn’t mean the token is a good investment.”
This critique underscores a broader trend in DeFi: many projects prioritize functionality over financial engineering, potentially leaving investors underrewarded.
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Why These Criteria Matter in Today’s Market
In 2025, the crypto landscape is more competitive than ever. With thousands of protocols vying for attention, distinguishing signal from noise is critical. Hayes’ two-pronged approach offers a pragmatic filter:
- Real usage – Are users paying with their own money?
- Tokenholder returns – Are investors being compensated fairly?
These questions help cut through hype and identify projects with sustainable business models. They also reflect a maturing market where speculative growth is giving way to fundamentals-driven valuation.
For retail investors, adopting this mindset can prevent costly mistakes—such as investing in protocols that rely solely on emissions to attract users or offer no yield despite strong metrics.
Frequently Asked Questions
Q: What does Arthur Hayes mean by “spending their own money” on a protocol?
A: He refers to users paying fees or using capital (like stablecoins or ETH) to access a service—not just participating because they’re earning free tokens through incentives. This indicates real demand.
Q: Why does Hayes criticize Uniswap despite its success?
A: Because while Uniswap generates massive fees, UNI holders don’t directly benefit from them. There’s no buyback, dividend, or staking yield tied to revenue, making the token economically weak despite the protocol’s strength.
Q: What makes Hyperliquid stand out according to Hayes’ criteria?
A: Hyperliquid shows real user adoption with organic trading volume and has implemented tokenomics that aim to return value to holders through fee-sharing and governance.
Q: Can a protocol be successful without rewarding its token holders?
A: In the short term, yes—especially if it offers superior technology or user experience. But long-term sustainability typically requires aligning token value with protocol performance.
Q: Are all token emissions bad?
A: Not necessarily. Emissions can help bootstrap growth, but they become problematic when they’re the only incentive. Projects need to transition from emissions-driven to usage-driven economies.
Q: How can investors assess if a protocol rewards its holders?
A: Look for mechanisms like staking rewards, buybacks, fee distributions, or governance revenue sharing. Transparent dashboards showing treasury activity and yield metrics are strong positive signals.
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Final Thoughts: Building a Smarter Investment Framework
Arthur Hayes’ investment philosophy reflects a shift toward fundamentals-first thinking in crypto. As the market matures, speculative narratives are being replaced by rigorous financial analysis. Protocols that combine real usage with sustainable tokenomics are likely to outperform in the long run.
For investors navigating this complex environment, Hayes’ framework offers a clear roadmap: prioritize projects where users vote with their wallets and where holding tokens delivers measurable returns.
By focusing on real economic activity and investor-aligned incentives, market participants can identify high-conviction opportunities—even in uncertain macro conditions.
Whether you're evaluating emerging layer-1 blockchains or established DeFi platforms, these principles serve as essential guardrails for building resilient portfolios in 2025 and beyond.