One way to hinder the long-term operation of a blockchain project is simply to launch a token.
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One way to hinder the long-term operation of a blockchain project is simply to launch a token.
Issuing a token will on one hand divert the project team's focus from the product to the token itself, and on the other hand trigger regulatory issues, undermining the team's long-term resolve.
Navigating Web3 tides with focused insightsIssuing tokens has long been politically correct in the crypto space—projects that don't issue tokens are even criticized for not being "web3 enough."
I used to support this token-issuance orthodoxy, but now the crypto industry has evolved into a stage with numerous real-world applications—meaning actual user demand exists, products genuinely deliver value, and projects can earn revenue generating positive cash flow.
Most DeFi projects, for example, don't really need to issue tokens. I believe any project not involving on-chain consensus should treat token issuance merely as an option, not a necessity.
It's time for the crypto space to reflect on the downsides of issuing tokens.
The biggest downside is that the token itself becomes the project’s primary product. The team’s main focus then shifts toward serving the token rather than building the actual product.
This isn’t anything new—it’s the most common phenomenon on Wall Street. After going public, most corporate management teams become short-sighted, overly focused on short-term stock prices to appease Wall Street. Since executives’ largest gains often come from stock options, maintaining share price becomes their top priority, turning the company into one where stock price reigns supreme, not product or customer.
Crypto exhibits this tendency even more intensely.
Many current crypto businesses generate positive cash flow—swaps collect trading fees, lending platforms earn interest spreads, Rollups profit from miner fee differentials.
Before issuing a token, teams naturally focus on developing solid products and serving users well to maximize profits. But once a token is issued, the team’s primary incentive instantly shifts to extracting tokens from the treasury and selling them at higher prices.
Under such economic models, perhaps this explains why so many crypto projects endlessly expand operations, branching into unrelated services and suffering from over-diversification.
One of DeFi’s greatest features is composability—for instance, Uniswap’s LP tokens can be integrated by MakerDAO, so MakerDAO doesn’t need to build its own swap protocol.
Yet today, nearly every project in the DeFi ecosystem has diversified: offering trading, lending, stablecoins, staking—the major categories are all covered by single projects.
Typical examples include Curve, Aave, and FXS—all-round players.
Regardless of actual utility, projects deploy across every possible chain.
Teams lose all focus.
Composability is greatly neglected. This situation likely stems from the following logic:
Crypto markets are primarily driven by news—whenever a project announces something new, it's seen as bullish, pushing the token price up temporarily and allowing the team to profit.
Additionally, teams can propose activities just to draw tokens from the treasury and sell them. This is a form of corruption.
Token issuance also undermines strategic resolve due to legal risks. As everyone knows, after issuing a token, concerns about personal freedom arise—how can anyone stay focused on long-term strategy?
Community plays a vital role in crypto. Often, a project’s greatest resource comes from its token-holding community—perhaps just a few groups or a fanbase around the official Twitter.
But after token issuance, the community mainly revolves around token price. Genuine participation in project development drops sharply. Team members likewise become excessively fixated on token price, neglecting community building and maintenance.
Those who made money trading will leave to chase the next token; those who lost money bring negativity; only those sitting on unrealized gains remain supportive community pillars.
In summary, issuing tokens diverts project teams’ attention from products to tokens. Regulatory risks remain significant, undermining long-term determination. Moreover, communities deteriorate post-token launch.
The crypto space must reconsider the necessity of issuing tokens, refocus on products and services, and reclaim the business world’s principle of putting users first.
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