Why are all Web3 projects Ponzi schemes?
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Why are all Web3 projects Ponzi schemes?
The model of "decentralized system vs. users" without a real product party will persist, and Ponzi models will continue to exist.
Navigating Web3 tides with focused insightsAuthor | Guatian
This article originated from a GameFi asset AMA I participated in last week as a guest. The host was offline due to network issues, so the guests took turns moderating.
Melody, whose voice is incredibly pleasant, spoke quickly: "The lifecycle of GameFi is too short!" I immediately jumped in: "Why is it so short?"
Melody: "Because they're all Ponzi schemes!" I kept playing the straight man: "Why are they all Ponzi schemes?" Then everyone started discussing, but unfortunately the topic didn't get fully explored—the Space shut down due to technical problems.
Over the following days, I shared bits of reflection daily, which eventually evolved into this article: Ponzi models are an inevitable and transitional phase during the early stages of WEB3 application projects. A more accurate title might be: Why do most WEB3 application projects start with Ponzi-style economic models?
There's a saying that "your position determines your perspective," but I firmly believe that without deeply analyzing WEB3 economic models, one cannot predict how WEB3 might disrupt WEB2 through new business models. I've always hesitated to use the word "disrupt"—partly because I dislike sensationalist clickbait like "XX revolution" or "epoch-defining," and partly because I feared overreaching. But my recent insights suggest that "disruption" might actually have a real chance in the future. Even if it doesn't happen, holding onto that belief isn't bad—especially for someone like me who HODLs BTC long-term. My personal investment approach can't compete with those chasing overnight 100x gains on Base; while others get rich flipping memecoins, I end up genuinely bald after losing money...
Let’s walk through the evolution of business models over the past few decades:
Phase One: Product Provider vs User
Before the rise of the internet and mobile internet, the relationship between product providers and users was simple: providers sold products, and users paid for their core functionality. If the product was good and built brand loyalty, user numbers grew. This was a one-sided dynamic: Product Provider VS User.
Phase Two: Product Provider vs Platform vs User
With the spread of the internet and mobile connectivity, human habits became deeply embedded in digital systems. A new player emerged—the platform. Leveraging technological advantages, platforms first developed products to gather users, then pressured late-coming product providers: "User attention and access are now under my control—you must pay to reach them." They also approached advertisers: "Look at all these eyeballs—won’t you place an ad? I’ll keep the barrier low; just bid high enough and you’ll appear on the front page."
Platforms like Taobao, Didi, and Douyin operate exactly this way. But here arises a challenge: user habits are hard to shift. How did these platforms initially acquire users? Human nature leans toward greed—true for both WEB2 and WEB3. So platforms raised funds from PE firms and used that capital to subsidize early users—offering $1 rides, $1 rice purchases, etc. These early WEB2 adopters resemble WEB3’s early miners. Why would PE firms act like philanthropists, funding both platforms and users? Because they knew this business model would eventually generate returns—from product providers who’d willingly pay premiums to access users. As long as the story holds, platforms could go public and investors could exit profitably. With PE funding, platforms could burn cash aggressively. Some succeeded spectacularly, growing into giants capable of dominating both product providers and users.
Now, platforms themselves are evolving, trying to distract increasingly savvy users: They need to add extra layers of value beyond basic product utility, otherwise platforms will simply cannibalize each other. New paradigms emerge—private traffic pools, influencer livestream selling, etc.
Take influencer sales as an example: Influencers often claim to rebel against platform monopolies, positioning themselves as peer-to-peer recommenders, seemingly replacing platforms with individuals. In livestreams, they enhance engagement by offering emotional rewards beyond product utility—poetic charm like Dong Yuhui, sensual appeal from "welfare girls," or chiseled abs from boyish streamers. Audiences find what they crave, and wallets open faster than ever. Yet behind many influencers sit organizations akin to traditional platforms—MCNs pulling the strings.
To summarize: In Phase Two, product providers and platforms grow together, but ultimately users bear the cost. New formats like influencer marketing offer slightly better user experiences by adding emotional satisfaction—but still revolve around extracting value from users.
Whether it’s e-commerce platforms or influencer sales, users remain the naive fish on the chopping block. Product providers and platforms collude to extract every penny. You may feel like you’re gaining early benefits, but eventually, you pay it all back.
Phase Three: Product Provider vs Decentralized System vs User
To address the flaws of Phase Two, let’s examine what WEB3-driven Phase Three introduces differently.
Compared to WEB2’s “Product Provider VS Platform VS User” model, WEB3 should evolve into “Product Provider VS Decentralized System VS User,” where the central intermediary shifts from centralized WEB2 platforms to a decentralized system. This system consists of protocols interacting via code, embodying WEB3 principles such as decentralization, privacy, and consensus-based ownership. From the user’s perspective, this means:
1. Your assets reside securely in your own wallet—no one can take them without your explicit consent;
2. You control whether your personal data is shared for commercial purposes, unlike WEB2 platforms that sell it directly to advertisers;
3. Everyone has voting power to influence how a decentralized system operates. For instance, a universally disliked service like Baidu could be voted out of existence if it were built on WEB3 architecture.
If this sounds so great, why do so many WEB3 applications still have short lifespans and exhibit Ponzi-like traits? Because we’re still extremely early—genuine product providers haven’t entered yet. The idealized “Product Provider VS Decentralized System VS User” currently exists only as “Decentralized System VS User.” Without final-paying product providers joining the ecosystem, teams running decentralized systems resort to mutual extraction—competing in cleverness (or foolishness), persuasion, and speed of exit.
Can you name any WEB3 apps today equivalent to Alipay or WeChat in terms of mass adoption? Forget about achieving that level—most projects can’t even clearly articulate what service they offer to the general public. If I were a pure WEB2 user, I couldn’t convince myself why I should try any current WEB3 vertical:
What does DeFi do? Generate tokens via code and endlessly loop them within closed ecosystems? Does avoiding DeFi negatively impact everyday life for WEB2 users?
What does SocialFi offer? Spending time in Telegram groups or platforms with thousands of members, chatting daily with a dozen active users about memecoins, degens, clubs, and "welfare girls"?
What does GameFi provide? A collection of unenjoyable games requiring grinding under short-term high-yield incentives to become an early miner?
The key question is: What actual problems or pain points in the WEB2 world do these so-called WEB3 "FI" applications solve? Currently, the answer appears to be: none at all.
Does this mean WEB3 is a scam? No—it’s simply in its infancy. Infrastructure is weak, and credible product providers haven’t arrived. Most project teams are hybrids of “smart contract coders + marketing operators,” essentially precursors to true “decentralized systems.” But looking back at WEB3’s development over the past five years, progress is evident: from basic public chains and token speculation, to DeFi, NFTs, and blockchain games—each step adds functional modules.
DeFi established a primitive self-sustaining decentralized cycle, enabling token flows independent of centralized exchanges (CEX). NFTs began showing signs of value accumulation (though sustainability remains uncertain)—imagine traditional finance without gold or similar stores of value. As pioneers among WEB3 applications, blockchain games continue experimenting—not just with Ponzi mechanics, but whether blockchain-enhanced gaming can appeal to mainstream players.
This process may take a very long time. By analogy with AI development—even counting from Geoffrey Hinton’s introduction of deep learning via neural networks in 2007 to ChatGPT’s widespread public adoption in 2023—it took 16 years. Therefore, we should expect the current model lacking real product providers—“Decentralized System VS User”—to persist for quite some time, with Ponzi dynamics continuing. In Guatian Lab’s view, Ponzi models as a category aren’t inherently right or wrong. They can be designed elegantly or crudely.
When might genuine product providers finally enter and help us move beyond pure Ponzi models?
First, regulatory clarity worldwide—regulation ceases to be a major obstacle;
Second, infrastructure matures—including resolution of recurring hacking incidents;
Third, decentralized consensus gains broader acceptance—people begin feeling “fed up with centralization”;
Fourth, clear pain points emerge that WEB2 either cannot solve or solves only at great cost (e.g., the recent rise of RWA, mostly backed by U.S. Treasuries, which already addresses the needs of crypto users wanting exposure to U.S. bonds)—problems uniquely solvable by WEB3.
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