Finding Optimistic Remedies Within the Three Major Bottlenecks and Opportunities in the Crypto Industry
TechFlow Selected TechFlow Selected
Finding Optimistic Remedies Within the Three Major Bottlenecks and Opportunities in the Crypto Industry
Using tokens to incentivize users is much easier than having startups spend actual dollars when they most need funding, helping to solve the dilemma of early-stage development.
Navigating Web3 tides with focused insightsAuthor: DeFi Cheetah
Translation: TechFlow
The First Problem – Misaligned Incentives
For many founders, the ultimate goal is a token listing rather than launching a strong product. This is because a token launch brings immediate financial gain. While this approach may maximize short-term profits, it contradicts the long-term health of the industry and value creation: founders’ personal incentives are misaligned with the sustainable development of the crypto space.
An increasing number of founders are chasing quick profits, setting a harmful precedent that equates success with token listings rather than product quality. This creates a negative feedback loop, attracting individuals seeking fast returns instead of meaningful innovation. It’s also why some founders or early industry leaders exit the space, and why crypto is often stigmatized—especially when compared to other tech sectors like AI.
When projects fail to deliver on promises due to weak or non-existent core products, it leads to investor and user disappointment. Over time, this erodes trust in the entire industry, making it harder for legitimate projects to gain support and impeding the sector's maturation.
The Second Problem – Misallocation of Resources
Many crypto venture capital firms operate purely hype-driven models, focusing more on whether a project can generate market excitement (which significantly impacts token price at launch) rather than its actual utility. Resources that could have been used to improve technology, enhance security, or expand product functionality are instead diverted toward marketing, hype generation, and token price manipulation. This misallocation hinders value creation and enables a "race to the bottom," where bad actors crowd out good ones.
I believe it’s entirely reasonable for VCs to pursue profits—they owe fiduciary duty to their limited partners (LPs) and aren’t running charities. In fact, VCs face significant challenges: due to long token lock-up periods, they’re often unable to exit during market peaks and are unfairly blamed when token prices drop. (That said, this is another topic I might explore later.)
The Third Problem: Value Creation Doesn't Necessarily Reflect in Market Cap
This means crypto VCs investing in deep tech may struggle to deliver strong returns to LPs, reducing incentives for others to make similar investments—exacerbating the second problem mentioned above. Particularly, projects that don’t align with current market trends often struggle to gain visibility within the community. Why?
As @cobie once said, “Most people in crypto can’t adequately assess a project’s technical merits or fundamentals on their own. Instead, retail investors heavily rely on signals and social proof when making decisions.” Since the market is largely driven by retail participants, this results in market inefficiencies (though this can be beneficial for finding investment opportunities), causing many valuable projects to be undervalued—often trading below meme coins!
More specifically, protocol development and builder-driven value creation take years, while traders in crypto bull markets typically focus on cycles measured in weeks or even days. As a result, token price performance is almost entirely driven by market attention. This leads many projects to spend more on business development and marketing than on R&D, with attention-grabbing tactics becoming commonplace.
Despite these issues, I remain optimistic about the crypto industry! There are at least three core value propositions that present massive market opportunities and will have profound long-term impacts.
First, the ability to issue non-custodial assets (like tokens, as opposed to bank-held paper money) continues to attract talented founders.
Despite its negative reputation, raising funds in crypto is often easier, and valuations tend to be higher due to greater token liquidity compared to equity. Tokens allow founders to access global capital without geographical constraints and to receive support from any investor with higher risk tolerance. The growth of the crypto ecosystem has largely been fueled by the ease of early-stage fundraising, drawing in a wave of talented builders.
Second, blockchains eliminate numerous intermediaries and reduce associated costs by enabling trustless cooperation.
For example, traditional exchanges must share fees with multiple parties handling brokerage, margin, risk management, settlement, custody, UI, APIs, etc., whereas crypto exchanges avoid most of these costs. As a result, consumers pay lower fees because service providers can reduce rates while still earning more—the cost savings outweigh the price reductions! Thus, total economic surplus increases, benefiting both consumers and producers.
Finally, blockchains enable value transfer through cryptographic tokens.
Using tokens to incentivize users—whose value depends on expectations of a project’s future—is far easier than spending real dollars when startups need funding most. This helps solve the chicken-and-egg problem of early-stage development.
More importantly, users can transfer and exchange forms of value that today’s network infrastructure struggles to handle. For instance, individuals can earn token rewards by completing tasks such as validating transactions or providing computing power to decentralized networks. Through blockchain—a replicated state machine—these processes become significantly smoother. New mechanisms for value transfer can give rise to novel business models that meet previously unaddressable needs.
I’m writing this because I know many people share these frustrations. Open discussion may help others realize they’re not alone—many truly feel the same way. And I believe this very tension marks the early stages of transformative technological development.
Join TechFlow official community to stay tuned
Telegram:https://t.me/TechFlowDaily
X (Twitter):https://x.com/TechFlowPost
X (Twitter) EN:https://x.com/BlockFlow_News
@DeFi_Cheetah
