Crypto Ecosystems Were Doomed From the Start
I’ve spent enough time watching ecosystem funds, grant programs, and “builder incentives,” which all follow the same broken playbook, and they all end the same way: failed and non-existent. I wanted to understand why that happens besides the obvious “grifting culture” and came to the conclusion that every single ecosystem that is not active today was doomed from its very beginning.
Recycling of The Same Capital
We have four groups here directly or indirectly responsible for the ecosystem: builders (developers), foundation, core team, and investors (funds or angels).
Typical capital flow among participants.
We decided to measure TVL as the key metric for everything: the amount of liquidity in the ecosystem, ecosystem maturity, ecosystem’s attractiveness, and at the end of the day, the ecosystem’s success. TVL is in fact a good metric, but not for everything, and especially not when everything is done just to make the TVL number go up without any second thought or longevity behind it.
Developers ← Foundation
Developers are the last people to receive the cheese in this cycle. They’re getting paid to build something on the chain, but here is the main problem: they build the product so it can just exist on the ecosystem map, it’s not for the end users.
Why? Because the key goal here for the foundation is to show the core team how many “great” developers are building on the chain and the immense potential that they have. Usually at this stage the chain is still not live or is in testnet mode, so developers don’t have to prove their user acquisition skills, they just need to build a product that somehow works and position it as a DEX on X Chain or a Wallet on X Chain or something like that.
Foundation ← Core Team
Before the foundation receives money from the core team to do an ecosystem fund (or do it themselves, it doesn’t matter that much), they need to agree on what the key metric is that they should aim for.
The key metric here is the amount of teams building on their chain. At this stage, quantity matters more than quality, and the foundation creates different grants programs, workshops for builders, and other stuff just to attract more builders to the chain, even though they will not receive the grants directly.
Another thing to admit here is that it’s usually not about how selective the foundation committee is, but how greedy they are. Grants are usually not enough to cover any development, but just enough to create the visibility of work. For example, if you received a grant from Optimism in the past, you could only use it to cover fees in the Optimism Network, nothing more.
Here, visibility and competitiveness matter more than builders in general, because the key metric until the chain launches is quantity, not quality.
Core Team ← Investors
After builders did their job and the foundation did their job, the core team can take a look and trick themselves into believing that they’re actually doing well. The foundation is popular, users start to follow their X page, activity on the website grows, overall interest in the chain grows. Founders start doing AMA sessions, going on podcasts and saying that their chain is the future of finance.
Now, they have inflated the metrics to present to their investors, showing that they’re doing well. Investors see “numba go up,” catch FOMO, and invest more in those chains. Investors also know how all of that works, so they need this hype to exit in the future. If you pay attention closely, none of them invest in equity, they need tokens to be liquid as fast as possible to exit now, sailing on a ship that’s later sinking.
Who is in the wrong position?
So with all of that said, we can identify a handful of reasons why this system was built exactly in this way.
Everyone wants to earn some money and doesn’t care about the future.
You care about the future, but you follow the same playbook as everyone else.
You think you can just throw money at the problem and the problem will fix itself.
While the first reason is ethical and the second reason is irresponsible, the third reason is actually delusional, which I want to uncover and show examples of from the past.
Throwing Money At The Problem Does Not Fix The Problem
If you could just throw money at the problem and it would fix itself, such scenarios would never happen:
Aster wasn’t able to compete with Hyperliquid despite millions of dollars put in and strong support from Binance.
Story Protocol didn’t do even 5% of what they promised despite raising 216 million USD.
All Ethereum k*llers from 2020-2021 died despite investing millions of dollars in their ecosystems.
Genuine teams who really wanted their product to succeed still underestimated the amount of time needed for user acquisition. The only vehicle of user acquisition was “airdrops” and different airdrop vesting programs like “don’t sell your airdrop for 6 months and you will receive more airdrop to sell later.”
If you’re only giving a financial incentive, don’t expect users to last when this incentive is gone, because other than that, you couldn’t do anything else.
An anti-example of this rhetoric would be TON Blockchain (recently renamed to GRAM). They already had the user acquisition problem solved (thanks to millions of users using Telegram around the world), but haven’t spent a dime on ecosystem building.
In 2023, they announced an ecosystem fund worth 250 million USD and hardly invested in any protocol. Every builder on TON will tell you that it’s impossible to receive anything from the TON Foundation.
I think it’s important to find a balance between ruthlessly throwing money at a problem and expecting the problem to be solved this way, but also not being greedy towards people who are actually genuine.
1. There is no reason to fund builders on unlaunched chain
This has been the biggest strategy that brutally flopped. There is generally no good reason to fund teams on a chain that is not yet launched. You give money to people to build using a product that does not exist.
Naturally, it attracts a lot of grifters, farmers, devshops, and developers who don’t care about the chain, security (hence why a lot of protocols are getting hacked even without social engineering), or developing a working product that will bring real revenue. There is no reason to build a business if you will always be subsidized by the foundation or ecosystem fund.
That’s exactly what happened to Aptos, Polkadot, Aztec Network, Blast, and many others. You’d be very smart if you could name at least one native app out of all of those networks that is still live today.
A chain that is actively being farmed without even being launched can only host apps that allow you to swap their farmed native token into stablecoins, anything else is artificial activity.
2. There is no reason to fund builders on launched chain as well
If your product is cool, infrastructure is cool, marketing is cool, business model is cool, why would you give money to people to build on your infrastructure if it’s already so good? Turns out it’s very bad.
If your product is good, people will use it, and developers will naturally flow there because they will see the opportunity. If you’re just “buying” developers, those are usually not good developers, and they will not build lasting products in your ecosystem.
I can count on one hand how many protocols got successful because of initial ecosystem funds, like The Graph, Jupiter, Squads, and ENS. Arguably, one of the best protocols funded by an ecosystem is @l2beat, but it’s a public good rather than a protocol that is supposed to make money and be beneficial to a particular ecosystem.
Hyperliquid never gave money directly to builders to build on their ecosystem, but they incentivized developers to come in a different way. Builder codes let developers earn a part of Hyperliquid fees based on actual usage and volume they bring. There are no grants, but a direct economic incentive to build something good.
There was absolutely no reason to give money to people to use your product if your product is good enough.
Promises of New Chains Are Awful
Another interesting reason is that pitches for new chains were basically as awful as possible, which would only attract grifters instead of genuine developers and users.
Movement: uses language that no good developer uses for building on EVM
Scroll: zkEVM for L2 like it’s a strong conviction point
Fuel: another L2 with rare language nobody uses
Story Protocol: IP-focused L1 blockchain (for what? use a database, for god’s sake)
My favorite so far is Morph: a hybrid optimistic zkEVM design that pairs optimistic execution with zk-proof verification, and exposes programmable payment middleware for cross-border remittances.
Do you f*cking understand how bad this pitch is? It sounds like a 10-year-old learned new words and now wants to flex his knowledge in front of his peers. That’s so bad.
One of the only blockchains that had a compelling pitch was @NEARProtocol. Human-readable account names, easy onboarding, intuitive UX, familiar languages that a lot of developers are proficient in, sharding, etc. But that was back in 2019!
Near has pivoted since then into a bunch of other stuff and now runs NEAR Intents, which a lot of people use without even realizing it. Near is an exception because over the time horizon we could find out that the team is genuine and generally cares about the industry (this wasn’t sponsored by Near, although I wouldn’t mind it, I really like the product).
Ecosystems aren’t made for users, but for developers
Another thing that a lot of people (including teams) don’t understand is that the ecosystem is made for developers, not for users. All of this branding stuff, meetups, conferences, marketing, business development: everything is made for developers.
If we see a scenario in the future where users use crypto in a decentralized way and truly don’t know which blockchain they’re using, then we won as an industry. But currently, a lot of resources are wasted on making the system look good and appealing to users, not developers.
Another thing that supports my thesis is the intents and cross-chain thesis, where everything is swapped seamlessly. Users don’t care about chains, and they shouldn’t care, but protocols like Berachain try to appeal to the community more than to developers. When the farming period is over, you’re left with nothing if you don’t focus your positioning on developers.
If I want to send stablecoins to my friend and we don’t know which chains we use, the chain with the best infrastructure wins, and I couldn’t care less if I’m using a giga zkEVM optimistic parallel execution native rollup or anything else. I just want the best execution for the application that I use, not the chain.
Chains are treated as games rather than financial instruments
The peak of GameFi was in 2021, like most people think, but I think the peak was actually in 2025. In my opinion, users were treated as gamers, while blockchains were treated as games.
Come download our game and create your account (connect wallet to frontend)
Explore different minigames (applications to use)
Play the games and receive rewards (swap, bridge to receive tokens from inflation)
The only problem is that in order for games to be played continuously (like Call of Duty, Counter-Strike, or Dota), they should be fun to play! You don’t have to issue any financial rewards for players to keep playing, they should receive fun.
Unfortunately, crypto’s promise is not to be fun, but to be a serious financial infrastructure for the whole world. It can’t be treated like a game, it should be treated according to what you want it to be. You can “buy” TVL, users, activity, but once you run out of rewards, everything fades away, you didn’t have a strong foundation to begin with.
I want to make it clear to people who are gonna say: “well, every industry experienced this, you have 99% of failed products in order for 1% to be successful.” It could be true, but a lot of crypto people aimed to be in the 99% from the beginning, not to be big, but just to sell and walk away before the crash. If you wanted your protocol to be cool and compete with TradFi, you could’ve treated it accordingly.
The Biggest Problem: tokens don’t play any role in the ecosystem
Blockworks cofounder recently posted a video saying that tokens together with equity don’t make any sense. I agree with that, because for most of the products (100% of them), there is no need to have both, as it doesn’t bring any benefits.
However, I think that tokens alone don’t make sense for 99% of the protocols. They don’t have any utility and are only used for money laundering and exiting, nothing else.
You might say that tokens’ utility is staking and governance, but I don’t see how staking useless stuff to get more useless stuff makes it a more attractive asset. The same goes for governance: the average holder is not interested in it, the average Joe who buys one share of Apple is interested in the stock growing and earning from it, not receiving voting rights in the first place.
UNI holders didn’t benefit from the financial activity of Uniswap for more than 5 years. The same goes for almost every other token in the top 100.
That logic applies the same way to ecosystem tokens — they’re worthless. If you’re an L1, alright, I can understand that you need your token to pay for fees, and here the token is fundamental to the whole ecosystem, especially with interesting economics. But if you’re an L2 that uses ETH to pay for fees, there is no reason for your token to exist except for speculation and artificial hype of the protocol.
What is the future of the ecosytems?
The future is always uncertain, but I believe it’s bright. The same ecosystem-building techniques will not be applied in the future, and ecosystems will be treated more seriously, with a serious foundation underneath. We could see chains transitioning to apps (like @Sophon moving to Base) and more teams actually caring about user acquisition.
As we transition into a more serious stage with less euphoria, crypto products will be valued more closely to equity and actual revenue made. Ecosystems will be way smaller and will be used for interesting mechanics of user acquisition, not just airdrop farming.
I’m very optimistic about the future.