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Home Articles

Why Are Crypto Projects Still Obsessed with “Community” Instead of Product?

10 April 2025
in Articles, Opinion
Reading Time: 9 mins read
112 4
Why Are Crypto Projects Still Obsessed with "Community" Instead of Product?

Source: Kriptomat

The cryptocurrency industry has always been heavily focused on crypto community building. From Bitcoin’s early days of grassroots adoption to the rise of meme coins and decentralized autonomous organizations (DAOs), “community” has been a driving force behind many projects. 

However, this intense focus on community sometimes comes at the expense of actual product development, leading to a cycle of hype-driven investments rather than sustainable innovation. 

In this article, we will explore why community engagement remains central to crypto, the risks of overhyping projects without real substance, and whether Web3 can strike a balance between community-driven crypto growth and tangible execution.

How Important is “Community” in Crypto?

Unlike traditional businesses that rely on centralized decision-making, Web3 marketing thrives on community-driven governance. Crypto projects depend on collective participation rather than a single authority, which fosters trust and aligns with blockchain’s decentralization ethos.

For example, Bitcoin’s protocol changes, such as SegWit and Taproot, were determined through community consensus, showcasing how decentralized governance enhances trust. 

RELATED: What is a Bitcoin Improvement Proposal (BIP)? And How Does It Work?

Similarly, Ethereum’s governance model includes a diverse set of stakeholders—developers, miners, and token holders—all contributing to its evolution.

Network Effects and Adoption

A strong community drives adoption, which is crucial for the success of any cryptocurrency or blockchain project. The more engaged a community is, the greater the network effect, leading to increased usage and liquidity of the token.

Bitcoin and Ethereum are prime examples of how community involvement fuels long-term growth. Bitcoin’s rise from an obscure cryptographic experiment to a globally recognized asset is largely due to its passionate early adopters. These individuals educated others, ran full nodes, and helped bootstrap an entire industry around Bitcoin.

Ethereum’s developer community has played a key role in the network’s upgrades, including the transition to Ethereum 2.0 and the implementation of smart contract functionalities. The Ethereum Foundation’s grants program, hackathons like ETHGlobal, and the continuous expansion of Layer 2 scaling solutions (such as Arbitrum and Optimism) highlight how community engagement accelerates development.

Furthermore, DeFi protocols such as Uniswap and Aave have thrived due to strong community backing. Uniswap, for example, went from an experimental project to one of the largest decentralized exchanges (DEXs) because of active user participation, liquidity providers, and governance token holders who continuously contribute to protocol improvements.

Marketing and Organic Growth

Traditional businesses invest heavily in paid marketing, but Web3 marketing rely on community advocacy. Social media platforms like Twitter, Discord, and Telegram act as major hubs for discussions, making word-of-mouth marketing highly effective.

For instance, the 2021 Dogecoin surge was largely driven by Reddit and Twitter communities, with influencers like Elon Musk amplifying the movement. Despite having no inherent technological innovation, Dogecoin’s market capitalization skyrocketed past $80 billion at its peak due to the sheer power of community engagement.

Dogecoin Skyrocketed Pass $80 Billion in May 2021. Source: Coingecko

Similarly, projects like Shiba Inu (SHIB), which started as a joke, managed to build a dedicated fanbase that drove its widespread adoption. The introduction of ShibaSwap and an ecosystem expansion plan only became viable because of the enthusiastic community that kept the project relevant.

Meme coins are not the only beneficiaries of community-driven marketing. Solana’s ecosystem growth can also be attributed to its vibrant developer and user community. Solana’s low fees and high-speed transactions attracted NFT projects, gaming applications, and DeFi protocols, all supported by an active online presence.

Additionally, influencer marketing and community engagement programs (such as token airdrops, staking rewards, and ambassador programs) create excitement and encourage organic participation.

The Downside of Hype: When Community Enthusiasm Overshadows Real Development

While community engagement is crucial to the success of crypto projects, excessive hype can often be detrimental. Many projects capitalize on viral marketing strategies and enthusiastic supporters to drive their token prices up, only to fail in delivering any meaningful product. The projects’ teams prioritize maintaining a strong and engaged community over actual product development. This phenomenon results in projects that remain perpetually stuck in the “roadmap” phase without launching functional products.

A prime example of this is SafeMoon, a token that gained massive popularity in 2021 due to its aggressive marketing campaigns and social media presence. However, as its community expanded, critics raised serious concerns. Investigative YouTuber “Coffeezilla” accused the SafeMoon team of misappropriating funds, and a class-action lawsuit alleged that the project used influencers and celebrities to promote the token with misleading information. By mid-2022, SafeMoon’s price had plummeted by over 95% from its all-time high, illustrating the risks of prioritizing hype over real technological innovation.

Image showing the Projects that failed due to overreliance on community hype on DeFi Planet

While strong communities play a key role in a project’s success, history has shown that hype alone is not enough to sustain long-term viability. Without a solid foundation of technology, utility, and continuous development, many overhyped projects eventually collapse under their own weight. For the crypto industry to mature, there must be a shift towards balancing community engagement with real-world product execution.

Can Web3 Balance Community-Driven Growth with Product Execution?

While an engaged user base is essential for adoption, real-world utility and technological innovation are necessary for long-term sustainability.

Web3 aims to create a decentralized internet where users have more control over data and governance. However, striking a balance between community engagement and tangible product development remains a significant challenge. One of the key factors in achieving this balance is having a long-term roadmap that aligns community enthusiasm with real product milestones. 

Successful Web3 projects recognize the importance of structured development rather than short-term hype. A great example of this is Ethereum’s transition to Proof-of-Stake (PoS). 

This shift, which took years of research and implementation, was not driven by mere speculation but by a clear technical vision. Ethereum’s community played a significant role in supporting this transition, but it was the developers’ persistence and structured execution that made it a reality.

Another crucial aspect is incentivizing builders rather than just promoters. Many crypto projects allocate significant resources to influencer marketing and community-building efforts, often at the expense of actual product development. However, projects that prioritize funding developers tend to achieve greater long-term success. Optimism, a Layer 2 scaling solution for Ethereum, launched grants specifically for developers contributing to the ecosystem. This initiative ensured that real innovation took place by rewarding those who actively improved the network rather than those merely hyping it online.

Additionally, regulatory pressure is increasingly shaping the crypto landscape. With greater scrutiny from governments and financial authorities, projects must focus on compliance and product utility rather than relying solely on speculative market dynamics. The SEC’s lawsuits against Ripple serve as reminders that token-driven marketing without clear legal frameworks can lead to severe consequences. Crypto projects that wish to survive regulatory scrutiny must prioritize real-world applications and ensure that their financial models are sustainable.

Ultimately, for Web3 to thrive, projects must find a way to balance their community-driven ethos with strong technical execution. While engagement is a powerful tool, it should complement—not overshadow—the actual development of blockchain-based solutions. This shift will help ensure that the next wave of crypto projects is built on innovation and usability, rather than speculation alone.

The Role of DAOs in Shaping Project Direction

Decentralized Autonomous Organizations (DAOs) have emerged as a powerful mechanism for aligning community interests with project development. Unlike traditional corporate structures, DAOs operate through decentralized governance, where token holders have a direct say in key decisions. This model reduces the risk of centralized mismanagement and rug pulls, as seen with MakerDAO, which successfully governs the DAI stablecoin through community-driven proposals and voting.

However, while DAOs empower users, they are not without challenges. One major issue is low voter turnout, which can lead to decision-making being concentrated in the hands of a small, active minority rather than reflecting the broader community’s interests. Additionally, DAOs are vulnerable to governance attacks. A notable example is the 2022 Beanstalk hack, where an attacker exploited the governance system to siphon $182 million, highlighting the security risks inherent in decentralized decision-making.

Despite these challenges, DAOs have the potential to drive meaningful development when implemented effectively. Projects like Uniswap and Aave have successfully leveraged DAOs to fund ecosystem initiatives while maintaining decentralization. If carefully structured, DAOs can strike a balance between community engagement and product execution, ensuring that Web3 projects prioritize both innovation and long-term sustainability.

Final Thoughts: Finding the Sweet Spot Between Hype and Substance

Community is crypto’s greatest strength—but also its biggest weakness when taken too far. A passionate, engaged user base fuels adoption, innovation, and growth. But when hype overshadows real development, it creates speculative cycles that often lead to crypto projects failing.

For the industry to mature, there needs to be a shift toward balancing Web3 marketing with actual execution. Developers should prioritize building before marketing, investors should demand substance over hype, and communities should hold projects accountable for their promises.

The future of Web3 depends not just on engagement but on real innovation. Will the industry rise to the challenge?

 

Disclaimer: This article is intended solely for informational purposes and should not be considered trading or investment advice. Nothing herein should be construed as financial, legal, or tax advice. Trading or investing in cryptocurrencies carries a considerable risk of financial loss. Always conduct due diligence. 

 

If you want to read more market analyses like this one, visit DeFi Planet and follow us on Twitter, LinkedIn, Facebook, Instagram, and CoinMarketCap Community.

Take control of your crypto  portfolio with MARKETS PRO, DeFi Planet’s suite of analytics tools.”

Tags: Crypto CommunityCrypto Projects
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Olajumoke Oyaleke

Olajumoke Oyaleke

Olajumoke Oyaleke is a creative writer with a passion for crafting engaging and informative guides across a variety of topics. Deeply interested in Web3 and blockchain technology, Olajumoke is dedicated to making complex concepts accessible, helping readers stay informed on the latest trends in the space. Through writing, Olajumoke aims to showcase the possibilities of Web3 and simplify its advancements for a broader audience.

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