Web3 has been heralded as a transformative force, promising decentralized solutions and democratized access to digital assets. Central to this vision is the proliferation of tokens, which are often introduced by projects to incentivize participation, raise funds, or establish governance mechanisms.However, the rampant issuance of tokens without clear utility or purpose has led to a landscape rife with speculation, misaligned incentives, and, in some cases, outright fraud.
This article delves into the reasons why many Web3 projects may not warrant a token, yet still opt to create one, exploring the consequences and highlighting examples that underscore the importance of purposeful token utility in Web3.
The Allure of Tokens in Web3
The appeal is easy to understand. Tokens offer a seemingly quick and easy route to capital. They let projects raise funds without the strings attached to traditional venture capital or the paperwork of equity deals. With enough buzz, a token launch in crypto can generate millions, even before a working product exists.
But that rush to tokenize often skips the most important question: does this project actually need a token? What role will the token play in the product’s success or is it just a fundraising gimmick dressed in technical jargon?
Too often, tokens are launched before a product is fully functional, before the community is built, and before there’s any clear use case. And without genuine token utility in Web3, tokens become speculative placeholders propped up by hype rather than value. This pattern not only confuses users but also erodes trust in the ecosystem as a whole.
Hype Without Substance: The Dangers of Purpose-Free Token Inflation
The crypto market’s meteoric rise has brought with it an explosion of new tokens but beneath the surface lies a sobering reality. In 2024 alone, over two million tokens were launched, yet only around 1.7% were actively traded within their first 30 days according to Chainalysis. This sharp contrast highlights a growing problem in the space: token launches in crypto are driven not by innovation or utility, but by hype and speculation.
Related: Why Most DeFi Projects Fail (And What Needs to Change)
Many of these tokens exist without a real purpose. They’re not solving problems, building ecosystems, or offering long-term value. Instead, they’re launched to ride waves of public excitement, often designed to attract quick investments before fading into obscurity. Some are quietly abandoned after failing to gain traction, while others are more sinister engineered as part of coordinated scams like pump-and-dump schemes and rug pulls.
In fact, data from 2024 reveals that 94% of decentralized exchange pools involved in suspected pump and dump crypto activities were eventually rug-pulled by the very people who created them. The remaining 6% were tied to wallets funded by the token deployers themselves, suggesting premeditated fraud.
The damage isn’t just theoretical. In February 2025, Argentine President Javier Milei publicly promoted the $LIBRA token, causing its price to skyrocket from $0.000001 to $5.20 in under an hour. But the euphoria didn’t last, within hours, the token had crashed to $0.99. Investigations later revealed that eight wallets linked to the token’s creators had withdrawn approximately $99 million, sparking allegations of a rug pull.
A similar scandal played out with the Squid Game token, which capitalized on the Netflix show’s popularity. Investors eagerly bought in, only to find they couldn’t sell their tokens by the time the truth emerged, the creators had vanished, leaving a trail of losses behind.
These cases reflect a troubling trend in the industry: tokens being launched not to build, but to exploit. Projects with no clear use case or roadmap contribute to a bloated and chaotic market, where legitimate innovation is drowned out by scams and speculative noise. The result is a growing erosion of investor trust and a stain on the credibility of the broader crypto space.
Short-Term Profits vs. Long-Term Trust
In the fast-paced world of Web3, it’s tempting for projects to cash in quickly. Launch a token, ride the hype, spark FOMO on social media, and rake in early profits. But what happens after the buzz dies down? Far too often, short-term profit-chasing leaves behind a trail of broken promises, disillusioned investors, and tarnished reputations. And while the crypto space may be known for its risk appetite, users are increasingly demanding more than just flashy launches, they’re looking for real value and trust that lasts.
Take the case of SafeMoon, a textbook example of how short-term gains can come at the expense of long-term credibility. When the project launched in 2021, it took off like wildfire. Promises of sky-high returns, bolstered by influencer endorsements and aggressive marketing, drew in waves of retail investors hoping to strike it rich. The project’s mechanics, including token burns and automatic liquidity generation, sounded innovative on paper. But behind the scenes, the foundation was shaky.
As token prices soared, many of SafeMoon’s early investors were left holding the bag when the value abruptly collapsed. Users raised red flags about disappearing liquidity and a lack of transparency. What began as a community-driven, get-rich-quick phenomenon quickly unravelled into a cautionary tale.
Eventually, regulators stepped in and the fallout was severe. John Karony, one of SafeMoon’s key figures, was found guilty on multiple counts, including securities fraud, wire fraud, and conspiracy to commit money laundering. The message was clear: exploiting tokenomics for personal gain doesn’t go unnoticed forever.
The bigger issue here isn’t just one project gone wrong. It’s a pattern. When projects launch tokens without a clear roadmap, sustainable utility, or long-term strategy, the consequences can be dire not just for the founders, but for the entire Web3 ecosystem. Communities lose faith, new users become more skeptical, and innovation suffers. We end up with a growing list of failed crypto projects that erode public trust and make it harder for legitimate innovation to thrive.
Trust in crypto isn’t built on big promises, it’s built on follow-through. Projects that think beyond the short-term pump and prioritize transparency, accountability, and meaningful engagement with their communities are the ones that stand the test of time. That means showing how the token supports real utility, aligning incentives with users rather than insiders, and being upfront about risks, limitations, and future plans.
Web3 doesn’t need more overnight millionaires, it needs builders who play the long game. Because in the end, hype fades, price charts fluctuate, but trust? That’s what endures.
Alternative Funding Models: Grants, Equity, Crowdsourcing
The good news? There are other ways to build and fund great Web3 projects, without minting a token on day one.
Grants, for one, have become an increasingly viable path. Ecosystems like Ethereum, Solana, and Arbitrum regularly award non-dilutive funding to projects that offer value to their network. No token needed, just a compelling idea and a committed team. These models provide more sustainable Web3 project funding that emphasizes product-market fit over market timing.
Equity funding is another tried-and-true option. Just like in traditional startups, Web3 projects can raise capital by giving investors a stake in the company rather than in a volatile token. This aligns incentives for long-term success instead of short-term speculation and reduces the risk of joining the ranks of failed crypto projects.
And then there’s the power of the crowd. Crowdfunding platforms allow creators to raise funds from future users, early adopters, and believers in the mission. What’s key here is transparency: contributors know what they’re backing, and why.
Choosing these paths doesn’t make a project less “crypto.” In fact, it often makes it more credible. It shows that the team is focused on solving real problems, not just launching pump-and-dump crypto schemes disguised as innovation.
Bringing It All Together
So, where does all this leave us?
It leaves the Web3 space at a critical inflexion point, one where reflection must replace reflex. Tokens have the potential to be powerful tools in the right hands and at the right time. But they’re not magic wands, nor are they guaranteed gateways to success. When launched without a clear purpose, genuine utility, or proper integration into a project’s ecosystem, they tend to backfire damaging credibility, confusing users, and undermining trust.
Founders and builders need to take a step back and ask the hard questions: What real function does this token serve? Could the project thrive without it? Do all Web3 projects need a token, or is the token simply a shortcut to early funding?
If these questions don’t yield solid answers, then maybe the token isn’t the missing piece. Maybe what’s needed instead is a more intuitive product, a loyal community, clearer goals, or actual user adoption. Web3 is overflowing with innovation, but it’s also plagued by copy-paste playbooks that prioritize hype over substance.
It’s time for a cultural reset.
Do all Web3 projects need a token? The answer is no. Token launches shouldn’t be default decisions, they should be deliberate, justified, and strategic. Because at the end of the day, projects that prioritize trust, transparency, and true utility will outlast those that simply chase the next pump.
In a world built on decentralization and freedom, let’s choose thoughtfulness over trend-chasing. Let’s make Web3 project funding and tokenization meaningful again.
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.
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