From burning money to industrial ecology: Web3 is following the old path of the Internet

Author: Jiayi

Some people say Crypto is a Ponzi scheme, a bubble, and a speculative game destined to return to zero.

Others say Web3 is a revolution, a paradigm shift, and a new stage of civilization based on technological continuity.

Two voices, a narrative tearing scene.

Don't rush to stand in line, let me first talk about a simpler conclusion:

The underlying logic of business has not changed.

Whether it is Web2 from portal to App, or Web3 from issuing coins and telling stories to competing for infrastructure, behind the prosperity, it is actually the same old road - only this time, the narrative is wrapped in the protocol, and the capital is hidden in the code.

Looking back at the past decade, the path of China's Internet is very clear: concept-driven, financing runs ahead of user growth; subsidies to attract traffic, capital-driven growth; then layoffs, efficiency improvements, and profitability; followed by platform transformation and technology reconstruction. Today's Web3 is also following a similar development rhythm.

In the past year, the competition between project parties has evolved into a competitive arena for acquiring users using TGE and Airdrop. No one wants to fall behind, but no one knows how long this "user exchange" game will last. Therefore, I wrote an article trying to break down those seemingly messy narratives into several more traceable stages.

Let's follow the footsteps of history to see how Web3 has come to where it is today and where it may go.

1. Review of the development stages of the Internet industry: from currency expansion to industrial collaboration

I believe most people are familiar with this history:

The Internet used to be a national carnival. Every day, more than a dozen apps would rush to let you "use it for free". One mobile phone number could be used to eat, take a taxi, get a haircut, and get a massage, just like Chinese New Year.

Today's Internet is a system engineering that has already run most of the way: you know which platform to buy the cheapest things, which App is the most efficient in which scenario, the ecological pattern has long been established, and innovation is hidden in efficiency.

So I won't go into details, just simply disassemble the four stages - reviewing these logics may help you better understand the path that Web3 is currently copying.

1. Narrative-driven, mass innovation stage (before 2010)

That was an era where trends were defined by "nouns".

"Internet +" has become a universal key. No matter what you are doing in medical care, education, travel, or local life, as long as you put on these three words, you can leverage hot money and attention. Entrepreneurs at that time were not in a hurry to make products, but first found tracks, created concepts, and wrote BPs. Investors are not chasing the revenue curve, but whether they can tell a story that is "new enough, big enough, and imaginative enough".

O2O, social e-commerce, sharing economy, under the rotation of terms, project valuations have soared, and the pace of financing is dominated by the rhythm of narrative. The core asset is not the user, not the product, nor the data, but a financing PPT that is smooth and in line with the trend.

This is also an era where whoever stands first has the opportunity. Verifying the product and running the model is the second step. You must tell the story first before you are qualified to enter the arena.

2. Burning money to expand and competing for traffic (2010-2018)

If the previous stage was about gaining attention through stories, this stage is about grabbing the market with subsidies.

From the taxi war between Didi and Kuaidi to the bicycle melee between Mobike and ofo, the entire industry has fallen into a highly consistent style of play: using capital to exchange for scale, using price to exchange for habits, and using losses to exchange for entry. Whoever can burn more rounds of financing will be eligible to continue to expand; whoever can get the next round of investment will be able to leave a position on the battlefield.

This is a period that puts "grabbing users" above everything else. Experience, efficiency, and product barriers are all in the back row. The key lies in who can be the first to become the user's default choice.

So the subsidy war intensified, and low prices almost became the standard: taking a taxi costs less than 5 yuan, scanning the code to ride a bike costs one cent, and offline stores are posted with App QR codes, waiting for you to eat, cut hair, and have massages for free. It seems to be the popularization of services, but in fact it is a battle for traffic controlled by capital.

It’s not about who has better products, but who can burn more money; it’s not about who can solve the problem, but who can “enclose the land” faster.

In the long run, this also lays the foundation for the subsequent refined transformation - When users are bought, more effort must be spent to retain them; when growth is driven by external forces, it is doomed to be difficult to close the loop.

3. Landing, refined operation stage (2018–2022)

When the story is told for too long, the industry will eventually return to a realistic problem: "After growth, how to land".

Since 2018, with the slowdown in the growth of mobile Internet users, the traffic dividend has gradually faded, and the cost of acquiring customers has continued to rise.

According to QuestMobile data, as of the end of September 2022, China's mobile Internet monthly active users are close to 1.2 billion, an increase of only about 100 million from 2018, which took nearly four and a half years, and the growth rate has slowed down significantly. At the same time, the scale of online shopping users will reach 850 million in 2022, accounting for nearly 80% of the total number of netizens, and the space for user growth is saturated.

At the same time, a large number of "story-type" projects driven by financing are gradually withdrawing. O2O and the sharing economy are the areas with the most concentrated liquidations at this stage: projects such as Jiedian, Xiaolan Bicycle, and Wukong Travel have fallen one after another, and behind them is a whole set of growth models that are not self-consistent and lack user loyalty and have been eliminated by the market.

But it is precisely in this ebb that a group of truly successful projects have emerged. They have a common feature: It is not a short-term popularity stimulated by subsidies, but a closed-loop business model built through real rigid demand scenarios and system capabilities.

For example, Meituan has gradually built a complete service chain from ordering to fulfillment, from traffic to supply in the local life track, becoming a platform-based infrastructure; Pinduoduo has quickly penetrated the minds of users in the sinking e-commerce market with its extreme supply chain integration and operational efficiency; social networking is firmly controlled by Tencent, e-commerce is fully occupied by Alibaba, and games are concentrated in the hands of Tencent and NetEase.

What they have in common is not "thinking further", but running more steadily and calculating more clearly - structurally completing the closed loop from traffic to value, and truly living as a sustainable product system.

At this stage, growth is no longer the only goal. Whether growth can be transformed into structural retention and value precipitation is the real watershed that determines the life and death of the project. Extensive expansion is eliminated at this stage, and what really remains are those systematic projects that can build a positive feedback mechanism between efficiency, products, and operations.

This also means that the era of narrative-driven is over, and business logic must have the ability to "close the loop" itself: retain users, support models, and run structures.

4. The ecosystem is basically finalized, and the stage of seeking opportunities for technological change (2023 to present)

After the leading projects came out, the survival problem has been solved by most projects, and the real differentiation has just begun.

The competition between platforms is no longer a battle for users, but a competition of ecological capabilities. As the head platforms gradually close their growth paths, the industry has entered a period dominated by structural stabilization, resource concentration, and collaborative capabilities. The real moat is not necessarily the leading function, but whether the internal circulation of the system is efficient, stable, and self-consistent.

This is a stage for system players. The pattern is basically finalized. If new variables want to break through, they can only look for gaps and technical breakpoints on the edge of the structure.

At this stage, almost all high-frequency rigid demand tracks have been demarcated by giants. In the past, they could compete for positions by "going online early and burning money quickly", but now, growth must be embedded in system capabilities. The platform logic has also been upgraded: from multi-product stacking to ecological flywheel, from single-point user expansion to organizational-level collaboration.

Tencent has connected WeChat, mini-programs, and advertising systems to build an internal circulation closed loop; Alibaba reorganized Taotian, Cainiao, and DingTalk, and horizontally connected the business chain to try to regain efficiency leverage. Growth no longer relies on new users, but on the structural compound interest brought by the self-operation of the system.

As user paths, traffic entrances, and supply chain nodes are gradually controlled by several leading platforms, the industrial structure has begun to become closed, leaving increasingly limited space for new entrants.

But it is precisely in this structurally converging environment that ByteDance has become an outlier.

It did not try to compete for resource positions in the existing ecosystem, but instead overtook others by using recommendation algorithms to reconstruct content distribution logic based on underlying technology. In the context of mainstream platforms still relying on social relationship chains for traffic scheduling, ByteDance has built a distribution system based on user behavior, thereby establishing its own user system and business closed loop.

This is not an improvement on the existing pattern, but a technological breakthrough that bypasses the existing path and rebuilds the growth structure.

The emergence of ByteDance reminds us that even if the industry structure tends to solidify, as long as there are structural faults or technical gaps, new players may still emerge. It's just that this time, the path is narrower, the pace is faster, and the requirements are higher.

Web3 is in a similar critical interval today.

2. Web3 Current Stage: "Parallel Mirror" of Internet Evolution Logic

If the rise of Web2 is an industrial restructuring driven by mobile Internet and platform models, then the starting point of Web3 is a system reconstruction based on decentralized finance, smart contracts and on-chain infrastructure.

The difference is that Web2 builds a strong connection between the platform and users; while Web3 attempts to break up and distribute "ownership" and reorganize new organizational structures and incentive mechanisms on the chain.

But the underlying motivation has not changed: from story-driven to capital-driven; from user competition to ecological flywheel, the path that Web3 has experienced is almost the same as Web2.

This is not a simple comparison, but a parallel reproduction of the path structure.

It’s just that this time, what is burned is token incentives; what is built is a modular protocol; what is rolled is TVL, active addresses and airdrop points table.

We can roughly divide the development of Web3 to date into four stages:

1. Concept-driven stage - coin issuance driven: story first, capital influx

If the early days of Web2 relied on the "Internet +" story template, then the opening remarks of Web3 are written in Ethereum's smart contracts.

In 2015, Ethereum went online, and the ERC-20 standard provided a unified interface for asset issuance, making "coin issuance" a basic capability that all developers can call. It did not change the essential logic of financing, but greatly reduced the technical threshold for issuance, circulation and incentives, making "technical narrative + contract deployment + token incentives" a standard template for the early days of Web3 entrepreneurship.

The explosion in this stage is driven more by the technology layer - For the first time, blockchain empowers entrepreneurs in a standardized form, making asset issuance move from a licensing system to open source.

There is no need for a complete product or mature users. As long as there is a white paper that can explain the logic of the blockchain 1.0 era driven by blockchain technology, an attractive token model, and a runnable smart contract, the project can quickly complete the closed loop from "idea" to "financing".

The early innovation of Web3 is not because the project is so smart, but because the popularization of blockchain technology has brought imagination to the blockchain 1.0 era.

And capital has quickly formed a "betting mechanism": whoever first blocks the new track, whoever starts the game first, and whoever first plays the narrative out, is likely to get exponential returns.

This has given rise to an "unprecedented capital efficiency": between 2017 and 2018, the ICO market experienced an unprecedented explosive growth, becoming one of the most controversial and iconic financing stages in the history of blockchain.

According to CoinDesk data, in the first quarter of 2018, the total amount of ICO financing reached US$6.3 billion, exceeding 118% of the total amount of financing in 2017. Among them, Telegram's ICO raised US$1.7 billion, and EOS raised US$4.1 billion in one year, setting a historical record.

In the window period of "everything can be blockchain" - as long as you put a label and build a narrative, even if the landing path is not clear, you can pre-pay the future valuation imagination. DeFi, NFT, Layer1, GameFi... Every hot word is a "window". The valuation of the project soared to hundreds of millions of dollars, or even billions, before the tokens were circulated.

This is an opportunity to enter the capital market with a low threshold, and a relatively clear exit path has gradually been formed: the primary market takes a position in advance, the secondary market stimulates emotions through narratives and liquidity, and then exits during the window period.

Under this mechanism, the core of pricing is not how much the project has done, but who takes a position earlier, who is better at creating emotions, and who has the window to release liquidity.

It is essentially a typical feature of the early new paradigm of blockchain - the infrastructure has just landed, the cognitive space has not yet been filled, and the price is often formed before the product itself.

The "concept dividend period" of Web3 comes from this: value is defined by narratives, and exit is driven by emotions. Projects and capital seek certainty from each other in a liquidity-driven structure.

2. The stage of burning money for expansion - projects are crowded, and the battle for users has started

All changes began with a "most expensive thank you letter in history".

In 2020, Uniswap airdropped 400 UNI tokens to early users, each of which was worth about $1,200 at the time. The project party called it "giving back", but the industry understood another word: the optimal solution for cold start.

At first, it was just a gesture of "giving back to the community", but it inadvertently opened the Pandora's box of the industry: the project party discovered that issuing coins can exchange loyalty, traffic, and even a community illusion.

Airdrops have changed from options to standard features.

Since then, the project parties have suddenly realized that almost all new projects have used "airdrop expectations" as the default module for cold start. In order to show their prosperous ecology to the market, they use tokens to purchase user behavior. The points system, interactive tasks, and snapshots have become a must.

A large number of projects have fallen into an illusion of growth that is "incentive-driven rather than value-driven."

The on-chain data has soared, and the founders are immersed in the illusion of "success": before TGE, there are millions of users and hundreds of thousands of daily active users; after TGE, the scene cools down instantly.

I still remember that in 2024, the DAU on the Fusionist chain once exceeded 40,000, but just after the Binance listing announcement, the on-chain activity almost dropped to zero.

I am not denying the airdrop. The essence of airdrop is to purchase user behavior, which is an effective means of attracting new users without consuming financing funds during cold start. But its marginal effect is rapidly decaying. A large number of projects have fallen into the formulaic cycle of airdrops to attract new users. After attracting new users, whether your business scenarios and product capabilities can have retention capabilities. This is the real return of value and the only correct answer for the project party to survive. (Note: Projects that survive by manipulating the secondary with funds are not within the scope of this discussion)

In the final analysis, bribing users to purchase behavior is not the core of growth. Without a commercial foundation based on even scenarios, airdrops ultimately consume the interests of the project party or users. When the business model is not closed-loop, tokens become the only reason for users to act. Once TGE is completed and rewards are terminated, users will naturally turn around and leave.

3. Business verification stage - real scenarios, narrative verification

I often advise project parties to think clearly about one thing before throwing coins:

What problem are you solving for which scenario? Who is the most critical contributor? After TGE, will this scenario still hold true, and will anyone really stay to use it?

Many project parties answered me that they can quickly achieve user growth through token incentives. I always ask: "Then what?"

Usually at this time, the project party will be silent for a while and smile: "Oh..."

Then, there is no more.

If you just want to get a wave of interaction by "issuing incentives", then you might as well send memes directly. At least everyone knows that this is an emotional game and there is no need to bear the expectation of staying.

Finally, everyone began to look back: What kind of structure did these traffic, interactions, and coins lead to? At the end of the coin throwing, I turned out to be a clown?

So the keywords at this stage became: Usage scenarios, user needs, and product structure. Only by relying on real scenarios and clear structures can you find your own growth path.

To be honest, I personally don’t like Kaito’s business logic - it is more like an extreme form of "bribery culture", which implies a high degree of utilization of incentive mechanisms, and it can even be said that it is a repackaging of the relationship between the platform and the content.

But it is undeniable that Kaito succeeded. It is an actual business scenario. The expectations before TGE have become an accelerator for the project to occupy the market, and the music and dance will continue after TGE. Because Kaito provides a business logic that allows KOLs to expose the project, the wool comes from the pig, and the key figures remain on the Kaito platform itself. Although many KOLs may know that this logic will eventually backfire on themselves, in a market of structural opportunism, "strategic compliance" has become the most rational choice. At the same time, I am also very pleased to see that more and more projects are beginning to build around real scenarios, whether it is trading, DeFi, or basic capabilities such as identity systems. Those teams that choose the right direction at the right time and polish out real products are gradually taking root and building their own industrialization path through the positive cycle capabilities of vertical scenarios - from use to retention, from retention to monetization.

The most typical example is exchange products: they convert high-frequency demand into structural traffic, and then complete the closed loop through assets, wallets, and ecological linkage, and walk out of the "structural evolution line" in Web3 projects.

4. Structural sedimentation period - platform finalization, variable contraction

The real business scenario that can be positively circulated is the ticket for the project to get the right to speak in the industry.

For example, Binance started from trading, gradually opened up liquidity, asset issuance, on-chain expansion and traffic entrance, and formed a full-process scheduling system from off-chain to on-chain; Solana, through the detonation of light assets and the acceptance of underlying performance, precipitated the feedback structure of the community, developers and tool system.

This is a cycle in which the industry shifts from project experiments to structural sedimentation - no longer competing for speed, but starting to compete for the completeness of the system.

But this does not mean that new projects have lost their chance to break through. The projects that can really stand out are not the ones with the loudest voice or the most extensive narrative, but those that can "fill in the gap" in structure or "reconstruct" in model.

Remember ByteDance in the mobile Internet era?

I believe that in the post-blockchain era, a new cycle driven by AI is coming. There will definitely be projects like ByteDance, which rely on AI to quickly run through the structure under the correct incision, complete industrial breakthroughs and self-closed loops.

The platform stage of Web2 left behind giants and flywheels, as well as gap breakers like ByteDance; the structural stage of Web3 may also breed the next variable project that "breaks out from the edge" with the correct structure.

Let's imagine for a moment, if it is infrastructure, it should be infrastructure built for the native AI era, promoting the development of technology products in this era, just like the mission of Ethereum in the blockchain 1.0 era mentioned above;

If it is DAPP, then it must be an application that uses AI to break the original user threshold (the Web3 user threshold is too high) and break the original business order.

If someone asks me, how will the future of web3 develop?

I would say: "Just like everything can be added to the Internet, its real potential is to reconstruct the usage path, lower the collaboration threshold, and give birth to a batch of products and systems that can really run in the post-blockchain era.