From "Burning Money" to Industrial Ecology: Web3 is Following the Old Path of the Internet

Author: jiayi 加一

To Those Confused During the Blockchain Transformation Era

Some say Crypto is a Ponzi scheme, a bubble, a speculative game destined to go to zero.

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

Two voices, a scene of narrative tearing.

No need to rush to take sides; let’s first discuss a more fundamental conclusion:

The underlying logic of business has not changed.

Whether from portals to Apps in Web2, or from issuing tokens and telling stories to competing on infrastructure in Web3, behind the prosperity lies the same old path—only this time, the narrative is wrapped in protocols, and capital is hidden in code.

Looking back over the past decade, the path of China's internet is quite clear: concept-driven, financing outpacing user growth; subsidies pulling traffic, capital-driven growth; then layoffs, efficiency improvements, and profitability; followed by platform transformation and technological restructuring. Today’s Web3 is also stepping on a similar development rhythm.

In the past year, the competition among projects has evolved into a contest using TGE and Airdrop as platforms to acquire users. No one wants to fall behind, but no one knows how long this "user exchange" competition will last.

Therefore, I write this article in an attempt to deconstruct those seemingly chaotic narratives into several more traceable stages.

Let’s follow the footprints of history to see how Web3 has come to today and where it might head next.

I. Review of the Development Stages of the Internet Industry: From Token Distribution Expansion to Industrial Collaboration

Most people are likely familiar with this history:

The internet used to be a nationwide carnival, with dozens of Apps vying to let you "get something for nothing." A single phone number could be used for dining, hailing a ride, getting a haircut, or having a massage, like celebrating the New Year.

Today’s internet, however, is a system engineering project that has already completed more than half of its journey: you know where to buy the cheapest goods, which App is most efficient in which scenario, and the ecological pattern has long been set, with innovation hidden within efficiency.

So, I won’t elaborate further; I’ll simply break down four stages—reviewing these logics may help better understand the path that Web3 is currently replicating.

1. Narrative-Driven, Mass Innovation Stage (Before 2010)

It was an era defined by "terms."

"Internet Plus" became the universal key; whether you were in healthcare, education, transportation, or local services, as long as you attached those three words, you could leverage hot money and attention. Entrepreneurs at that time were not in a hurry to create products; instead, they first sought out tracks, built concepts, and wrote business plans. Investors were not chasing revenue curves but rather whether a "sufficiently new, large, and easy to imagine" story could be told.

O2O, social e-commerce, sharing economy—under the rotation of terms, project valuations soared, and financing rhythms were dominated by narrative rhythms. The core asset was not users, products, or data, but a financing PPT that told a smooth story fitting the trend.

This was also an era where "whoever positions first has a chance." Validating products and running through models was the second step; telling the story on the wind was the prerequisite to entering the arena.

2. Money Burning Expansion, Traffic Competition Stage (2010-2018)

If the previous stage was about competing for attention through stories, this stage was about hard-subsidizing to seize the market.

From the Didi and Kuaidi taxi wars to the bike-sharing battles between Mobike and Ofo, the entire industry fell into a highly consistent strategy: using capital to exchange for scale, using price to change habits, and using losses to gain entry. Whoever could burn through a round of financing had the right to continue expanding; whoever could secure the next round of investment could maintain their position on the battlefield.

This was a time when "capturing users" was paramount. Experience, efficiency, and product barriers took a back seat; the key was—who could become the default choice for users first.

Thus, the subsidy wars escalated, and low prices became the norm: rides for less than 5 yuan, one cent for bike rides, offline stores plastered with App QR codes, waiting for you to eat, get a haircut, or have a massage for free. It seemed like service proliferation, but in reality, it was a capital-controlled traffic competition.

It wasn’t about whose product was better, but who could burn more money; it wasn’t about who could solve problems, but who could "grab land" faster.

In the long run, this also laid the groundwork for the subsequent refined transformation—when users are bought, more effort must be spent to retain them; when growth relies on external forces, it is destined to be difficult to self-loop.

3. Landing, Refined Operation Stage (2018-2022)

When stories are told for too long, the industry will eventually return to a real question: "After growth, how to land?"

Starting in 2018, as the growth rate of mobile internet users slowed, the traffic dividend gradually faded, and customer acquisition costs continued to rise.

According to QuestMobile data, by the end of September 2022, the number of monthly active users of China's mobile internet approached 1.2 billion, an increase of only about 100 million compared to 2018, taking nearly four and a half years, with growth significantly slowing. Meanwhile, the number of online shopping users reached 850 million in 2022, accounting for nearly 80% of the total number of internet users, with user growth space nearing saturation.

At the same time, many "story-driven" projects reliant on financing gradually exited the stage. O2O and the sharing economy were the areas most concentrated in this phase of reckoning: projects like Street Power, Xiaolan Bike, and Wukong Travel fell one after another, behind which lay a whole set of growth models that were incoherent and lacked user loyalty being eliminated by the market.

However, it was also in this tide of retreat that a batch of truly viable projects emerged. They shared a common characteristic: not driven by subsidies to stimulate short-term heat, but by real demand scenarios and systemic capabilities, completing the construction of a closed commercial model.

For example, Meituan 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 rapidly penetrated user minds in the sinking e-commerce market with extreme supply chain integration and operational efficiency; social networking was firmly controlled by Tencent, e-commerce was fully occupied by Alibaba, and gaming was concentrated in Tencent and NetEase.

Their commonality was not "thinking further," but running more steadily and calculating more clearly—structurally completing the closed loop from traffic to value, truly becoming a sustainable product system.

In this stage, growth was no longer the only goal; whether growth could be transformed into structural retention and value accumulation became the true dividing line determining the life and death of projects. Extensive expansion was eliminated in this stage; what remained were those systemic projects capable of building a positive feedback mechanism between efficiency, product, and operation.

This also meant that the era of narrative-driven business had passed; commercial logic must possess the ability to "self-loop": retaining users, sustaining models, and running through structures.

4. Ecological Basic Stabilization, Technological Transformation Seeking Opportunities Stage (2023 to Present)

After leading projects emerged, the survival issues of most projects have been resolved, but the real differentiation has just begun.

Competition between platforms is no longer a battle for users but a contest of ecological capabilities. As leading platforms gradually close off growth paths, the industry enters a period of structural stabilization, resource concentration, and collaborative capability dominance. The real moat is not necessarily a leading function but whether the internal circulation of the system is efficient, stable, and self-consistent.

This is a stage for systemic players. The pattern is basically set; if new variables want to break through, they can only seek gaps at the structural edges and technological breakpoints.

In this stage, almost all high-frequency demand tracks have been delineated by giants. In the past, one could still compete for position by "going online early and burning money quickly," but now, growth must be embedded within systemic capabilities. The platform logic has also been upgraded: from multi-product stacking to ecological flywheels, from single-point user expansion to organizational-level collaboration.

Tencent integrates WeChat, mini-programs, and advertising systems to build an internal circulation closed loop; Alibaba reorganizes Taotian, Cainiao, and DingTalk to horizontally connect commercial chains, attempting to regain efficiency leverage. Growth no longer relies on new users but on structural compounding brought by the system's self-operation.

As user paths, traffic entry points, and supply chain nodes are gradually controlled by a few leading platforms, the industrial structure begins to close, leaving less and less space for new entrants.

However, it is also in this structurally converging environment that ByteDance has become an outlier.

It did not attempt to compete for resource positions within the existing ecology but instead took a shortcut, starting from underlying technology, reconstructing content distribution logic with recommendation algorithms. In a context where mainstream platforms still rely on social relationship chains for traffic scheduling, ByteDance built a distribution system based on user behavior, thereby establishing its own user system and commercial closed loop.
This is not an improvement of the existing pattern but a technological breakthrough that bypasses existing paths and reconstructs growth structures.

The emergence of ByteDance reminds us: even if the industrial pattern tends to solidify, as long as there are structural fractures or technological gaps, new players may still emerge. Only this time, the paths are narrower, the rhythms faster, and the demands higher.

Today’s Web3 is in a similar critical interval.

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

If the rise of Web2 was a restructuring of the industry driven by mobile internet and platform models, then the starting point of Web3 is a systemic reconstruction based on decentralized finance, smart contracts, and on-chain infrastructure.

The difference is that Web2 constructed a strong connection between platforms and users; while Web3 attempts to shatter and distribute "ownership," and reorganize new organizational structures and incentive mechanisms on-chain.

But the underlying dynamics have not changed: from story-driven to capital-driven; from user competition to ecological flywheel, the path Web3 has experienced is almost identical to that of Web2.
This is not a simple comparison but a parallel reproduction of path structures.

Only this time, what’s being burned is token incentives; what’s being built are modular protocols; what’s being competed for are TVL, active addresses, and airdrop scoreboards.

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

1. Concept-Driven Stage—Token Issuance Driven: Story First, Capital Flows In

If the early Web2 relied on the "Internet Plus" story template, then the opening of Web3 is written in the smart contracts of Ethereum.

In 2015, Ethereum went live, and the ERC-20 standard provided a unified interface for asset issuance, making "token issuance" a basic capability that all developers could call upon. It did not change the essential logic of financing but significantly lowered the technical threshold for issuance, circulation, and incentives, allowing "technical narrative + contract deployment + token incentives" to become the standard template for early Web3 entrepreneurship.

The explosion of this stage came more from technological drivers—blockchain empowered entrepreneurs for the first time in a standardized form, moving asset issuance from a permission-based model to an open-source model.

No complete product was needed, no mature users were required; as long as there was a white paper that could clearly articulate the logic of the blockchain-driven blockchain 1.0 era, an enticing token model, and a runnable smart contract, the project could quickly complete the closed loop from "idea" to "financing."

The early innovations of Web3 were not because the projects were clever but because the popularization of blockchain technology brought the imagination of the blockchain 1.0 era.

And capital quickly formed a "betting mechanism": whoever first positioned in the new track, whoever first launched, and whoever first spread the narrative could potentially gain exponential returns.

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

According to CoinDesk data, in the first quarter of 2018, the total amount raised through ICOs reached $6.3 billion, exceeding 118% of the total amount raised in 2017. Among them, Telegram's ICO raised $1.7 billion, and EOS raised $4.1 billion within a year, setting a historical record.
During the "everything can be blockchain" window period—just by attaching a label and building a narrative, even if the path to landing was not yet clear, one could prepay future valuation imaginations. DeFi, NFT, Layer1, GameFi… each buzzword was a "window." Project valuations soared to hundreds of millions, even billions, before tokens were even circulated.

This was an opportunity for low-threshold entry into the capital market, and it gradually formed a relatively clear exit path: early positioning in the primary market, stimulating emotions in the secondary market through narratives and liquidity, and then completing exits during the window period.

In this mechanism, the core of pricing was not how much the project did, but who positioned earlier, who was better at creating emotions, and who mastered the window for releasing liquidity.

It essentially embodies the typical characteristics of the early blockchain new paradigm—basic infrastructure just landed, cognitive space not yet filled, prices often formed ahead of the product itself.

Thus came Web3's "concept dividend period": value defined by narrative, exit driven by emotion. Projects and capital sought certainty from each other within a liquidity-driven structure.

2. Money Burning Expansion Stage—Projects Cluster, User Competition Fully Ignited

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

In 2020, Uniswap airdropped 400 UNI tokens to early users, each airdrop valued at about $1,200 at the time. The project referred to it as "giving back," but the industry understood it as another term: the optimal solution for cold starts.

Initially just a gesture of "giving back to the community," it inadvertently opened Pandora's box for the industry: project parties discovered that issuing tokens could exchange for loyalty, traffic, and even create an illusion of community.

Airdrops went from being an option to a standard feature.

Since then, project parties have had their eyes opened, and almost all new projects have made "airdrop expectations" the default module for cold starts, using tokens to purchase user behavior to showcase their prosperous ecology, with point systems, interactive tasks, and snapshots becoming mandatory.

Many projects fell into a growth illusion driven by "incentives rather than value."

On-chain data soared, and founders immersed themselves in the illusion of "success": casually having millions of users and hundreds of thousands of daily active users before TGE; once TGE passed, the scene instantly cooled down.

I still remember in 2024, Fusionist's on-chain DAU once broke 40,000, but after the Binance listing announcement, on-chain activity almost plummeted to zero.

I do not deny the concept of airdrops. The essence of airdrops is to purchase user behavior, an effective way to acquire new users without consuming financing funds. But its marginal effect is rapidly diminishing. Many projects fell into a formulaic cycle of airdrop-driven user acquisition, and after acquiring new users, whether your business scenario and product capabilities could retain them is the true value return and the only correct answer for the project parties to survive. (Note: Projects that survive by manipulating the secondary market with funds are not included in this discussion.)

Ultimately, bribing users for purchasing behavior is not the core of growth; without a commercial foundation even in scenarios, airdrops ultimately consume the interests of either the project parties or the users. When the business model lacks a closed loop, tokens become the only reason for user actions. Once TGE is completed and rewards cease, users will naturally turn away.

3. Commercial Validation Stage—Real Scenarios, Narrative Validation

I often advise project parties to think clearly about one thing before distributing tokens:

What problem are you solving for which scenario? Who are the key contributors? After TGE, does this scenario still hold, and will anyone truly stay to use it?
Many project parties respond that they can quickly achieve user growth through token incentives. I always ask, "And then?"
Usually, at this point, the project parties will pause, smile, "Oh…"
And then, there’s nothing more.

If you only hope to exchange a wave of interactions for "issuing incentives," you might as well just issue a meme. At least everyone knows this is an emotional game and does not need to bear the expectation of staying.

Finally, everyone begins to look back: what kind of structure did these traffic, interactions, and distributed tokens lead to? In the end, I became the clown.

So the keywords for this stage have become: usage scenarios, user needs, product structure. Only by relying on real scenarios and clear structures can one carve out a growth path of their own.

To be honest, I personally do not like Kaito's business logic—it resembles an extreme form of "bribery culture," implying a high utilization of incentive mechanisms, and can even be said to be a repackaging of the relationship between platforms and content.

But it cannot be denied that Kaito succeeded. It is a real commercial scenario, with pre-TGE expectations becoming an accelerator for the project to capture the market, and post-TGE, the music continues to play. Because Kaito provided a way for KOLs to expose the project, with the benefits falling on the pigs while key figures remained on the Kaito platform itself.

Although many KOLs may be aware that this logic will ultimately backfire on themselves, in a structurally opportunistic market, "strategic compliance" has become the most rational choice.

At the same time, I am also pleased to see that more and more projects are beginning to build around real scenarios, whether in trading, DeFi, or foundational capabilities like identity systems.

Those teams that choose the right direction at the right time and refine real products are gradually taking root and sprouting through the positive cyclical capabilities of vertical scenarios—from usage to retention, from retention to monetization—building their own industrial paths.

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

4. Structural Accumulation Period—Platform Stabilization, Variable Contraction

Truly positively cyclical commercial scenarios are the entry ticket for projects to gain industrial voice.

For example, Binance started with trading, gradually connecting liquidity, asset issuance, on-chain expansion, and traffic entry, forming a full-process scheduling system from off-chain to on-chain; Solana leveraged light assets to ignite and support underlying performance, accumulating feedback structures of communities, developers, and tool systems.

This is a period where the industry shifts from project experimentation to structural accumulation—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 opportunity to break through. The projects that can truly emerge are not the loudest or those with the broadest narratives, but those that can "fill positions" structurally or "reconstruct" on the model.

Do you 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 certainly be projects like ByteDance that, leveraging AI, rapidly run through structures at the right cut and achieve breakthroughs and self-loops in the industry.

The platformization stage of Web2 left behind giants and flywheels, as well as gap-breakers like ByteDance; the structural period of Web3 may similarly give birth to the next variable project that "breaks out from the margins" with the correct structure.

To imagine a bit, if it is infrastructure, it should be the foundational infrastructure built for the native AI era, promoting the development of technological products in this era, just like the mission of Ethereum in the blockchain 1.0 era mentioned above;

If it is a DAPP, then it must be an application that uses AI to break the original user usage barriers (the user threshold for web3 is too high), disrupting the original commercial order.

If someone asks me how Web3 will develop in the future?

I would say: "Just like everything can be added to the internet, its true potential lies in the post-blockchain era, reconstructing usage paths, lowering collaboration thresholds, and giving rise to a batch of truly viable products and systems."