The chief executive officer (CEO) of Binance, Changpeg Zhao, says that incentives such as airdrops and play-to-earn are not enough to make a crypto project successful. Zhao made the comment via a Twitter post. He outlined some of the shortfalls in overemphasis on incentivizing users, rather than building a supporting business model that would help the token to support value.
In the post made on May 3, CZ wrote that incentives such as staking primarily attract new users but will not add much to the project in terms of value.
Revenue Must Be Greater Than Incentives
Zhao said that for a cryptocurrency project to be successful, that it must build a revenue model that is “greater than the incentive” it gives to users. He highlighted that the key that successful blockchain platforms have kept in view is building products that people actually use.
Zhao maintained that the sustainability of any cryptocurrency token is dependent on ensuring that revenue is greater than incentives. He explained further that:
“Revenue can be anything that the users have to spend the coins, pay to the developers for virtual goods, network fees, etc. ”
Service is Value
In their contribution, Frxreseach said that many cryptocurrency token projects presume that selling their tokens is a means of generating value. He said that what such projects failed to understand is that, to add value, an ecosystem must render a service. This should be what people are paying for instead of just shilling the token.
Too many teams assume selling token as revenue income instead of earning their income through providing services.
As crypto getting more mature by the day, investors will ultimately disqualify the former for the latter.
— frxresearch 🔶 (@frxresearch) May 3, 2022
Zhao agreed, saying that selling tokens is not a revenue model. However, he agreed that it could be a bootstrapping method to help the team to develop a service. He said that selling tokens as a revenue model is not sustainable.
Some Affected Projects
Shazha Quadri, co-founder at Collegium De Legalpreneur, agrees with the Binance CEO. Quadri said that these are some of the issues that Axie Infinity and Compound are facing.
“Personally see revenue drops in these ecosystems. Yet, we are still in the building phase, so am super excited what the future brings ahead”
A Twitter user, @BNBTC_on_BSC, said that a strategy that works is adopting deflationary models like Bitcoin and burning of tokens. But CryptoSafu Gems summarized the view as follows:
“I believe the same. As long as we provide value through #Crypto Projects They would keep on achieving bigger heights & a better investor base rather than pump and dump groups built on solely hype”