Headline: Vitalik: Crypto projects can’t “pay users or fail” — incentives should offset risk, not replace real product-market fit Ethereum co-founder Vitalik Buterin pushed back on the idea that airdrops and token rewards are a sustainable route to adoption, arguing that crypto apps must move beyond “pay users or fail” tactics and focus on genuine utility and committed communities. In a recent discussion on X, Buterin acknowledged that incentives are a realistic feature of today’s market, but he drew a clear line between sustainable reward systems and short-sighted pay-to-play campaigns. Sustainable models, he said, are those where rewards are funded from revenue or value generated by other users—an economic loop similar to traditional businesses. Unsustainable models, by contrast, rely on handing out payouts simply to drive activity or inflate metrics. Buterin explained that early-stage rewards can be justified in specific cases. For example, liquidity providers and other early contributors face elevated technical and security risks — hacks, protocol bugs, and outright project failure — so higher rewards can serve as compensation for bearing that risk. He even illustrated the point with a recent personal anecdote about receiving a payout from a project (Fileverse) after it reached a level of real-world use. Buterin cautioned that once projects complete audits and earn community trust, those elevated rewards should taper off. Paying every user to simulate growth creates two major problems: teams misjudge sustainability—assuming future profits will cover early giveaways—and user engagement collapses once payouts stop because many participants were only there for the rewards. He also warned of social-side effects: aggressive reward campaigns often incentivize low-quality promotional content and activity created to chase bounties rather than build value. That kind of behavior can hollow out communities; when payments end, so does most of the activity. Buterin emphasized an important distinction between product types. In DeFi, capital is largely fungible and the size of liquidity can be the dominant factor. On social platforms, however, quality of contributors—people who build tools, write documentation, answer questions—matters far more than raw user counts. These committed contributors often work without ongoing payments and are what sustain projects long-term. His prescription: use incentives to offset identifiable early risks and gradually phase them out as those risks decline, while focusing the “bulk of the effort” on building genuinely useful applications. “This was historically ignored, because it’s not necessary for narrative engineering to create a speculative bubble. But now it is necessary,” he wrote, arguing that the industry is shifting toward utility-driven growth rather than reward-led booms. Bottom line: token rewards can help bootstrap networks when they compensate for real, early-stage risks, but they’re not a substitute for product-market fit, trust, and a committed community. Projects that rely primarily on payouts risk short-lived activity and fragile ecosystems. Read more AI-generated news on: undefined/news

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