How Do 99% of Unprofitable Web3 Projects Survive?

Original Author: Ryan Yoon, Tiger Research Original Compilation: Saoirse, Foresight News 99% of Web3 projects have no cash revenue, yet many companies still spend huge sums on marketing and events every month. This article will delve into the survival rules of these projects and the truth behind "burning money". Key Takeaways • 99% of Web3 projects lack cash flow; their cost expenditures rely on tokens and external funding, not product sales. • Premature listing (token issuance) leads to a surge in marketing spending, thereby weakening the competitiveness of the core product. • The reasonable Price-to-Earnings (P/E) ratio of the top 1% of projects proves the lack of actual value support for the rest. • Early Token Generation Events (TGE) allow founders to achieve an "exit and cash out" regardless of the project's success or failure, creating a distorted market cycle. • The "survival" of 99% of projects essentially stems from a systemic flaw built on investor losses rather than corporate profits. Prerequisite for Survival: Verified Revenue-Generating Capability "The prerequisite for survival is having a verified revenue-generating capability" — this is the most crucial warning in the current Web3 space. As the market matures, investors are no longer blindly chasing vague "visions". If a project cannot acquire real users and actual sales, token holders will quickly sell and exit. The key issue is the "runway", i.e., the time a project can sustain operations without profitability. Even without sales, costs like salaries and server fees require fixed monthly payments, and teams with no revenue have almost no legitimate channels to maintain operational funds. Cost of Funding Without Revenue: However, this model of "surviving on tokens and external funding" is only a stopgap measure. There is a clear upper limit to assets and token supply. Ultimately, projects that exhaust all funding sources either cease operations or quietly exit the market. Web3 Revenue Ranking Table, Source: Token Terminal and Tiger Research This crisis is widespread. According to Token Terminal data, globally, only about 200 Web3 projects have generated revenue of $0.10 or more in the past 30 days. This means 99% of projects lack even the ability to cover their own basic costs. In short, almost all cryptocurrency projects have failed to validate the feasibility of their business models and are gradually declining. The High Valuation Trap This crisis was largely predetermined. Most Web3 projects went public (token issuance) based solely on a "vision", without even having a tangible product. This stands in stark contrast to traditional enterprises — which must first prove their growth potential before an Initial Public Offering (IPO); whereas in the Web3 space, teams are tasked with justifying their high valuations *after* going public (Token Generation Event, TGE). But token holders won't wait indefinitely. With new projects emerging daily, if a project fails to meet expectations, holders will quickly sell and exit. This puts pressure on the token price, threatening the project's survival. Consequently, most projects invest more funds into short-term hype rather than long-term product development. Clearly, if the product itself lacks competitiveness, even the most intensive marketing will ultimately fail. At this point, the project falls into a "dilemma trap": • If focused solely on product development: It requires significant time, during which market attention fades and the runway shortens. • If focused solely on short-term hype: The project becomes hollow, lacking substantive value support. Both paths ultimately lead to failure — the project cannot justify its initial high valuation and eventually collapses. Seeing the Truth of the 99% Through the Top 1% However, a top 1% of projects, with massive revenues, have proven the viability of the Web3 model. We can assess the value of major profitable projects like Hyperliquid and Pump.fun through their Price-to-Earnings Ratio (P/E Ratio). The P/E ratio is calculated as "Market Cap ÷ Annual Revenue". This metric indicates whether a project's valuation is reasonable relative to its actual revenue. P/E Ratio Comparison: Top Web3 Projects (2025): Note: Hyperliquid's sales are annualized estimates based on performance since June 2025. The data shows profitable projects have P/E ratios ranging from 1x to 17x. Compared to the S&P 500's average P/E of around 31x, these top Web3 projects are either "undervalued relative to sales" or have "exceptionally strong cash flow". The fact that top projects with actual earnings can maintain reasonable P/E ratios ironically makes the valuations of the remaining 99% appear untenable — it directly proves that the high valuations of most projects in the market lack a foundation in real value. Can This Distorted Cycle Be Broken? Why can projects with no sales still maintain valuations in the billions? For many founders, product quality is secondary — Web3's distorted structure makes "quick exit and cash out" much easier than "building a real business". The cases of Ryan and Jay perfectly illustrate this: both launched AAA-level gaming projects, yet their outcomes were completely different. Founder Differences: Web3 vs. Traditional Model Ryan: Chose TGE, Abandoned Deep Development He chose a path centered on "profit": securing early funds by selling NFTs before the game's launch; then, while the product was still in a rough development stage, holding a Token Generation Event (TGE) based solely on an aggressive roadmap and listing on a mid-tier exchange. After listing, he maintained the token price through hype to buy himself time. Although the game eventually launched late, its quality was extremely poor, and holders sold off. Ryan ultimately resigned under the guise of "taking responsibility", but he was the real winner of this game — On the surface, he pretended to focus on work, but in reality, he drew a high salary while making huge profits by selling his unlocked tokens. Regardless of the project's final outcome, he quickly accumulated wealth and exited the market. In Contrast, Jay: Followed the Traditional Path, Focused on the Product Itself He prioritized product quality over short-term hype. But developing a AAA game takes years. During this time, his funds gradually ran out, leading to a "runway crisis". In the traditional model, founders must wait until the product launches and generates sales to receive substantial returns. Jay raised funds through multiple financing rounds but ultimately had to shut down the company before completing the game due to a funding shortfall. Unlike Ryan, Jay not only made no profit but also incurred significant debt and left with a failure record. Who is the Real Winner? Neither case produced a successful product, but the winner is clear: Ryan accumulated wealth by exploiting Web3's distorted valuation system, while Jay lost everything trying to build a quality product. This is the harsh reality of the current Web3 market: exploiting overvaluation for early exit is far easier than building a sustainable business model; and ultimately, the cost of this "failure" is borne entirely by investors. Returning to the initial question: "How do 99% of unprofitable Web3 projects survive?" This brutal reality is the most honest answer to that question.