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 amounts on marketing and events every month. This article will delve into the survival rules of these projects and the truth behind “burning money.”

Key Points

• 99% of Web3 projects lack cash flow, relying on tokens and external funding for expenses, not product sales.
• Early listing (token issuance) leads to a surge in marketing expenses, weakening the core product’s competitiveness.
• The reasonable P/E ratio of the top 1% projects proves that the rest lack actual value support.
• Early Token Generation Events (TGE) allow founders to realize “exit liquidity” regardless of project success or failure, creating a distorted market cycle.
• The “survival” of 99% of projects fundamentally stems from systemic flaws built on investor losses rather than corporate profits.

Preconditions for Survival: Verified Revenue Capability

“Survival depends on verified revenue capability” — this is the most critical warning in the current Web3 space. As the market matures, investors no longer blindly chase vague “visions.” If a project cannot attract real users and generate actual sales, token holders will quickly sell off and exit.

The key issue is the “funding turnover period,” i.e., how long a project can sustain operations without profits. Even without sales, fixed costs like salaries and server fees must be paid monthly, and teams with no income have almost no legitimate channels to maintain operational funds.

Funding costs without revenue:

However, this “relying on tokens and external funding to survive” model is only a stopgap. Assets and token supplies have clear limits. Ultimately, projects that exhaust all funding sources will either cease operations or quietly exit the market.

Web3 revenue ranking, source: token terminal and Tiger Research

This crisis is widespread. According to Token Terminal data, only about 200 Web3 projects worldwide have had revenue of at least $0.10 in the past 30 days.

This means 99% of projects lack the ability to even cover their basic costs. In short, almost all crypto projects have failed to validate the feasibility of their business models and are gradually declining.

The Valuation Trap

This crisis was largely predetermined. Most Web3 projects go public (via token issuance) based solely on “vision,” without even having a real product. This contrasts sharply with traditional companies — before an IPO, they must prove growth potential; in Web3, teams often need to justify their high valuation only after listing (TGE).

But token holders won’t wait indefinitely. As new projects emerge daily, if a project fails to meet expectations, holders will sell off quickly. This puts downward pressure on the token price and threatens the project’s survival. Therefore, most projects divert more funds into short-term hype rather than long-term product development. Clearly, if the product itself lacks competitiveness, even intensive marketing will eventually fail.

At this point, projects fall into a “dilemma trap”:

• Focusing solely on product development: requires a lot of time, during which market attention wanes, and funding turnover shortens;
• Focusing only on short-term hype: makes the project hollow and lacking real value support.

Both paths ultimately lead to failure — the project cannot justify its initial high valuation and will eventually collapse.

Seeing Through the Top 1% to Understand the Truth of 99% of Projects

However, 1% of top projects demonstrate the viability of the Web3 model through massive revenue.

We can assess their value via the Price-to-Earnings Ratio (PER) of leading profit-generating projects like Hyperliquid, Pump.fun, etc. PER is calculated as “market cap ÷ annual revenue,” reflecting whether a project’s valuation is reasonable relative to its actual income.

PER comparison: Top Web3 projects (2025):

Note: Hyperliquid’s revenue is based on annualized estimates since June 2025.

Data shows that profitable projects have PERs ranging from 1 to 17. Compared to the S&P 500’s average PER of about 31, these top Web3 projects are either “undervalued relative to sales” or have “excellent cash flow.”

Projects with real earnings can maintain reasonable PERs, which makes the valuations of the remaining 99% appear unjustified — directly proving that most projects in the market are overvalued and lack real value support.

Can This Distorted Cycle Be Broken?

Why do projects with no sales still maintain valuations of billions of dollars? For many founders, product quality is secondary — the twisted structure of Web3 makes “quick exit liquidity” much easier than building a sustainable business.

The cases of Ryan and Jay illustrate this well: both launched AAA-level game projects, but their outcomes were vastly different.

Founder Differences: Web3 vs. Traditional

Ryan: Chooses TGE, abandons deep development

He took a path centered on “profitability”: before the game launched, he raised early funds by selling NFTs; then, while the product was still in rough development, he held a token generation event (TGE) based on a bold roadmap, and listed on a mid-sized exchange.

After listing, he used hype to sustain the token price, buying time for himself. Although the game was delayed, its quality was poor, and holders sold off en masse. Ryan eventually resigned citing “taking responsibility,” but he was actually the real winner in this game ——

On the surface, he appeared focused on work, but in reality, he was earning high salaries and profiting massively by selling unlocked tokens. Regardless of the project’s ultimate success or failure, he quickly accumulated wealth and exited the market.

Conversely, Jay: Follows the traditional path, focuses on the product itself

He prioritized product quality over short-term hype. But AAA game development takes years, and during this period, his funds gradually depleted, leading to a “funding crisis.”

In traditional models, founders wait until the product is launched and sales are achieved before earning significant profits. Jay raised funds through multiple rounds of financing, but ultimately, due to lack of funds, he shut down the company before the game was completed. Unlike Ryan, Jay didn’t profit at all and left behind massive debt and a failed record.

Who is the real winner?

Both cases did not produce successful products, but the winner is clear: Ryan accumulated wealth by exploiting the distorted valuation system of Web3, while Jay lost everything trying to build a quality product.

This is the brutal reality of the current Web3 market: leveraging over-inflated valuations to exit early is much easier than building a sustainable business; ultimately, the “failure” costs are borne entirely by investors.

Returning to the initial question: “How do 99% of unprofitable Web3 projects survive?”

This harsh reality is the most honest answer to that question.