Tokenomics Flaws Drive Crypto Project Failures

Flawed tokenomic structures are undermining the sustainability of even technically robust crypto projects. With more than half of new tokens failing, the credibility of the cryptocurrency market is increasingly at risk.

Arthur Iinuma, an expert in crypto token design, authored a report linking failed projects to bad tokenomics. “Bad tokenomics kill good projects,” he emphasized. Projects like Aptos also suffered due to poor token unlock strategies. Many blue-chip projects saw leadership teams central to their decline. Billions in market capitalization have been wiped out almost overnight for these projects, and over 53% of all tokens listed since 2021 are now defunct. This represents widespread investor losses and a dent in asset class confidence.

Projects such as Terra (LUNA) used algorithmic methods that proved unsustainable, resulting in multi-billion dollar losses. Celsius collapsed under a Ponzi-like yield scheme, leading to ceased withdrawals and massive financial damage. These failures highlight the importance of sustainable, stakeholder-friendly economic models across the sector.

The impact of these collapses extends beyond immediate financial loss. Investor sentiment is negatively influenced, causing temporary drags on mainstream assets like ETH and BTC. Regulatory bodies like the SEC and CFTC have scrutinized poor tokenomics and sustainability in their broader consumer risk analysis, although specific statements are sparse. Data from Dune Analytics and other on-chain platforms underscore the risks posed by abandoned projects, underpinned by factors like loss of community engagement and development stagnation. The focus on long-term planning over speculation becomes apparent as a key remedy.