Too many Web3 projects believe that airdropping tokens equals success. But here’s the reality: tokens don’t create product-market fit, it can’t. I’ve seen projects burn millions in incentives, only to collapse when users dump their tokens and disappear.

Here are three common tokenomics mistakes that kill Web3 projects and how to avoid them.

Short-Term Incentives, No Long-Term Utility

The mistake: Projects rely on airdrops, high APYs and staking rewards to attract users, but they fail to create real demand for the token.

Common issues include:

• Once rewards stop, users leave.

• If people only hold the token for farming, they’ll dump it as soon as a better yield appears elsewhere.

How to fix it:

• Design utility beyond speculation, making the token essential to the platform through governance, access or payments.

• Balance emissions and demand to prevent supply from outpacing real usage.

• Create reasons to hold and spend the token, not just farm and dump it.

Lesson: If users don’t need your token outside of farming, your project has no long-term future.

Poor Token Distribution, The Wrong People Get Rich

The mistake: Too many tokens are allocated to VCs, early investors and insiders, leaving real users with almost nothing.

Common issues include:

• If insiders control more than 70% of supply, it’s a cash grab, not an ecosystem.

• A bad vesting schedule leads to massive sell pressure before real adoption happens.

How to fix it:

• Prioritize community-first allocation by rewarding actual users, contributors and long-term supporters.

• Structure vesting schedules gradually to prevent large token unlocks from flooding the market.

• Implement sustainable liquidity mechanisms to ensure buyers aren’t constantly outnumbered by sellers.

Lesson: If users feel like exit liquidity, they won’t stick around.

No Real Product, Just a Token

The mistake: Projects launch a token before they even have a working product, sounds like a MEME token, doesn't it?

Common issues include:

• Raising funds with a token based on vague promises of "big things coming".

• No real utility, making the token purely speculative, when the hype dies, so does demand.

How to fix it:

• Build the product before launching the token, ensuring it enhances the platform rather than replacing it.

• Tie the token to real engagement by making it necessary for interactions within the ecosystem.

• Avoid ponzinomics, where new buyers fund early adopters’ exits instead of supporting a sustainable model.

Lesson: A token is not a business model, it’s a tool that should support a real product.

Final Takeaway

If you think airdrops and staking rewards alone will make your project successful, think again. The best tokenomics models follow three key principles:

• They create real demand.

• They distribute tokens fairly.

• They support a strong product.

Web3 success isn’t about short-term speculation, it’s about long-term sustainability.