Vitalik Buterin says crypto apps must move beyond “pay users or fail,” using incentives only to offset early risks while focusing on real utility and committed communities.
- Vitalik Buterin rejects “pay users or fail” as a growth model, arguing that sustainable incentives mirror normal businesses where revenue from some users funds value for others.
- He says early rewards can fairly compensate liquidity providers and early adopters for smart contract, hack, and project failure risks, but should fade as protocols mature and audits reduce risk.
- Buterin warns that airdrops and social media payout schemes inflate metrics with low-quality activity, while real adoption comes from useful apps and committed community contributors.
Ethereum co-founder Vitalik Buterin has weighed in on ongoing debates within the cryptocurrency industry regarding user acquisition strategies, cautioning against reliance on unsustainable financial incentives.
Buterin goes on recent cryptocurrency rant
In a recent online discussion on X, Buterin responded to claims that cryptocurrency applications cannot achieve meaningful adoption without airdrops or token rewards. The debate centered on whether financial payouts remain essential for building network effects in the sector.
Buterin acknowledged that incentives reflect current market conditions but warned against adopting a “pay users or fail” growth strategy, according to his posts on the social media platform.
The Ethereum co-founder drew distinctions between sustainable and unsustainable reward structures. Sustainable models involve paying certain users from revenue collected from others, creating an economic loop that mirrors traditional business models where income funds growth, he stated.
Buterin said paying users during early project stages can be justified in specific circumstances. Liquidity providers face risks including potential hacks or project failure, as new protocols carry technical and security vulnerabilities, he noted. Rewards in these cases serve as compensation for assuming elevated risk levels.
Once projects complete audits and establish trust within the sector, risk levels decline and high rewards become unnecessary, according to Buterin’s analysis.
The approach differs from paying users solely to generate activity or traffic, he stated. Paying all users during early growth phases can create long-term sustainability issues, as teams may incorrectly assume future profits will cover initial spending. Activity often drops once rewards end because many users joined exclusively for payouts, Buterin noted.
Aggressive reward campaigns risk undermining cryptocurrency communities, according to the post. Projects that compensate users for posting promotional content frequently produce unintended outcomes, with creators focusing on earning rewards rather than producing quality content. Activity typically declines when payments cease, as users lack incentives to continue platform engagement.
Buterin distinguished between decentralized finance applications and social platforms. In DeFi, capital functions uniformly regardless of provider, he stated. On social platforms, quality and active users carry more significance than user base size.
Committed community members often build tools, write documentation and answer forum questions without expecting rewards, according to Buterin. These contributions tend to strengthen projects over time, he stated.
Effective incentives should offset temporary weaknesses in early-stage products and decline as those weaknesses diminish, Buterin argued. Campaigns that pay users to inflate metrics can create appearances of adoption while failing to build sustainable communities.
“The bulk of the effort should be on making an actually-useful app. This was historically ignored, because it’s not necessary for narrative engineering to create a speculative bubble. But now it is necessary,” Buterin wrote.
The Ethereum co-founder argued that the cryptocurrency sector is gradually transitioning toward models driven by real utility rather than reward-led growth. Strong incentive structures compensate for early disadvantages and naturally phase out as projects mature, according to his statements.
