The two-wheel drive of Web3 companies: equity financing and token incentives

Written by: Liu HonglinMany

people ask me what I think about the relationship between the equity of Web3 companies and tokens. This question may sound like a cliché, but in fact, it relates to the core asset design logic of a company: what exactly do you rely on for financing? What do you rely on to link users? What is the basis for cashing out capital? And these problems determine the fundamental difference between Web3 companies and traditional Internet companies.

In this article, Mr. Honglin would like to communicate with you from three levels: the financing path of Web3 companies in the future, value distribution, and the integration trend of equity and token.

Token will become the mainstream form, but not a financing toolThis

is my first clear judgment on the Web3 industry: the issuance of Token will still be the mainstream action in the future, but its positioning is undergoing a fundamental change - no longer used to pull financing, but to activate users and distribute the value of the platform's growth.

What have been the most common uses of Token over the past few years? The answer is financing - especially when the primary market financing is cold and the compliance path is not clear, Token has become a tool for many entrepreneurial teams to "curve fundraising". As soon as the white paper was written, the airdrop was launched, and the exchange was launched, the project party and early investors shipped first, and the user took over last.

But today, this set of plays is becoming more and more difficult. On the one hand, there is the continuous tightening of supervision, especially the gradual tightening of the supervision of token financing in mainstream jurisdictions such as the United States, Europe, and Hong Kong. On the other hand, the maturity of users - the old narrative is no longer useful, and the dream of "financing is wealth freedom" is becoming more and more difficult to talk about.

At the same time, a new path is taking shape: Token is not a "bargaining chip" for project launch, but a "tool" for platform operation. Its function is no longer a voucher for asset trading, but more like a "value sharing mechanism" within the platform. Not financing logic, but marketing logic. It's not sent for money, but for users.

But this does not mean that Token is "reduced" to a points system. On the contrary, it assumes the role of a "compound incentive tool" that is more complex and more motivating than the traditional point system. It can bind user behaviors (such as transactions, recommendations, and interactions), combine NFTs for hierarchical rights and interests design, and guide the community to self-organize and govern. This vague state of "quasi-financial, non-securities" is the charm of the Token mechanism, and it is also the reason why it cannot be easily summarized by the word "points".

In other words, Token is not "more points in the system", but "a new set of native incentive languages in the system that can circulate, price, and match the value contributions of different users". It is a way for users to participate in the growth of the platform, and it is a means to redefine the cost that was originally consumed in the operating budget as a "marketable asset". This is why Web3 projects continue to emphasize elements such as "incentive mechanism", "liquidity" and "value anchoring" when designing the token economic model, rather than simply "reward points".

Equity is still the right way for Web3 companies to realize their capitalThe

second judgment is also very clear: for the vast majority of companies that really want to become bigger and stronger, and create brilliance forever, the final capital realization path is still to take the traditional equity channel. In other words, when it is time to raise funds, take equity financing, and when it is time to exit, go through IPO, mergers and acquisitions or equity transfers. Tokens do not and cannot replace this role of equity.

This is very important. Many project parties will fall into a misunderstanding in the early stage: since Token can be on the exchange, since users can buy and sell, and the price can rise, is it possible to replace equity with Token, or even simply "short equity, only issue Token"? But you really have to calm down and think about it, is there an anchor relationship between the price of Token and the company's profit? If the company is doing well, will the price of Token necessarily rise? Does a user holding a token have the right to vote or dividends in the company?

The answer is basically "no". Token and equity are two sets of logic, two worlds, and it is a fantasy to expect to replace equity with Token, and to expect to be able to exchange gold coins for playing games and buy a car. You can participate, circulate, and get incentives within the platform, but that doesn't mean you own the platform.

And the true asset value and ultimate capital gains of a company are always written on that dry but real and effective balance sheet. Equity represents the legal right to claim the net assets and future profits of the enterprise, which cannot be replaced by Token, no matter what jurisdiction or financial system.

Because of this, Web3 project parties should be soberly aware that Token is an operational tool, not a financial exit path. When it really comes to introducing large amounts of financing, M&A or IPO, Token does not have any legal and commercial "capital exit channel" function. Financing, mergers and acquisitions, and restructuring, these actions must be realized through equity in the end. You can't expect a potential investor to say, "I'm going to take 10% of your shares," and you hand over a token address and say, "This is it."

The integration of Token and equity is the focus of the next stage of the industry

, but things are not a binary opposite. In fact, the convergence trend between Token and equity has become more and more obvious, which is also the third direction of development I judge.

The most typical case is that the concept of "security token" has been reintroduced. The concept was discussed back in 2018 when the STO bubble occurred, but was shelved at the time due to unclear regulation and immature infrastructure. Now, with the advancement of on-chain compliance technology and the gradual entry of traditional financial institutions into the space of tokenized assets, this path is starting to become a reality.

For example, a listed company can tokenize some of its shares and turn them into on-chain certificates. Alternatively, fund products can be made in the form of tokens to achieve more fine-grained share splitting and circulation. Under this model, Token is no longer a "point in a virtual economy", but a "digital representation of real financial products", with real asset mapping and legal rights.

Of course, such a design has very high compliance requirements. KYC, anti-money laundering, accredited investor identification, information disclosure, custody audit, all serious processes in traditional finance must be integrated into the life cycle of the token. These links must also rely on the intermediary forces in the traditional financial system - securities companies, compliant exchanges, regulated custodians, etc.

So we will see an interesting trend: the future Token world is not an ideal country that is completely oriented to "decentralization", but more like a "digital extension" of traditional finance. The combination of equity and token is not to remove all intermediaries, but to improve the liquidity and programmability of assets in the new technical context.

Summary: The dual ledger structure of Web3 companiesSo

if you have to summarize the asset structure of Web3 companies in the future in one sentence, I think it can be said that

Web3 companies are the creatures of "dual ledgers" - a ledger with the names of shareholders and equity records; The other ledger has the user's address and the token is issued.

The former determines the company's control, financing ability and capital exit path, and is the core asset of the corporate governance structure. The latter determines whether users are willing to stay for a long time, whether they are willing to participate in growth, and is the growth engine of whether the business model can run through.

Tokens cannot be expected to replace equity, it is not a vehicle of ownership; But the power of Tokens cannot be ignored, as it is a key means of activating users and market expectations. It is neither an empty incentive code nor a blank strip of financial assets, but a unique expression sandwiched between marketing and finance.

Finally, I would like to emphasize that the Token we are talking about here does not include crypto assets that play the role of "underlying currency" such as Bitcoin and stablecoins. They are another paradigm, an entry point to another financial system, and are not part of the enterprise-level asset structure that we are discussing. (If you are interested in this topic, you can read another article by Mr. Honglin: "Layered Money: Re-understanding Gold, Dollar and Bitcoin")

But for Web3 entrepreneurs, understanding that "equity is the expression of power, and Token is the reward of users" may be the most critical lesson in re-understanding corporate structure and asset design.