The Uncomfortable Truth About Web3 That Founders Need to Hear

The Bull Market is Back, But So Are the Old Problems

The charts are green, institutional capital is flowing in, and the phrase “bull run” is back on everyone’s lips. It feels like a fresh start for crypto and Web3. But beneath the surface of rising prices and renewed optimism, a dangerous rot remains. If we, as builders and founders, don’t confront it head-on, this bull market will inevitably lead to the next catastrophic collapse.

Let’s be brutally honest: for all the talk of enabling innovation, the crypto industry also created the most efficient financial rails for criminals in modern history. It normalized a culture of dodging regulations by hopping jurisdictions and became dangerously addicted to leverage. This isn’t just about a few “bad apples” like FTX; it’s about a foundational culture that has often prioritized growth at any cost over stability and trust.

The Great Divide: Why Mainstream Still Sees a Rigged Casino

While industry insiders celebrate the recovery, the public remains deeply skeptical. The numbers don’t lie, and they paint a grim picture:

• Roughly 63% of U.S. adults believe using cryptocurrency is not reliable or safe.
• A staggering 64% equate investing in crypto to pure gambling.
• Nearly half of potential investors stay away due to a fear of being scammed.

This isn’t a simple branding issue that can be fixed with a better marketing campaign. It’s a fundamental trust deficit. When the median consumer hears “Web3,” they don’t think of permissionless innovation; they think of romance scams, “pig butchering,” and billions lost to hacks and rug pulls. Until we can convince the average person that our products aren’t designed to exploit them, widespread adoption will remain a fantasy.

The Original Sin: When Avoiding Regulation Became the Business Model

For years, the unwritten playbook for many Web3 startups was built on regulatory arbitrage. The strategy was simple: move fast, break things, and hide behind buzzwords.

• Launch a “DAO” to obscure control, while the real decisions are made by a few core members in a private chat.
• Create a token that looks, acts, and smells like a security, but call it a “utility token” to avoid scrutiny.
• List on offshore exchanges that operate with minimal oversight.
• When compliance questions arise, deflect by pointing to decentralization and user privacy.

Here is The Uncomfortable Truth About That Founders Need to Hear: If your business model collapses the moment you implement basic Know Your Customer (KYC) and Anti-Money Laundering (AML) checks, you haven’t built an innovative business. You’ve built a high-tech laundromat.

If your platform custodies user assets, you are a financial institution. If you create markets for tokens, you are involved in market structure. If you offer yield on deposits, you are engaging in shadow banking. It’s time to pick a regulatory framework and operate within it, before regulators choose one for you.

Leverage: The Engine of Growth and the Architect of Ruin

Crypto’s primary growth hack has always been leverage. It’s not just the obvious 100x perpetual futures that lure in retail traders. It’s the hidden, systemic leverage that creates cascading collapses:

• Rehypothecated Collateral: Assets being pledged multiple times over, creating a fragile house of cards.
• Cross-Margin Contagion: Where the failure of one asset triggers a domino effect across an entire platform.
• “Points” and Airdrop Farming: Incentives that encourage users to take on massive, often misunderstood, risks for future rewards.

This isn’t “financial freedom.” It’s systemic risk being offloaded onto the least sophisticated market participants. It fuels explosive, reflexive bubbles on the way up and guarantees brutal, forced liquidations on the way down, eroding trust with every cycle.

A Path Forward: Building a Resilient and Trustworthy Web3

Criticism without a solution is just noise. So, what can responsible founders do to build enduring projects and help clean up the industry’s reputation? It starts with rejecting the old excuses and embracing accountability.

1. Make Compliance a Core Feature, Not an Afterthought

Integrate robust KYC/AML processes from day one. Treat compliance as a product requirement that protects users and builds legitimacy, not as a bureaucratic hurdle to be avoided.

2. Embrace Radical Transparency

Users deserve to know the risks. Provide simple, one-page summaries in plain English that clearly explain: How does this protocol make money? What are the specific ways a user can lose their funds? In the event of a crisis, who gets paid back first? This builds informed consent and genuine trust.

3. Implement Real Governance

Move beyond governance theater. A DAO where a handful of insiders hold the majority of votes is not decentralized. Establish genuine checks and balances, independent oversight, and clear accountability structures that can’t be overruled by a few key stakeholders.

4. Self-Police the Ecosystem

The industry must stop tolerating serial offenders and grifters. Good actors need to be vocal in calling out bad projects and refusing to integrate with protocols that have a history of exploits or shady practices. A rising tide only lifts all boats if the boats aren’t full of holes.

Conclusion: Let’s Earn This Second Chance

The technology underpinning Web3—composability, global access, and permissionless innovation—is genuinely revolutionary. It has the potential to build a more open and equitable financial future. But that potential has been squandered by a culture that too often weaponized it against public trust.

The current market recovery isn’t an absolution of past sins; it’s a test. It’s a chance to prove that Web3 has matured. Let’s earn it by making crime harder, treating regulation as a given, and using leverage as a controlled tool, not as the entire business model. The future of the industry depends on it.