For more than decade, startups followed a similar playbook: build an app, acquire users, monetize them with subscriptions or advertising, then grow them by centralized control. However, with the evolution of Web3, a growing number of startups no longer believe that app-centric models will yield the best results for long-term growth, user retention, and network effects. Instead, many are experimenting with token-based ecosystems and how to coordinate value, governance and user participation using crypto tokens instead of centralized platforms.
But this does not mean the end of apps. It is a shift, however, towards a different architecture and ownership model. The programmability, shared ownership and decentralized coordination enabled by tokens change how startups onboard users and scale networks, making the design and issuance of tokens a core architecture decision and not just a fundraising mechanism.
In this article, we explore to what extent startups truly want to build token economies over applications, why they want to, what the challenges are, and what the future holds for Web3-based startups.
Understanding Token-Based Ecosystems Versus App-Centric Models
Applications have usually operated through centralized model, where a company would manage the infrastructure, owns the user data, define the application monetization model and capture network value. This model has been effective in certain cases, but has limitations in cases where trust, transparency and community-governed applications are key.
In contrast, token ecosystems use token design to govern and allocate value and control among participants in the system, where tokens are used as an economic primitive for governance, access, and incentive and usage. Rather than being passive consumers, users would become stakeholders and their incentives would align with the platform.
This ineffectiveness is why most token development companies today are focused on creating entire ecosystems instead of just digital assets. Tokens are not alternatives for apps and websites, they merely change the role of an app from product to interface co-owned by users.
Why Startups Are Exploring Token-Based Ecosystems
Incentive Alignment and Network Effects
Incentive alignment, a common justification for token-based ecosystems, suggests that users create value for the platform but do not see a share of the economic value. Through tokens, startups can reward early users, contributors, and developers in ways that can be built to scale.
Protocols like DeFi have shown that token rewards can be used to incentivize liquidity providers, developers, and users on-chain, and it is now commonplace in gaming, creator economies, and on infrastructure networks where utility token development is foundational to participation.
Community-Driven Growth
By using tokenized ecosystems, founders can bootstrap their community considerably faster than apps-only companies, giving token holders roles as evangelists, contributors, and governors of decentralized growth loops, therefore reducing their reliance on paid marketing.
This is attractive for early-stage entrepreneurs who do not have the funds to compete with more established applications; consequently, many token development firms for startups focus on community economics as their competitive advantage over customary user acquisition and retention strategies.
Tokens as Infrastructure, Not Just Assets
A core idea of the Web3 mentality is that tokens are a form of infrastructure. They will coordinate behavior, automate incentives, and ease permission-less innovation within distributed organizations.
For example, infrastructure projects use tokens to incentivize node operators and validators, in which case crypto token construction is almost inextricable from protocol design. The token does not overlay the product, but rather forms the product’s economic engine.
This is quite different from older token-generation events, where startups mainly saw tokens as a way to raise money, and today more founders understand the importance of sustainability, even if that understanding does not affect their ability to raise money.
Governance and Ownership in Token-Based Models
Another major incentive for the token ecosystem is decentralized governance, where tokens can give their holders voting rights to influence protocol upgrades, treasury allocations, and development direction.
Although adding complexity, governance mechanisms increase trust. In an ecosystem where policies or data usage in centralized applications can change rapidly, token-based governance emerges as an attractive alternative. This is why regulatory compliant tokens have become the focus of many efforts by startups that wish to reduce this risk.
Are Apps Becoming Secondary Interfaces?
Despite the hype for token ecosystems, apps are not disappearing. Apps are becoming the front-ends for decentralized backends. Wallets, dashboards and mobile apps become a central part of the user’s experience, although they are no longer an intrinsic part of ownership or value of the underlying assets.
The app is replaceable, and it’s only the protocol that comes along with the data. It is a reversal of priorities. However, because startups design their protocols before the interfaces that connect to them, that architecture remains.
Real-World Examples of Token-First Startups
When incentivized appropriately, as demonstrated by the success of decentralized exchanges, blockchain games and social protocols, token-centric models outperform app-centric ones because incentive structures and ownership models are transparent and easy to understand.
Tokenized economies in video games enable user ownership of in-game assets, as well as user contribution to game development, but it would be difficult to integrate these features in the app market, which incentivized early Web3 game companies to create custom game tokens.
Challenges and Trade-Offs
Complexity and Execution Risk
Token-based ecosystems are not necessarily easier for creators to launch than apps. They require expertise in tokenomics, smart contract security, and regulatory uncertainty, and poorly executed systems will feature inflationary tokens, governance inertia, and a decline in user trust.
This is why many founders enlist the help of seasoned crypto token development companies as token economies require expertise across software engineering, economics and game theory. This is no longer just engineering, it is also economics.
Regulatory and Compliance Considerations
Unlike apps, tokens are subject to changing regulation, and startups should assess the requirements across jurisdictions for tokens that have governance or financial aspects. This has led to a demand for the development of tokens that satisfy legal standards without compromising on innovation.
Token Economics and Cost Considerations
Token ecosystems are not trivially cheaper to build than applications, for example, infrastructure inside a decentralized ecosystem might be cheaper, but developing and maintaining tokenomics can be expensive.
Protocol founders must consider smart contract audits, token models, legal consultation, and ecosystem management to estimate the crypto token development cost. These costs are typically offset by lower customer acquisition costs and reduced churn for users.
Token-Based Ecosystems Versus Traditional Monetization
While customary applications are mostly monetized through subscriptions, advertisements and data monetization, token ecosystems are often monetized through participation in networks, staking of tokens, and appreciation of tokens.
(Their logic is different from most companies, which extract value from users; token ecosystems create shared value.) For this reason, many founders think that tokens make a better economic model in the long run.
Are Tokens Replacing Apps or Redefining Them?
That explains why startups are not abandoning the app, but instead debating what role the app will play in the new world of tokens. Apps become the interface, and tokens are the connective tissue through which users and developers interact with the protocol.
A hybrid model explains why Web3 token creation companies advocate for interoperability and composability, as tokens allow interoperability across ecosystems where apps do not.
Long-Term Outlook: Strategic, Not Trend-Driven
Token ecosystems are not another boom and bust cycle however. It is an evolution of the way we create, augment, govern and make the most out of our digital assets, and the startups that understand this, will respond incrementally and steadily to the waves in their environment.
Tokenization is not for every startup. For products that need to be simple and rapid, an app may provide a better solution. Ideally, the best token-based startups will search for ecosystems where they are a fit, not where they have a vague opportunity.
Conclusion
Startups are increasingly prioritizing token-based ecosystems not because apps are obsolete, but because tokens unlock capabilities that apps alone cannot provide. From incentive alignment and decentralized governance to community-driven growth, tokens reshape how platforms scale and sustain value.
As token development continues to mature, startups will move beyond experimental launches toward carefully designed ecosystems that balance usability, compliance, and decentralization. Those that succeed will not replace apps—they will transcend them, building systems where users are no longer just customers, but partners in growth.
