The tokenization gold rush continues to captivate entrepreneurs, but Roni Eshett, a seasoned blockchain and fintech expert, sees through the hype.

At the Orbit Growth Summit, Roni Eshett delivered a reality check that should make most founders think twice: with over 20,000 tokens in existence, 70% of the total market cap remains concentrated in just Bitcoin and Ethereum, leaving thousands of tokens, essentially worthless. This concentration reveals a fundamental truth that many founders overlook: most projects don’t need their own token, and many shouldn’t even be on a blockchain.

The Four Pillars of Tokenization
Is Tokenization Right For Your Startup?

Roni outlined four reasons startups consider tokenization: utility, compliance, fundraising, and growth. But each comes with significant caveats that founders must understand before diving in.

Utility: When Tokenomics Go Wrong

The most compelling reason to tokenize should be genuine utility within your product ecosystem. However, forcing utility where it doesn’t belong can be catastrophic.

Consider Civil, a well-funded media startup that raised $5 million and secured partnerships with Forbes and the Associated Press, one of the world’s largest news agencies serving thousands of newspapers and broadcasters globally. Their vision was noble: create a decentralized news platform where readers directly fund journalists, reducing advertising bias. The token was meant to enable community governance and content vetting.

The execution failed spectacularly. Journalists—not crypto natives—found token acquisition confusing and cumbersome. Community members struggled with the same issues, leading to minimal engagement. Worse, the vetting mechanism became a “money game” where decisions were determined by who could stake more tokens, exactly the opposite of their anti-bias mission.

On the flip side, Axie Infinity demonstrated how tokenization can create massive value before destroying it. At its peak, the play-to-earn game had 2.7 million daily active users and a $3 billion valuation. But poor tokenomics—specifically an imbalance between the supply and demand of their SLP (Smooth Love Potion) reward tokens that players earned for playing.

The mechanics were simple but fatal: players earned SLP tokens as rewards for playing, which could be used for in-game purchases or exchanged for cash. As the game’s popularity exploded, it became too easy to earn SLP tokens. With millions of players farming tokens daily, the market was flooded with supply. Players began overselling their SLP rewards, driving down prices. This created a classic death spiral—fewer players meant less demand for SLP, which drove prices down further, accelerating the exodus.

The token lost 99% of its value, and daily users dropped 90%. While poor tokenomics was the primary driver of Axie’s collapse, the company also faced additional challenges including a major hack in 2022 and the broader crypto winter that hit the entire market.

The lesson: Tokenomics isn’t just about hype—it’s about tying tokens to real-world economic value with sustainable supply and demand mechanics.

Compliance: Why DAOs Won’t Save You

Many entrepreneurs view tokenization and DAOs as regulatory shields. This is a dangerous misconception.

As Roni bluntly stated: “The only example where founders are 100% protected is Bitcoin, because no one knows who Satoshi is”—referring to Satoshi Nakamoto, Bitcoin’s pseudonymous creator whose real identity remains unknown.

Even the most decentralized projects aren’t immune to regulatory scrutiny. Roni highlighted cases like Uniswap—despite operating under a DAO, it received a Wells Notice from the SEC (Securities and Exchange Commission) and faced penalties from the CFTC (Commodity Futures Trading Commission), including fines and asset delistings. Tornado Cash saw three developers charged, with one sentenced to five years in the Netherlands. While the regulatory landscape has evolved since, it remains fragmented and uncertain across jurisdictions.

The reality: Regulations are evolving and decentralization doesn’t guarantee legal immunity.

Growth: The Community Engagement Myth

The theory sounds compelling: tokens create ownership, engagement, and loyalty. Users holding tokens feel invested in the project’s success and will actively participate in governance.

The practice tells a different story. Most DAOs struggle with massive voter apathy. Even when projects offer financial incentives for participation, engagement remains low.

Developer grants and hackathons present similar challenges. While grants can be effective, they’re expensive and often fail to drive meaningful traction. Hackathons, though cheaper, typically attract developers who jump from one competition to another, building prototypes without intention to scale.

The reality: Token ownership rarely translates to meaningful community engagement. Even successful examples like Reddit’s Community Points, which initially drove 4x engagement, proved unsustainable and possibly a form of market manipulation, and were eventually shut down.

The Fundraising Reality

Token fundraising can be lucrative, with valuations often exceeding traditional startup metrics, especially during bull markets. However, the ecosystem attracts short-term thinking despite investors’ claims of long-term vision.

The structure mirrors traditional fundraising—friends and family, angels, VCs—but with crucial differences. Lock-up periods are shorter, and many crypto investors are primarily motivated by quick returns. This creates inherent risks around market manipulation, from classic pump-and-dump schemes to malicious contract manipulation.

Protection strategies include careful token allocation, extended lock-up periods, and building strong, distributed communities that make price manipulation more difficult.

The Due Diligence Framework

When evaluating tokenization projects, Roni focuses on several key factors:

• Team credibility: What’s their track record? Avoid at all costs if they are tied to previous scams.
• Strategic partnerships: Are they driving real traction?
• Community engagement: What’s the actual level of social media and forum activity?
• Problem-solution fit: Does the token genuinely solve a real problem?
• Founder investment: How much of their own time and money have they committed?

The Path Forward

For entrepreneurs considering tokenization, the framework should be:

• Question the necessity: Can you achieve your goals without a token or blockchain?
• Validate real utility: Does the token serve a genuine purpose in your product ecosystem?
• Understand regulations: Consult legal experts early.
• Design for sustainability: Focus on long-term value creation over short-term speculation.

The tokenization opportunity is real, but it requires the same disciplined approach as any other business decision. As the market matures and regulatory clarity increases, the projects that endure will be those solving real problems with sustainable economics—not those chasing the latest crypto trend.

The bottom line: Good tokenomics aren’t just about hype—they’re about tying tokens to real-world value. Most projects don’t need a token, and those that do must be prepared for a complex, regulated, and highly competitive landscape.

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Orbit Growth Summit is where Orbit founders learn growth tactics from top experts in product-led growth, performance marketing, and scalable systems.