Author: Liu Honglin
Many people ask me how I view the relationship between equity and Token in Web3 companies. This question may sound like an old topic, but in fact, it relates to the core asset design logic of a company: What do you rely on for financing? What do you use to connect with users? What do you use to realize capital gains? And these questions precisely determine the fundamental difference between Web3 companies and traditional internet companies.
In this article, Lawyer Hong Lin wants to communicate with everyone from three levels: future Web3 company financing paths, value distribution, and the integration trend of equity and Token.
Token Will Become Mainstream, But Not a Financing Tool
This is my first relatively clear judgment about the Web3 industry: Token issuance will still be a mainstream action in the future, but its positioning is undergoing a fundamental transformation - no longer used for fundraising, but to activate users and distribute platform growth value.
In the past few years, what was the most common use of Token? The answer is financing - especially when primary market financing was cold and compliance paths were unclear, Token became a "roundabout fundraising" tool for many startup teams. Write a white paper, do an airdrop, list on an exchange, with project parties and early investors selling first and users ultimately holding the bag - this "financing - issuance - cutting leeks" logic once became the industry's default approach.
But today, this approach is becoming increasingly difficult. On one hand, regulation is continuously tightening, especially in mainstream jurisdictions like the United States, Europe, and Hong Kong, where Token financing regulation is gradually becoming stricter. On the other hand, users are becoming more mature - the old narrative no longer works, and the dream of "financing equals financial freedom" is becoming harder to sell.
Meanwhile, a new path is taking shape: Token is not a "chip" for project launch, but an "tool" for platform operation. Its function is no longer a certificate of asset trading, but more like a "value sharing mechanism" within the platform. It's not a financing logic, but a marketing logic. Not issued to exchange for money, but issued to exchange for users.
But this does not mean Token has "degraded" to an points system. On the contrary, it undertakes a more complex and more incentive-effective "composite incentive tool" role compared to traditional points systems. It can bind user behaviors (such as transactions, recommendations, interactions), combine with Non-Fungible Tokens for hierarchical rights design, and even guide community self-organized governance. This "quasi-financial, non-securities" ambiguous state is the charm of the Token mechanism and why it cannot be easily summarized by the word "points".
In other words, Token is not "adding some points to the system", but "adding a native incentive language that can circulate, be priced, and match different user value contributions" to the system. It is a way to let users participate in platform growth, a means of redefining costs originally consumed in operational budgets as "circulating assets". This is why Web3 projects continuously emphasize elements like "incentive mechanisms", "liquidity", and "value anchoring" when designing Token economic models, rather than simple "reward points".
Equity Remains the Proper Path for Web3 Companies' Capital Realization
The second judgment is also clear: For most companies truly wanting to grow strong and create lasting glory, the ultimate capital realization path still relies on traditional equity channels. That is, raising funds with equity when financing is needed, and exiting through IPO, acquisition, or equity transfer. Token cannot and will not replace equity's role.
This point is very important. Many project parties will fall into a misunderstanding in the early stages: Since Token can be listed on exchanges, and users can buy and sell with prices rising, can Token replace equity, or even simply "remove equity and only issue Token"? But if you calmly think about it, does Token price have any anchoring relationship with company profitability? Will the company's good performance definitely cause Token price to rise? By holding Token, do users obtain company voting rights or dividend rights?
The answers are basically "no". Token and equity are two sets of logic, two different worlds. Expecting Token to replace equity is like expecting to buy a house by earning game coins - it's the same level of fantasy. You can participate, circulate, and receive incentives on the platform, but this does not mean you own the platform.
A company's true asset value and ultimate capital returns are always written on that dry but effective balance sheet. Equity represents the legal right to claim enterprise net assets and future profits, which cannot be replaced by Token in any jurisdiction or financial system.
Therefore, Web3 project parties must clearly recognize: Token is an operational tool, not a financial exit path. When large-scale financing is needed or merger and acquisition or IPO must be realized, Token does not possess any legal or commercial "capital exit channel" function. Financing, mergers and acquisitions, restructuring - these actions ultimately still must be achieved through equity. You can't expect a potential investor to say: "I want to acquire 10% of your company's shares" and you hand over a Token address saying "here it is".
Token and Equity Integration is the Next Industry Focus
However, things are not absolutely binary. In fact, the integration trend between Token and equity is becoming increasingly apparent, which is my third predicted development direction.
The most typical case is the concept of "Security Token" being brought up again. This concept was discussed as early as the 2018 STO bubble but was shelved due to unclear regulations and immature infrastructure. Now, with the advancement of on-chain compliance technology and traditional financial institutions gradually entering the Token asset field, this path is becoming realistically possible.
For example, listed companies can Token-ize part of their shares, turning them into on-chain credentials. Or fund products can be created in Token form, achieving more granular share splitting and circulation. In this mode, Token is no longer "points in a virtual economic body" but "digital expression of real financial products" with genuine asset mapping and legal rights.
Of course, such design requires extremely high compliance. KYC, anti-money laundering, qualified investor identification, information disclosure, custody audit - all serious traditional financial processes must be integrated into the Token lifecycle. These stages must also rely on intermediary forces in the traditional financial system - securities companies, compliant exchanges, regulated custody institutions, etc.
So we will see an interesting trend: The future Token world is not a completely "decentralized" ideal country, but more like a "digital extension" of traditional finance. The combination of equity and Token is not to remove all intermediaries, but to enhance asset liquidity and programmability in a new technological context.
Summary: Web3 Companies' Dual Ledger Structure
So if you must summarize the future Web3 company asset structure in one sentence, I think it can be said like this:
Web3 companies are "dual ledger" organisms - one ledger writes shareholders' names, recording equity; another ledger writes user addresses, issuing Tokens.
The former determines the company's control rights, financing capabilities, and capital exit paths, being the core asset of enterprise governance structure; the latter determines whether users are willing to stay long-term and participate in growth, serving as the growth engine for whether the business model can work.
You can't expect Token to replace equity; it is not a carrier of ownership. But you also cannot ignore Token's power; it is a key means of activating users and market expectations. It is neither a hollow incentive code nor a financial asset note, but a unique expression between marketing and finance.
Finally, I emphasize: The Token we discuss here does not include crypto assets like Bitcoin or stablecoins that play "underlying currency" roles. They belong to another paradigm, another financial system entry point, and are not part of the enterprise-level asset structure we are discussing. (If interested in this topic, you can read another article by Lawyer Hong Lin: "Layered Currency: Reunderstanding Gold, US Dollar, and Bitcoin")
But for Web3 entrepreneurs, understanding that "equity expresses power, Token rewards users" might be the most critical lesson in reimagining company construction and asset design.
