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ToggleIn the recent year-long Crypto Winter, Web3 startups have withered like fallen leaves. The bull market frenzy has vanished, replaced by broken funding chains, rampant hacking, and strategic lapses. Many companies that once enjoyed immense success with top-notch teams and VC backing are now struggling to survive in the cold wind: some have hastily transformed, some have sold themselves at low prices, some have shut down quietly, and others have suffered devastating thefts.
Layoffs and departures followed, with many senior figures leaving the company, including Tom Howard, Head of Strategy at CoinList; Abdul Rehman, Head of DeFi at Monad; Benjamin Speckien, Head of Security at Celo; and Aleksander Leonard Larsen, COO of Axie Infinity.
This is not merely a financial crisis, but a brutal reflection of industry reshuffling. Essentially, these phenomena stem from a profound clash between technology and capital, products and markets, and vision and reality within the Web3 ecosystem. Each story reflects the confusion and discontent of the market participants.
layoffs
Layoffs are a common strategy for crypto projects during a bear market. By cutting staff in non-essential positions such as marketing and technology, projects can significantly reduce labor costs, improve operational efficiency, and thus ensure the longest possible survival period, preparing for the next bull market.
In early February, the well-known cryptocurrency exchange Berachain announced a 25% reduction in its workforce (up to 200 people) and the closure of its exchange operations in the UK, EU, and Australia. Two weeks later, its senior management team, including COO Marshall Beard, CFO Dan Chen, and CFO Tyler Meade, resigned one after another, with their original responsibilities being taken over by other management team members.
This comes just three months after its IPO, during which time its stock price has fallen by more than 60%, and the dismal market conditions and revenue situation have forced it to adopt an aggressive business contraction strategy.
In early January, the Berachain Foundation also announced the layoff of most of its retail marketing team, and lead developer Alberto would also be leaving the company. The project acknowledged that the retail-first strategy would be less effective across the cryptocurrency space during 2024/2025.
In August 2025, Eclipse Labs, a developer of modular rollups infrastructure, announced a team restructuring, laying off 65% of its staff. That same month, Lido announced a 15% reduction in staff due to cost pressures, and the founder of Sandbox announced his resignation and a 50% reduction in staff, shifting the focus away from metaverse business towards Web3 applications and the Launchpad project. In July 2025, Eigen Labs announced approximately 25% layoffs, shifting its business focus to EigenCloud.
Layoffs may appear to be a cost-control measure, but at a deeper level, they represent a reassessment of a company's future revenue expectations. When management chooses to reduce team size, it essentially means they are judging that, in the current market environment, the returns from marginal expansion are no longer sufficient to cover the additional costs.
This also means that Web3 startups are shifting from a "growth-first" to a "survival-first" approach. Efficiency issues masked during bull markets are magnified in bear markets. Whether organizational structures are redundant, marketing efforts are inefficient, and product iterations truly meet user needs will all be exposed under cash flow pressure.
Transformation
If layoffs are a form of passive contraction, then transformation is a proactive adjustment. Even projects with sufficient financial support need to carefully consider whether their established strategic direction aligns with current market trends and user needs.
Many projects built their growth logic in the previous cycle on the premise of ample liquidity and high risk appetite. When these premises disappear, the narrative becomes inconsistent. As a result, we see many projects choosing to expand beyond simple on-chain infrastructure into areas such as payments, AI, and RWA.
Polygon is a typical example. As a long-established Layer 2 project, Polygon maintains a leading position in both technology and market. However, due to the increasing market neglect of the Layer 2 sector and its difficulty in competing with non-EVM public chains such as Solana and Aptos, it decided to transform into the stablecoin sector in January of this year. The first step was to acquire payment-related capabilities and resources through acquisitions.
In early January, Polygon Labs announced the acquisition of Coinme and Sequence to enhance its core infrastructure for regulated stablecoin payments and fund flows. Coinme provides regulated access to U.S. fiat currency deposits and withdrawals, connecting cash, debit cards, and digital assets within the existing regulatory framework. Sequence is the infrastructure that abstracts bridging, trading, and gas operations for end users.
Polygon stated that these acquisitions collectively form the foundation for Open Funds Stack, designed to enable regulated stablecoin payments and fund flows, running on Polygon's blockchain. Polygon Labs will become a profitable blockchain payments company.
Last month, Solana ecosystem NFT marketplace Maagic Eden announced that it would gradually cease support for the EVM and Bitcoin Runes and Ordinals marketplaces, and would instead focus its main resources on its newly launched prediction market project, Dicey.
The collective transformation of Bitcoin mining companies has become a typical example. In November 2025, Bitfarms announced that it would shut down its Bitcoin mining operations within the next two years and transform its facilities into artificial intelligence and high-performance data centers. Recently, Bitfarms also announced that it would change its name to Keel Infrastructure, completely severing its association with "Bitcoin" at the company name level.
In February, Cipher Mining announced its rebranding as Cipher Digital and sold its mining farm stake to Canaan Creative for approximately $40 million, aiming to focus on becoming a leading data center developer and operator in the next generation of computing.
Selling oneself
Even projects backed by substantial funding have been forced to sell themselves due to slow product development and a lack of confidence. A prime example is the decentralized social protocol Farcaster.
In mid-January, the decentralized social protocol Farcaster announced its acquisition by Neynar. Ownership of the protocol contracts, codebase, application, and Clanker will be transferred to Neynar, which will be responsible for its subsequent operation and maintenance. At the same time, the project team fully returned $180 million in funding to investors.
Just a month ago, Farcaster co-founder Dan Romero announced a major strategic shift for the platform, abandoning the "social-first" approach of the past four years in search of product-market fit and turning to a wallet-centric growth model. However, this acquisition suggests that Farcaster's exploration in the wallet sector has not met the team's expectations.
Another decentralized social protocol, Lens Protocol, is facing a similar situation. Due to a continuous decline in user activity, the original Lens team announced that the protocol has been taken over by Mask Network, and the original team will become technical advisors, returning to their expertise in the DeFi field to innovate.
Ready Player Me, a cross-platform NFT platform for game avatars, was highly favored by the industry after its $56 million funding round led by a16z. However, due to the declining popularity of the NFT sector, its user base plummeted, with its X account posting only five tweets in the past year. At the end of last year, Ready Player Me was sold to streaming giant Netflix, and its team members successfully exited the business.
Stolen
Theft has become the fate of many high TVL protocols. Hackers see them as highly sought-after targets, with large sums of money being stolen almost every week. This results in significant losses for the protocols themselves or depositors, exacerbating distrust in the market and among users.
In mid-February, IoTeX, a well-known DePin infrastructure provider, suffered a hacker attack on its cross-chain bridges. The leakage of validator owners' private keys allowed unauthorized control of the bridge contracts, resulting in losses of $4.4 million. IoTeX subsequently announced 100% compensation for users affected by the hack, with minimal impact on project operations. However, for many smaller projects, a hacker attack can be catastrophic.
In early February of this year, Step Finance, a Solana-based DeFi protocol, suffered a breach of its executives' devices, resulting in the theft of approximately $40 million from its vault. Subsequently, the team explored various possibilities, including fundraising and acquisitions, but failed to find a viable solution, thus making the difficult decision to immediately cease all operations.
In early January of this year, the blockchain computing scaling protocol TrueBit was attacked by a smart contract integer overflow vulnerability. Attackers, through carefully crafted input parameters, triggered an overflow error in the token purchase price calculation function, allowing them to mint a large number of protocol tokens (TRU) at extremely low or even zero cost. They then immediately destroyed these tokens to extract a large amount of ETH from the pool, ultimately profiting $26.4 million, while the price of TRU tokens plummeted to zero. Following the announcement of accountability in January, TrueBit's official X account has not been updated since.
Shutdown
Compared to layoffs and business transformations, many more projects quietly collapse during a long and drawn-out process. They invest a lot of money and manpower in product development, marketing, and token listing, but their funds and patience are exhausted by one marketing campaign after another that makes little impact and new products with few users, ultimately forcing them to announce the cessation of operations.
Founded in 2018, DappRadar was once the most popular application data statistics website in the crypto industry. Despite having raised over $7 million in funding, the platform decided to issue tokens in 2021 to expand its cash flow due to monetization difficulties. However, the tokens suffered a continuous price drop due to a lack of utility, and could not provide sustainable financial support.
"We have made the difficult decision to shut down the DappRadar platform. In the current environment, operating a project of this scale is no longer financially sustainable. After exhausting all possibilities, we have had to make this difficult choice," DappRadar stated in its announcement. "As we turn away, we are confident that we have stayed on the right track, adhered to our principles, and contributed positive energy to the industry."
In February of this year, the multi-chain lending protocol ZeroLend officially announced that it would cease operations after three years. "Over the past period, several chains initially supported by ZeroLend have become inactive or experienced a significant drop in liquidity. In some cases, oracle providers have also stopped providing support, making it increasingly difficult to reliably operate the market or generate sustainable revenue. At the same time, as the protocol grew in scale, it attracted more attention from malicious actors, including hackers and fraudsters. Combined with the inherently low-profit, high-risk nature of lending protocols, this resulted in the protocol operating at a loss for an extended period."
In December 2025, the cross-chain smart wallet Blocto announced it was ceasing operations. "Over the past few years, we have incurred losses exceeding $5.5 million to maintain community services. But this cannot continue indefinitely. Realizing that our operating funds were about to run out, we began trying to communicate with the leadership of Flow/Dapper in June of this year, but failed to secure a single meeting with them. Each email exchange took weeks, while our remaining funds continued to dwindle."
Conclusion
In the early stages of Web3 development, the power of narrative far outweighed the product itself. A grand vision and a seemingly disruptive mechanism were often enough to attract capital and users. However, as overall liquidity returned to rationality and investors and users began to recalculate the risk-reward ratio, only projects with clear cash flow logic, genuine user needs, reliable technical architecture, and compliance capabilities could truly weather the cycle.
These real-world examples throughout the article serve as a cold mirror reflecting the structural vulnerabilities accumulated in the Web3 ecosystem during its period of rapid expansion: over-reliance on external liquidity, neglect of business loops, and insufficient awareness of security and compliance.
However, this downturn is not the end, but rather a necessary stage in the industry's maturation. Almost all technological revolutions in history have gone through similar stages: capital frenzy, bubble expansion, sharp correction, and rebuilding confidence. Web3 is no exception.
Therefore, rather than viewing these layoffs, transformations, thefts, and shutdowns as pessimistic signs, it's better to understand them as a necessary selection process. As the regulatory framework becomes clearer, infrastructure efficiency continues to improve, and the market itself undergoes self-purification, the teams and products that survive the downturn often possess a stronger risk awareness and clearer business logic. Coupled with the increasingly powerful assistance and integration of AI capabilities, the new cycle of the crypto ecosystem is more promising than ever before!
