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Beyond X-to-Earn: How Web3 Growth Models Learned to Stop Chasing Hype

· 13 min read
Dora Noda
Dora Noda
Software Engineer

Axie Infinity once counted 2 million daily players. By 2025, that figure had collapsed to 200,000—a 90% freefall. StepN's user base evaporated from hundreds of thousands to under 10,000. Across the board, play-to-earn and X-to-earn models proved to be financial Ponzi schemes dressed as innovation. When the music stopped, players—functioning more as "miners" than gamers—vanished overnight.

But three years after the initial crash, Web3 is rebuilding on fundamentally different assumptions. SocialFi, PayFi, and InfoFi are learning from the wreckage of 2021-2023, prioritizing retention over extraction, utility over speculation, and community over mercenary capital. This isn't a rebrand. It's a retention-first framework built to outlast hype cycles.

What changed, and what are the new rules?

The Ponzi That Couldn't Scale: Why X-to-Earn Collapsed​

Zero-Sum Economics​

Play-to-earn models created zero-sum economies where no money was produced inside the game. The only money anyone could withdraw was money someone else had put in. This structural flaw guaranteed eventual collapse regardless of marketing or initial traction.

When Axie Infinity's SLP (Smooth Love Potion) token began dropping in mid-2021, the entire player economy unraveled. Players functioned as short-term "miners" rather than genuine participants in a sustainable ecosystem. Once token rewards declined, user retention collapsed immediately.

Uncapped Token Supply = Guaranteed Inflation Crisis​

Uncapped token supplies with weak burning mechanisms guarantee eventual inflation crises. This exact flaw destroyed Axie Infinity's player economy despite initially appearing sustainable. StepN suffered the same fate—when profit dynamics weakened, user churn accelerated exponentially.

As Messari's State of Crypto 2025 Report revealed, tokens without clear utility lose almost 80% of active users within 90 days of Token Generation Event (TGE). Too many teams inflated early emissions to artificially boost TVL and user numbers. It attracted attention fast but drew the wrong crowd—reward hunters who farmed emissions, dumped tokens, and exited the moment incentives slowed.

Shallow Gameplay, Deep Extraction​

GameFi financing collapsed over 55% in 2025, resulting in widespread studio closures and revealing major flaws in token-based gaming structures. Major game tokens lost over 90% of their value, exposing speculative economies masquerading as games.

The underlying problem? P2E failed when token rewards were asked to compensate for unfinished gameplay, weak progression loops, and the absence of economic controls. Players tolerated subpar games as long as yield remained high. Once the math broke, engagement vanished.

Bot Armies and Fake Metrics​

On-chain metrics sometimes suggested strong engagement, but closer analysis revealed that significant activity came from automated wallets rather than real players. Artificial engagement distorted growth metrics, giving founders and investors false confidence in unsustainable models.

The verdict was clear by 2025: financial incentives alone cannot sustain user engagement. The quest for quick liquidity destroyed long-term ecosystem value.

SocialFi's Second Chance: From Engagement Farming to Community Equity​

SocialFi—platforms where social interactions translate into financial rewards—initially followed the same extractive playbook as play-to-earn. Early models (Friend.tech, BitClout) burned bright and fast, relying on reflexive demand that evaporated once speculation faded.

But 2026's SocialFi looks fundamentally different.

The Shift: Equity Over Engagement​

As the Web3 market matured and user acquisition costs soared, teams recognized that retaining users is more valuable than acquiring them. Loyalty programs, reputation systems, and on-chain activity rewards are taking center stage, marking a shift from hype-driven growth hacks to strategic retention models.

Instead of rewarding raw output (likes, posts, follows), modern SocialFi platforms increasingly reward:

  • Community moderation — Users who flag spam, resolve disputes, or maintain quality standards earn governance tokens
  • Content curation — Algorithms reward users whose recommendations drive genuine engagement (time spent, repeat visits) rather than simple clicks
  • Creator patronage — Long-term supporters receive exclusive access, revenue shares, or governance influence proportional to sustained backing

Tokenized loyalty programs, where traditional loyalty points are replaced by blockchain-based tokens with real utility, liquidity, and governance rights, have become one of the most impactful Web3 marketing trends in 2026.

Sustainable Design Principles​

Token-based incentives play a crucial role in driving engagement in the Web3 space, with native tokens being used to reward users for various forms of participation such as completing specific tasks and staking assets.

Successful platforms now cap token issuance, implement vesting schedules, and tie rewards to demonstrable value creation. Poorly designed incentive models can lead to mercenary behavior, while thoughtful systems foster genuine loyalty and advocacy.

Market Reality Check​

As of September 2025, SocialFi's market cap hit $1.5 billion, demonstrating staying power beyond initial hype. The sector's resilience stems from pivoting toward sustainable community-building rather than extractive engagement farming.

InfoFi's Rocky Start: When X Pulled the Plug​

InfoFi—where information, attention, and reputation become tradeable financial assets—emerged as the next evolution beyond SocialFi. But its launch was anything but smooth.

The January 2026 Crash​

On January 16, 2026, X (formerly Twitter) banned applications that reward users for engagement. This policy shift fundamentally disrupted the "Information Finance" model, causing double-digit price drops in leading assets like KAITO (down 18%) and COOKIE (down 20%), forcing projects to rapidly pivot their business strategies.

InfoFi's initial stutter was a market failure. Incentives were optimized for output instead of judgment. What emerged looked like content arbitrage—automation, SEO-style optimization, and short-term engagement metrics resembling earlier SocialFi and airdrop-farming cycles: fast participation, reflexive demand, and high churn.

The Credibility Pivot​

Just as DeFi unlocked financial services on-chain and SocialFi gave creators a way to monetize communities, InfoFi takes the next step by turning information, attention, and reputation into financial assets.

Compared with SocialFi, which monetizes followers and raw engagement, InfoFi goes deeper: it tries to price insight and reputation and to pay for outcomes that matter to products and protocols.

Post-crash, InfoFi is bifurcating. One branch continues as content farming with better tooling. The other is attempting something harder: turning credibility into infrastructure.

Instead of rewarding viral posts, 2026's credible InfoFi models reward:

  • Prediction accuracy — Users who correctly forecast market outcomes or project launches earn reputation tokens
  • Signal quality — Information that leads to measurable outcomes (user conversions, investment decisions) receives proportional rewards
  • Long-term analysis — Deep research that provides lasting value commands premium compensation over viral hot takes

This shift repositions InfoFi from attention economy 2.0 to a new primitive: verifiable expertise markets.

PayFi: The Silent Winner​

While SocialFi and InfoFi grab headlines, PayFi—programmable payment infrastructure—has been quietly building sustainable models from day one.

Why PayFi Avoided the Ponzi Trap​

Unlike play-to-earn or early SocialFi, PayFi never relied on reflexive token demand. Its value proposition is straightforward: programmable, instant, global payments with lower friction and costs than traditional rails.

Key advantages:

  • Stablecoin-native — Most PayFi protocols use USDC, USDT, or USD-pegged assets, eliminating speculative volatility
  • Real utility — Payments solve immediate pain points (cross-border remittances, merchant settlements, payroll) rather than relying on future speculation
  • Proven demand — Stablecoin volumes exceeded $1.1 trillion monthly by 2025, demonstrating genuine market fit beyond crypto-native users

The growing role of stablecoins offers a potential solution, enabling low-cost microtransactions, predictable pricing, and global payments without exposing players to market swings. This infrastructure has become foundational for the next generation of Web3 applications.

GameFi 2.0: Learning from $3.4 Billion in Mistakes​

The 2025 Reset​

GameFi 2.0 emphasizes interoperability, sustainable design, modular game economies, real ownership, and cross-game token flows.

A new type of gaming experience called Web2.5 games is surfacing, exploiting blockchain tech as underlying infrastructure while steering clear of tokens, emphasizing revenue generation and user engagement.

Retention-First Design​

Trendsetting Web3 games in 2026 typically feature gameplay-first design, meaningful NFT utility, sustainable tokenomics, interoperability across platforms, and enterprise-grade scalability, security, and compliance.

Multiple interconnected game modes sharing NFTs and tokens support retention, cross-engagement, and long-term asset value. Limited-time competitions, seasonal NFTs, and evolving metas help maintain player interest while supporting sustainable token flows.

Real-World Example: Axie Infinity's 2026 Overhaul​

Axie Infinity introduced structural changes to its tokenomics in early 2026, including halting SLP emissions and launching bAXS, a new token tied to user accounts to curb speculative trading and bot farming. This reform aims to create a more sustainable in-game economy by encouraging organic engagement and aligning token utility with user behavior.

The key insight: the strongest models in 2026 reverse the old order. Gameplay establishes value first. Tokenomics are layered only where they strengthen effort, long-term commitment, or ecosystem contribution.

The 2026 Framework: Retention Over Extraction​

What do sustainable Web3 growth models have in common?

1. Utility Before Speculation​

Every successful 2026 model provides value independent of token price. SocialFi platforms offer better content discovery. PayFi protocols reduce payment friction. GameFi 2.0 delivers actual gameplay worth playing.

2. Capped Emissions, Real Sinks​

Tokenomics specialists design sustainable incentives and are increasingly in demand. Community-centric token models significantly improve adoption, retention, and long-term engagement.

Modern protocols implement:

  • Fixed maximum supply — No inflation surprises
  • Vesting schedules — Founders, teams, and early investors unlock tokens over 3-5 years
  • Token sinks — Protocol fees, governance participation, and exclusive access create continuous demand

3. Long-Term Alignment Mechanisms​

Instead of farming and dumping, users who stay engaged earn compounding benefits:

  • Reputation multipliers — Users with consistent contribution history receive boosted rewards
  • Governance power — Long-term holders gain greater voting weight
  • Exclusive access — Premium features, early drops, or revenue shares reserved for sustained participants

4. Real Revenue, Not Just Token Value​

Successful models now depend on balancing user-driven governance with coherent incentives, sustainable tokenomics, and long-term revenue visibility.

The strongest 2026 projects generate revenue from:

  • Subscription fees — Recurring payments in stablecoins or fiat
  • Transaction volume — Protocol fees from payments, trades, or asset transfers
  • Enterprise services — B2B infrastructure solutions (APIs, custody, compliance tools)

What Killed X-to-Earn Won't Kill Web3​

The collapse of play-to-earn, early SocialFi, and InfoFi 1.0 wasn't a failure of Web3—it was a failure of unsustainable growth hacking disguised as innovation. The 2021-2023 era proved that financial incentives alone cannot create lasting engagement.

But the lessons are sinking in. By 2026, Web3's growth models prioritize:

  • Retention over acquisition — Sustainable communities beat mercenary users
  • Utility over speculation — Products that solve real problems outlast hype cycles
  • Long-term alignment over quick exits — Vesting, reputation, and governance create ecosystem durability

SocialFi is building credibility infrastructure. InfoFi is pricing verifiable expertise. PayFi is becoming the rails for global programmable money. And GameFi 2.0 is finally making games worth playing—even without the yield.

The Ponzi era is over. What comes next depends on whether Web3 builders can resist the siren call of short-term token pumps and commit to creating products users would choose even if tokens didn't exist.

Early signs suggest the industry is learning. But the real test comes when the next bull market tempts founders to abandon retention-first principles for speculative growth. Will 2026's lessons stick, or will the cycle repeat?

Sources​

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