How do incentive illusions trap Web3? Breaking the deadlock requires mechanism innovation

A recent industry research report highlights a sharp contradiction in the Web3 ecosystem: users are becoming increasingly active in participation incentives, yet the ecosystem is gradually devolving into a place of low-value repetitive labor. This “traffic illusion” masks a deeper problem—the incentive mechanisms have become seriously disconnected from product value. Odyssey’s experiments provide us with an observational window to see the true nature of this dilemma.

From “Traffic Trap” to “Essential Value”: A Shift in Understanding

Many projects fall into a misconception: equating user numbers with success. But the real question is, what are the large influx of users participating in?

The illusion was tempting—design enough tasks, offer ample token rewards, and users will flood in continuously. But behind this traffic vanity, the quality of the ecosystem declines sharply. When token value returns to rationality, retention rates plummet. That’s why many incentive activities eventually turn into KPI-chasing games.

True ecosystem accumulation comes from users recognizing the product’s inherent value, not short-term token gains.

The Homogenization Growth Dilemma: Why Web3 Activities Become “On-Chain Drudgery”

When all projects design similar incentive tasks, what do users face? Repetitive, tedious, inefficient experiences.

Specific manifestations of homogenization:

• Every project involves social sharing, inviting friends, checking in
• Tasks have low thresholds, many participants, diluting individual user value
• No real skill requirements or creative space—just pure “click labor”

More dangerously, “Witch-style growth” proliferation occurs. When incentives are generous enough, a user can easily create dozens of accounts to repeatedly participate. This blurs the line between genuine users and “wool-pullers,” making it impossible for projects to distinguish valuable participants from arbitrageurs. The result: inflated metrics but unhealthy ecosystems.

This pattern causes Web3 activities to evolve into “on-chain labor” with no technical content, no learning opportunities, and no real value exchange. Participants feel exhausted, and projects see no sustainable growth.

A New Paradigm for Incentive Mechanisms: Combining Credit, Privileges, and Profit Rights

To break this deadlock, incentive mechanisms need to shift from single-token rewards to a three-dimensional value-driven system.

First Dimension: Credit Accumulation
Every genuine, quality participation by users builds their credit score. High-credit users gain greater trust and status within the ecosystem—an intangible but valuable asset. For example, they might get priority access to whitelist new projects or more voting power in community decisions.

Second Dimension: Privilege Levels
Different credit levels grant users differentiated rights. High-level users can participate in more valuable early-stage projects, enjoy better trading conditions, or become community governance members. These privilege incentives are more effective for long-term engagement than simple token rewards.

Third Dimension: Profit Rights
Link user participation to real gains from ecosystem growth. For instance, users could share in transaction fee revenues, investment returns from ecosystem funds, or appreciation of governance tokens. This way, users are not just participants but stakeholders with vested interests.

The core idea of this approach is: upgrading from “transactional relationships” to “partnerships.” Users are no longer laborers motivated solely by incentives but active participants growing with the ecosystem.

Behavioral Layering and Mechanism Constraints: Key to Rebuilding a Win-Win Ecosystem

True innovation in incentives also requires a deep understanding of user behaviors.

Behavioral stratification strategies:
Differentiate incentives based on actual contribution types—builders (developers, content creators), disseminators (community managers, opinion leaders), and ordinary participants (traders, liquidity providers). This prevents unfairness caused by “one-size-fits-all” incentives.

Mechanism constraints and optimization:

• Set task difficulty gradients to prevent low-value task proliferation
• Establish anti-witchcraft mechanisms to identify and penalize arbitrage behaviors
• Incorporate unit economics assessments to ensure reasonable input-output ratios for incentives
• Implement regular feedback loops so users can see ecosystem improvements

When mechanisms are well-designed, incentives become tools for ecosystem filtering and optimization, not just traffic attraction.

From Illusion to Reality: Ecosystem Accumulation as True Value

Reflecting on this process, the core issue is clear: the root of the incentive illusion lies in mistaking short-term traffic for long-term value.

A healthy Web3 ecosystem should be characterized by: well-designed incentive mechanisms that motivate genuine belief in the ecosystem’s value; differentiated behaviors that reward various contributions; and a combination of credit, privileges, and profit rights aligning user interests with ecosystem growth.

Only then can true accumulation occur—not just account numbers, but user stickiness, project innovation, and community cohesion. Odyssey and other experiments are attempting to break the illusion of incentives and point toward this direction. The question is, who will be the first to succeed on this path? Whoever does will lead the next stage of Web3 growth.