The fierce clash between technology and capital, products and markets, vision and reality has caused Web3 startups to fall one after another like falling leaves. Waves of layoffs, pivots, and closures are sweeping through the industry, each story reflecting participants’ confusion and reluctance.
(Background: a16z: Using crypto spirit to find Web3 talent, no longer just looking at education and big-company resumes)
(Additional context: Why do gold farming studios support WoW but “kill” all Web3 games?)
Table of Contents
Toggle
- Layoffs
- Pivots
- Selling Out
- Hacks
- Closures
- Conclusion
In the recent crypto winter, Web3 startups have been falling one after another like leaves. The once euphoric bull market has vanished, replaced by broken funding chains, rampant hacking, and strategic confusion. Many companies, once backed by top teams and leading VCs, now struggle to survive in the cold: some hurriedly pivot, some sell cheaply, some shut down in silence, and others suffer devastating hacks.
A wave of layoffs and resignations has followed, with senior figures like Tom Howard of CoinList, Abdul Rehman of Monad DeFi, Benjamin Speckien of Celo, Aleksander Leonard Larsen of Axie Infinity leaving their companies.
This is not just a financial crisis but a brutal reshuffle of the industry. Fundamentally, these phenomena stem from a deep collision within the Web3 ecosystem—between technology and capital, products and markets, vision and reality—each story revealing the confusion and unwillingness of market participants.
Layoffs
Layoffs are a common strategy for crypto projects in bear markets. Cutting non-essential roles like marketing and tech personnel can significantly reduce costs and improve operational efficiency, helping projects extend their survival and prepare for the next bull run.
In early February, the well-known crypto exchange Berachain announced a 25% layoff (up to 200 people) and shut down its trading operations in the UK, EU, and Australia. Half a month later, senior management including COO Marshall Beard, CFO Dan Chen, and General Counsel Tyler Meade resigned, with responsibilities taken over by other management team members.
This was only three months before its IPO, during which its stock price had already fallen over 60%. The bleak market conditions and revenue issues forced it to adopt aggressive business contraction strategies.
In early January, the Berachain Foundation also announced the layoffs of most retail marketing teams, and lead developer Alberto left. The project admitted that a retail-first strategy in 2024/2025 was no longer effective across the crypto space.
In August 2025, modular rollups infrastructure developer Eclipse Labs announced a 65% reduction in team size. That month, Lido announced a 15% layoff due to cost pressures; Sandbox founder stepped down and cut 50%, shifting focus from metaverse to Web3 applications and Launchpad plans. In July 2025, Eigen Labs laid off about 25%, refocusing on EigenCloud.
On the surface, layoffs are cost-control measures, but deeper down, they reflect a reassessment of future revenue expectations. When management reduces team size, it essentially judges that the marginal returns from expansion no longer justify the additional costs under current market conditions.
This also signals that Web3 startups are shifting from “growth first” to “survival first.” Efficiency issues masked during the bull market are magnified in the bear phase. Organizational redundancy, market deployment efficiency, and product iteration relevance to user needs all come under scrutiny under cash flow pressure.
Pivots
If layoffs are a passive contraction, then pivots are active adjustments. Even projects with sufficient financial backing need to carefully consider whether their strategic direction aligns with current market trends and user needs.
Many projects built their growth logic in the previous cycle on abundant liquidity and high risk appetite. When these premises vanish, their narratives become unsustainable. As a result, many are extending from core on-chain infrastructure to payments, AI, RWA, and other directions.
Polygon is a typical example. As a veteran Layer 2 project, it maintains a leading position technically and in the market, but with Layer 2 increasingly sidelined and unable to compete with non-EVM chains like Solana and Aptos, in January it decided to pivot toward stablecoin sector, starting with acquisitions to gain payment-related capabilities and resources.
In early January, Polygon Labs announced the acquisition of Coinme and Sequence to enhance regulated stablecoin payments and fund flow infrastructure. Coinme provides a licensed US dollar on/off ramp, connecting cash, debit cards, and digital assets within existing regulatory frameworks. Sequence offers infrastructure that abstracts bridging, transactions, and gas operations for end users.
Polygon stated these acquisitions form the foundation of an open financial stack aimed at enabling regulated stablecoin payments and fund flows on its blockchain. Polygon Labs aims to become a profitable blockchain payments company.
Last month, Solana ecosystem NFT marketplace Magic Eden announced it would gradually cease support for EVM and Bitcoin Runes and Ordinals markets, redirecting resources to its new prediction market project Dicey.
Bitcoin mining companies are also undergoing typical pivots. In November 2025, Bitfarms announced it would shut down its Bitcoin mining operations over the next two years and convert its facilities into AI and high-performance data centers. Recently, Bitfarms rebranded as Keel Infrastructure, severing direct ties with “Bitcoin.”
Cipher Mining announced in February it would rebrand as Cipher Digital, selling its mining farm shares to Canaan Creative for about $40 million, focusing on developing next-generation computing data centers.
Selling Out
Even projects with massive funding, due to slow product progress and waning confidence, have to sell out. A typical case is decentralized social protocol Farcaster.
In mid-January, Farcaster announced it was acquired by Neynar, with all contracts, codebases, apps, and ownership transferred to Neynar, which will handle ongoing operations and maintenance. The project team also refunded $180 million in investor funds.
Just a month earlier, co-founder Dan Romero announced a major strategic shift, abandoning the “social-first” approach of over four years to focus on wallet-centric growth. But this acquisition indicates Farcaster’s exploration in the wallet space did not meet expectations.
Similarly, Lens Protocol faced a comparable fate. Due to declining user activity, the original team announced the protocol was taken over by Mask Network, with the original team becoming technical advisors and returning to DeFi innovation.
Cross-game avatar NFT platform Ready Player Me, previously backed by a16z with $56 million, was highly regarded. But as the NFT sector declined and user numbers plummeted—its Twitter account only posted five tweets last year—it was sold to streaming giant Netflix at the end of last year, with the team successfully exiting.
Hacks
Hacks have become a fate for many high TVL protocols. Hackers see them as prime targets, with large-scale thefts happening almost weekly, causing severe losses to protocols and depositors, further eroding market and user trust.
In mid-February, IoTeX’s cross-chain bridge was hacked, with validator private keys leaked, allowing unauthorized control of the bridge contract, resulting in a loss of $4.4 million. IoTeX announced full compensation for affected users, with minimal impact on operations. But for many small to medium projects, such attacks are catastrophic.
In early February, Solana-based DeFi protocol Step Finance lost about $40 million after a security breach involving its high-level devices. The team explored options including financing and acquisitions but couldn’t find a viable solution, ultimately deciding to cease all operations immediately.
In early January, blockchain scaling protocol TrueBit was attacked via an integer overflow in its smart contract. Attackers exploited carefully crafted inputs to trigger overflow errors in the token purchase calculation, allowing them to mint TRU tokens at minimal or zero cost, then immediately burn them to extract high ETH from the pool. The attacker profited $26.4 million, and TRU’s price plummeted to zero. After issuing a responsibility notice in January, TrueBit’s official X account has not posted updates since.
Closures
Compared to layoffs and pivots, many projects quietly fold during long, drawn-out struggles. They invest heavily in product development, marketing, and token listings, but funds and patience are exhausted in marketing failures and underwhelming user adoption, forcing them to cease operations.
DappRadar, founded in 2018, was once the most popular analytics site in crypto. Despite raising over $7 million, monetization challenges led it to issue tokens in 2021 to boost cash flow. However, the token lacked utility, its price kept falling, and sustainable funding became impossible.
“We have made the difficult decision to shut down the DappRadar platform. In the current environment, operating at this scale is no longer financially sustainable. After exhausting all options, we have no choice but to make this tough call,” DappRadar stated. “As we step away, we believe we have stayed true to our principles and contributed positively to the industry.”
In February, multi-chain lending protocol ZeroLend announced it would cease operations after three years. “Over time, some chains supported by ZeroLend have become inactive or experienced significant liquidity drops. In some cases, oracle providers also ceased support, making reliable market operation or sustainable income increasingly difficult. Meanwhile, as the protocol grew, it attracted malicious actors including hackers and scammers. Coupled with the slim profit margins and high risks inherent in lending, this led to long-term losses.”
In December 2025, cross-chain smart wallet Blocto announced it would shut down. “Over the past few years, we have absorbed over $5.5 million in losses to maintain community services. But this cannot go on forever. Realizing operational funds are nearly exhausted, we started communicating with Flow/Dapper leadership in June, but have yet to secure a meeting. Each email takes weeks, while our remaining funds are depleting.”
Conclusion
In the early stages of Web3, storytelling often overshadowed the product itself. Grand visions and seemingly disruptive mechanisms could attract capital and users. But as liquidity rationalizes and investors and users reassess risk-reward, only projects with clear cash flow logic, genuine user needs, reliable technology, and compliance will survive cycles.
These real-world examples serve as a cold mirror reflecting the structural fragility accumulated during the rapid expansion of the Web3 ecosystem: over-reliance on external liquidity, neglect of business closed-loops, and insufficient security and compliance awareness.
However, this winter is not the end but a necessary phase of industry maturation. Almost all technological revolutions have gone through similar stages: capital frenzy, bubble expansion, sharp correction, and confidence rebuilding. Web3 is no exception.
Therefore, rather than viewing layoffs, pivots, hacks, and closures as pessimistic signals, see them as a necessary filtering process. As regulatory frameworks become clearer, infrastructure efficiency improves, and the market self-purifies, the teams and products that emerge from this winter will have stronger risk awareness, clearer business logic, and with the aid of increasingly powerful AI capabilities, the new cycle of crypto ecosystems will be more promising than ever before!
