Equity is an expression of power, and Token is the user’s rewards.
Written by: Liu Honglin
Many people ask me how to view the relationship between the equity of Web3 companies and tokens. This question sounds like a cliché, but in reality, it relates to the core asset design logic of a company: what exactly are you relying on for financing? What connects you to users? What allows you to realize capital monetization? And these questions fundamentally determine the differences between Web3 companies and traditional internet companies.
In this article, Lawyer Honglin wants to communicate with everyone from three perspectives: the future financing paths of Web3 companies, value distribution, and the trend of the integration of equity and tokens.
Tokens will become the mainstream form, but not a financing tool.
This is my first relatively clear judgment on the Web3 industry: the issuance of Tokens will still be a mainstream action in the future, but its positioning is undergoing a fundamental shift - no longer used for raising funds, but for activating users and distributing the value of platform growth.
What have been the most common uses of Token over the past few years? The answer is financing - especially when the primary market financing is cold and the compliance path is not clear, Token has become a tool for many entrepreneurial teams to “curve fundraising”. As soon as the white paper was written, the airdrop was launched, and the exchange was launched, the project party and early investors shipped first, and the user took over last.
But today, this gameplay is becoming increasingly difficult. On one hand, there is the tightening of regulations, especially the gradual tightening of regulations on Token financing in major legal jurisdictions such as the United States, Europe, and Hong Kong; on the other hand, users are becoming more mature—the old narrative is no longer effective, and the dream of “financing means financial freedom” is becoming harder to sell.
At the same time, a new path is taking shape: Tokens are no longer the “chips” for project launches, but rather the “tools” for platform operations. Their function is no longer a voucher for asset trading, but more like a “value-sharing mechanism” within the platform. It is not a financing logic, but a marketing logic. It is not sent to exchange for money, but sent to exchange for users.
But this does not mean that Token is “reduced” to a points system. On the contrary, it assumes the role of a “compound incentive tool” that is more complex and motivating than the traditional point system. It can bind user behaviors (such as transactions, recommendations, and interactions), combine NFTs for hierarchical rights and interests design, and guide the community to self-organize and govern. This vague state of “quasi-financial, non-securities” is the charm of the Token mechanism, and it is also the reason why it cannot be easily summarized by the word “points”.
In other words, Token is not “more points in the system”, but “a new set of native incentive languages in the system that can circulate, price, and match the value contributions of different users”. It is a way for users to participate in the growth of the platform, and it is a means to redefine the cost that was originally consumed in the operating budget as a “marketable asset”. This is why Web3 projects continue to emphasize elements such as “incentive mechanism”, “liquidity” and “value anchoring” when designing the token economic model, rather than simply “reward points”.
Equity is still the right path for Web3 companies to monetize capital
The second judgment is also very clear: for the vast majority of companies that truly want to grow strong and achieve lasting brilliance, the ultimate path to capital realization is still through the traditional equity channel. In other words, when it’s time to finance, equity financing should be pursued, and when exiting, one should go for IPOs, mergers, or equity transfers. Tokens will not, and cannot, replace this role of equity.
This is very important. Many project parties will fall into a misunderstanding in the early stage: since Token can be on the exchange, since users can buy and sell, and the price can rise, is it possible to replace equity with Token, or even simply “short equity, only issue Token”? But you really have to calm down and think about it, is there an anchor relationship between the price of Token and the company’s profit? If the company is doing well, will the price of Token necessarily rise? If a user holds a token, does he have the right to vote or dividends in the company?
The answers are mostly “no.” Tokens and equity are two different logics, two different worlds. Relying on tokens to replace equity is akin to the fantasy of earning gold coins in a game to buy a house or a car. You can participate, circulate, and obtain rewards within the platform, but that does not mean you own the platform.
The true asset value and ultimate capital gains of a company are always reflected on that dry but valid balance sheet. Equity represents a legal claim to the company’s net assets and future profits, which cannot be replaced by tokens, regardless of the jurisdiction or financial system.
Because of this, Web3 project parties should be soberly aware that Token is an operational tool, not a financial exit path. When it comes to introducing large amounts of financing, M&A or IPO, Token does not have any legal and commercial “capital exit channel” function. Financing, mergers and acquisitions, restructuring, these actions, after all, must be realized through equity. You can’t expect a potential investor to say, “I’m going to take 10% of your shares,” and you hand over a token address and say, “This is it.”
The integration of tokens and equity is the focus of the next stage of the industry.
But things are not as clear-cut as a binary opposition. In fact, the trend of integration between tokens and equity has become increasingly evident, which is the third development direction I foresee.
The most typical case is the concept of “Security Tokens” being brought back to discussion. This concept was discussed as early as 2018 during the STO bubble, but was put aside at that time due to unclear regulations and immature infrastructure. Now, with the advancement of on-chain compliance technology and traditional financial institutions gradually entering the tokenized asset field, this path is beginning to become realistically possible.
For example, a publicly listed company can tokenize a portion of its shares, turning them into on-chain certificates. Alternatively, fund products can be structured in the form of tokens, achieving finer granularity in share splitting and circulation. In this model, tokens are no longer “points within a virtual economy,” but rather a “digital representation of real financial products,” possessing real asset mapping and legal rights.
Of course, such a design has very high compliance requirements. KYC, anti-money laundering, qualified investor identification, information disclosure, custody audits, all serious processes of traditional finance must be integrated into the lifecycle of the Token. Furthermore, these links must rely on the intermediary forces within the traditional financial system — securities companies, compliant exchanges, regulated custodians, etc.
So we will see an interesting trend: the future Token world is not a completely idealized “decentralized” utopia, but rather a “digital extension” of traditional finance. The combination of equity and Tokens is not to eliminate all intermediaries, but to enhance the liquidity and programmability of assets in a new technological context.
Summary: The Dual Ledger Structure of Web3 Companies
So if you have to summarize the asset structure of future Web3 companies in one sentence, I think it can be said like this:
Web3 companies are the “dual ledger” organisms - one ledger records the names of shareholders and keeps track of equity; the other ledger records user addresses and issues Tokens.
The former determines the company’s control, financing capability, and capital exit path, making it a core asset of the corporate governance structure; the latter determines whether users are willing to stay long-term and whether they are willing to participate in growth, serving as the growth engine for the business model to succeed.
One cannot expect tokens to replace equity, as they are not a vehicle for ownership; however, one cannot ignore the power of tokens, as they are a key means of activating users and market expectations. They are neither a string of hollow incentive codes nor a promissory note for financial assets, but a unique expression that lies between marketing and finance.
Finally, I would like to emphasize that the Token we are talking about here does not include crypto assets that play the role of “underlying currency” such as Bitcoin and stablecoins. They are another paradigm, an entry point to another financial system, and are not part of the enterprise-level asset structure that we are discussing. (If you are interested in this topic, you can read another article by Mr. Honglin: “Layered Money: Re-understanding Gold, Dollar and Bitcoin”)
But for Web3 entrepreneurs, understanding “equity is an expression of power, and tokens are user rewards” may be the most crucial lesson in rethinking company structure and asset design.
