Web3 Under Examination: Transformation, Resilience, and Survival Stories in the Deepest Winter

As market liquidity shrinks and bullish narratives lose their appeal, the crypto ecosystem faces a true test. This recession wave isn’t just about red numbers on the screen—it’s a moment when Web3 projects reveal their true character through tough choices. From massive layoffs to radical business transformations, from forced acquisitions to devastating security vulnerabilities, these stories shape a new industry landscape. Keel Infrastructure, formerly known as Bitfarms, has become one of the most striking symbols of this strategic reorientation—from traditional Bitcoin hash producers to next-generation AI infrastructure players—highlighting how old industry players must make extreme pivots or face extinction.

Cost Efficiency vs. Survival: Wave of Layoffs in the Crypto Ecosystem

When abundant capital suddenly dries up, the first strategy companies adopt is operational cost optimization. Layoffs are not just administrative actions—they are management’s acknowledgment that marginal expansion can no longer cover additional costs in the current market environment.

Berachain, an EVM-compatible blockchain project that once went public, announced a 25% reduction of its 800 employees in early February, along with shutting down exchange operations in the UK, EU, and Australia. The situation worsened three months later when stock prices fell more than 60%, forcing the CFO, COO, and Chief Legal Officer to resign simultaneously. Several months prior, the Berachain Foundation also decided to lay off most of its retail marketing team, admitting that its consumer-focused strategy had failed to generate significant returns.

Similar stories repeat across various corners of the ecosystem. Eclipse Labs, a developer of customizable modular rollups, announced a 65% reduction in August 2025. In the same month, Lido announced a 15% layoff due to operational cost pressures. Eigen Labs cut about 25% of its team while refocusing its business on EigenCloud. Even Sandbox, once a shining metaverse platform, decided to pivot from metaverse to more general Web3 applications, with plans for a Launchpad and a 50% staff reduction.

These phenomena illustrate a structural contraction within the industry—when management cuts staff, they are essentially signaling a new assessment of long-term revenue expectations. Operational efficiencies hidden behind bullish euphoria now appear illusory when cash flow dries up. Overgrown organizational structures, low marketing effectiveness, and product iterations misaligned with user needs—all become naked truths under survival pressure.

Strategic Transformation: Keel and the Pivot Stories Reshaping the Industry

If layoffs are a form of passive contraction, business transformation is a more active and meaningful adaptation. Many projects with sufficient financial runway must question whether their strategic paths remain relevant to market trends and real user needs.

During bull markets, many startups built growth logic based on the assumption that liquidity would always be abundant and investors would continue chasing high risks. When this assumption proved false, the business narrative lost momentum. That’s why we see massive transformations: from Layer 2 to stablecoins, from NFT metaverse to AI infrastructure, from retail-focused to regulated blockchain payments.

Polygon, while still leading technically and in market positioning, faces limitations due to waning market interest in Layer 2 solutions and difficulty competing with non-EVM blockchains like Solana and Aptos. In January 2025, Polygon Labs announced a major pivot toward stablecoins through the acquisition of Coinme and Sequence. Coinme brings regulatory licenses for fiat deposit-withdrawal channels, connecting cash, debit cards, and digital assets within existing legal frameworks. Sequence offers abstractions for operations like bridging, trading, and Gas fees—transparent to end users. Together, they form a regulated payment stack on Polygon blockchain, positioning the project as a profitable blockchain payment company.

The most dramatic transformation, however, is Bitfarms rebranding as Keel Infrastructure. In November 2025, the established Bitcoin mining company announced it would cease Bitcoin mining operations within two years and convert its facilities into high-performance AI data centers. This move is symbolized by the corporate name change to Keel Infrastructure, deliberately distancing itself from “Bitcoin” at the corporate identity level. Cipher Mining followed a similar path, rebranding as Cipher Digital while selling its mining assets to Canaan for about $40 million, focusing instead on AI data center development and operation.

These transformations demonstrate that in a bear market, repositioning is not a luxury but a survival necessity. Keel and Cipher Digital exemplify how traditional players recognize their Bitcoin mining edge is eroding, while vast opportunities are emerging in the booming AI infrastructure layer. Magic Eden, a leading Solana NFT marketplace, also announced it would cease support for EVM and Bitcoin Runes markets, shifting its core resources to the Dicey prediction protocol.

Forced Acquisitions: When Vision Meets Market Reality

Even startups backed by top venture capital sometimes have to accept acquisitions due to slow product progress and lost investor confidence. Farcaster, a decentralized social media protocol, faced this moment in mid-January when Neynar announced it would acquire the project. Ownership of protocol contracts, code repositories, applications, and Clanker all transferred to Neynar. In a dramatic move, the project team returned the entire $180 million funding to investors—a transparent acknowledgment that the business path was not achieved.

A month before the acquisition, Farcaster co-founder Dan Romero announced a major strategic pivot from a “social first” focus (pursued for over four years) to a wallet-based growth model. Yet the acquisition itself indicated that even this pivot could not save the project—expanding into a wallet ecosystem also failed to meet internal expectations.

Lens Protocol experienced a similar trajectory. After a sustained decline in user activity, the protocol was acquired by Mask Network, with the original team transitioning to technical advisors and refocusing on DeFi innovation. Ready Player Me, a cross-game NFT avatar platform that received $56 million from a16z, saw its NFT segment collapse and user numbers plummet. At the end of last year, the project was bought by Netflix—an exit that rewarded the team but marked the end of their Web3-native ambitions.

These acquisition phenomena reveal a harsh truth: in a bear market, valuations plummet, and even projects with backing from premium VCs must accept acquisition offers rather than face slow death.

Security Vulnerabilities: When Hackers See Protocols as ATMs

In DeFi and blockchain protocols, security is the last line of defense. But when hackers target high TVL protocols, the impact can be fatal—not only for the protocol itself but also for the entire ecosystem’s trust.

IoTeX, a well-known modular DeFi platform, suffered an attack in mid-February when validator private keys leaked, allowing hackers to control the bridge contract without authorization. The loss amounted to $4.4 million USD. Because IoTeX has strong resources, they announced full compensation to affected users—this attack did not shake their core operations.

However, for mid-scale protocols, security breaches can be deadly. Step Finance, a DeFi protocol on Solana, lost $40 million from its treasury in early February when malware compromised an executive device. After exploring options including funding and acquisition without success, the team decided to cease operations altogether.

TrueBit, a blockchain computation protocol, faced a different type of attack. Exploiting integer overflow in smart contracts, attackers carefully crafted input parameters to trigger overflow in price calculation functions. The result: the attacker minted large amounts of TRU tokens at nearly zero or no cost, then quickly exited by withdrawing significant ETH from pools. The hacker’s profit reached $26.4 million, while TRU’s price plummeted to zero. Since taking responsibility in January, the official TrueBit Twitter account has not been updated.

Silent Collapse: When Operations Fade Away

Compared to dramatic layoffs or spectacular transformations, many projects experience a much quieter demise—through long journeys filled with false hopes, fruitless product iterations, and finally, announcements of closure.

DappRadar, founded in 2018 as the industry’s most popular application statistics site, received over $7 million USD in funding but struggled with monetizing data. Their attempt to issue tokens in 2021 to boost cash flow failed: the tokens had no real utility and their price continued to fall. Ultimately, DappRadar announced the shutdown of its platform, admitting that operating such a project in the current environment could not achieve financial sustainability.

ZeroLend, a multichain lending protocol, closed after three years. The team explained that supported chains became inactive or liquidity dried up, oracle providers ceased support, regulatory overhead increased, and with inherently low margins and high risks, ongoing losses made operations unsustainable.

Blocto, a cross-chain smart wallet, announced its shutdown in December 2025 after maintaining community services with cumulative losses exceeding $5.5 million. The team had been trying to communicate with Flow/Dapper leadership since June to find solutions, but each email exchange took weeks—while the runway continued shrinking.

These stories reveal a cruel paradox: when macro liquidity dries up, even brilliant ideas with initial financial backing cannot survive without clear unit economics and proven product-market fit.

From Contraction to Maturity: What Is Really Happening?

In early Web3, the narrative power far exceeded product quality. Grand visions and seemingly revolutionary mechanisms attracted capital and users. When macro liquidity returned to normal levels, investors and users rapidly repriced risk-reward ratios. Only projects with clear cash flow logic, genuine user demand, reliable technical architecture, and compliance capability could survive.

Every example in this landscape acts as a cold mirror for the industry—reflecting the structural fragility accumulated during rapid ecosystem expansion: over-reliance on external liquidity, ignorance of sustainable business cycles, and lack of security and compliance awareness.

But this winter is not an ending but an inevitable stage in industry maturation. Historically, nearly every technological revolution has gone through similar phases: capital euphoria, bubble inflation, sharp correction, and trust recovery. Web3 is no different.

Therefore, rather than viewing layoffs, transformations, security breaches, and closures as signs of pessimism, it’s better to see them as part of a natural selection process. As regulatory frameworks become clearer, infrastructure continues to improve, and markets filter naturally, teams and products that survive this winter typically develop sharper risk awareness and clearer business logic. Coupled with increasingly powerful AI capabilities, the crypto ecosystem in this new cycle is more worth anticipating than ever before. Keel Infrastructure—formerly Bitfarms—and other protagonists in this story are rewriting the playbook for a new era.