Incentive design could change retail investors' fortunes

Crypto has struggled not due to flawed technology, but because the industry's incentive structures have inadvertently worked against the users it was intended to serve, according to Ilya Tarutov, founder of Tramplin. He argues that each crypto market cycle, starting with excitement and ending in catastrophic drawdowns and an erosion of trust, follows a predictable pattern driven by how incentives are designed.

The Psychology of Risk in Crypto

The current system quietly pushes everyday users toward the greatest risks, often driven by the psychological mindset that higher desired returns require greater risk. While staking markets have surpassed $245 billion, typical APYs of 2%-10% offer minimal annual profits on small balances. In contrast, derivatives platforms processed a staggering $85.7 trillion in trading volume in 2025, highlighting the prevalence of high-leverage trading opportunities.

The Need for a "Savings Layer"

Tarutov contends that simply staking is insufficient, as platforms often still promote speculation, high leverage, and risky strategies. He proposes the creation of a crypto savings product with capital preservation as a core design goal. This "savings layer" should be built on principles of capital preservation, full transparency, and rewards for discipline over speculation, functioning effectively for both small and large balances.

He draws parallels to traditional savings products like the UK's Premium Bonds, which preserve capital while offering chances at prizes, having paid out 71,722,056 prizes totaling 4.95 billion pounds ($6.6 billion) in 2025. Similarly, prize-linked savings are gaining traction in the United States as a way to build consistent saving habits.

Designing for User Protection

The mechanics of a crypto savings layer must be simple and transparent, clearly explaining reward generation. Crucially, incentives must work even with small balances, rewarding consistency and discipline over speed or early entry. The system should aim to minimize losses and encourage long-term participation, acting as a tool to help everyday users stay in the game rather than pushing them out.

Tarutov emphasizes that if the next crypto cycle fails to introduce user protection mechanisms, everyday users will continue to experience cycles of hype followed by painful collapses. He concludes that the industry must shift its focus from maximizing turnover to reducing losses, optimizing the technology for user protection rather than short-term gains to ensure a worthwhile future for crypto.