A thorough understanding of the legal risks underlying compensation structures constitutes the most fundamental protection of one’s own rights and interests.

Introduction

Nowadays, an increasing number of individuals are joining the Web3 industry, which is no longer a novel phenomenon. Professionals from various fields—such as technology, product development, and operations—are flocking to this emerging sector, infusing it with vitality.

Compared with the traditional internet, Web3 is often labeled with attractive tags such as “high salaries,” “global remote work,” and “flexibility and freedom.” Especially during market upswings, many practitioners have indeed achieved returns far exceeding those in traditional industries, which has attracted an increasing number of professionals transitioning from Web2 to the Web3 sector.

However, once actually immersed in the industry, many discover that the “modus operandi” of Web3 differs from their expectations. As an industry still rapidly taking shape, many aspects have not yet formed unified rules—whether in terms of organizational forms, modes of collaboration, or compensation structures, all exhibiting rich diversity.

Here, you may no longer be merely an “employee,” but are more commonly referred to as a “contributor”; your income may also no longer be a fixed monthly salary deposited into your account, but rather a flexible mix of fiat currency, stablecoins, project tokens, and even future incentives subject to vesting periods.

This flexibility brings more possibilities, but also accompanies considerable confusion:

  • What are the primary employment models in Web3?
  • What are the differences between Web3 compensation practices and traditional payroll methods?
  • To prevent default by project sponsors, what precautions should workers take in the early stages?

In response to these real and specific questions, this article will outline common collaboration models and compensation payment methods in Web3, clearly highlight potential risks, and provide practical recommendations to help you embrace opportunities while proceeding with greater stability and peace of mind.

 

Primary Employment Models in Web3

In the Web3 ecosystem, it is important to recognize that your relationship with a project team may extend beyond that of a mere "employee." Currently, common cooperation models are primarily categorized into three types, each corresponding to distinct rights and risks:

(1) Domestic Labor Contract Employment

A small number of Web3 projects have incorporated entities within mainland China and will enter into formal labor contracts with you, thereby establishing a standard employment relationship. This model is fully governed by the domestic Labor Law of the People's Republic of China. The company will contribute to social insurance on your behalf and withhold individual income tax, making this arrangement no different from the traditional "employment" model with which you are familiar.

However, it should be noted that Web3 projects currently adopting this fully compliant domestic employment model are relatively few in number.

(2) Cross-Border Independent Cooperation

This is currently the most prevalent model in the industry. The project entity is typically incorporated offshore (e.g., in Singapore, Hong Kong, etc.), and you will enter into a "Service Agreement," "Consulting Agreement," or "Independent Contractor Agreement" with the entity in your individual capacity.

Under such circumstances:

  • You are legally regarded as a commercial partner rather than an employee in an employment relationship.
  • You are not afforded the full protections of the Labor Contract Law (such as severance pay, paid annual leave, etc.).
  • Compensation payment methods are highly flexible, and remuneration in project tokens is very common under this model.

(3) Engagement Through Domestic Flexible Employment Platforms

Some projects may establish a cooperative relationship with you through third-party flexible employment platforms. The platform may enter into a contract with you and disburse compensation (typically in Renminbi).

While this approach may satisfy the need to "receive fiat currency," the underlying legal relationships can be quite complex:

  • You may have an employment relationship with the platform, or it may merely be a civil cooperation.
  • Discrepancies often arise among the entity responsible for social insurance contributions, the entity filing individual income tax returns, and the actual employing entity.
  • The platform’s own compliance status will directly affect the protection of your rights and interests.

Understanding which model applies to you is the first step in clarifying your rights and assessing income-related risks.

 

Common Compensation Methods and Risk Points in Web3

Under the different employment models described above, compensation payment methods in the Web3 industry exhibit significant diversification. Please note that there is no one-to-one correspondence between employment models and compensation disbursement methods; multiple compensation methods may exist within a single employment model.

(1) Fiat Currency Payment

Generally speaking, paying compensation in RMB via bank transfer is the method with relatively lower legal risk. If accompanied by clear contractual arrangements and proper tax handling, the overall compliance pathway is relatively well-defined.

Among the employment methods mentioned above, domestic employment relationships or disbursement through flexible employment platforms both involve fiat currency payments. However, it should be noted that in practice, it is common for part of the compensation to be paid in fiat currency while the remainder is paid in stablecoins, project tokens, or other forms. For example, if an employee’s actual monthly income is RMB 30,000, RMB 10,000 might be paid in fiat currency, with the remaining RMB 20,000 paid in equivalent-value tokens.

In such circumstances, key legal issues arise regarding how offer letters are issued, how employment contracts are drafted, and at what amount social insurance and tax declarations should be made. When facing these issues, we recommend that both individuals and enterprises consult with professional legal counsel and carefully consider the specifics of the project or engagement.

(2) Stablecoin Payment

Compensation paid in stablecoins is the most common form of remuneration in the Web3 industry.However, because stablecoins are a type of crypto asset and their payments are tied to blockchain addresses, several common legal questions arise: When a stablecoin payment is made, how can it be determined that the practitioner received the funds, or how can it be proven that the employer made the payment? Are there scenarios involving third-party collection or disbursement?

For many Web3 practitioners, the challenges of stablecoin compensation extend beyond legal compliance; they also include the additional risks encountered when converting stablecoins into fiat currency (i.e., cashing out).

In providing legal advice to practitioners, the author of this article has encountered multiple cases in which individuals, after receiving stablecoins as compensation, suffered financial losses or even faced criminal liability risks due to insufficient experience in the cash-out process, resulting in the receipt of illicit funds or involvement in money-laundering chains.

(3) Payment in Project Tokens

In certain Web3 projects, compensating employees with tokens is a relatively common practice.Because the project itself holds substantial amounts of non-mainstream tokens, distributing tokens to employees or collaborators is often low-cost and operationally simple.

However, it is important to note that such compensation is essentially akin to a high-risk investment: if the token price fluctuates significantly, your actual income will likewise vary.

At the same time, for purposes of long-term incentives and token management, such projects typically do not distribute all tokens at once but instead establish a "vesting period," under which tokens are unlocked in installments based on length of service or performance milestones. This model resembles equity incentive plans at traditional companies, providing some expectation of future gains, but it also raises new issues that warrant careful attention, such as the possibility of unilateral changes to the rules by the project sponsor, the reasonableness of vesting conditions, and the transparency of the vesting process.

Furthermore, whether compensation is paid in stablecoins or project tokens, there may be certain legal and operational risks relating to legality, taxation, and fund transfers.

 

Mankun Recommendations

Payroll in Web3 is indeed complex and prone to disputes. To avoid pitfalls,The two most critical points are: clearly set out the terms in the contract and ensure that fund flows are compliant.

(1) Execute clear and comprehensive written agreements

Compensation structures in the Web3 industry differ from those in traditional industries, and standard employment contracts alone are often insufficient to address all potential disputes. To clarify the rights and obligations of both parties, you are advised to execute the following documents:

1. Clarify the nature of the engagement:Clearly define in the agreement whether the relationship between the parties is an employment relationship, a cooperative relationship, or another form, to avoid ambiguity in characterization at a later stage.

2. Specify the compensation structure and payment methods:

  • Specify the components of compensation (such as base salary, performance-based pay, token incentives, etc.);
  • Agree on the payment cycle, currency (fiat currency or crypto assets), and payment channels.

3. Token incentive clauses (if applicable):

  • Specify the type, quantity, and corresponding value of the tokens;
  • Agree on details such as the distribution timing, lock-up rules, and vesting conditions (Vesting Schedule);
  • You may attach the "Token Incentive Plan" as an annex to the agreement.

Recommendation: Even when adopting a domestic employment relationship model, the parties should concurrently execute a Supplementary Compensation Agreement or a specialized incentive document to ensure that compensation-related terms are comprehensively stipulated.

(II) Strictly Ensure Compliance in Fund Flows and Foreign Exchange

In the course of cross-border payments or settlement using crypto assets, it is essential to plan compliance pathways in advance to avoid crossing legal red lines:

1. Comply with Foreign Exchange Administration Regulations:

  • Where cross-border fiat currency payments are involved, foreign exchange settlements shall be conducted through compliant channels, avoiding unauthorized currency exchange or cross-border fund transfers.

2. Compliance Notice on Crypto Asset Payments:

  • Pay attention to the current regulatory status of cryptocurrencies within mainland China to avoid violations of financial regulatory policies;
  • It is advisable to assess the legality and stability of payment pathways in advance. Compliance risks must not be disregarded merely because such practices are common in the industry.

3. Joint Responsibilities of Enterprises and Individuals:

  • Both the company and the recipient shall proactively understand relevant laws and regulations and, where necessary, consult professional legal or tax advisors to ensure that fund transactions are lawful and compliant.

Legal Counsel’s Note: Compliance matters are significant; do not overlook potential legal risks in various fields due to considerations of convenience or industry customs.

 

Conclusion

What Web3 represents is a more flexible and decentralized approach to employment and incentives, but legal risks do not disappear as a result. On the contrary, at a stage where the rules are not yet fully clear, compliance awareness is particularly important.

For enterprises, compliant compensation arrangements help stabilize teams and reduce dispute costs; for practitioners, fully understanding the legal risks behind the compensation structure is the most basic protection of their own rights and interests.Web3 innovation should not come at the cost of ignoring the law; rational and prudent participation may be the way to long-term mutual benefit.