Countdown to the foundation's exit? The rise of corporate systems and the reconstruction of the encryption governance paradigm

Author: Fairy, ChainCatcher

Editor: TB, ChainCatcher

Eleven years ago, the Ethereum Foundation was registered in Switzerland, setting an early paradigm for the governance structure of crypto projects. By the time of the “Ten Thousand Chains Take Off” era, the foundation became a “standard configuration” for Layer 1 projects—decentralized, non-profit, and serving the community; these labels were once regarded as the “gold standard of governance” for blockchain projects.

However, a recent article by a16z titled “The End of the Era of Cryptocurrency Foundations” has rekindled people’s thoughts on foundations. The real dilemmas of this idealized structure are gradually being exposed, and the halo of foundations is quickly fading.

When ideals shine into reality: A case study of the out-of-control foundation model

The ideal foundation, adorned with a strong moral halo, is seen as an indispensable bridge connecting the initial stage of project linking with autonomous governance. However, as many projects enter the maturity and scaling stage, this mechanism has begun to reveal structural fatigue. Internal struggles, resource misallocation, and weakened community participation… An increasing number of project foundations are experiencing governance imbalance issues in their actual operations, and the gap between ideals and reality is being amplified.

The Arbitrum Foundation allocated a large amount of ARB without DAO approval, provoking strong opposition from the community, and the foundation explained it as a communication issue; the Kujira Foundation faced a series of liquidations and a crash in coin prices due to using KUJI tokens for leveraged operations, ultimately handing over the treasury to the DAO; the Ethereum Foundation has been criticized multiple times for selling ETH at high prices and inefficiency, and although it has begun reforms recently, doubts persist.

In terms of power structure, the early Tezos project fell into prolonged internal strife due to power struggles between the foundation and the founding team, which not only delayed the token issuance process but also led to lawsuits from investors. A similar situation occurred with the Cardano Foundation, which was accused of marginalizing founder Charles Hoskinson and lacking proactive actions in key matters such as on-chain governance and charter drafting.

It can be seen that some foundations currently face issues such as lack of transparency in governance processes, ambiguous power structures, weak fund management and risk control, as well as insufficient community participation and feedback mechanisms. In the context of a more friendly regulatory environment and rapid changes in the industry, should the role positioning and governance model of foundations be re-examined and upgraded?

The Invisible Benefit Network and the Fate of Tokens

In the actual operation of cryptocurrency projects, the role division between the foundation and Labs has gradually formed a structural paradigm: the foundation is responsible for governance coordination, fund management, and ecological funding, while technical development is usually undertaken by independent Labs or Dev companies. However, there may also be an increasingly complex reality of intertwined interests behind this.

According to crypto KOL “Crypto Fearless”, behind North American projects like Movement, a specialized foundation called “Architecture Output Group” has been formed, consisting of lawyers and traditional compliance consultants. They provide standardized “Labs + Foundation” templates for projects, assisting with compliance in token issuance, governance structure design, and deeply participating in key matters such as airdrop rules, ecological fund allocation, and market-making cooperation.

However, these directors are often not original members of the project, but instead hold key positions in the foundation with annual salaries in the hundreds of thousands of dollars, possessing substantial “compliance veto power” without deeply participating in product development, and even influencing the flow of critical resources.

We have compiled a list of public chain projects that have been active and highly participatory in the foundation over the past year, and we have analyzed the market performance of their tokens in the past three months and one year:

Looking at the overall data, most fund-led project tokens have fallen to varying degrees in the past three months, and the annual performance is also weak. However, this trend is also affected by the overall downward trend of the altcoin market.

According to crypto KOL “Crypto Fearless”, two projects ranked in the top 200 by market capitalization plan to dissolve their foundation structure in the second half of this year and directly merge into Labs. As two mainstream organizational forms of crypto projects, foundations and corporate structures each have their own focus: foundations emphasize non-profit, decentralization, and ecological governance, while corporate structures are oriented towards efficiency and growth, pursuing business development and market capitalization growth.

At the same time, a16z also stated in the article that a developer company model can more precisely mobilize resources, attract talent, and respond quickly to changes. With the rise of the U.S. stock market’s listing boom and the increasing correlation between cryptocurrencies and stocks, a company-led governance structure seems to have more advantages.

So, has the countdown already begun for the exit of some foundations?