This episode exposes crypto’s fundamental flaw: misaligned token structures that leave investors vulnerable and hinder innovation. The industry faces a reckoning, forcing a choice between equity-like clarity and decentralized ideals.
The Token Holder Reckoning: Uniswap, Aave, and Axelar
- Uniswap's Unification: Uniswap Labs combined its foundation and lab entities, eliminating front-end fees and streamlining operations. This move aims to align incentives and value accrual to the UNI token.
- Aave's Internal Strife: Aave Labs redirected a $10 million annual swap fee revenue stream from the Aave DAO to the Labs team without clear communication, sparking public outrage from figures like Mark Zeller.
- Axelar's Acqui-hire: Circle acquired Interop Labs, Axelar's core developer, for its engineering talent and proprietary IP. The deal explicitly excluded the Axelar Network Foundation and AXL token, leaving token holders uncompensated.
- Miles argues, "When you invest in a or you know Axelar etc you're expecting value to accrue to the thing that you're investing you're not expecting value to accrue to two different things."
Gensler Era Legacy & Operational Friction
- Regulatory Avoidance: Early protocols established separate entities (e.g., Cayman-based foundations, Labs companies) to avoid being labeled as securities and facing legal action.
- Logistical Hurdles: DAOs historically struggled with basic legal functions, like contracting vendors, forcing Labs entities to manage operational aspects, including front-end development.
- Operational Drag: Miles, reflecting on his experience as a DAO service provider, describes the "awful" process of running a startup in such a setting, with public B2B negotiations and firewalled communication between foundation and labs teams.
- Mike states, "There are very real infrastructure legal and regulatory reasons why a lot of these entities are set up in the way that they are."
The Equity vs. Token Conundrum
- Investor Hypocrisy: Mike highlights that many investors protesting recent token holder violations previously overlooked similar issues, like the Aave Horizon controversy, where a potential second token launch would have diluted DAO value.
- M&A Focus on Equity: Mergers and acquisitions in crypto increasingly target equity and intellectual property, not tokens, leaving token holders out of acquisition benefits.
- The Founder's Trillemma: Founders seek to launch tokens post-Product-Market Fit (PMF), ensure value accrual and IP ownership to the token, maintain operational control, and avoid security classification—a combination currently difficult to achieve.
- Zave notes, "What you're seeing at the moment is that they're actually acquiring the equity they're not acquiring the token."
Reimagining Public Markets & Regulatory Reform
- Broken IPO Market: Companies remain private for extended periods, limiting wealth creation for broader investors and exacerbating societal wealth concentration.
- Crypto's Transparency Advantage: On-chain businesses inherently offer public, verifiable data, which could enable a regulatory model based on enhanced disclosure rather than heavy-handed rules.
- "Equities Light" Proposal: Mike suggests a new regulatory approach for crypto-based businesses: lower disclosure barriers for those operating entirely on-chain, allowing greater transparency to reduce the need for extensive regulation.
- Mike asserts, "What crypto has told us is that we need to reevaluate equities laws in the US."
Corporate Tokens & The Path Forward
- Corporate Token Catalyst: Large corporations launching tokens (e.g., Coinbase's Base, Tempo) will likely force a clearer definition of token rights and value accrual, as retail investors may flock to familiar brands.
- Buybacks as a Signal: Protocols like Pump.fun and Hyperliquid use token buybacks to signal value and commitment to token holders, potentially becoming a new industry standard for demonstrating alignment.
- Industry Consolidation: The current environment will differentiate strong teams willing to undertake difficult restructuring from those clinging to outdated models, leading to market consolidation.
- Miles concludes, "I think we're legitimately running out of buyers that people want to buy this stuff... if you're not just going to go through this cycle of speculation driving gains, you need something else."
Investor & Researcher Alpha
- Capital Reallocation: Expect capital to shift towards protocols demonstrating clear token utility, transparent value accrual, and strong founder-token holder alignment, potentially favoring those undergoing difficult restructuring like Uniswap.
- M&A Due Diligence: Investors must scrutinize the equity-token split in early-stage deals. Acquisitions will increasingly target equity and IP, leaving token-only positions vulnerable to dilution or exclusion from acquisition benefits.
- Regulatory Push: Research into "equities light" frameworks and on-chain disclosure standards will gain prominence. Protocols that proactively implement verifiable on-chain revenue and value accrual mechanisms will differentiate themselves.
Strategic Conclusion
Crypto's broken token structures demand immediate, fundamental reform. The industry must define clear token rights, align incentives between founders and token holders, and advocate for "equities light" regulation. The next step is a period of intense restructuring and consolidation, forcing protocols to build transparent, value-accruing models that prioritize long-term investor trust.
