The Breakdown - Crypto’s Ownership Problem | The Breakdown

Episode Date: February 10, 2026

What does it actually mean to “own” a token? As regulation catches up, the token economy may be facing its biggest identity crisis yet. Plus, a conversation with Paul Dylan-Ennis. Thanks for tuning in! As always, remember this podcast is for informational purposes only, and any views expressed by anyone on the show are solely their opinions, not financial advice. – Follow Blockworks Research: https://x.com/blockworksres Follow Paul: https://x.com/post_polar_ Follow David: https://x.com/dcanellis — Get top market insights and the latest in crypto news. Subscribe to Blockworks Daily Newsletter: https://blockworks.co/newsletter/ — Timestamps: (00:00) Intro (00:57) You Will Eat The Bugs (03:18) Ownership Vs Access (06:23) Regulatory Arbitrage (08:55) DAS Promo (09:44) The Triangle of Decentralization (15:37) Onchain-Offchain Symmetry (17:14) Interview with Paul Dylan-Ennis - - Disclaimer: Nothing said on The Breakdown is a recommendation to buy or sell securities or tokens. This podcast is for informational purposes only, and any views expressed by anyone on the show are solely our opinions, not financial advice. Host and guests may hold positions in the companies, funds, or projects discussed.

Do you remember when the World Economic Forum published an essay that said, You'll own nothing and you'll be happy? What if I were to tell you that most of the token economy has so far operated on a very similar principle? And it's not even crypto's fault, for reasons we'll get into in a moment, but the hope is that all of that is about to change with the Clarity Act, alongside evolving feedback from the market. While we all wait and see what actually makes it into US law, no matter what happens, we just don't really know what crypto is going to look like on the other side.

As crypto initiatives across the entire industry are now faced with extensively overhaul their existing tokens or risk being left behind. I am your host David Canellis. This is The Breakdown. Let's get to it. Nothing said on The Breakdown is a recommendation to buy or sell securities or tokens. This podcast is for informational purposes only, and any views expressed by anyone on the show are opinions, not financial advice.

Host and guests may hold positions in the company's funds or projects discussed. So about that Weaf essay, you've probably seen some memes quoting the piece, which was later republished by Forbes, maybe with the face of Klaus Schwab, the German founder of the web, who served as its executive chair until he resigned last year. Klaus didn't actually write the essay the quote is from, that was Danish politician Ida Olkin, a social democrat who has previously served as the country's minister for the environment and has dedicated much of her professional energy towards sustainability in circular economies.

World Economic Forum later shared a video summarizing a number of predictions for the start of the next decade, one of which included the now famous line and it largely became a meme from there. The original essay actually had a much longer title. Welcome to 2030. I own nothing. have no privacy and life has never been better. The essay itself is really a thought experiment on what life might be like when AI and robots

take over much of the work that humans do, enabled by a hyper-connected array of apps and technology that result in all of us, quote, suddenly having time to eat well, sleep well, and spend time with other people. Welcome to my city, or should I say our city. I don't own anything. I don't own a car. I don't own a house. I don't own any appliances or any clothes.

Ida explains that in our city we don't pay any. rent because someone else is using our free space whenever we do not need it. My living room is used for business meetings when I am not there. It might seem odd to you, but it makes perfect sense for us in this city. Everything you considered a product has now become a service. We have access to transportation, accommodation, food and all the things we need in our daily lives. One by one, all these things became free, so it ended up not making much sense to own much. The essay is very short. It's really more like a long poem. And if we're being honest, it's a socialist variant on the same future painted by relentless techno-optimists like Elon Musk and Bilaghi Srinivassan,

that automation, AI and technology can and will free humanity from existential concerns like work and scarcity. Except where their worldviews diverge is in the role of the state. In Ida's future of the world, everything that could be run by a private company is instead managed autonomously by the state, with the tech acting as the great coordinator of sorts for all society. In Musk and Balaghi's world, it's either private corporations or permissionless decentralized protocols that manage those public goods, turning the technology itself into a de facto government, even if that technology would be totally indifferent to politics and so on. This is the network state rather than the nation state. And how does this relate to the tokens that we have today? Well, for one, where Ida

reframed the very definition of ownership to mean the right to use a product when it's appropriate for me to do so, the crypto economy has done its own subtle reframing of what ownership actually means. For the sake of argument, let's consider self-custody as the default way to own tokens. When you self-custody tokens as in your holding coins in a blockchain address that you control, those tokens are really more like bearer assets, at least functionally speaking. Whoever controls the private key can sign transactions involving the token. Who owns those tokens legally, spiritually and ethically, whichever way you want to frame it, never really comes into it. Putting to one side, the fact that crypto is considered property in many jurisdictions around the world,

allowing courts to decide who owns which particular coins, the chain does not really care who legally owns the coins. From the chain's perspective, the only thing that matters is control, control over the private keys. With this in mind, ownership only really matters when something goes wrong, when courts or police need to decide who owns what. Until that point, access is really what matters. Let's use ETH as an example.

ETH does not have on-chain governance, so owning ETH or more precisely controlling the private keys to an address that contains ETH, does not exactly convert to ownership of a position in the network's rules. Those rules are decided via off-chain governance, via proposals, and an open-source development process that relies on reputation, social dynamics, and so on. Owning ETH gives you a financial position in Ethereum's incentive system, staking rewards.

That's the cleanest formal entitlement you can point to. If you have enough ETH, you can also join the validator set, which isn't a formal governance vote, but it does give large stakeholders leverage when Ethereum's off-chain governance gets contentious. And of course, holding Eath gives you protocol native rights, the ability to send it, receive it, and use it inside any smart contract that accepts it. What it doesn't give you is equity-style ownership of the network or a direct on-chain mechanism to vote on protocol development. Miles Jennings, head of policy and general counsel at A16Z, drilled down on what this means in practice in February last year, writing that network tokens do not provide the owner with any financial interest in another person or enforceable contractual rights with the respect to ongoing efforts.

but their value is often tied to a blockchain-based network. Miles explains that the relationship between the token and the chain can be as simple as the token price being driven by market demand for the chain, or as complicated as the price being directly tied to revenue-generating activity on the chain. In all such cases, this relationship introduced risks that implicated securities laws, he wrote. But we're moving into a world where the most basic interpretation of ownership is no longer enough. Soon, the idea that you own the infrastructure just by owning the token may need to come with enforceable claims, rights to cash flows or revenue sharing that someone has a

duty to honor, not just control of a private key and not just the ability to use a protocol. Just to be clear, owning a token that comes with protocol rights is a real technological innovation, but for a lot of the investable crypto class, ownership may need to start looking more like equity-style claims, especially when an off-chain entity is the one collecting and managing on-chain revenues. And this is where things start to get messy. For the longest time, crypto has been stuck in an endless cat and mouse game of regulatory arbitrage, whereby it was absolutely necessary that developers who build both blockchain-based networks and the protocols and apps that run on top

of them were legally separated from the tokens associated with those networks, protocols, and apps. That's because the SEC was so adamant in using the how we test to determine whether tokens are securities. If you want to do an IPO with a token, come see us, file financial statements, file disclosure, take the responsibility our laws require, and we're happy to do that. to help you do that public offering. Generally the idea was to make it clear that the managerial efforts of a set of core

devs or their development studio are not solely responsible for the value of the tokens themselves. There's a few common strategies to achieve this, but in a perfect world, both the chain and the coin supplies would be so decentralized that token holders are relying on no one group or entity to manage the project. So that's one. Decentralize your network to the point that token holders are not obviously relying on one single team to bring value to the network. And by extent, mentioned the native coins price. That could mean increasing the number of unrelated parties that run validator nodes, for example, so that no one group is responsible for the network's resilience to downtime or overall censorship resistance.

In the case of protocols or apps that run on top of blockchains, it could mean increasing the number of unrelated stakeholders with power over decisions related to development and treasury management, maybe with a governance token. And to their credit, governance coins were originally conceived as a solution to on-chain capital coordination and are indeed capable of doing exactly that, the limit but in fact there is and always will be human nature. But besides that, there's an obvious problem with both scenarios here. In the first case, it's totally unrealistic to expect a blockchain to launch with an already sufficiently decentralized validator set to be comparable to, say, modern-day Bitcoin, Ethereum or even Solana.

This is one reason for subnets and roll-ups and so on, which in various ways either inherit or borrow the infrastructure from other more established chains. Usually they're larger validator sets. It's also why some new layer ones have opted for pre-eastern, established lists of permission validators which had already agreed to support the network from day one, similar to how Canton has rolled out, and also soon to be tempo. This is exactly why certain legal interpretations suggested that the SEC might have considered the ETH token sale, the ICO for Ethereum that ran in 2014, to be a security in and of itself, but over time the network

and its development decentralized to the point that ETH evolved into a commodity. Quick break before we continue, Blockworks's flagship institutional conference, Digital Assets Summit, is back in New York. City this March 24th through 26th. Das brings together allocators, asset managers, policymakers and the builders actually shaping crypto's next phase. Not the hype cycle, but the infrastructure and capital behind it. This year's summit represents over $4 trillion in assets under management, with more than 150 speakers and 750 institutions in attendance. Speakers include leaders from firms like Blackrock and Franklin Templeton, senior policy makers and regulators. Don Wilson of DRW

will be there, alongside core crypto infrastructure teams across Bitcoin, Ethereum and stablecoins. If you'll looking for a serious institutional grade view of where digital assets are headed in 2026, this is where that conversation happens. Use code breakdown 200 for $200 off. Learn more at blockworks.com slash events. Now back to the show. And as for the problem with governance tokens, when researchers try to analyse the effectiveness of Dow's and token voting, they often find an unfortunate mix of low holder engagement and hyper-powerful whales tend to skew decision-making processes to the point that they might actually work against decentralisation efforts. But again, just like how launching a chain that is already significantly decentralized is unrealistic, it's also not

fair to expect that token-based governance voting can be effective without widespread delegation to larger, motivated investors with way more skin in the game. But when those well, voters are the same ones writing the checks that end up paying for the developer's offices, salaries, and so on, you can see how some might suggest that governance coins are more decentralization theater than decentralized finance. The thing is, for the overwhelming majority of tokens, governance-related or not, there is an expectation of profit, which, means then it's also very important that the expectation not be directed at any one particular group and so we have the great triangle of decentralization where on one corner there is the

Dow used for governance on another corner the non-profit foundation in the Caymans or what have you that wraps around the Dow to interface with the real world and pays the bills with grants and so on and then the labs that actually ships code which might even be located in New York and for the longest time the market was okay with all of this because it meant that tokens could be launched and airdrops could be farmed even under an SEC regime that was convinced that most tokens on the market were in fact security. The SEC was always a few years behind April when it comes to crypto. It took years for regulators to move on from focusing solely on obvious fraud to charging

celebrities with touting violations for straightforward capital raises via ICOs. Boxer Floyd Mayweather Jr. and music producer DJ Khaled settled their case with the SEC. It says that investigators found Mayweather did not disclose he was paid by three cryptocurrency companies to promote investments through social media, including... How many more years would it take for them to finally come around to running the almighty triangle of decentralization through the Howie test? And so this brings us up to today. The era of the modern-day regulated, gated initial coin offerings via platforms like Legion, Echo

and Sonar, which are mostly only available to either venture capitalists or accredited investors. Quite different to say how the Ethereum ICO was conducted, which was open to anyone with a Bitcoin wallet. But it's safe to say that these platforms are a natural expression. of the crypto industry's desire to self-regulate to keep the innovation ticking over, at least while important bills like the Clarity Act are hashed out. About that, it's true that the Clarity Act is going to be a game changer

in terms of providing a much clearer way to classify tokens. And as of the time this video was made, the bill is working its way through Congress, which means there's still time for substantive changes to what was initially proposed. The Act, as it stands, does many things that feel really right, that there is never to be a presumption that a digital asset is a security, is really good, that a governance coin could also be a digital commodity is also really good. A digital commodity under the Clarity Act would be any coin that is intrinsically linked to a blockchain, as in native coins like Ethan's soul, but could also mean other tokens closely

intertwined with a network, and whose value is either derived or expected to be derived by the use of that blockchain. Or in other words, if you expect that the price of Eth or Sol, either now or in the future, largely depends on how much demand there is to pay for blocks based on those networks, then Ethos Sol should be considered a digital commodity in a way that doesn't implicate securities laws. Clarity also gives token issuers who want to bootstrap themselves with a coin offering a four-year window to launch and grow a blockchain system into a mature network, which perhaps could be longer but at least accounts for how centralized chains can be when they're first deployed. But Clarity's big bet is that tokens can be treated like a commodity even if the sale looked like

an investment contract, especially once the network matures and no one actor is in control. The idea to ring fence the token from the fundraising is legitimately fantastic. The fundraising is a social interaction, whereas the token itself, as SEC Chair Paul Atkins rightfully put it, is a matter of code and technology. The open question is whether projects can ever attach real cash flow rights to tokens without turning the digital commodity into a security. So if a token has claims to cash flows, dividends, revenues, fee share or buybacks, what have you, then there still could be a way for regulators to consider that token a security,

regardless of whether it also functions like a digital commodity. Are those protocol fees emerging from autonomous code, or is there a token issuer promising a payout to token holders? We just won't know, at least until the SEC decides whether it's worth taking up that particular fight with some unlucky defy project in the future. Now, recall that Chair Atkins has previously said that most cryptocurrencies are not securities.

So not every crypto asset is an investment contract or, therefore, security, and we're out to give people certainty in that. And that's again because crypto asset is a technological description in his words and refers to the role that the crypto asset has within the blockchain network it has been deployed on. It tells you something about how records are kept and value is transferred, but it says very little about the legal rights attached to a particular instrument or about the economic reality of a particular transaction, which are key to determining whether something is a security. I believe that most crypto tokens trading today are not securities, Akin said. And that's precisely because any coin that launched in the past decade was more than likely built by people who were paranoid about attributing anything even remotely resembling ownership of rights beyond a right to use the network app or protocol. That most coins are actually digital commodities is a self-fulfilling prophecy that is about to come true. But what are hold is actually left with?

Token prices that are largely in the red. Maybe it's because as commodities they aren't attractive. Yet, with the current level of demand and perhaps the level of ownership, rights to revenue or fees and so on could actually be what's missing. There is hope. In a previous episode, we explored the idea that the market has largely dictated the direction that Solana has gone in in its mission to be the high throughput backbone for internet capital markets. I can't think of any more optimistic read on the current situation with tokens

than that the market is indeed giving direct feedback on how they are structured, that governance and utility alone is not enough to entice long-term and continued fresh capital that would drive token prices higher. There needs to be more transparency around how the tokens were formed and initially distributed, and this is largely why we are now seeing initiatives like Blockworks's own token transparency framework and investor relation portals picking up so much steam from within both the crypto venture space and the builders themselves. If the information asymmetry between token issuers and investors is indeed the problem, then self-regulating in pursuit of off-chain transparency that's on par with transparency on-chain is a clear pathway

through that makes the whole industry better. But I can't help it feel that even after clarity is ratified, we will still be left in exactly the same situation, with token issuers more concerned with maintaining their status as a digital commodity, a mark of decentralization that will carry too much weight to entertain the idea of granting any real tangible rights to token holders, lest they be subjected to the SEC all over again. Perhaps we need to wait until hype builds around tokenized equity in early stage companies for that to really change. And by that point, there may no longer be any real appetite for tokens as we've known them at all. I put all of this to veteran solar punk Paul Dylan Ennis, lecturer and assistant professor at the University of

Dublin School of Business. And here's some of what he had to say. With me is my very special guest, Paul Dylan Ennis. Thank you so much for joining us, Paul. Very happy to be here. Cool. I really wanted to get you on because, you know, in my head, you kind of represent the solar punk community, in a way, at least in the crypto context. So, like, I wonder, like, how you responded to this framing of, you know, aligning the token economy or, or even, like, Ethereum with the World Economic Forum thing about, like, Ida Orkin's essay of, you'll learn nothing and you'll be happy. Like, how do you feel about that kind of comparison? It's an unexpected comparison. That essay,

is a fascinating one because it's lived medically through this conspiratorial life. And it was fascinating to hear what the actual origin of the story is. When it comes to crypto itself, I tend to think about, one of the things I think is really interesting in your discussion is this distinction between

the asset, like what I would call the native asset or what I think you call the network asset. So we're talking about layer one blockchain like Bitcoin, Ethereum, and Solana. And we have this token. It has a purpose within the system. And also we've got the associated bearer rights there as well. Which is, I think, is also important to mention.

This is something people overlook that the public key cryptography, securing of assets, is an intrinsic part of what we do. That is philosophically essential to the autonomy, sovereignty, aspect and gets overlooked, I think, quite often. But at the same time, it doesn't give you, I guess, what you're extending into, which is this question of, okay, it gives you positive freedoms at a philosophical level or a political level. But at this point in the industry's history, people are interested in more.

They're demanding more. They want to share in the revenue. They want to have a sense that holding a token isn't simply a bet on the overall performance of that asset. So the fortunes of Bitcoin, Ether, and Solana, and you follow along as a spectator or a spectator participant, you're just watching, and then you don't really have a say in what's going on. You're just observing. And as we've seen over the last, say, a little while, that effectively puts you in a very passive position relative to the market. And that's not a good position to be in in crypto. It's a very topsy-turvy, volatile world.

It's so difficult because like, you know, instinctively, and it's just like a product of such high market caps for all of these chains and stuff like that, that we instinctively want giant valuations and, you know, really good looking charts that go all the way up and to the right to say that these chains or even these projects are worthwhile. But in effect, you could have a situation where you do have these public good networks that have all of these smaller public goods or communities rallying around them that are inherently so small a niche that they don't attract a lot of cash flow and they don't attract a lot of revenue. But they are still incredibly worthwhile and they do need some kind of larger decentralized chain ecosystem to really. exist how they want to exist. But what is the incentivization there apart from that these communities can exist and they do exist? And like I think that's kind of where a lot of it is stuck because you do, it happens with say like decentralized social media and creator coins and stuff like that, that you do want to incentivize participation in communities with something monetary, but that injects all these sorts of problems that kind of bastardize what the community.

was meant to be in the first place. And a lot of instances that those communities outright reject anything to do with those kind of financializations. Like, how do you swear all of those things while still maintaining like an ideological connection to what crypto is actually right now? This is a difficult one because from my perspective, the D-Gen culture, for, let's say, during the meme coin era was on the ascendant. And effectively, if you look at it, crypto as a concentric circle, cypher punk and solar

punk and regent would be sort of little circle and then surrounded by the DGents. And they took over for a while and they effectively argued for this pure financialization of crypto that actually, when you really look at it, it is just a casino that we build this outrageously complicated casino. and this casino is even more excessive than the one that we were birth from. Now, the interesting thing is that we were, we originate from this reaction to a failed financial crisis of 2008, but nonetheless at the end of it, and I guess this would be almost a Greek tragedy that we become, you know, much worse than the people.

We were, yeah, we became the sit over time. And that, that seemed for a while to be the, the direction, like that that's how things are going to go. And at least in Ethereum, which I can speak the most on, this also came with this idea that we should try to corporatize more. We should lean into the more business energy. We should see itself more and more as an industry as opposed to a movement. So the movement, the radicalization part, the self-sovereignty, the core values of decentralization, permissionlessness, credible neutrality would go in there as well. All of these values were seen as in the way of efficiency.

So this would also have come from the threat of Salana. So Salana is the younger, cooler version of Ethereum. It's doing tricks on a skateboard and embarrassing the old Ethereum's. And it gets things done faster. It's like move faster, the kind of classic Silicon Valley, effective accelerationist way of seeing things today. And one of the reactions in the Ethereum community was, well, we'll do that, right? We'll become more pragmatic.

So the Ethereum Foundation adopts this more pragmatic mindset. So the cyphabunks are on one side, so like Shaway and Vitalik, etc. And then we get more pragmatists in. So Tamash comes in, he's the figurehead of the Ethereum Foundation that represents this more pragmatic strain, which is effectively the strain, which says that we should be more, let's say, favorable to institutionalization. We should understand the market forces more, and we should also focus on ETH, the asset. That was the real message of that whole populist revolt was that ETH is underperforming. It's also under threat from Solana, and we need to imbibe this more pragmatic mindset. And then I think what you've seen over the last year is that when you do that, right,

that's something that has been done. It's been incorporated into like the Ethereum world and crypto more broadly. And in a way like DGEN has slipped away, DGEN has actually been overtaken by a more mature mindset. So people begin talking in the terminology of the business school. So from my perspective, I see people adopting this language that is as familiar to me from, say, people in the management department, the economics department. But I never heard crypto people use them before. So revenue is a good example. And even like token value accrual is a kind of.

word that's saying economics professor would be like, oh, that's the kind of thing I want. Why haven't you mentioned that before? That sounds like something we could work with. And like all of this has been brought in, but we haven't seen the explosion, the effects, you know, the kind of excitement that, I'm sorry, let's say the market outcomes that would have been expected by becoming more pragmatic. So I think one of the things that's worth stating about this becoming more institutional, becoming more pragmatic, is that we should no longer be looking to say the cyphor punks and the solar pumps to explain why is Ethereum not performing or why is Salana not performing? And now the question should be turned more on the business people,

the more the pragmatic people and say, like, now that we've become more like the traditional business world and we're talking in this kind of language, why has this not managed to make ETH go to 10K. So that's at least one perspective that I think is worth. There's a certain point where you have to, you're no longer the person pushing against the elite, but you are actually the message. It's like the way Trump still talks about the elites,

even though he's the president of the United States, for example. Thank you so much for your time, Paul. And yeah, hopefully we'll have you back on the breakdown again soon. Thank you so much. Yep. Thank you for Adam.