Unchained - The Top Things Investors Need to Know Before Buying Crypto Tokens

Episode Date: March 19, 2026

Across Protocol wants to retire its token in exchange for equity. Is the DAO model structurally broken? Thank you to our sponsor! Adaptive Security With Across Protocol proposing to retire its ACX token in favor of equity, a long-simmering question in crypto governance is finally breaking into the open: do token holders actually have meaningful ownership, or just the illusion of it?  As the regulatory environment under the new U.S. administration shifts dramatically from the Gensler era, the structures that crypto teams were forced to build may now be working against the very communities they were meant to serve.  Ryan Yi, founder of OnChain Group, and Felipe Montealegre, co-founder and CIO of Theia, have studied these incentive structures closely, and what they have found is uncomfortable. From PumpFun's suppressed valuation to the perverse incentives baked into token buyouts, this conversation examines whether the DAO model was ever built to last, and what governance actually needs to look like if crypto is going to compete with global finance. Guests: ⁠⁠⁠⁠Ryan Yi, Ex Coinbase, Coinbase Ventures, and CoinFund ⁠⁠⁠⁠Felipe Montealegre, Co-Founder & Chief Investment Officer at Theia Links: Read our Aave deep dive here Learn more about your ad choices. Visit megaphone.fm/adchoices

Hi, everyone, welcome to Unchained. You're an O'Hap resource for all things Crypto. I'm your host, Laura Shin. Thanks for joining this live stream. Before we get started, a quick reminder. Nothing you hear in Unchained as investment advice. This show is for informational and entertainment purposes only, and my guest tonight may hold assets discussed on the show. For more disclosures, visit Unchained Crypto.com. This episode is brought to you by Adaptive Security, the first cybersecurity company, backed by Open AI. As AI makes deep fakes and synthetic identities easier than ever, Adaptive helps companies test and strengthen their defenses. Learn more at Adaptivesecurity.com. Quick note before we get into today's episode. Bits and Bips now has its dedicated feed. We're

spinning off from the unchained feed and moving to a new podcast and YouTube channel. So if you want to keep up with our weekly live streams and macro meets crypto breakdowns, make sure to subscribe to Bits and Bips directly. We won't publish there until March, but subscribe today so you can be ready for launch. Be sure to subscribe to the new feeds at unchaincrypto.com slash bits and dips. Today's topic is tokens versus equity in Dow's. Here to discuss are Ryan Yee, founder at OnChane Group and Fipe. Jesus.

Felipe Montelegray, co-founder and chief investment officer at Thea. Welcome, Ryan and Felipe. Thank you for all right. So we're going to be discussing a topic that just keeps coming up again and again in crypto nowadays. And that's this tension between tokens and equity. But before we dive into the details around the across token protocol, which is, or the across token, which is the most recent news that concerns this topic, we're just going to have

each of you describe your background and how you came to spend a lot of time thinking about this issue. Ryan, why don't we start with you? Sure. Thanks, Laura. Yeah, my name is Ryan. My background is primarily as a crypto VC. And so seeing a lot of these investment structures, both.

both from an equity perspective, but also a conversion into token as well as token directly. And then most recently, kind of began to talk to a lot of founders, kind of navigating these complex situations in relation to their business strategy. And so, yeah, we've set up a company basically targeted towards providing financial services, helping these founders navigate these issues. Felipe? Great. Yeah. So my background is right now I'm Chief Investment Officer at Thaya. Thaya is a liquid token fund focused on long-term buy and hold for liquid tokens. So we focus primarily on projects with revenue earnings fundamentals and we try to benefit

from their growth in the same way that equity market participants would benefit from the growth of businesses. This is very different than the way that most token trading was done early on in our funds life, where I think a lot of people were used to trading. narrative tokens, you know, hoping a token would catch a narrative, go up in price, and then it could sell and exit. We're investing more in the way that people invest for the long term, right? You buy a company, you trust a team, you plan out a strategy, and then you benefit from business growth and revenue growth.

In the process of doing that building our fund, we realized that, you know, one of the major issues to the step of investing was the token problem, which is that tokens did not confer sufficient rights on for token holders. So there's a lot of ways that tokens can be leaky buckets. You know, it's easy for teams to sell or move away. But one of the most kind of pervasive problems was the token equity problem, where previous investors who had equity could siphon value it from tokens. And that's why we think about this problem all the time, because it really impacts our long-term returns and our short-term returns. We've had issues with it multiple times despite being very careful,

and we know that every other liquid fund out there has had the same problems come up again and again. And it's frankly been an existential issue for the liquid token space. All right, so let's dive into the across token issue. Last week, the Risk Labs Foundation, which is behind across protocol, made waves. when it proposed that the Dow govern protocol become a company. For the transition, they proposed retiring the ACX tokens and offering an equity exchange to token holders. Their motivation was this, quote, as a cross deepens our work with institutional and enterprise partners, the token and death structure has materially impacted our ability to close partnerships and integrations.

Transitioning to a traditional legal entity would meaningfully improve our ability to enter enforceable contracts, structure revenue agreements, and deliver more value to across stakeholders. So as I mentioned earlier, this is just the most recent example of various entities in crypto, finding that DAOs are kind of cumbersome from a business perspective. And they're trying to change these structures to become more nimble. So this across proposal right now is just a temperature check. But I was so curious to hear your reaction to this idea. And either one of you can go first.

Yeah, I mean, sure. I think on a high level where we probably should begin is, you know, what was maybe the premise of tokens to begin with kind of early in this industry. I think we have enough data points now where, you know, I think the user and the stakeholder really being aligned as your token holder is quite important. I think there are certain teams that execute this very well. So I think Hyper Liquid is a great example of this where their main user is a trader and therefore they're also probably their largest token holder as well. And I think in sort of the space of interoperability and bridging, kind of becoming a lot more clearer around who your customer is in that regard and whether

or not they have the capacity or even desire to hold tokens, I think that maybe is like a valid line of argument in some capacity. But I think there's actually a larger story here, if I'm being honest. So if we zoom out and look at sort of the team that is. is building the across protocol project. People may have forgotten, but they're also the developers of an Oracle project called UMMA or UMA. And so if you think about it, this is one team that

is really building two products at the same time. So they're building out this Oracle products, UMA, and then they're also building out this bridging product, which is across. And theoretically, UMA powers a lot of the across infrastructure. But I think as just taking sort of like the early stage sort of VC bucket hat on, it is actually kind of hard for a team to focus on two products at the same time. And I think the sort of if you, you know, everything in retrospect,

but I think one mistake is thinking that you can have basically a token for each product as well, right? And so, you know, when you launch a token, yes, it's like great because you get liquidity and you're able to bootstrap your community. But at the same time, it's like the the amount of cost that goes into it is the equivalent of like as a startup team, you're effectively going public as a company. So managing the token, managing market makers, managing listings, managing liquidity. Like this is a huge time suck, especially if you're early stage founder that's still trying to find product market fit. Right. And so I think, you know, if I just looked at the stats or the fundamentals of the actual products involved, you know, Across was one of the leading bridge

providers and I think to this day still, you know, has a lot of usage. But in terms of the relation to their core product, which is UMA, across at one point was 50. 50% of all of UMA's activity, and now it's less than 10%. Right? And I think the across product itself has also lost around 80% of its TVL since its peak. And then if you actually zoom out, the majority of UMA's activity is actually as an Oracle for the polymarket prediction markets. Right. And so I think if you're a team that's navigating these things and you're realizing, hey, like, at one point, you know, one of these products actually had more mind share and more growth potential in our mind.

Now going forward that actually that sort of matrix in terms of the ROI of having a token for each of those products in that respective capacity can also change over time as well. And so the way I view this is that it's effectively like a tender offer to the token community. They're saying, hey, if you want to transition into this equity structure, you know, you have a chance to do that as a token holder. These are your rights. If you don't want to take that deal, that's fine. You can go and, you know, take this cash offer from the treasury. And effectively, it's up to the token holder on what they want to do. But ultimately, what the across project gets is they get the token holders that are aligned in their success when they convert into this equity structure.

And effectively, they can shed all the activities as well as related costs that would come with managing an entire token community for another product within their portfolio. So that's how I would view it, sort of not within isolation, but within the broader sort of product strategy thinking. behind the team. Felipe. Yeah, I agree with all that. I think across brings up a couple interesting questions. One is the question of equity versus token. We've heard from a lot of teams that having an outstanding token hurts their ability to do

B2B sales and the ability to deal with large institutions. And that's just a reality in the market today. Now, those things can change over time, right? But if you're, if having a token is a problem for your core fund, function in your core go to market sales problem, it's a liability, right? And then the question is, how do you solve that? And we've had some teams solve that by just discontinuing their token, which I believe is quite unethical to do that to people who have savings in a token.

But the way that I crossed it is to me from the outside, because I'm not close to that project, seems like a very fair way to do the, to do the migration. Because you're offering everybody the ability to to participate in the equity stack. And you know that you're offering in a good terms because the price shot up after the proposal. And we're still many days later trading above the proposal price.

And that's kind of, you know, it's one of the core, I think signals will have to look at as people do these transitions over the next few months is did the token go up or down relative to where I was trading before? And, you know, people will always kind of talk about the proposal and try to spend a narrative. But if the token goes down, people are clearly getting less than they thought they had,

before. And if it goes up, then it, it, it, it, um, it resolves some uncertainty and maybe it gives people even more than it thought they had before. So I think that was quite nice to see. Now, that's, it's not always a hard rule because the question is, um, there's some ways to game that, which I can go into, but, but that's, it's a overall, it's pretty good rule. I think something that Ryan mentioned is important to is, you know, this idea of having multiple tokens, it doesn't make any sense at all. You don't see it in equity markets. There's like, there's like a handful of, you know, it's like, it's like a handful of, exceptions. One is Musk that people always point to. And even he's consolidating operations

now, it seems like. But like most businesses have significant revenue generation from products that were launched after the initial IPO, right? The obvious examples are Amazon makes half of its earnings from AWS, which is launched six years after IPO, or sorry, eight years after APO. Apple makes most of its running from the iPhone, which was launched decades after IPO, like people invest in businesses in large part because they believe management teams will continue to ship products. And having the idea that you'll have a token for each product doesn't make any sense for investors because you lose all that optionality. And it also doesn't make sense from an incentive point of view. Because you always have the risk that you'll,

the management team will focus all of their energy and use the treasure that they raise from your money as an investor on some new product with a new token. So I'm glad that you'll, the management team will focus, every time I see a business like across, consolidate from multiple tokens to one or even just one equity, we're always happy to see that because, again, it doesn't make sense from a strategy or incentive's point of view. Go ahead. I'll just say it's the same with token and equity. You know, they had token equity. That's a reality.

There are many reasons why that happened. The first, the most common one is that people thought in a prior regime that won't come back, that tokens were kind of free capital. and every token you launched is kind of, you know, free 50 or 100 million dollars market cap that you can count on. But the market's just no longer accept that. So now that we've gone through that process of kind of rejecting that, you know, nonsensical idea, people are consolidating into one instrument, token or equity. And, you know, we don't have an opinion.

You can have token or equity. Just do it in a way that's fair and disclose to all participants. So nobody is, um, is, for. into squalining their savings. Yeah, so to go back to your earlier point about the token price, so it basically doubled in price pretty much right away from about 3.5 cents to 7 cents. And then it dropped down to 4.3.7 cents, which is the price that they put in the proposal, you know, for those who choose not to participate in the token to equity exchange,

they will be able to sell their ACX for exactly that price. exactly that price. So it makes sense that that would be the new floor for it. So one of the, you know, reasons that they cited for why they were going to or why they were making this proposal is because they said, quote, at current ACX valuations, we believe the across protocol is significantly undervalued. And I wondered if you agreed with that and if you also thought that turning into a private company would give it a more appropriate valuation or if you just generally have a way to, you know, kind of do a quick back of the napkin math on coming up with such valuations?

I don't have a view on whether it's undervalued or overvalued. Typically, we don't have a view unless we've done, you know, many weeks of diligence and have access to all financial information. So I don't have it here. Brian, did you? Yeah, I mean, that's the same. I think like the, what you should maybe look at is like what were the inputs that maybe the team was thinking through as part of that decision. So, you know, if you look at, you know, the token allocation, effectively, you know, 20% sort of belongs to the team and foundation.

25% belongs to the treasury, which technically is, you know, within the rights of the token holders. And then 55% are owned by investors in the public, which are all fully vested. So, you know, if you think about the sort of math, you know, here. Yeah, my view is I'm not exactly sure how much of the tokens are going to convert into equity, but just to make maybe like napkin math, right? Let's just assume that the 55% of all investors, they're the ones that actually have rights to basically the $21 million at that total valuation. Right. So my view there is really they're taking the amount of balance sheet that they have in Treasury. They're probably thinking, hey, like to actually capitalize

this business, in the most like base case scenario, we need X amount of money. And the remainder amount of money that we're allowed to give the token holders based on this base case for us is around like this $20 million number. So in my view, that's probably the math that they were doing. So one of those inputs being the amount of dollars that they have in the treasury. And then the other was also simply just like the price of the token right now. Right. And so, you know, if you look at the 40 announcement and basically the buyout price, the buyout price was higher. And so I think as a token holder, you could probably make the argument that like, hey, it's not like they're, you know, giving us a worse valuation here. They're technically giving us a better valuation. But I think the more broader question, though, is that how do we kind of think about the new entity valuation based on the conversion? Right. So if we believe most of the team and the foundation and the treasury is going to be moving over, then effectively that is, in my view, and some like not the full percentage of people. take the money into the conversion, then effectively it's like an anti-dilution into that company.

And so those people that do get value into the company effectively are able to own more of it, which is like, you know, a good sort of argument that goes against the other fact, which is now that, you know, this vehicle is illiquid. And so therefore, like, there should be some discount to that as well. Okay. Yeah, the, that price, the 4.375 cents or whatever, that was 25% higher than the last 30 days of trading. So I guess like the other, oh, go to Felipe. One really think, quick thing. I don't think this is the case with the cross. I don't know, but I don't think it is. But everything in crypto gets gamed over enough time. The big perverse incentive here that people have is to drop price as before making an announcement.

Because basically the market is going to be happy as it increases the price. and the deal will be perceived as fair. So companies could hide financials, roll in more costs, maybe make statements that make people question the validity of the token. It's very easy to get your price down as a management team of a company. It's very easy. So basically, every company is going to do this equity

to token equity conversion has a bit of a short on their own token, because they can announce conversion at a premium. based on the price the day before. And I think it's just something to watch out for here. Because, again, you know, it's perverse incentives have a way of being really taken to the limit in this industry. Okay. I actually want to add a comment to that, which is true, which is, you know, one of the, one thing that's kind of interesting maybe in this sort of token equity conversion is that there is no details about the equity entity. And I don't think that's out of malice.

I think that's actually more for regulatory reasons because you can't really do a public solicitation of a private investment opportunity. And so as a result, I think they have done enough analysis with their lawyers on what they can and can't say. And they're publicly what's said in the governance form is that the team shares will move one to one. And I think what they're basically saying is that like

there's not going to be some like crazy dilution. But, you know, the fact of the matter is that like you don't know until you actually read the equity opportunity. And so the reason why I think they put this out as a temp check actually is they wanted people to know that they were doing this. And you basically had to signal intent on whether you wanted to see the equity opportunity or not. What I would guess then is that they would self-certify from an accredited investor status. So then they can actually look at the equity opportunity.

So this is one of those things where like in a perfect world, you would have both sets of investment opportunities in front of you as a token holder, whether that's like the cash buyout or whether that's the new equity entity. But I know probably for regulatory reasons, they can't actually show the equity opportunity until these token holders like self-certify that they have enough like across tokens and, you know, they actually want to see what's happening here. So, you know, it's like you can assume like super perverse incentives. You can also assume it from like a regulatory side.

But, you know, it's kind of this thing where like I think we have to kind of just wait you can see on like what the final deal is on the other side of it. Yeah. And the last thing I'll say is we will know if it's fairly valued or undervalued from the market price, you know, once this is in full swing because people who are K-YC and can see it can see numbers will bid this above the 4331 if it is cheap because it's just going to be a cheaper way to buy the equity for VC funds and look at funds. So right now the market signaling that it's not undervalued, signaling that it's not undervalued, seeing that people kind of prefer the cash option by and large, but, you know, we should give some time for the information to flow.

Yeah, that bit that Ryan said about how they're probably trying to figure out kind of like how many people they might get. That makes sense because in the posts, they have a little, you know, less than one minute survey that you, you know, they just want to kind of like gauge interest. And then for the audience who didn't see these details, I just want to call these out because these are, you know, just some of the details that Ryan and Felipe are referencing. So you can exchange your tokens for equity exposure in this across code. They're calling it. Or if you have less than 5 million ACX tokens, then I think you can like get equity in some kind of special purpose vehicle. and then, you know, if you have more than $5 million, you can have direct equity in the C Corp. And then that last other option that I mentioned was you can just get bought out for USC. So one other thing that I want to talk about, and this goes back to the Oom of it, so it's kind of funny because Hart Lamper, who is, I don't know his exact title, but he's basically the head.

he posted on X talking about how the focus for across going forward was going to be agentic payments. And he basically said across, quote, has two more yet to be announced deals that make moving money free for users. Because he talked about how with stable coins he felt like one of the problems was that the user had to pay the fees and that the issuer, because they're making all the interest should be paying the fees for users. And he talked about how he thinks this will be like, you know, just kind of the main way that stable coins are handled from a business perspective in 2026. And he said that, you know, securing these deals, quote, securing these deals requires contracts and out of protocol payments, which are functions that are not well suited for DAOs. So, you know, this, I mean, this is something we keep hearing over and over again.

This is not the first Dow founder to talk about this. But I was just so curious because, like, you know, Stani also mentioned this in a recent essay. So what kind of activity do you think does make sense for a DAO to handle versus a centralized entity? So there's a lot loaded onto the word DAO. That's the thing that makes it hard to discuss. A political entity with multiple stakeholders that debate in public, I think is a very hard sell for business trying to compete in the global financial space. If you're trying to compete with a global fintech company led by people who are really high quality and you're having to get everything through a forum post, it's going to be really hard to compete. And you just mean that from like a competitive kind of privacy strategy perspective, right?

Privacy strategy, but more importantly, the ability to move fast and have leadership, right? It's, you know, DOWs are good at imposing controls. They're not good at moving quickly. And that's what we've seen the number of Dow's and the influence of Dow's decline every year since they were a big topic in 2020 or since 2021. Now, you know, most private companies are led by leaders who push the company forward. That's been the evolutionary outcome of U.S. capital markets and global capital markets is companies are run by leaders. Now, there's one important nuance to that, which is in public markets where most of the market, where most value is created, these leaders have controls. And that's the SEC reporting, 10Ks, 8Ks, quarterly earnings.

There is accountability to your shareholding in public markets. And you need that as well, because what we've seen in this space and in every time where accountability has been loose is that a leader who has the ability to enrich themselves at the benefit of shareholders and no controls, will do so more often than not. And that's been the history of this industry for the past five years as well. So I think when you think about what Dow's

did well and what they did not do well, what they did not do well is the CEO will. You know, when the CEO is having to negotiate with the Dow to make decisions that are core to their job, I don't think Dow has done that well at all. And Stani said then in his post, and that makes sense. And it's been the same experience

for everybody else just had this situation come up, right? how can't negotiate a B2B contract through a Dow in the case of across. Now, where Dow has been really good is accountability. And obviously, Alve had been a great project despite the Dow inefficiency. And a big part of that has been accountability to Alvey tokenholders and Alvey stakeholders. Now, I think there are better ways to handle accountability than Dow's as they are conceived right now. But we absolutely need some way to have leaders of companies be accountable to token holders. or to equity holders, depending on what path they pursue.

Now, Meta-Dow, as the word DAO in it, is a company that's kind of balancing that line where CEOs are allowed to lead their company, but anything that's a board-level decision where you have to replace a CEO, liquidate a company, go through an acquisition, is decided by token holders through a novel governance mechanism. I think we'll see more experience like that,

where the circle or the kind of radius of the CEO is left intact, but everything that has to do with token holder rights and accountability is, is tackled through some Dow type mechanism. Yeah, I think I generally agree with Felipe there. I think the question really is kind of around what is the, like, what exactly do they mean by the transaction or like what do they mean by like deals? in that capacity. And really, it's like two things. One is like you're either trying to raise money from a new investor or you're trying to find an efficient way to spend resources. And I think

generally speaking, in terms of efficiently spending resources, the way that I've seen that work out in Dow's is you either need to ask for every time you want to basically get new resources, or you basically ask for a lot of money up front so that you could do things on your own and like not have to deal with the doubt to like spend resources. What I've generally seen is that yes, like you can go in the direction of trying to ask for like some lump sum up front so that you could spend it because that gets rid of the efficiency problem in some capacity. But you can only judge in retrospect how efficient that use of cost of capital was.

And I think if you ask a lot of token holders, they actually feel like, oh, we feel actually these teams are not good purveyors of capital. They did not spend this capital in like a wise and efficient way. And I think on top of that, or just the worst case scenario is there's just no like audit at all. Right. So in some ways like, you know, in the same way, you know, startups raise money and like they spend money on like hiring and all that kind of stuff and they're free to do that. Ultimately, it is up to the discretion of like the CEO in that perspective. I think my view is actually like token startups are basically the same.

Like once they raise token and they raise cash, like they can kind of do anything with it that they want. It's just a matter of like tapping into the token reserves to like ask for more money and capital. So I think my view here, at least with the cross is I don't know how they're thinking about this agentic space and, you know, whether, you know, they are thinking through an investment or like a cost structure. But my sense is that in either case, right, if you're a VC that is wanting to back a company and the agentic side, chances are you probably want to back an equity company and don't want to touch a token. So they probably have some interest in investors from that side of the world. And they want to bring in those investors in like a future round. And then I think secondly speaking, they probably do want to move quickly with, you know, sort of sharing what would typically be like an equity share with like some company.

But in order to do that, they would probably need to go through a Dow process. And then in doing so, basically like me to ask the Dow to like, you know, approve some money and, you know, reveal like what their product strategy is and who the partner is. And the partners probably don't want all the information out there as well. And so, you know, my view here is like, like I said, it depends on the product and it depends on the category. And, you know, maybe the across product at the end of day is still a bridge. But now they're dealing with different stakeholders who are coming from the AI agentic side. And those people may not actually want to prefer like touching anything token related.

And so to that degree, like I'm willing to give the benefit of that to the team. But it kind of goes back to this idea of like who are the stakeholders, you have? actually trying to bring along for like your next phase of growth. And sometimes that may not actually be like crypto-native people. That might be like other parts of the stakeholder base. All right. So in a moment, we're going to talk about some of the other kind of developments around this tension between tokens and equity, but first a quick word from the sponsors who make this show possible. This episode is brought to you by Adaptive Security, the first cybersecurity company backed by Open AI. As AI becomes

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You can learn more at adaptive security.com. Quick note before we continue with today's episode, Bits and Bips now has its own dedicated home. We're spinning off from Unchained and launching a standalone podcast and YouTube channel focused on the Fed, macro, AI, and how it all collides with crypto. If you want to keep up with our weekly live streams and macro meets crypto breakdowns, make sure you're following bits and bips directly. We won't start publishing until March, but getting set up now means you'll be ready on day one. You can find the new bits and bips channels at unchained crypto.com slash bits and bips.

You can also find us by searching bits and bips on YouTube, Apple Podcasts, Spotify, or wherever you listen. Back to my conversation with Ryan and Felipe. So we brought up AVE at some point. That was the most recent debate over kind of labs versus Dow structures. And that, you know, unfortunately resulted in kind of like a splintering of the Dow. Some of the key groups like BGD and AVE Chan left. You know, so the initial proposal was AVE Labs, you know, suggested having all of its revenues sent to the Avey Dow Treasury

and then like requested that the foundation or sorry, the Dow basically grant them $25 million worth of stable coins plus 75,000 AVE tokens for work. They also thought the foundation should own the AVE trademark and the IP. But generally, like, what did you think of that, like before we get into all the drama and everything that happened, like, what did you just think of that proposal? So that was a Temcheck. We were, I think the Temcheck and the proposal, the Ophoo proposal on the same. when the same idea are both important because Avey has been facing this issue of token versus equity

for a few months now in the liquid markets. You know, Avey is one of the highest quality of businesses in the on-chain space. Most people have a view of a price where they would want to buy this asset. You know, it has that rare quality where it's been able to maintain market share over four or five years now, which is really rare and hard to find in this industry. and it's in one of the most profitable segments, the borough lend segment, that has the most room for growth

as this industry goes mainstream. So people want to own it. I think the problem's always been this token equity issue. And this temp check and the upcoming proposal solved that issue. That is by far the most important thing for us investors of that issue to solve.

There will be no AVA Labs equity or a VARA equity that competes with the token. There will be no second token. All revenues created by the team will go to the Ava token That, again, that was an existential issue for the token. Then there's a matter of the details of the proposal and who's left and who's left and who has left and who stays behind with the other project. I think there's a lot more that can be debated there.

You know, the question is, are they getting too much capital? Should there have been a way to make this work with Mark Zeller or the BDG team? Obviously, that would have been better for everyone if there was a path there. You know, it's very much subject to the specifics of each personality or something you can debate when it comes to the amount of capital being given. But the overall point in the proposal, which was to unify equity and token under one ticker, was extremely important. And I hope it can get done with as little collateral damage as possible. Yeah, you know, I kind of zoom out and think about like the history of these projects. also from like, you know, taking more of a product-oriented view of kind of how we got here.

So, you know, basically, Avey started off as like a token only, right? It was EFland actually back in the day and then they converted it to AVE. And I think for a while it worked because I think the core team worked together under the same umbrella. And even though some of the core team members effectively left, they were all still under the same sort of AVE coalition, right? So whether they were represented under like a different entity name within the DAO, effectively they were kind of all working in some sense of like coordination to execution.

I think where things started to kind of show up was a couple of years ago when the Avara entity was created. And we noticed kind of the AVE sort of products we tried to go beyond just the AVE protocol. So you have things like a wallet product, you had the, what is it, the social product, I believe it was called. And then, you know, they had all these other things that were working on. And I think in that time, it was fine until they actually started to face real competition from new upstarts, specifically Morpho.

And so I think in that regard, they're like, oh, wait, this is the crown jewel. This is the main product. We actually need to focus up here. And I think what came out of it was a realization of a couple things. one is, hey, like, let's not focus on any of these products anymore. Let's just focus on the Ave product. And so I believe, you know, the lens product was sold to another company. And they've kind of like shuttered off a lot of these other things as well.

But I think it was another realization of like, okay, like if we were to ship sort of a new product and innovate and do all those things, do we still have the right business structure to tackle those things, right? And I think the short answer was basically them realizing that no. like we actually need to kind of centralized control under one one sort of brand and so i think the question was then like okay who should own that um how how should we reward these people and then how do we sort of fund this business sustainably so i do think for avae a large part of their risk factor is actually sort of in the rear view mirror now but now it is up to you know stani and the rest of the stewards who are sort of driving the protocol forward to actually see whether they can

sort of compete and continue to innovate. And it does feel like things have just gotten a lot more competitive than that space as well. But did you think that their proposal was a good one, that it makes sense for them to do it that way? Well, I think the net outcome is basically you have one person driving the business and the product going forward. And then the second is like what is basically the economic relationship between the Dow and that team. Some people think it's like too expensive. Other people think it's fairly funded. I don't really have a strong opinion either way. But I think the core goal is like, you know, if you're a business wanting to integrate one of these protocols, you don't want every BD decision to be like, you know, you might talk to

one person, but like, okay, wait, I need to talk to like four or five other stakeholders who all work at different companies and like get him on the phone and then like we come back to you with the proposal. But purely just for like business separation reasons, it delays like doing a deal by like weeks, right? Whereas like if you're just dealing with like one counterparty, you know, one entity effectively, it's just a lot easier to coordinate and like actually win those deals. And my sense is that now because of the like the next growth segment for that space is specifically dealing with enterprises and institutions. Right. So, you know, I was involved in the Coinbase sort of defy-mullet deal that went out. But ever since then now, there's so many of these

deals coming out, right? Yeah, you're talking about with Morpho. Exactly. And I think like, like the counterpart is that they're dealing with are definitely more within like the institutional world sort of the more capital allocator world and I think for those people they need to have a lot more of like a tighter sort of business rhythm yeah yeah and you can see that by I mean morphos in the same business right and they went the exact same route where there's centralized control by the morpho team and then the morpho token solved the equity token problem perfectly where they subsume the equity into a not-for-profit entity that has a mandate to support the token. So they locked themselves basically said, we cannot pay out dividends or do buybacks for equity.

Your investment is safe with us. There's no way for anybody here to make any money through token price appreciation. And eventually token, you know, cash distribution as well, possibly. But the flip side of that is you have to trust the team, right? We cannot take your value from you, but you have to trust us to, you know, have no revenue for as long as it takes for us to compete. You have to trust us to negotiate deals privately and announce them when they're ready. You to trust us to sell, you know, double digits, percentage of the company to Coinbase and Apollo if we think that's necessary.

And you have to trust us to kind of steward this business. And that's a fine, it's a totally fine trade to make um you know as token holders we were happy to make that trade if if we have the proper accountability and security which which morpho does and what you're seeing from alve is then actually following morpho into the same structure again because the other structure just will you can i you know i can i expect zero political like true dows to compete with global fintech companies zero And if I'm wrong, I'll be wrong by one or two. And that's why you see companies like Ave, Morpho, and Unuswap moving this direction.

And they would have moved this direction sooner had it not been for the game, which is kind of the two original sins of the token problem are zero interest rate policy because everything was valued at nonsensical valuations. People thought they could ship tokens with no revenue. And Gensler, which created this equity token split and all this nubus language around these companies. for four years, right? So Ob and Uniswap, both companies that I think we criticized heavily last year for having token equity problems have both come around and unified their token and equity behind the token in both cases because they're no longer fighting with the SEC.

And they can do make a decision that makes the most sense for them as a business and for their investors. Yeah, I think that's really underappreciated the regulatory tax. here. I mean, it's literally night and day, right? I think you, you know, projects that I've spoken with sort of that were building under the previous administration, they literally had to do everything and create all these like things to basically seem like the issuer had no relationship to the token. And so, you know, at face value, it's basically, oh, the teams actually don't care about the token. But even if the teams do care about the token, they had no, like, their lawyers

are basically telling them don't do this under any circumstance. I think under this new regime now, the general climate is just a lot better. But I'm also basically seeing a lot of the legislation being passed and hopefully we'll see like clarity actually sort of crystallize this into law, hopefully. But the idea is that I'm generally seeing founders be a lot more open in terms of their risk tolerance in terms of speaking about their token more openly and actually associating with their token in a real way. And so I think that's actually the primary driver as to why you're seeing all these kinds of like interesting transactions happening that are involving tokens right whether that is like the across token buyout

whether that is sort of a restructuring or the aave capacity or whether that's like a unisoft b-switch and i do think like a lot of the u.s companies especially who are under this sort of equity versus token i think they had that structure put on them through the sort of the VC fundraising sort of environment and apparatus that existed. And then they were effectively handicapped, whether they couldn't really do one or the other. But I think now that's basically been lifted. And so some teams are realizing, hey, like, we should all fully go in on the token, which you've seen with like a un-swap. And then you'll see some teams that are thinking, hey, like, actually given where we are in terms of like the stage that we need to grow into and the

stakeholder base in just the general crypto world seems more institutional, we actually need to go more towards equity. And so some maybe are thinking about, hey, like, let's, you know, basically buy out the token lawyers and bring them into the equity region. And you're seeing it across the space. We're talking about big deals here. But these transitions are happening at a small scale constantly. You know, I can think of five teams in a portfolio company that are either have done this already or are in the process of doing this transition. One from this week is derived, the options protocol.

You know, they've been around for five years. They've always been token holder friendly. But they published an official. release talking about how the token was at the center of their business. There was no competing equity. Everybody was paid in token and basically representing their commitment to the token in all circumstances. And you're seeing a lot more of these releases come out and they really do have weight. So representations by teams like that, you know, they are made with the intention that people can use them in an investment committee to make investment decisions.

And it's not something that you can say lightly. And you know, during the gunswere, you know, people were saying lawyers are advising people against these these posts because because they do have teeth they do have weight um this implies to disclosure protocols like the blockworks token transparency protocol you know if you if you do a write up in those 20 pages um and talk about your token and how you treat your token within your your business and whether your token is this main source of value accrual investors will look at that to make investment decisions and they can bring that up either legally or directly in the future. So these things are quite optimistic about the way this is moving in terms of people of tokens having true rights behind them.

Yeah, yeah, these are all great examples and great points. But let's talk about one that maybe didn't go down so well, which was the controversy around Circles acquisition of Axelar's development team, developer team. And that deal excluded the Axler Network, the Foundation, the AXL token holders. I mean, there was another team that was brought in to manage all of those. But I wondered, you know, what you thought about how that deal played out. And if you had any thoughts on how you would have done it differently or if you thought, you know, that what they did made sense. Yeah.

So let's just zoom out here for a second. This is not the first version of a deal like this where you basically have a labs equity entity. and then you have, you know, basically the token. Most of these projects that were funded in this way, most VCs have exposure to both, right? So they invests into the equity, and then they basically have some sort of convertible structure into owning the token as well.

Now, what usually ends up happening is that the team, the IP, usually sits in the equity entity, and then sort of the token balance sheet and all those things sit within sort of the token entity as well. So, you know, I think if you are somebody that is, looking into acquiring a team or a product or anything like that, chances are there's probably going to be some sort of token structure involved. And there have been M&A deals in the past that actually were able to acquire the equity entity

without having to touch to token. And so I believe Coinbase acquired a company called Ironfish maybe like a year and a half ago to like focus on privacy. I believe they had a token. I believe they also had acquired, you know, a team called Red Wallet, B, B, B, B, and a half which have like a token PRD token. So, you know, Circle acquiring Axelar, I wouldn't put POSDAET as like the only thing. It's like there's basically a string of these types of deals that have been done before.

I think the reality, though, is that, you know, for a lot of these teams, I have yet to see an actual sort of big product or strategic acquisition. So in other words, most of these were actually aqua hires. And so in that capacity, the only thing that the acquire actually wants to touch is the talent and the talent sits under the equity. And if you're a buyer, you're like, hey, like, I can get the equity entity and I could get basically the team. But in order to do this, I actually can't be seen touching the token because as the

acquire, I do not want to face any liability from the token holders because, you know, they could get sued, for example, by some token holder out there that feels like, hey, like, you guys just basically, you know, we're able to take the main developers and the managers of this protocol and like you know effectively no one's really working on this going forward my view is is that I actually think this is kind of a vestige of the past because that was under the regime of like you know you were completely separated from the token as the equity entity and therefore like you know because you gave that language and you gave that expectation in some capacity you can effectively still do you could have done that deal now but I think that in current in the current regime as

Philippine and I've been talking about token holder rights are basically the non-negotiated This is like the main, I think one of the main inputs that founders are really thinking through. And going forward, I can't really, it would be strange and I think it actually would be a lot more negative ROI for a founder to basically try to repeat like what happened with the with the Circle Axler deal in my opinion. Yeah. Also I think my view is that, you know, the more that you actually tie sort of the value of the token to the business and the product and the protocol, if you are actually the acquire and wants to bring that in-house, Now you can't just do the deal without the token because the token is actually the core piece of that equation So I do believe in this world actually where maybe one day these acquires are going to think about hey like how do we bring this in house You can't just like steal the main like you know builder or like the the employees you actually need to deal with the token

holders and that probably looks something actually similar to like effectively a tender offer like it wasn't across except that's in like sort of an asset sale and acquisition perspective Yeah. I Across is the better model, right? So I'm not close to Axler at all. I don't even know the team, honestly. Tenser had a similar acquisition with Coinbase. We were not investors in that either, but basically,

if you've promised anybody that the token will benefit from the business growth, you should do what Accross did and do a tender offer where you're allowed to, where token was allowed to convert to equity or receive cash. And I think the across signal is important for token founders, I think a lot of token founders feel trapped by the business very often, trapped by the token, because they don't want to do anything unethical or kind of, you know, tokens are held by individuals with savings, right? So no, most people don't want to abandon these people and kind of do something that's,

well, mark them forever as an unethical kind of scammer. Across is a good, is a good case study in what you can do, right? And giving people the ability to K-Y-C, get equity, be part of the transaction. Tensor and Axler, you know, I'm not close to XLR, Tensor definitely, is what you should not do, right? Because you are essentially sending a token zero, sending people savings to zero, and if you had represented that the token was the value,

you know, the value of the mechanism for the business, you essentially lied to people, have them invest into your token and have them lose their money. It's been, because of all the guardrails, in the Genssel regime, it's hard for these early teams that are transitioning to be sued because usually they'll have no public language at all, saying the token was the main value accrual instrument. But to the extent that, you know, people have those representations, you won't be able to do these deals going forward without having token holder lawsuits.

All right. So there's just one more specific example I want to touch on before we go to more general questions, which is I saw that the Exchange Backpack is going to to go with this hybrid model where basically they offer equity to long-term stakers of their token. And Armani, Farrante, the founder, wrote on X, quote, as far as I'm aware, this is the first time a user has been able to earn the equity of a company by just using the product. I wondered what you thought of that idea. I don't have a strong view on the backup model. you know generally I don't I don't like having equity and token split but here's the mechanism to convert one to the other

I would prefer them to have just one or the other just equity or just token but aside from that no strong opinion yeah I agree on that I think my view is that they're trying to build optionality into the type of business that they want to build obviously on one side they want to be you know this regulated exchange and I think having sort of a traditional capital structure that reflects that is sort of matches that sort of strategy, but at the same time, they're also trying to do like a retail go to market, which obviously, I think the token direction kind of matches that. And so my view there is they're kind of like trying to build optionality, but, you know, based on the conversation that we've been having, you know, during this hour, like our view is like ultimately like one person is going to lose whether you're the token holder or the equity holder. And I think those things eventually need a merge into one capital structure. The dual models don't trade well. I mean, look at pump that point, right? It's one of the most profitable businesses in the industry. They have a ton of cash value. They are trying to pursue the dual equity token model to preserve optionality.

And they trade, you know, they have like the lowest multiple of any business, you know, above like 10 million dollars of revenue. And the reason why is because people don't trust that they will, that they have a claim to the cash, and they don't trust that they will get the revenues indefinitely. And without saying whether that's right or wrong, it's a legitimate concern from token holders. you know, Pump would trade much better if it only had a token or if it only had equity, you know, but let's say if it only had a token, it would trade much better if they would resolve the token equity problem. And that's been the case for a lot of these businesses.

The market is going to push them in one direction to the other. So I wouldn't be surprised if that having a backpack as well. Huh. Okay. Okay. So I'm so curious what you guys think generally about Dow's. You know, Stani, he wrote in this essay on, X. He described trying to build with a Dow structure as, quote, fighting your own organizational structure every single day. He said, quote, proposals that should take a day can often take weeks of form post, temperature checks, and multiple votes. Meanwhile, your competitor ships and positions themselves against the slow Dow. Dow's also become politicized very quickly, and it's easy

for voting to become about attention, which, yeah, that's an interesting statement. Participants take sides, lean toward the loudest voices, and form political alliances to get their own proposals passed later. Just as large companies end up with managers instead of founders, Dow's end up with politicians. Yeah, all of this was super interesting to me. And then he said, quote, it can often feel like we took the worst parts of corporate bureaucracy and remove the parts that create accountability in the name of decentralization. So what do you think of his remarks there? And I kind of, I kind of I kind of asked this earlier, but still like, like generally, like, what do you think is the future of DAWs? I think that's all true. Everything said, just from, you know, seeing DAWs from the outside participating.

It's, it is, it's a bureaucratic process where having a political instinct can be an asset to people, right? So you want to get retweets, you want to use them in inflammatory language, all the tools. I mean, it's a, it's a government, right? all the tools we see people using government will work in DAO's as well. I think the future of DAO's is a system like MetaDow where the market decides. That's in the meta-Dow structure, you basically create two tokens based on the two decisions that are at hand. And then the business opts in for the one that trades higher. So in the case of something like, you know, the, the ABE proposal we're talking about now,

Stanley would have a proposal, Zaudelaar have a proposal. The market would trade ABE under both circumstances. And then we could opt in for the one that makes the token trade higher. Basically, this is instantiating the token as the objective function for the business, which is important that, you know, US capital markets did that when the Dodds versus four decision was made over. hundred years ago and it was a pivotal moment for US capital markets. We need to do that in internet capital markets as well. But more importantly, it makes it so that investors decide the outcome of businesses based on skin-in-the-game trading decisions. So if I think that

Sony's proposal is better for AVE, I can buy more AVE and that market, that signal can be reflected in the market price and push the market towards making a decision. And if I think that Stani's proposal is worse, I could sell Avey, I could short Avey, I could short Avey under those circumstances. And then you don't have politicians. You don't have kind of, you know, this political lobbying. What you have is, is investor communications where you're kind of pitching your strategy to investors. And sophisticated pools of capital can ultimately end up deciding where the, you know, what decisions are made based on what benefits long-term holders the most. And then would, would you say that like the labs entity could vote, I mean, sorry, could trade,

in that or like they absolutely absolutely because they would be they would first of all they have the most information about proposal so it's an important source of information but also trading means you are buying more contingent on the proposal happening so if you if you want to single say that say a lab's want to single-handly buy pass proposal they'd have to buy 30% of the the supply. And if they do that and pass proposal, they are the ones who stand the most to lose from the proposal passing. So because you have skin in the game as the outcome of the future key mechanism, those people who have the most to lose with the outcome going wrong are the ones that have the loudest voice. And that's very important in these in this in these outcomes.

And we we approximate that in boards by having large shareholders be able to place board members. right? And you can have a pure version of that in private equity where the people who own the whole company make the decisions. You're tying ownership to decision-making ability. And that's a good thing. It's not a bad thing. Yeah, I agree with that. I think like I always kind of, I think this discussion is a little bit sort of predated in a sense because like, you know, the main goal I think right now for this state of the industry is let's not focus on the word Dow, let's focus on the word token holder. And we're really at this point of the industry where we are basically getting a re-rating in terms of the type of investor that actually wants to buy in tokens. Right. Because if you think about most of the activity and growth that's happening in crypto in the past sort of year and a half, you know, driven by like prediction markets and things like hyperliquid, there are risk taking happening, but they're not actually like dealing with tokens directly, right? And so I do think this idea of token holder and token holder rights are becoming more prevalent. And that's really the main goal, right, is can we trust these teams to build products that can actually scale and can we actually underwrite growth here? And I think that's really like the stage

of the industry that we're in right now. Yeah, I think about us as basically going from like Series B to like Series C, Series D if I had to sort of use VC Parlance. And I think sort of in that sort of quest to do that, we're probably still at the stage where you still need to sort of centralized decision-making and product roadmap under the team that has the most information, and is probably the original team that actually built, like, the main protocol, right? And so my view is, though, is that as these sort of teams become bigger and bigger, it probably will get to a point where if they want to launch a second product or a third product under the same sort of, you know, interface or brand, it actually doesn't make sense

to launch another token for that. what might actually make sense is to ask for a budget from the data to do that. And so in that direction, it's kind of like, you know, you're basically mapping ownership of the token and the resources to the amount of, you know, importance that you're giving basically to the second product that may be generating value, which is basically how like traditional corporations exist right now too, but this is at least more fluid and people can at least build in the open. And then they can actually be audited at the open,

which I think is really the sort of power of continuing the Dow structure. But I just think at this point right now where we really need to focus on just like, hey, like, how do we grow? How do we have people believe in tokens again? And how can we sort of enforce this idea of token holder rights? And I think once we do that, then we can get to the second order question of like, okay, how do we have the right controls and transparency around these people? And I say I think both of these things are sort of independent, but eventually they will converge into what I believe is like the end state of like what a public company in crypto would be, which is basically a token at scale. And if you think about, I think, you know, the biggest assets out there, like Bitcoin, like, you know, Satoshi was the issuer, technically, I guess if you want to use that word, but nobody knows who he is, right? And so who's a new voice of Bitcoin, right? And then with Ethereum, too, I think you have Vitalik still showing his soft power within the ecosystem, but it's also a little bit more decentralized. I think for most projects, you know, they're a little bit more earlier stage in terms of just like reach and global scale right now, where they probably don't need to have that level of central as coordination until they can actually scale and get to a point where investors have

confidence like, okay, like this is not going to, they're not going to be outcompetia, like they're not going to go away. And they have like some sort of moat that's going to help them continue in their business value, at which point then they can start to have these discussions around what's the most efficient use of capital. How do we think about the right stakeholder base and how do we sort of, you know, make sure the ecosystem is continuing to thrive and continue to sustain itself? Felipe, do you have a minute to talk about what you think would be like the optimal outcome for either token holders or equity structures in crypto? Yeah. And I'll go back to, you know, it's the same answer. I think I think the meta-doucher should really get to right because you have accountability from day one because you need accountability. Otherwise, giving people money on the internet will lead to theft unless you have accountability. That's kind of an iron rule that that, that, people have learned many times and has been reinforced by this industry over and over again.

So I just think that giving people, you know, no matter whether their early stage or late stage, give people money without control will just not go well on average. And we've seen all, I mean, we've seen so many cases, right, where people, I CEO, raise a lot of money and then take the money and run. Or they move to Bali and stop working, pay themselves private a decade, or they do consulting fee, you know, consulting engagements to design. a brand and get paid $10,000 and buy a house. Like, the surface area for fraud without controls is too big to ever have a situation without control.

But we just need to find a way to impose controls that does not hamper business growth. Because the flip side of that is like the most important companies in the world today are still centralized and led by leaders, right? Amazon, Google, Microsoft, Apple, and Vindia, they have very clear leaders who decide what is happening in that company. that company. They don't have any of this Dow type of like fighting your internal structure every day. So I think whether it's earlier or late stage, you just need to be able to balance both of those things. I think MetaDial is a credible attempt, a very credible attempt to give the CEO operating leeway within the business. And then when it comes to capital allocation or when it comes to budgets or things where theft can be involved, where boards usually get involved in

equity markets, then you submit it to a few target trade. trade, vote, you know, whatever you want to call it, where the token holders have a say. But I think getting that, you know, whether some metadata or somebody else, getting that balance right is critical because I, you know, coming up to the end here, I do want to say tokens are not just kind of equity. There is a true token vision that's true and that the industry is audit around. Like there are only 8,500 public companies for like half the world population, right? And getting a public company, raising through the, raising BC usually means being well connected

in San Francisco or New York. And definitely living in the U.S. for the most part. That's not exactly true, but it's closely true. And the vision of having global capital flows on the internet, global fundraising through ICOs, tokens that you can really design and innovate around. We haven't even scratched to surface there because we have been kind of stuck on this token problem in the mud of the token problem. But it is worth fighting for a good future for tokens.

And I think that something like the metadata system, balancing accountability and balancing the ability to execute is critical to getting us into that next stage or we can focus on the benefits of tokens instead of what bonds of tokens. Yeah, I agree with Felipe there. I mean, you know, I don't know the actual number, but if you look at, let's say, the top 20, you know, most profitable sort of projects in crypto, I would probably argue like at least half of them are like purely on-chain businesses. and those businesses actually have tokens, right? So if you believe, and eventually now that we've sort of figured out the institutional plumbing with like ETFs and digital asset treasuries and those kinds of things, like to me, it's the same outcome for the world where it's like, okay, you're a traditional company,

you have some launching business model, but you basically go public in like the traditional realm. And then in the parallel case, basically you have another business that is also at that stage a level of growth and profitability and revenue, but they just are also represented through like an ETF of the actual underlying token. And I think both are actually like credibly positive outcomes for the space. And that actually would still, in my opinion, like meet the vision of like the original thesis of tokens and like why we did it because ultimately I do think it probably in the long run

is a better form of like fundraising coordination and actual sort of incentive and transparency. All right. You guys, this was such a fun conversation. Thanks so much for sharing. And if you want to shout out any social handles or websites, go ahead right now. You can follow me at Thaya Research on Twitter. Yeah, you can follow me at E underscore L-O-N. So Elon.

Okay. Great. All right. Well, thanks so much for joining. And thanks to everyone for joining this live stream. Thank you.