A recent article by a16z titled ‘The End of the Crypto Foundation Era’ has reignited discussions about the role of foundations in the cryptocurrency space. The once-idealized governance model is now revealing structural weaknesses, with its prestige rapidly diminishing.
Eleven years ago, the Ethereum Foundation’s establishment in Switzerland set an early paradigm for crypto project governance. During the ‘multi-chain boom,’ foundations became standard for Layer 1 projects, championing decentralization, non-profit status, and community service as the ‘gold standard’ of blockchain governance.
However, recent cases highlight growing systemic issues. The Arbitrum Foundation faced backlash for allocating ARB tokens without DAO approval, while Kujira’s foundation lost control of its treasury after leveraged operations led to liquidation. The Ethereum Foundation has also drawn criticism for ETH sales and perceived inefficiency.
Governance challenges include:
– Opaque decision-making processes
– Ambiguous power structures
– Weak financial controls
– Insufficient community engagement mechanisms
Notable conflicts include Tezos’ prolonged internal struggles between founders and its foundation, and Cardano’s alleged marginalization of its founder in governance matters.
Behind the scenes, a professionalized ‘foundation architecture’ industry has emerged, with lawyers and compliance consultants offering standardized templates. Critics point to high-salaried directors wielding veto power without deep project involvement.
Market data shows most foundation-led projects have underperformed in recent months, though broader market trends contribute to this pattern. Some top-200 projects are reportedly considering abandoning foundation structures in favor of corporate models, which proponents argue offer greater efficiency and responsiveness.
As regulatory environments evolve and industry dynamics shift, the crypto sector faces fundamental questions about optimal governance structures. The traditional foundation model may require significant adaptation to remain relevant in this rapidly changing landscape.
