Does VC have too much stake in crypto? This blockchain founder thinks investors 'must become mindful of the many downsides of typical VC-backed coins.' (Op-ed by The_JUDii)
need an overhaul? This is one of many questions swirling in the wake of FTX’s downfall: When the prominent exchange collapsed, it left behind a long line of helpless creditors and lenders — including many promising projects dependent on funds promised by Sam Bankman-Fried and company.
The problem starts with a project’s pre-sale/closed sale, which naturally favors the sort of wealthy venture capital firms that are in a position to inject substantial capital, typically in return for significantly discounted tokens. At this juncture, VCs invariably promote their portfolios and the token of choice, causing many retail investors — buoyed by the fact that a reputable name is backing a project — to grab a bag for themselves.
And, of course, the market value of said tokens is not at the mercy of VCs aggressively pursuing their own goals. If regular folk are the ones buying into a project, its lifeblood will be organic: Some will own more than others, but none has the power to single-handedly bring the ship down. What's more, newer investors get access to tokens at a fair market rate.Flaws in the existing system are not exclusive to VCs and the multiple early-sale rounds in which they participate.
We often read about the wisdom of the crowd and the benefits of community governance in crypto. Yet such sentiments are completely forgotten when projects chase funding. It is time to think long and hard about how crypto projects should be financed.
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