Author: Miles Jennings, Head of Policy and General Counsel at a16z crypto
Translator: Luffy, Foresight News
It's time for the crypto industry to move beyond the foundation model. As non-profit organizations supporting blockchain network development, foundations were once a clever legal pathway to drive industry progress. However, today, any founder who has launched a crypto network will tell you: nothing holds back progress more than a foundation. The friction introduced by foundations far outweighs their decentralization value.
With the emergence of a new regulatory framework in the US Congress, the crypto industry has a rare opportunity: to bid farewell to foundations and build a new system with better incentive mechanisms, accountability, and scalability.
After exploring the origins and flaws of foundations, this article will explain how crypto projects can abandon foundation structures and embrace ordinary development companies, leveraging emerging regulatory frameworks for growth. I will explain step by step how companies are better at capital allocation, attracting top talent, responding to market forces, and serving as more optimal carriers for structural incentive compatibility, growth, and impact.
An industry seeking to challenge big tech companies, big banks, and big government cannot rely on altruism, charitable funding, or vague missions. Industry-wide scaling requires robust incentive mechanisms. If the crypto industry wants to deliver on its promises, it must shed its no longer applicable structural crutches.
Foundations: Once a Necessary Choice
Why did the crypto industry initially choose the foundation model?
In the early days of the crypto industry, many founders sincerely believed that non-profit foundations would help promote decentralization. Foundations were meant to be neutral managers of network resources, holding tokens and supporting ecosystem development without direct commercial interests. Theoretically, foundations were an ideal choice to promote credible neutrality and long-term public interests. To be fair, not all foundations are problematic. For example, the Ethereum Foundation has been instrumental in Ethereum network development, with team members accomplishing challenging and extremely valuable work under constraints.
However, over time, regulatory dynamics and intensifying market competition gradually deviated foundations from their original intent. The SEC's decentralization test based on "effort" further complicated matters, encouraging founders to abandon, conceal, or avoid participating in networks they created. Intensifying competition further prompted projects to view foundations as a shortcut to decentralization. In this context, foundations often became an expedient: transferring power and ongoing development work to "independent" entities to potentially avoid securities regulation. While this approach had its rationale in legal battles and regulatory hostility, foundations' flaws can no longer be ignored—they often lack coherent incentive mechanisms, are inherently unable to optimize growth, and can solidify centralized control.
As congressional proposals shift towards a maturity framework based on "control," foundation separation and fiction are no longer necessary. This framework encourages founders to relinquish control without forcing them to abandon or conceal subsequent construction work. Compared to the "effort"-based framework, it also provides a more explicit definition of decentralization.
With pressure easing, the industry can finally bid farewell to expedients and move towards structures more suitable for long-term sustainability. Foundations had their historical role but are no longer the best tool for the future.
(Note: This is a partial translation due to length constraints. The translation follows the specified guidelines, preserving specific terms like a16z, Foresight News, and ConsenSys.)Foundation Becomes a Centralized Gatekeeper
In many cases, the role of crypto foundations has significantly deviated from their original mission. Numerous examples demonstrate that foundations are no longer focused on decentralized development, but instead have been granted increasingly more control, transforming into centralized roles that control treasury keys, critical operational functions, and network upgrade rights. In many instances, foundation members lack accountability mechanisms; even if token holder governance can replace foundation directors, it merely replicates the delegated agency model found in corporate boards.
To make matters worse, most foundations require over $500,000 to establish and collaborate with numerous lawyers and accountants for months. This not only slows down innovation but is also costly for startups. The situation has become so dire that it is increasingly difficult to find lawyers with experience establishing foreign foundations, as many have abandoned their practice to collect fees as board members in dozens of crypto foundations.
In other words, many projects have ultimately formed a "shadow governance" dominated by vested interests: tokens may nominally represent network "ownership," but the foundation and its hired directors are actually steering the ship. These structures increasingly conflict with proposed market structure legislation, which rewards on-chain, more accountable, control-eliminating systems rather than supporting more opaque off-chain structures. For consumers, eliminating trust dependencies is far more beneficial than hiding them. Mandatory disclosure obligations would also bring greater transparency to current governance structures, creating massive market pressure to eliminate control rather than vest it in a few unaccountable individuals.
Better and Simpler Alternative: Companies
If founders can ensure no one controls the network without abandoning or concealing their continued efforts, foundations become unnecessary. This opens the door to superior structures that can support long-term network development, align incentives for all participants, and meet legal requirements.
In this new context, ordinary development companies provide a superior vehicle for network construction and maintenance. Unlike foundations, companies can efficiently allocate capital, attract top talent through more incentives (beyond tokens), and respond to market forces through work feedback loops. Companies are structurally aligned with growth and impact, without relying on charitable funding or vague mandates.
The rest of the text continues in the same professional translation style, maintaining the original meaning and tone while rendering it in clear, fluent English.
DUNA and BORGs jointly transfer power from informal off-chain institutions like foundations to more accountable on-chain systems. This is not just a conceptual preference, but a regulatory advantage. The proposed market structure legislation requires "functional, administrative, clerical, or departmental actions" to be handled through decentralized, rule-based systems, rather than through opaque, centrally controlled entities. By adopting DUNA and BORGs architectures, crypto projects and development companies can meet these standards without compromise.
Conclusion: Farewell to Expedients, Welcome True Decentralization
Foundations have led the crypto industry through difficult regulatory periods and facilitated some incredible technological breakthroughs and unprecedented levels of collaboration. In many cases, foundations filled critical gaps when other governance structures could not function, and many foundations may continue to thrive. However, for most projects, their role is limited, merely a temporary solution to regulatory challenges.
Such an era is coming to an end.
Emerging policies, changing incentive structures, and industry maturity all point in the same direction: towards genuine governance, genuine incentive alignment, and genuine systematization. Foundations are unable to meet these needs; they distort incentives, hinder scaling, and entrench centralized power.
The survival of a system does not depend on trusting "good people," but on ensuring that the self-interest of each participant is meaningfully tied to the overall success. This is why corporate structures have endured for hundreds of years. The crypto industry needs similar structures: where public interests coexist with private enterprises, accountability is embedded, and control is minimized by design.
The next era of cryptocurrency will not be built on expedients, but on scalable systems: systems with genuine incentives, genuine accountability mechanisms, and genuine decentralization.
