1/ For years, a hostile SEC forced crypto founders into a broken model: drive all value into equity, not tokens. The result? Incentive misalignment, ineffective governance, and more legal risk. In this post, @jessewldn and I explain why that model failed and how to fix it.

2/ We explain a simple principle for value accrual in crypto: Onchain value → tokens Offchain value → equity Founders following this principle can drive value into tokens and equity without a conflict between the two.

3/ The old SEC handcuffed founders with a legal theory that said “any effort to generate token value = security.” That theory gave rise to ineffective DAO governance and the era of the foundation, which @milesjennings rightly critiqued and declared over:

4/ The question is, what comes next? The answer is, companies can drive value into tokens — without outsourcing to a foundation — as long as the value lives onchain. Tokenholders can and should fully own and control onchain revenue, assets, and infrastructure.

5/ The core innovation of tokens isn’t governance. It’s ownership. Founders should automate everything they can, and DAOs can delegate powers like changing protocol parameters back to companies, as long as DAOs retain ultimate control. Minimize governance, maximize ownership.

6/ What about equity? Offchain revenue and assets — in bank accounts, from service contracts, etc — belong to the companies that own and control them. That's equity value. If founders want to drive value to tokens, it must be onchain and belong to tokenholders from the start.

8/ The appeal of the one-asset model lies in its simplicity. But it does raise regulatory questions under U.S. law. The key is distinguishing it from company-backed tokens like FTT. The difference: tokenholders must have ownership and control, not just reliance on a company.

9/ Regulatory compliance isn't optional. To comply with securities law, companies can’t have the same power and information asymmetries with tokenholders that entrepreneurs have with investors. That's why tokenholders owning and controlling onchain value is crucial.

10/ New developments in U.S. policy may soon validate the proper distinction between tokens and equity. Congress and the SEC are working on legislation and rulemaking that centers on control, not ongoing efforts to generate value. The future is uncertain, but on the way.

11/ There's no one right answer for how to structure tokens and equity — only tradeoffs, as always. We wrote this post to clarify the path forward now that founders have a fresh chance to explore all that tokens can do. Hit us up @variantfund if that's you. [end]