Venture capital giant a16z crypto challenges the relevance of traditional crypto foundations, arguing they now obstruct progress and decentralization. The firm proposes a new governance model for the blockchain era.
a16z Slams Crypto Foundations for Stifling Innovation and Blocking Decentralization
A leading voice in the cryptocurrency investment space, a16z crypto, has delivered a sweeping critique of traditional crypto foundations, calling for a fundamental shift in how blockchain projects are governed.
In a new blog post published this week, Miles Jennings, a16z crypto’s head of policy and general counsel, declared it is “time for the crypto industry to move on” from the longstanding nonprofit foundation model that has shaped blockchain ecosystems like Ethereum. His comments highlight rising frustration among developers and investors who now view these structures as a hindrance rather than a help.
“These days, some see [the foundation model] as a pricey, clunky setup that messes with incentives, slows things down, and brings in hidden power plays,” Jennings wrote.
Foundations Once Vital, Now “Create More Friction Than Decentralization”
Crypto foundations, often based offshore, were initially designed to promote decentralization, navigate regulatory uncertainty, and distribute development funding without exposing contributors to legal liability. However, Jennings argues that the model has outlived its utility.
While acknowledging that some—like the Ethereum Foundation—have been instrumental to blockchain growth, the post criticizes the broader ecosystem. Foundations, Jennings notes, “create more friction than decentralization” in today’s regulatory and operational climate.
Time for Developers to “Stop Pretending to Disappear”
As U.S. lawmakers begin to shift from an “efforts-based” approach to a “control-based maturity framework” for determining decentralization, Jennings suggests it is no longer necessary for founders to artificially distance themselves from their projects.
“Under the new approach, a founder could continue working on their network without pretending to disappear from it,” he stated. This evolution would eliminate the need for what he calls “convoluted workarounds” like offshore foundations that cost millions to set up and operate.
Lack of Accountability and Market Discipline
Jennings contends that foundations, lacking shareholders and profit motives, spend pre-allocated tokens with “little direct feedback from the market.” This absence of accountability has led to poor capital allocation and weakened incentive alignment.
“Accountability is built into corporate structures,” Jennings argued. “Traditional companies—developer companies, in particular—are better suited to build out protocols and tools. They can hire top talent, allocate capital efficiently, and are bound by market discipline.”
Foundations Acting as Gatekeepers
Rather than serving as neutral facilitators of open development, some foundations have accrued centralized power, controlling “treasury keys, critical operational functions, and network-upgrade rights,” according to the blog post. This undermines the very ethos of decentralization that many in the crypto industry claim to champion.
The legal and tax constraints facing nonprofits often prevent them from launching consumer-facing applications, even when such tools are essential for network growth. “Some foundations are barred from running apps that clearly benefit the chain,” the post says.
The Case for a New Governance Framework
a16z’s new governance framework encourages building decentralized systems from day one, without relying on costly, rigid foundation models. The firm believes future blockchain ecosystems can thrive with corporate-style structures that emphasize flexibility, accountability, and innovation.
As the crypto industry matures, a16z’s critique signals a broader reckoning with the foundational choices that defined its early years. With regulation tightening and demands for transparency increasing, the traditional foundation model may no longer be able to keep up.
Jennings’s message is clear: it’s time to stop clinging to outdated structures and start building for the future.
