The internal shareholding ratio of cryptocurrency companies is approaching that of classic startups. Unlike pure equity startups, cryptocurrency startups maintain two capitalization tables. The first is the equity structure table, which is the same as non-cryptocurrency startups. The second is the token cap table: who owns how many tokens. In the early days of cryptocurrency, the convention for the distribution of founder tokens [1] was 80/20 community/internal. Employees, investors, and the foundation responsible for operating the project (internal) retain 20% of the tokens. In the IPO of a classic startup, the equity distribution is the opposite. Insiders own 80%. Why is it distributed like this? The mainstream sentiment was well articulated in the 2020 Messari report on the state of L1s: Projects that distribute tokens to insiders (team, founders, and venture capitalists) at the expense of the community put themselves at a disadvantage. The report continues, “Times have changed, and the ideal ratio is also changing.” Since the report was published, new projects have been increasing the share of insiders. Ethereum was launched nearly 7 years ago with 15% insider ownership. Four years ago, TRON launched TRX at 26%, and Tezos launched XTZ at 20%. In the past two years, a large number of L1s have been launched, ranging from 33% (DOT) to 48% (SOL). Recently, the insider holding rate of FLOW is 58%. It is worth noting that Flow is a subsidiary project of Dapper Labs, which has a different structure from the other companies on the list. Regardless, this trend is broader than a single company. Will the internal ownership of cryptocurrency companies gradually become similar to the structure of listed companies after going public: insiders own 80% of the shares on the day the IPO ends? Most companies sell about 20% at the IPO. The data suggests so. Are there any downstream effects? Let’s look at some selected correlations of these tokens. In short, fewer tokens are circulating – logically, because they are closely held. Second, there is a slight correlation between insider ownership and market value. It seems that the more insider ownership there is, the greater the increase, with no upper limit. Most importantly, the correlation with the token’s performance over the past 12 months is zero, indicating that the market behaves no differently. If this continues, we should expect the token equity structure table of cryptocurrency companies to approach that of classic startups. Are there broader implications? The Messari report continues: But high-end projects of this scale will need to devote more resources to optimizing transparency and community-centered incentives to offset any concerns about centralization. I am curious to delve into whether the activities of developers are related to the genesis token economic model. So far, I have not seen much to support the reversal of this trend, which could make investing in cryptocurrency companies more similar to equity rounds and invite more capital into the ecosystem. As insiders gain greater ownership, employees and investors will receive greater returns. For investors, greater ownership reduces the exit value we take on in our investments. Of course, this comes at the expense of the community. Ultimately, the core issue supporting these distribution decisions is: How much token equity structure does the community need/want to participate on a large scale? We are testing our answers, getting closer year by year. Token distribution on the day of creation. This changes as network participants contribute to the network and receive rewards. In addition, different networks have inflationary and deflationary policies that may change the number of tokens. The App Store model comes to Web3. What I meant by the above is that “the equity structure table of cryptocurrency companies is getting closer to the structure of Web2 startups.” Recently, EVMOS, a Web3 project, has advanced an important innovation for the Web3 ecosystem. EVMOS has implemented Ethereum’s virtual machine on the Cosmos chain (https://evmos.org/). The EVMOS token model innovates on its predecessors by introducing the dynamics of the App Store into Web3. In Apple’s App Store, users pay Apple to access apps, and developers receive a revenue share. This does not happen in today’s Web3, except on EVMOS. When users pay gas fees (transaction fees) to use EVMOS, 50% of the fees go to the developers who develop the apps. Another 50% is rewarded to the validators. Governance token holders can vote to change the 50/50 distribution in the future. Gas sharing rewards developers to write popular applications on EVMOS. Developers promote a healthy L1 blockchain: no matter how sophisticated the technology, the underlying database is not valuable without applications. A stadium without entertainment will not sell tickets. Historically, Web3 companies have paid developers from their funds or a dedicated ecosystem fund to build applications on the chain. Although this technique may initially achieve the same result, developers may not stick around after the check hits the bank (or
