Funding

Evolution

  • Self funded
  • PoW mining - zcash and other founders reward - rental nicehash etc
  • VC - equity - pre-sale tokens
  • Token distribution - ICO - IEO - bonding curves -liquidity mining - DEX liquidity
  • Patronage by exchanges and other stakeholders
  • PoS rewards

** the graphs are estimations intended to convey the evolution and future projections of funding and organizational structure in crypto.

In the founding days of crypto projects were mostly self funded by creators like Satoshi , DWdollar etc. Once again in recent times we see a rise in self funding due to the comparitively lower cost of launching due to the composability and transparency of contracts on ethereum.

Slowly the industry began using PoW liquidity, block rewards and pre-mines as a source of funding. Due to the trust minimized nature and longterm alignment of block reward funding in projects like Zcash we can expect to see block reward funding on the rise.

Venture capital started financing in equity and then adapted to the token paradigm securing pre-sales and other distribution methods. Now we see combinations od equity and token allocations on the rise once again with a fairly developed ecosystem of marquee firms and angels filling the rounds of exciting projects.

The mastercoin ICO in 2013 heralded the birth of the token distribution methods of raising funding for projects. The token distribution methods have gone through various cycles and are recently on the rise again due the ease of DEX listing and programmability. Purely token distribution methods also skip regulatory concerns for smaller and malicious projects.

Recently large ecosystem holders (exchanges etc) have begun the system of patronage to fund developers working on core protocols. This system of patronage looks on the upswing in economically relevant protocols like bitcoin and ethereum.

With start of economically relevant PoS protocols we can expect PoS block rewards to make up a larger share of funding in the future.

Organization

Evolution

  • Unorganized
  • Foundation
  • Equity co
  • DAOs

In terms of project structure in the early days loosely knit unstructured organizations dominated. Due to the nascency and novelty of crypto projects founders in some cases had extreme centralized control of code repos that they eventually delegated and expanded to the community based on participation and skill.

As token based distribution proliferated with the rise of ethereum, foundations increased delaying regulatory concerns. As venture capital became more dominant traditional heirarchy based equity organizations became more common. There are ofcourse projects that gradually change the nature of their organization structure from traditional organization to a more distributed structure. This evolution of structure based on the stage of growth seems promising considering todays immaturity in voting based DAOs.

Nonetheless we are seeing an uptick in pure DAOs using community first transparent governance. This format of transparent governance is on the rise but the jury is still out on whether it is more effective than a traditional hierarchy based organization. Although DAOs certainly represent a novel experiment in governance which is heavily called for in today’s environment of governance stasis.

Due to the strength of DAOs to

  • form and grow communities and products in an inclusive manner
  • enable low cost legal structures through code
  • enable transparency and auditability
  • enable easy forking to competing projects in case of stasis

we can expect DAOs to increase as a % of crypto project structures.