With the U.S. regulatory framework taking shape, the encryption industry is facing a structural turning point: what was once a regulatory safe haven, the "foundation (foundation)", has now become an obstacle to innovation and scaling. a16z policy chief Miles Jennings pointed out in an article that future on-chain governance should no longer require detours and compromises, but should be built on more efficient, more responsible, and better-aligned corporate and smart architectures with market incentives.
The safe harbor of the past, the institutional burden of today.
The foundation model was originally designed with good intentions, aiming to maintain the role of a decentralized neutral entity, allowing founders to promote network construction without violating securities laws. However, after many years of development, the incentive distortions and operational inefficiencies of this structure have increasingly come to light.
Miles Jennings points out in the text:
The foundation lacks shareholder oversight and performance pressure, with a lack of accountability in the use of funds, and organizational goals that are vague and unable to be market-oriented. Ultimately, this leads to slow decision-making, resource wastage, and may even become the actual focal point of centralized power.
( Ethereum Foundation major reorganization, focusing on expanding L1, strengthening Rollup dedicated Blobspace, and optimizing UX )
The three structural flaws of the foundation
He also pointed out the main problems faced by the current foundation:
Incentive Imbalance: The nature of the foundation's operation is "the donation of others' funds", and performance cannot be measured through revenue or surplus. In contrast, a corporate structure can drive efficiency through profit motives and constrain decisions through market feedback mechanisms such as revenue growth and return on investment (.
Legal restrictions on diversified innovation: Most foundations are not allowed to directly engage in commercial activities, even if these activities promote online transaction volume and ecosystem growth. This limits their ability to participate in key areas such as new products, compliant intermediaries, or consumer applications.
Governance failure and centralization. Foundations often hold the keys to the treasury, network upgrade permissions, and strategic dominance, yet lack effective accountability mechanisms. High establishment costs and legal barriers have also forced many founders to adopt opaque "shadow governance" structures.
Foundation Corporateization: Creating a New Type of Builder that Coexists with the Internet
Jennings argues that as the new legislation shifts from "behavior-oriented" to "control-oriented," founders no longer need to pretend to be decoupled from the internet, but can openly use the company for construction, as long as no single entity controls the entire situation. Under this framework, the company can:
Efficiently allocate funds and talent
Accept market testing based on operational results.
Maintain long-term consistency with the healthy development of the network.
In this regard, new tools or systems can also be introduced to ensure that the incentives between the company and the encryption network remain aligned, such as public benefit corporation )PBC(, inflation profit sharing, milestone phase unlocking, and contract guarantees, to establish an ecosystem that balances transparency, fairness, and flexibility.
The new infrastructure replacing the foundation: DUNA and BORG
He further proposed two new governance structures:
DUNA ) Decentralized Non-registered Non-profit Association (: Grants DAO legal status, allowing it to sign contracts and hold assets, but without the need to establish a board of directors or centralized governance mechanisms, enabling the DAO to truly take the lead in everything and to perform performance recourse against the company.
BORG ) Automated Governance Module (: Automatically executes the management functions of the DAO through smart contracts, such as fund allocation, security committee, upgrade mechanisms, etc., making overall governance more transparent, efficient, and accountable.
The combination of the two not only simplifies administrative and legal processes but also constructs a scalable and sustainable governance system for DAOs, which is expected to become mainstream in the future.
)a16z 2025 Technology Trend Predictions: The Future of AI, on-chain, and Digital Identity (
From temporary solutions to sustainable systems
The foundation once played an indispensable role in the early stages of the encryption world, helping teams navigate regulatory uncertainties and gathering talent and resources for the open-source community. However, this model was not designed for long-term development and is difficult to support the grand ambitions of Web3 to challenge tech giants, traditional finance, and government systems.
Jennings's appeal goes to the core: "Decentralization cannot rely on evading substantive control, but must remove the source of control through institutional design."
Future encryption projects must return to the essence of the system and establish a structure that truly allows stakeholders to share the results and bear risks together in order to usher in the next growth cycle.
Is this article suggesting that the foundation is dragging down project development? a16z policy director: The next step for the encryption industry is "corporatization". Originally appeared in on-chain news ABMedia.
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Foundation dragging down project development? a16z policy director: The next step for the encryption industry is "corporatization".
With the U.S. regulatory framework taking shape, the encryption industry is facing a structural turning point: what was once a regulatory safe haven, the "foundation (foundation)", has now become an obstacle to innovation and scaling. a16z policy chief Miles Jennings pointed out in an article that future on-chain governance should no longer require detours and compromises, but should be built on more efficient, more responsible, and better-aligned corporate and smart architectures with market incentives.
The safe harbor of the past, the institutional burden of today.
The foundation model was originally designed with good intentions, aiming to maintain the role of a decentralized neutral entity, allowing founders to promote network construction without violating securities laws. However, after many years of development, the incentive distortions and operational inefficiencies of this structure have increasingly come to light.
Miles Jennings points out in the text:
The foundation lacks shareholder oversight and performance pressure, with a lack of accountability in the use of funds, and organizational goals that are vague and unable to be market-oriented. Ultimately, this leads to slow decision-making, resource wastage, and may even become the actual focal point of centralized power.
( Ethereum Foundation major reorganization, focusing on expanding L1, strengthening Rollup dedicated Blobspace, and optimizing UX )
The three structural flaws of the foundation
He also pointed out the main problems faced by the current foundation:
Incentive Imbalance: The nature of the foundation's operation is "the donation of others' funds", and performance cannot be measured through revenue or surplus. In contrast, a corporate structure can drive efficiency through profit motives and constrain decisions through market feedback mechanisms such as revenue growth and return on investment (.
Legal restrictions on diversified innovation: Most foundations are not allowed to directly engage in commercial activities, even if these activities promote online transaction volume and ecosystem growth. This limits their ability to participate in key areas such as new products, compliant intermediaries, or consumer applications.
Governance failure and centralization. Foundations often hold the keys to the treasury, network upgrade permissions, and strategic dominance, yet lack effective accountability mechanisms. High establishment costs and legal barriers have also forced many founders to adopt opaque "shadow governance" structures.
Foundation Corporateization: Creating a New Type of Builder that Coexists with the Internet
Jennings argues that as the new legislation shifts from "behavior-oriented" to "control-oriented," founders no longer need to pretend to be decoupled from the internet, but can openly use the company for construction, as long as no single entity controls the entire situation. Under this framework, the company can:
Efficiently allocate funds and talent
Accept market testing based on operational results.
Maintain long-term consistency with the healthy development of the network.
In this regard, new tools or systems can also be introduced to ensure that the incentives between the company and the encryption network remain aligned, such as public benefit corporation )PBC(, inflation profit sharing, milestone phase unlocking, and contract guarantees, to establish an ecosystem that balances transparency, fairness, and flexibility.
The new infrastructure replacing the foundation: DUNA and BORG
He further proposed two new governance structures:
DUNA ) Decentralized Non-registered Non-profit Association (: Grants DAO legal status, allowing it to sign contracts and hold assets, but without the need to establish a board of directors or centralized governance mechanisms, enabling the DAO to truly take the lead in everything and to perform performance recourse against the company.
BORG ) Automated Governance Module (: Automatically executes the management functions of the DAO through smart contracts, such as fund allocation, security committee, upgrade mechanisms, etc., making overall governance more transparent, efficient, and accountable.
The combination of the two not only simplifies administrative and legal processes but also constructs a scalable and sustainable governance system for DAOs, which is expected to become mainstream in the future.
)a16z 2025 Technology Trend Predictions: The Future of AI, on-chain, and Digital Identity (
From temporary solutions to sustainable systems
The foundation once played an indispensable role in the early stages of the encryption world, helping teams navigate regulatory uncertainties and gathering talent and resources for the open-source community. However, this model was not designed for long-term development and is difficult to support the grand ambitions of Web3 to challenge tech giants, traditional finance, and government systems.
Jennings's appeal goes to the core: "Decentralization cannot rely on evading substantive control, but must remove the source of control through institutional design."
Future encryption projects must return to the essence of the system and establish a structure that truly allows stakeholders to share the results and bear risks together in order to usher in the next growth cycle.
Is this article suggesting that the foundation is dragging down project development? a16z policy director: The next step for the encryption industry is "corporatization". Originally appeared in on-chain news ABMedia.