Crypto’s revolution began with a radical promise: financial systems run on code for communities, not corporations. Yet in a few years, token launches morphed from grassroots movements to corporate pageantry. VCs became the new investment banks and centralized exchange listings the new IPOs. Now, the pendulum is swinging back. It’s time for crypto to rediscover its decentralized soul.
Back to Our Roots
Rewind to 2014: Ethereum’s ICO sold approximately 50% of the initial ETH supply to 8,800 accounts for $16 million. No VCs buying in ahead of time, no “pre-sales” to insiders, and no special exchange agreements. The public sale was transparent and participants were united by optimism for the long-term success of the protocol.
This pattern held for many ICOs that immediately followed. These weren’t just token sales, they were community formation events.
Then everything changed. Twenty-nine ICOs raised $90 million in 2016. In 2017? Nine hundred raised over $6 billion. As they scaled, token launches became increasingly centralized before being (temporarily) brought to their knees by regulators enforcing broken securities law.
The Centralization Creep
Why did token launches become increasingly centralized in 2017? Two reasons.
First, crypto entrepreneurs began adopting the traditional startup playbook: raise from “expert” funds and accredited investors at a discount, then sell to the public later at higher prices after ostensibly “de-risking” the project.
Second, regulatory pressure mounted. The SEC’s enforcement actions against projects like Kik and Bitconnect (the latter of which was outright fraud) sent shockwaves through the industry. Founders, fearing similar treatment, retreated to safer ground: limiting token sales to accredited investors and institutional capital.
What followed was predictable. Projects raised tens of millions in private rounds, leaving only scraps for public sales—if they happened at all. The community-building aspect of token launches diminished, replaced by financial engineering and exchange listing strategies. And the public relationship with the tokens that do launch without taking VC dollars has become almost entirely speculative. Today, as an example, pump.fun users continue to launch thousands of new (purely speculative) memecoins every day.
The Problem with Venture Capital in Crypto
VCs serve an arguably indispensable role in traditional capital markets. But in crypto, they rarely provide meaningful guidance, user acquisition strategies, or operational support. Their primary value-add—acting as a FOMO signal and increasing the odds of a high-profile exchange listing—has limited relevance when the goal is building sustainable, user-governed and owned decentralized networks.
More problematically, VCs contribute to substantial sell pressure once projects list their tokens on public exchanges. The economics are straightforward: buy tokens at steep discounts during private rounds, then begin liquidating once tokens hit exchanges and reach liquidity, frequently before the project has achieved product-market fit.
The reason the model works for traditional startups is that liquidity doesn’t come for many years and VC incentives are therefore more aligned with their portco’s long term goals.
Similarly, the role of centralized exchanges in token launches has evolved from facilitator to gatekeeper. Projects now pay exorbitant listing fees—ranging from tens of thousands to millions of dollars—for the privilege of accessing their trader bases.
Yet beyond liquidity (which decentralized exchanges increasingly provide), what value do these centralized entities add? Many have transformed into toll collectors, extracting value rather than creating it for the projects they list.
The Case for Decentralization
Returning to decentralized token launches offers several advantages.
First, public participants are more likely to become actual users rather than pump and dumpers. In the best case, individuals who connect with a project’s vision, and participate in a public sale are invested not just financially but intellectually and emotionally. These participants hold tokens longer and contribute more meaningfully to ecosystem growth.
Second, public launches create broader awareness. Rather than concentrating tokens among a small group of investors, they distribute them widely—bootstrapping the very network effects that make these projects valuable.
Third, decentralized launches avoid the misaligned incentives that plague the current model. When tokens are distributed fairly, without preferential terms for insiders, everyone succeeds or fails together.
Addressing the Challenges
Of course, decentralized launches aren’t without challenges. They require significant marketing expenditure to reach broad audiences—something that taking VC money can help fund. They also demand careful legal navigation in an uncertain regulatory environment.
However, these challenges are surmountable. Community funding models, grants from existing crypto networks, and new legal structures under a more crypto friendly US administration will facilitate compliant public participation.
The Path Forward
As we look to the future, the most successful token projects will likely be those that embrace decentralization from day one—not just in their technology but in their token distribution. They’ll recognize that a thousand committed community members are more valuable than five VC logos.
The future of token launches isn’t just decentralized because it’s ideologically aligned with crypto’s ethos (though it is). A truly decentralized token launch—where tokens are distributed broadly to actual users without privileged insider discounts or private pre-sales—creates aligned incentives, genuine community, and sustainable network effects.
The most successful projects of the next wave will be those that remember what made Ethereum’s launch special: not the money raised, but the community formed. In returning to these roots, we won’t just be honoring crypto’s past—we’ll be securing its future.
