Cryptocurrencies have long championed the ideals of decentralization: removing intermediaries, empowering individuals with control over their assets, and creating censorship-resistant systems. Yet, behind this virtuous vision often lies an unexpected reality. Many prominent crypto projects are, in effect, governed by foundations—nonprofit entities that look and act strikingly similar to traditional corporations. This raises an important question: Are these foundations quietly functioning as secret corporations in the digital era?
The Role of Foundations: From Helpers to Power Centers
Foundations initially emerged in the cryptocurrency space to support the development and community growth surrounding a project. The Ethereum Foundation, for example, was established to fund research, back core developers, and promote the ecosystem without exerting direct control over the protocol itself. Many other major projects followed this model—Tezos, Cardano, Polkadot, Avalanche, and Near, among others. These nonprofits were entrusted with managing large holdings of tokens, distributing grants, handling marketing efforts, and navigating legal terrain, all while ideally serving as stewards rather than decision-makers.
However, as the industry matured, the role of these foundations began to evolve—and not always in ways that promoted decentralization. They started actively steering roadmaps, making executive decisions, and becoming the public face of their projects. Foundations began controlling branding, social media, strategic partnerships, and even governance proposals. This created a strange paradox: protocols remain decentralized in theory, managed by communities and blockchains, but in reality, major decisions came from a centralized organization backed by token holders but not always accountable to them.
Examples of Foundation Influence
- Solana: The Solana Foundation plays a central role in directing ecosystem development. It coordinates developer grants, curates partnerships, and manages much of the public narrative. While such coordination isn't inherently negative, it means the foundation's priorities largely determine which projects flourish and how the ecosystem evolves. In times of crisis, such as network outages or controversies, it is typically the foundation, not the decentralized network participants, who manage the response.
- Tezos: Despite having an on-chain voting system, early governance heavily involved entities closely aligned with the Tezos Foundation, like Nomadic Labs. Voting outcomes often mirrored the foundation’s preferences, highlighting how off-chain influence can undermine genuine decentralized governance.
- Arbitrum: In early 2023, the Arbitrum Foundation proposed allocating a significant portion of ARB tokens for its own use, provoking community backlash. The controversy was heightened by the foundation moving tokens prior to any formal vote. This incident exposed the murky boundaries between on-chain governance ballots and off-chain authority, calling transparency and decentralization into question.
The Legal Dimension and Its Implications
Foundations also serve as legal entities providing a protective "wrapper" around crypto protocols. This offers benefits such as clarity around intellectual property, regulatory compliance, and partnership formation. Yet such legal control can become a double-edged sword. Foundations controlling trademarks, treasury funds, or access to development can effectively gatekeep project direction. This creates a form of "decentralization theater"—a facade of openness where decision-making power remains highly centralized behind legal and institutional walls.
Why This Matters: Decentralization at Stake
The fundamental promise of cryptocurrencies is to build trustless, censorship-resistant ecosystems that operate independently of traditional organizational structures like boards or PR teams. When a foundation assumes de facto control, that promise weakens. We have witnessed projects falter when foundations stumble—whether due to legal disputes, misplaced incentives, or internal conflicts—leading to stalled development, loss of community trust, or even the collapse of entire ecosystems.
Emerging Models for True Decentralization
Thankfully, there is no one-size-fits-all blueprint, and some projects are charting new paths to genuine decentralization:
- Optimism is developing a dual-house governance system, one representing token holders and another encompassing long-term contributors and “citizens.” This bifurcation aims to counterbalance institutional capture by distributing decision-making across distinct groups.
- Nouns DAO exemplifies pure on-chain governance with transparent treasury management and no centralized foundation. Every action is proposed, voted on, and executed openly on-chain. While this model can be chaotic and less efficient, it embodies the ethos of decentralization most authentically.
How to Spot "Secret Corporations" in Crypto Projects
For investors and users keen to avoid hidden centralization, consider the following:
- Who controls the treasury and funding decisions?
- Who authorizes governance proposals, and how much influence does the foundation or core team hold?
- Does the foundation handle marketing, partnerships, or communications exclusively?
- Are there clear plans for the foundation to gradually step back and transfer authority to the community?
- If the foundation vanished tomorrow, would the protocol still function independently?
If the answers reveal concentrated power or dependence on a small group, then decentralization may be more superficial than real.
Conclusion
While the concept of decentralized cryptocurrencies offers a transformative vision, the reality often reveals powerful foundations acting as shadow corporations, making key decisions that shape projects’ futures. Recognizing this dynamic is essential for anyone navigating the crypto landscape—whether as an investor, developer, or user. The good news is that lessons learned from early experiments are fueling innovations in governance and institutional design, aiming for a truly decentralized future.
As the crypto community continues to grow, so too will its capacity to build protocols that resist centralization’s gravitational pull. In the meantime, staying vigilant and informed about the role of foundations helps preserve the integrity and promise of decentralized technology.
Have you encountered a crypto project where the foundation seems to be calling all the shots? Or perhaps one that successfully distributes governance in a truly decentralized manner? Share your experiences and insights in the comments to keep this critical conversation going.
By Wolfy Wealth - Empowering crypto investors since 2016
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Disclosure: Authors may be crypto investors mentioned in this newsletter. Wolfy Wealth Crypto newsletter, does not represent an offer to trade securities or other financial instruments. Our analyses, information and investment strategies are for informational purposes only, in order to spread knowledge about the crypto market. Any investments in variable income may cause partial or total loss of the capital used. Therefore, the recipient of this newsletter should always develop their own analyses and investment strategies. In addition, any investment decisions should be based on the investor's risk profile.
