Founder of 6th Man Ventures: Forget the “token vs. equity” debate, what really needs to be trusted?

Author: Mike Dudas , Founder of The Block and Founder of 6th Man Ventures

Compiled by: Ken , ChainCatcher

Whether a "dual-token + equity" structure is feasible does not have a simple or universally applicable answer. However, a core principle is that you must be certain that your team is not only absolutely outstanding but also possesses a long-term vision, committed to building a founder-led, decades-long enterprise-level business, like Changpeng Zhao.

I believe that for application-layer projects that require long-term leadership, token mechanisms are often inferior to equity structures. For example, you can see that many founders of DeFi 1.0 protocols have largely left their projects, and many of these projects are struggling, essentially running in "maintenance mode" by DAOs and other part-time staff. DAOs and token-weighted voting have proven to be poor mechanisms for making sound decisions, especially at the application layer; they lack the speed to make decisions and the "founder-driven" level of knowledge and ability.

Of course, the pure equity model is not always superior to tokens. Binance is a prime example—tokens grant them the ability to offer fee discounts, staking for airdrops, access privileges, and other rights related to their core business and blockchain, features that equity ownership cannot clearly provide.

"Ownership tokens" also have their limitations, and are currently difficult to apply directly within products or protocols. Distributed applications and networks are fundamentally different from traditional companies (otherwise, what would be the point of us in this industry?), and pure equity is clearly less flexible than tokens. While "equity+" type token designs may emerge in the future, this is not the current reality (moreover, the US currently lacks market structure legislation, and issuing pure equity-like tokens with direct value capture capabilities and legal rights still faces risks).

In short, you can imagine a scenario (as Lighter depicts): an equity entity operates on a "cost-plus" model, serving as an engine for the token-driven protocol. In this architecture, the equity entity's goal is not profit maximization, but rather maximizing the value of the protocol's token and ecosystem. If this model works, it will be a huge benefit for token holders. Because you have a well-funded Labs entity (like Lighter with its own token treasury for long-term development), and the core team holds a large number of tokens, there's a strong incentive to drive token appreciation (while maintaining the crypto-native and on-chain nature of the core token design, differentiating it from the structurally complex associated Labs entity).

In this model, you really need to have a high level of trust in the team because, in most current cases, token holders don't have strong legal protections. Conversely, if you don't believe the team has the ability to execute and create value for the tokens they've heavily invested in, why did you even participate in the project in the first place?

Ultimately, it all comes down to the team's capabilities, credibility, execution, vision, and actions. The longer a great team stays in the market and delivers on its promises, the more their tokens will exhibit the "Lindy effect." As long as teams maintain good communication and clearly direct value towards their tokens through buybacks, substantive governance, and utility within the underlying protocol, we will see the best tokens—even those with equity/Labs entities—explode in 2026.