A16z-backed startup faces entropy crypto shutdown after failing to reach venture scale

After several pivots and intense experimentation, the team behind entropy crypto shutdown has decided to close the company and return money to backers.

Entropy winds down after failed search for a scalable model

Crypto startup Entropy, backed by prominent investor A16z, is shutting down operations after it failed to develop a business model that was, in its own words, “venture scale.” The firm will return all funds to investors as part of the wind-down. Moreover, the move underscores the pressure facing early-stage crypto ventures in 2025.

Founder and CEO Tux Pacific, who launched Entropy in late 2021, said the team had exhausted viable strategic options and no longer saw a credible path forward. However, Pacific emphasized that investors would be made whole as capital is distributed back.

From decentralized custody to crypto automation

Entropy initially positioned itself as a decentralized custody platform, with backing from Andreessen Horowitz, Coinbase Ventures, and Dragonfly Capital. Dragonfly led a $25 million seed funding round in 2022, signaling high expectations for the project. However, those expectations did not translate into a sustainable commercial model.

According to Pacific, the company experimented with multiple directions over roughly four years before focusing on crypto automation. Over the second half of 2025, the team developed a crypto automations platform that integrated artificial intelligence and aimed to serve as a decentralized alternative to mainstream workflow tools like Zapier.

That said, an initial market feedback process quickly raised red flags. As Pacific explained, the “initial feedback request revealed that the business model wasn’t venture scale,” which effectively closed off the route to building a large, independent company. This realization led directly to the decision on the entropy crypto shutdown and the process to return capital.

Founder steps away from the crypto sector

Pacific described the endgame as a stark personal choice. “I was left with the choice to find a creative way forward or pivot once more,” Pacific said, reflecting on the startup’s journey. After what Pacific called “four hard years working in crypto,” the conclusion was that the team’s best work had already been done.

Moreover, Pacific indicated that it was “time to close up shop” rather than attempt another pivot in an unforgiving market. In parallel with the wind-down, the Entropy founder has decided to exit the crypto space altogether and begin exploring new opportunities in the pharmaceuticals sector.

A difficult year of shutdowns for crypto projects

The closure of Entropy adds to a broader string of failures that has swept across the digital asset ecosystem in 2025. The project joins a cohort of ventures unable to align ambitious technology with sustainable economics. However, this pattern is not limited to infrastructure startups.

In March 2025, Linear Finance, a protocol backed by NGC Ventures, also shut down after prolonged financial strain. A sudden delisting from Binance further undermined its ability to operate, ultimately rendering the project unsustainable and forcing its closure.

Web3 gaming projects also under pressure

The Web3 gaming sector has been hit just as hard. Across the blockchain-based gaming landscape, Ember Sword, an Ethereum-based massively multiplayer online role-playing game, shut down only a few months after launching its early access version. Moreover, its downfall came despite early attention and the broader buzz around Web3 games.

Ember Sword joined other high-profile closures, including Deadrop, Nyan Heroes, and Tatsumeeko, among others. These titles struggled with a brutal funding environment and chronically weak user engagement, which proved difficult to overcome even with strong branding and ambitious roadmaps.

What Entropy’s closure signals for venture-backed crypto

Entropy’s experience highlights a key tension in venture-backed crypto: cutting-edge technology alone is not enough if the underlying business model cannot reach the scale investors expect. However, the decision to return investor capital in full stands out in a sector where many projects dissolve with limited accountability.

The series of shutdowns in 2025 reflects a market resetting expectations after years of easy funding. For founders like Tux Pacific, the end of Entropy marks both a professional turning point and a broader sign that only the most robust crypto models are likely to survive the current cycle.

In summary, Entropy’s wind-down, the pivot struggles, and the broader wave of project closures in 2025 illustrate how venture-driven crypto experiments are being stress-tested by real-world market demands.