It is time to rethink the VC-dominated model of crypto funding.


Venture capital firms are known for dumping tokens and causing price collapses. This problem could be solved by community-based funding models. Opinion Collect this article as NFT. Does the funding space for crypto need to be overhauled? This is just one of many questions that have been raised in the wake FTX’s collapse. VCs promote their portfolios and their tokens, which encourages many retail investors to grab a bag. You might wonder: What else do they have to do? A VC’s sole purpose is to make money for its limited partners. If that is done by dumping on the markets, most people won’t blink an eye. Omar Little, The Wire says that the game is out there and it’s either you play or you get played. Some unscrupulous players go one step further and manipulate prices to borrow against their holdings to make more bets. This increases the industry’s systemic risk. Although it is possible to repeat this process multiple times, if macro headwinds occur, even VC bellwethers could become distressed sellers and have to sell every token in their portfolio. This is what Solana (SOL), which has links to FTX Ventures, and Alameda Research, is seeing. All but the most reactive retail investors end up with tokens worth a fraction of what they paid when VCs dump their coins. What’s the solution? A distributed, community-based funding model will create a stronger market. Projects that attract a wide range of contributors from the beginning, backers who are fairly remunerated, are not susceptible to the single point failure that can result from having one large, often over-leveraged VC bootstrapping operation. The market value of these tokens is not at risk from VCs who are aggressively pursuing their goals. Regular people will buy into projects, which will make it more sustainable. While some will own more than others but no one can bring down the ship. Newer investors have access to tokens at a fair rate, which is a great advantage. The flaws in the existing system do not only affect VCs but also the many early-sale rounds in their participation. Often, project founders receive large early rewards, putting a lot of distance between themselves and the community contributors to which they invariably preach a message of “We’re all here in it together”. While receiving capital from a serious Web3 investor can be a significant moment for startups, what does it mean? How many serial investors are true supporters with a long-term view for the projects they back and are genuine supporters? If a VC fails, it could bring down your project. These sentiments are often forgotten when projects seek funding. It is time for us to think about how crypto projects should be funded. We must be aware of the many drawbacks of typical VC-backed crypto coins as investors. Instead of copying Silicon Valley suits, we need to learn to look at the upsides of typical VC-backed coins. Infinitybloc is his decentralized gig economy platform. He also serves as its CEO. He has a bachelor’s in commerce from Curtin University. This article is not intended to be or should not be considered legal or investment advice. These views, thoughts and opinions are solely those of the author and do not necessarily reflect the views or opinions of Cointelegraph.


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