Who Buys a Token With No Legal Protection? Blockworks Co-Founder Attacks Crypto’s Dual Equity-Token Model
Summary
- Michael Ippolito said crypto projects’ dual equity-token structure cannot work properly.
- Ippolito said successful examples of the dual structure are becoming rarer, and investors will apply steeper valuation discounts because of uncertainty.
- He said token holders face a structural vulnerability because they have no legal protections and can be rugged at any time, asking who would buy such assets.
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Michael Ippolito, co-founder of Blockworks, issued a warning about crypto projects that use a dual structure of equity and tokens.
In a post on X on June 26, Ippolito wrote that he had once been relatively neutral on the issue, but no longer believes mixed equity-token structures can work.
The model refers to crypto projects raising money from institutional investors such as venture capital firms by issuing traditional corporate equity, while selling tokens to the public or retail investors. Critics have long argued that the structure inevitably creates conflicts of interest between equity investors and token holders.
Ippolito wrote that successful examples of the model are extremely rare and becoming even less common. While the structure is unlikely to disappear immediately, investors will apply steeper valuation discounts because of the uncertainty, he added.
He also criticized the structural vulnerability facing token holders. "You can be rugged at any time under the pretext of countless exceptional circumstances," he wrote. "Who would buy an asset that offers no legal protection against that?"
"If you are a project issuer, there are only two choices," he added. "Pick one now — equity or tokens — or bleed out slowly and collapse."
Doohyun Hwang
cow5361@bloomingbit.ioKEEP CALM AND HODL🍀