Original Title: more on dual token + equity models in crypto
Original Author: @mdudas
Translated by: Peggy, BlockBeats
Editor's Note: Amid the recurring discussions on "Are tokens equivalent to equity?" and "Is the dual structure doomed to fail?", this article offers a more restrained judgment, emphasizing that the key lies not in the structure, but in the people. Mike Dudas points out that tokens are not inherently superior to equity, and DAOs have not proven suitable for applications requiring long-term leadership. What truly endures through cycles is a team with long-termism and execution capability.
As the boundaries between tokens and equity gradually blur, the dual structure of token + equity is becoming a common choice for application layer projects. As observed by institutions like Delphi Digital, equity is moving on-chain, and tokens are aligning more closely with equity attributes. Mike Dudas reminds us in the article that whether this hybrid model can succeed ultimately depends on whether incentives are aligned and commitments are consistently fulfilled—this is becoming a watershed moment for application layer projects in the next cycle.
Here is the original text:
There is no simple or "one-size-fits-all" answer to whether the "dual token + equity" structure is feasible. However, there is a core principle: you must genuinely believe that this team is exceptional and possesses long-termism; they are the kind of team willing and able to operate things as a company led by founders for decades.
I would argue that in many cases, for application layer projects that require long-term leadership, tokens may even be inferior tools to equity. For instance, you will see that many founders of protocols from the DeFi 1.0 era have largely distanced themselves from their projects; many projects are now struggling to operate in "maintenance mode" under DAOs or other part-time participants.
It has been proven that DAOs and token-weighted voting are not good decision-making mechanisms, especially in application layer projects—they struggle to make high-quality judgments when quick decisions are needed and rely on "founder-level" knowledge and capabilities.
Of course, the "pure equity model" is not strictly superior to tokens in any sense. Binance is a good counterexample: tokens allow them to offer fee rebates, staking mechanisms for airdrops and permissions, and a range of incentives and rights related to core business and blockchain ecology… these things are difficult to express and achieve clearly through traditional equity.
The so-called "ownership coins" also have obvious limitations: currently, they are hard to truly embed in products or protocols. Distributed applications and networks are fundamentally different from traditional companies (otherwise, why would we be doing this?), and pure equity tools are not flexible enough. In the future, there may be some form of "equity-plus" token, but that is not the reality today; coupled with the fact that the U.S. still lacks clear market structure legislation, launching a "quasi-equity token" with direct value attribution and legal rights remains highly risky.
Regardless, you can imagine a world similar to what Lighter describes: equity entities operate on a "cost plus" basis, serving as the engine for token-driven protocols.
In this case, equity entities do not aim for profit maximization but rather for maximizing the value of the token protocol and its ecosystem.
If successful, this would be an extremely valuable gift for token holders—because you have a well-funded laboratory-type entity (Lighter has a token treasury for long-term R&D), while core participants hold a large amount of tokens, thus being strongly incentivized to drive the growth of token value; and the core token design remains crypto-native, on-chain, and distinct from a relatively independent, more complex laboratory entity.
In such a structure, you must trust the team. Because in most current designs, token holders do not have strong legal rights. But if you do not believe the team can execute and create value for the tokens they also hold in large amounts, then why would you participate in this token in the first place?
Ultimately, it all comes down to the team's capability, credibility, execution, vision, and their previously validated actions. The longer an excellent team stays in the market and continues to fulfill their past commitments, the more their tokens will exhibit the "Lindy Effect."
Assuming the team communicates well and clearly conveys value through buybacks, meaningful governance mechanisms, and the real usability of the underlying protocol, you will see in 2026 that even with equity/laboratory entities present, the best tokens will truly stand out.
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