Written by: Cookie
The day before yesterday, the Interop Labs team (the initial developers of Axelar Network) announced that they were acquired by Circle to accelerate the development of their multi-chain infrastructure Arc and CCTP.
In theory, being acquired is a good thing. However, the further details provided by the Interop Labs team in the same tweet have caused a stir. They stated that the Axelar network, foundation, and AXL token will continue to operate independently, and its development work will be taken over by CommonPrefix.
In other words, the core of this transaction is that 'the team is incorporated into Circle' to promote the application of USDC in the fields of privacy computing and compliant payment, rather than an overall acquisition of the Axelar network or its token system. The team and technology were bought by Circle. Your original project is not something Circle is concerned with.
After the acquisition news was announced, the price of the Axelar token $AXL initially surged slightly and then began to decline, currently down about 15%.
This arrangement quickly sparked intense discussions in the community about 'token vs equity'. Several investors questioned how Circle, through the acquisition of teams and intellectual property, substantively obtained core assets while circumventing the rights of AXL token holders.
'If you are a founder and want to issue a token, either treat it like equity, or get out.'
In the past year, similar cases of 'wanting teams, wanting technology, not tokens' have repeatedly occurred in the crypto space, causing serious harm to retail investors.
In July, the Kraken-affiliated Layer 2 network Ink's foundation acquired the decentralized trading platform Vertex Protocol based on Arbitrum, taking over its engineering team and trading technology architecture, including synchronized order books, perpetual contract engines, and currency market code. After the acquisition, Vertex closed its services on nine EVM chains, while the token $VRTX was abandoned. Following the announcement, $VRTX fell over 75% on the same day and then gradually 'went to zero' (currently with a market cap of only $73,000).
However, holders of $VRTX at least have a glimmer of comfort because they will receive a 1% airdrop during the Ink TGE (the snapshot has ended). Next, there will be worse situations where tokens are directly invalidated with no compensation.
In October, pump.fun announced the acquisition of the trading terminal Padre. When the news of the acquisition of Padre was announced, pump.fun also stated that the Padre token would no longer be used on the platform and directly indicated that there were no future plans for that token. Due to the declaration of the token's invalidation at the end of the thread, the token instantly doubled before sharply falling again, and now $PADRE has only a market value of $100,000.
In November, Coinbase announced the acquisition of the Solana trading terminal Vector.fun built by Tensor Labs. Coinbase integrates Vector's technology into its DEX infrastructure, but it does not involve the Tensor NFT market itself or the token rights of $TNSR, and part of the Tensor Labs team will shift to Coinbase or other projects.
The price movement of $TNSR is relatively stable among several examples, being a case of a rise followed by a fall; currently, the price has returned to the level expected of an NFT market token, and is still above the low point before the acquisition news.
In Web2, small companies being acquired by large enterprises in a manner of 'wanting teams, wanting technological intellectual property, but not equity' is legal, and this situation is known as 'acquihire'. Especially in the tech industry, 'acquihire' allows large enterprises to quickly integrate excellent teams and technologies through this method, avoiding the lengthy process of hiring from scratch or internal development, thus accelerating product development, entering new markets, or enhancing competitiveness. Although it is disadvantageous to small shareholders, it stimulates overall economic growth and technological innovation.
Nevertheless, 'acquihire' must also meet the principle of 'acting in the best interests of the company'. The reason these examples in the crypto space make the community feel so angry is that as 'small shareholders', they completely disagree with the project parties in the crypto space acting in 'the best interests of the company', being acquired for better project development. Project parties often dream of listing on the US stock market when they can make big money from the project, while they issue tokens to make money when everything is just starting out or when they are nearing the end (the most typical example being OpenSea). When these project parties make money from tokens, they turn around and look for their next opportunity, leaving past projects only as a note in their resumes.
So, do retail investors in the crypto space have to keep swallowing their broken teeth? Just the day before yesterday, former Aave Labs CTO Ernesto released a governance proposal titled '$AAVE Alignment Phase 1: Ownership', firing a shot to defend token rights in the crypto space.
The proposal advocates that Aave DAO and Aave token holders should explicitly control core rights such as protocol IP, brand, equity, and income. Representatives from Aave service providers, including Marc Zeller, publicly endorsed the proposal, calling it 'one of the most influential proposals in Aave's governance history.'
In the proposal, Ernesto mentioned, 'Due to some things that have happened in the past, some previous posts and comments have shown strong hostility towards Aave Labs, but this proposal seeks to remain neutral. This proposal does not imply that Aave Labs should not be a contributor to the DAO, or lacks legitimacy or capability in contributing, but the decision should be made by Aave DAO.'
According to the interpretation of crypto KOL @cmdefi, the cause of this conflict lies in Aave Labs replacing the front-end integrated ParaSwap with CoW Swap, with the subsequent fees flowing to Aave Labs' private address. Accordingly, supporters of Aave DAO believe this to be a form of plunder, as with the presence of AAVE governance tokens, all benefits should prioritize AAVE holders or remain in the treasury to be decided by DAO voting. Additionally, previously, revenue from ParaSwap would continuously flow into the DAO, and the new CoW Swap integration changed this status, leading the DAO to further believe this to be a form of plunder.
This directly reflects a contradiction similar to that of 'shareholders versus management', and highlights the awkward positioning of token rights in the crypto industry once again. In the early days of the industry, many projects promoted their tokens based on 'value capture' (such as earning rewards through staking or directly sharing profits). However, since 2020, the SEC's enforcement actions (such as lawsuits against Ripple and Telegram) have forced the industry to shift towards 'utility tokens' or 'governance tokens', which emphasize usage rights rather than economic rights. As a result, token holders often cannot directly share in project dividends—the project's income may flow to the team or equity held by VCs, while token holders are left like small shareholders who are powered by love for free.
As in several examples mentioned in this article, project parties often sell teams, technological resources, or equity to VCs or large enterprises, while simultaneously selling tokens to retail investors. The final outcome is that resource and equity holders profit first, while token holders are marginalized or even gain nothing. Because tokens do not possess legal investor rights.
To avoid the regulation of 'tokens cannot be securities', tokens are being designed to be increasingly 'useless'. Because of this regulatory evasion, retail investors find themselves in a very passive and unprotected situation. The various cases that have occurred this year have reminded us, in a sense, that the current 'narrative failure' in the crypto space may not be that people no longer believe in narratives—narratives are still good, profits are still decent, but when we buy tokens, what exactly can we expect?
