Risk Labs, the foundation that built two of crypto’s most widely-used protocols, has proposed handing one of those protocols from a decentralised autonomous organisation to a new, private company.
Founder Hart Lambur explained the rationale succinctly on social media on Wednesday.
“Having a token generally hurts more than it helps,” he wrote.
The proposal concerns Across Protocol, a so-called bridge that allows users to move crypto between otherwise siloed blockchains. Across was the fourth-largest bridge when measured by user deposits on Wednesday.
Across is governed by investors who hold the ACX token. Risk Labs has proposed creating a private company, and converting current investors’ tokens into shares in that company. Alternatively, Risk Labs could buy out ACX holders who are uninterested in shares in the new company, according to the proposal.
The proposal comes amid a crisis of confidence for proponents of DAOs. The digital cooperatives were meant to provide a more democratic way to structure businesses, offering token-gated membership that empowered investors to suggest and vote on ways to improve a protocol.
But many of these so-called governance tokens have languished, and the DAO model has proven controversial, suffering low engagement and claims of “decentralisation theatre.”
Most recently, the DAO that manages Aave, the world’s largest decentralised financial protocol, saw months of bitter infighting that culminated in the planned departure of two prominent service providers.
In its proposal, Risk Labs said its token-centric management model has prevented it from striking deals with other companies.
“Transitioning to a traditional legal entity would meaningfully improve our ability to enter enforceable contracts, structure revenue agreements, and deliver more value to Across stakeholders,” the proposal reads.
The value of ACX doubled after Risk Labs’ proposal was published on Wednesday, jumping to more than six cents per token. That suggested many investors also saw the DAO model as a drag on Across’ fortunes.
Lambur said transitioning to a private company would allow Across to focus on stablecoins and artificial intelligence, two sectors that are expected to boom in the coming years.
According to the proposal, tokenholders could exchange their tokens for shares in the new company on a one-to-one basis.
“All token holders—institutional investors, employees, everyday token holders—are treated the same,” the proposal reads.
But there’s a catch: that option would be limited to ACX holders with more than 5 million tokens, a quantity worth about $30,000 as of Wednesday evening.
Another 100 US-based investors and roughly 500 international investors would be able to swap tokens for shares through a special-purpose vehicle. But that option would also be limited to investors with a certain number of ACX tokens, according to the proposal.
ACX holders who don’t meet that criteria or who aren’t interested in shares would be able to sell their tokens for four cents apiece — a 25% premium on the token’s pre-proposal price.
Risk Labs has also built the Uma protocol, which helps to settle disputes on Polymarket.
