The End of the Encryption Foundation: Towards a More Efficient Decentralization Architecture

The encryption foundations were once important tools for promoting the development of blockchain networks. However, with the development of the industry, they have gradually become major factors hindering the Decentralization process.

With the emergence of a new regulatory framework in the U.S. Congress, the encryption industry has encountered a rare opportunity: to abandon the encryption foundation model and adopt a mechanism with clearer responsibilities and greater scalability to rebuild the ecosystem.

The emergence of the encryption foundation model stems from the early founders' idealism of Decentralization. They were designed as neutral managers of network resources, aiming to avoid interference from commercial interests by holding tokens and supporting ecosystem development. However, as the regulatory environment changed and market competition intensified, this model gradually deviated from its original intention.

The encryption foundation model has many structural flaws:

1. Lack of effective interest coordination mechanisms
2. Unable to achieve scalable growth optimization
3. Ultimately forming new centralized control

With the proposal of a new regulatory framework based on control, the illusion of separation for crypto foundations is no longer necessary. The new framework encourages founders to relinquish control while still being able to participate in the development, and provides clearer standards for Decentralization.

The encryption foundation has many problems in terms of incentivizing collaboration. The lack of profit motives leads to a lack of clear feedback mechanisms, direct accountability, and market constraints. In contrast, corporate structures are built with accountability mechanisms, constrained by market laws, and can allocate resources and optimize benefits more effectively.

The encryption foundation also faces legal and economic constraints. They typically do not have the authority to develop peripheral products or engage in commercial activities, even if these activities could significantly benefit network development. This limitation severely hinders the diversified development of the ecosystem.

In terms of operational efficiency, the structure of encryption foundations often leads to artificial fragmentation of team collaboration, resulting in efficiency loss and a decline in product quality.

What is even more concerning is that many cryptocurrency foundations have gradually evolved into centralized gatekeepers, controlling treasury keys, critical operational functions, and network upgrade permissions, which is contrary to the original intention of Decentralization.

In comparison, conventional development companies provide a better vehicle for the ongoing construction and maintenance of the network. These companies are able to allocate capital more efficiently, attract top talent, respond to market demands, and possess stronger growth potential and influence.

In order to address the potential issue of incentive misalignment that may arise from the company structure, the following tools can be used:

1. Public Benefit Corporation (PBC) Structure
2. Network Revenue Sharing Mechanism
3. Milestone Attribution Mechanism
4. Contract Guarantee Terms
5. Programmatic Incentive System

Two emerging solutions - Decentralization Non-Profit Association (DUNA) and Cybernetic Organization (BORG) tools - provide an efficient pathway for implementing these solutions.

DUNA grants DAOs legal entity status, enabling them to enter into contracts, hold assets, and exercise legal rights, while avoiding the complex structures and centralization issues of traditional encryption foundations.

BORG, as a technology for autonomous governance and operation, enables DAOs to migrate the "governance convenience" originally handled by encryption foundations to run on-chain, increasing transparency and accountability.

With the emergence of new policies, the transformation of incentive structures, and the maturation of the industry, the encryption industry is developing towards genuine governance, substantial collaboration, and systematic operations. The future encryption ecosystem will be built upon a scalable system that possesses real incentives, real accountability, and real decentralization.