If a bank/VC/institutional whale controls 75% of a cryptocurrency, what’s the point?

The year is 2021. LitChain is a lit startup, soon to debut it’s new coin LitToken (LIT), running off of the Jupithereum (JTH) blockchain. LitChain is planning an ICO and wants to raise as much money as possible, both to help the founders’ early retirement goals and to help build out the LitChain solution. In the early days of 2016 / early 2017, they would have simply just done an ICO and raised $30 million worth of ether (ETH). However, the times have changed. Nowadays, U.S. citizens are allowed to participate in the ICO and VC’s are allowed exclusive rights to pre-sale tokens. There’s ample interest among the public in contributing to LitChain’s upcoming ICO, and they think they can raise $60 million from the public crowdsale token creation event. Additionally, they plan to raise another $60 million from an institutional pre-sale round, led by Whale Capital, a prominent VC. Whale Capital would control half the tokens, while the public would own the other half. There are several scenarios that could result:

  1. the LitChain users use the platform as usual, and token value (LIT vs. JTH) appreciates in value over time as adoption increases
  2. the LitChain has moderate adoption and eventually plateaus.
  3. Whale Capital convinces LitChain to make several key strategic decisions that are antagonistic to the LitChain users’ collective wishes. A group of LitChain users get together and create DankChain, a “better” version of LitChain that is built by the people, for the people. Eventually all LitChain users jump ship, the LitChain project is deemed a colossal failure, and Whale Capital fails to deliver returns to its LPs.

In the new world of decentralized capital, institutional whales likely won’t prevail. But hey, just because people started using Slack, doesn’t mean they stopped using email. Just because people started using email, doesn’t mean they stopped mailing letters to each other.