Crypto infrastructure project Yellow, which is building a decentralized clearing and settlement network for digital asset trading, on Friday announced refunded more than $8 million to early investors, in a move that signals a break from the venture capital-led funding model that has dominated the digital asset industry.
The decision, disclosed by co-founder Alexis Sirkia, involved returning the majority of external VC capital while retaining only a small group of investors deemed aligned with the project’s long-term development.
The refunds account for nearly 100% of the initial raise, leaving minimal token allocation in the hands of external venture firms.
The move comes as scrutiny grows over the role of venture capital in token ecosystems, particularly around concerns of misaligned incentives between early investors and broader communities.
Founder Cites Misalignment With Venture Capital Incentives
Sirkia said the decision was driven by a need to protect the project’s long-term vision and maintain alignment with its user base.
“Capital always comes at a cost, typically at the expense of relationships with the community of token holders. We refuse to let that happen at Yellow,” he said in a public statement.
He added that many venture participants were not aligned with the project’s long-term goals, pointing to industry practices such as early selling and hedging strategies that can put downward pressure on token prices and erode trust among users.
The restructuring leaves only a small portion of tokens held by external investors, with the majority now tied to the project’s community, team, and ecosystem participants.
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Shift Toward Community Ownership Model
Yellow said the decision is intended to ensure that ownership and incentives within the network are concentrated among builders and users rather than financial backers.
The project, which has attracted over 500 developers building on its open-source infrastructure, is positioning itself around a model where participation and contribution play a larger role in value distribution.
By reducing reliance on venture capital, Yellow is attempting to address a recurring criticism in crypto markets, where early-stage investors often hold significant token allocations that can later be sold into public liquidity.
Raises Questions Over Future Funding Models
The move highlights a growing debate over whether crypto projects can sustain growth without traditional venture backing.
Venture capital has historically provided not only funding but also strategic support and access to networks that can accelerate adoption.
Moving away from that model could limit those advantages, particularly in a competitive market.
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