🟪 Who owns crypto protocols?

Making token holders feel like owners

Author

Byron Gilliam
March 31, 2025

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“You own the company. That's right — you, the stockholder.”

— Gordon Gekko

Who owns crypto protocols?

Crypto investors have recently sent $590 million to World Liberty Financial (WLF), a Delaware-registered “nonstock” corporation. 

But that hasn’t made them owners. 

This is unusual because when investors send money to a newly registered corporation, they usually do so in return for equity — a legal claim on a corporation’s earnings and assets (which includes the money just received from investors).

In the case of World Liberty Financial, however, what investors get in return is a “governance token” — WLFI — that has no claim on the corporation’s assets, earnings or anything else.

World Liberty Financial is admirably upfront about this.

The terms and conditions of the WLFI token sale make clear that WLFI has no economic rights: “The Tokens do not confer any rights, express or implied, other than [governance] … the Token does not represent or confer any ownership … you will not have any rights to any fees generated by the WLF Protocol or earned by the Company.”

WLF’s lawyers could not have spelled it out for us any clearer than that. 

Still, it’s a little unnerving for a traditional investor like myself to see the proceeds of the token sale described as “fees.”

“The Trump family now has a claim on 75% of net revenues from token sales,” Reuters reported this morning. “The arrangement means the Trump family is currently entitled to about $400 million in fees.”

They might also have called the proceeds “earnings” because, as “nonstock” corporate status of WLF suggests, the WLFI token isn’t stock in a company — it’s a product that the company sells.

In other words, crypto investors have simply sent $400 million straight into the Trump family’s coffers.

The head of that family is the president of the United States — and is famously transactional — so it’s obvious why people might want to send them money.

(Justin Sun, for example, appeared to get an immediate return on his $75 million investment in WLFI when the SEC paused its case against him.)

Less obvious is why crypto investors are willing to invest in the tokens of revenue-generating protocols if, as is usually the case, those tokens don't give them any more rights than they’d get with WLFI.

Why would anyone buy into a business that is under no obligation to share any of its revenue with investors?

The only reason that I can think of is that protocols sometimes use that revenue to buy their own tokens. 

Do the right thing (even if you don’t have to)

In US markets, share buybacks first became common after the SEC legitimized and encouraged them with the adoption of Rule 10b-18 in 1982.

The rule, which provided companies with a "safe harbor" from accusations of market manipulation, arrived just as corporate America was internalizing Milton Friedman’s idea that the primary responsibility of any corporation is to maximize value for shareholders.

This marked a sea-change from the "managerialism" of the 1960s and 70s, when executives typically prioritized empire-building and their expense accounts over capital efficiency and shareholder returns.

In the era before Gordon Gekko had lectured the executives of Teldar Paper in Wall Street, managers often ran companies as if they, not shareholders, owned the company.

Prioritizing stock buybacks might have been the quickest way to correct that behavior because buybacks both increase shareholders’ claims on a company’s earnings and demonstrate that those claims will be honored.

This is even more important in crypto, where tokens have no enforceable claims to either earnings or assets.

For tokens to have demonstrable value then, it has to be embedded in their tokenomics.

And for revenue-generating protocols, that should probably mean buybacks.

Unlike companies, protocols cannot create value for tokenholders by reinvesting profits in M&A (a protocol can’t really buy another protocol) or using it to reduce debt (protocols shouldn’t have any debt to reduce). 

It’s also harder for protocols to reinvest in growth — they often lack capital-intensive operations, so excess revenue has fewer productive uses.

(If you think the protocol you’re invested in should use revenue to incentivize demand, you might not be invested in a good protocol.)

But even where protocols can reinvest profitably, buybacks may still have more value to them because, in crypto, it’s not just about capital allocation — buybacks are also a way to signal that tokenholders will be treated like owners.

That should have immense value in an asset class that’s in dire need of a Gordon Gekko moment — protocols today often treat token holders even worse than companies treated shareholders in the 1970s.

As it happens, the fictional Gekko didn’t have it exactly right when he told Teldar Paper’s assembled shareholders that they owned the company — they didn’t.

Not literally, at least.

In The Shareholder Value Myth, Lynn Stout argues that "shareholders do not, and cannot, own corporations.” 

Instead, “corporations are independent legal entities that own themselves."

What equity investors own, Stout explains, are shares that function as contracts between shareholders and corporations — contracts that grant shareholders limited rights like voting for the board of directors and approving mergers, but not true ownership of a company.

If that sounds like a distinction without a difference to you, it’s probably because US investors have been treated as owners for four decades now.

Token holders, by contrast, still need reassuring on that point — and buybacks may be the best way to do it.

World Liberty Financial will never have to buy back tokens because its token holders don’t expect it — they’re not in it for the earnings.

But most crypto investors are.

So every other revenue-generating protocol should be trying to make token holders feel like owners.

— Byron Gilliam

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