Insight: Tokens should capture on-chain value, while Equity should capture off-chain value

On December 24, Jake Chervinsky—Chief Legal Officer at crypto venture capital firm Variant Fund—took to social media to note that the debate over tokens versus equity is just getting started. Many crypto projects launched during Gary Gensler’s tenure as SEC chair, when intense regulatory pressure pushed development teams to funnel nearly all value into equity rather than tokens. Now, as the policy landscape shifts and new opportunities emerge, understanding how tokens and equity can (or can’t) complement each other will take significant time and experimentation—and that experimental phase is underway right now. “I don’t have a specific take on Aave’s situation, but I want to stress one point: clarity is always paramount. Token holders need to clearly know what they own, what they can control, and what they can’t. The design space for capturing token value is far broader than traditional equity; I don’t think a standardized token model (like stocks) will emerge anytime soon. We believe tokens should carry on-chain value, while equity should hold off-chain value. The core innovation of tokens is self-sovereign ownership of digital assets—they let holders directly own and control on-chain infrastructure without relying on off-chain intermediaries. Off-chain value is different: token holders can’t directly own or control off-chain revenue or assets, so in most cases, that value should belong to equity. That said, other models may work too—some projects could opt for a single-asset model with no equity at all; others might treat their tokens as tokenized securities and comply with future SEC rules for this market.”