Ethereum co-founder: on-chain platform will eliminate venture capital Paradigm, prophecy intensifies market controversy

Joseph Lubin, co-founder of Ethereum, made a significant statement on the X platform, indicating that venture capital firms are merely a necessary tool in the transitional phase of the Ethereum ecosystem. In the future, on-chain investment platforms will allow anyone to invest directly in blockchain projects, completely bypassing venture capital intermediaries. This statement comes as the Ethereum community is embroiled in intense debate due to Paradigm's rising influence.

Venture Capital is a Transition, Not an Endpoint: Ethereum's Strategic Compromise

Joseph Lubin has been discussing some people's concerns about venture capital in the cryptocurrency space. He specifically mentioned Paradigm, one of the largest and most influential investment firms. In a chat on X, Lubin stated: “The purpose of venture capitalists participating is always to make a profit, but they still play a crucial role in guiding mainstream investors into the realm of decentralized innovation.”

According to Lubin, many traditional investors do not understand Blockchain technology at all, or at least do not fully comprehend it. He stated that venture capital firms fill this gap, using systems they are familiar with and understand to review new projects, manage risks, and bring the substantial funds that the Ethereum ecosystem truly needs. Lubin wrote, “We now need venture capital because they are the comfortable bridge for the flow of world capital into our ecosystem.”

This discourse reveals the practical dilemmas faced by the Ethereum ecosystem. Although the idea of decentralization is a core value of Blockchain, in reality, most development teams still require significant funding to maintain operations, pay engineer salaries, and drive technological innovation. The traditional Initial Coin Offering (ICO) model has faced stringent regulations following the 2017-2018 bubble, leading many projects to seek venture capital funding instead. Venture capital not only brings capital but also offers industry networks, strategic guidance, and brand endorsement.

Lubin acknowledged that some people are concerned that the involvement of venture capital may ultimately undermine the entire decentralized system—but he believes this is just a transitional phase. What he wants to say is that Ethereum should not be afraid to collaborate with traditional finance, even if it will ultimately build its own tools to replace traditional finance. This pragmatic stance is not without controversy within the Ethereum community, as purists argue that compromising with traditional finance dilutes the concept of decentralization.

The Triple Role of Venture Capital in the Ethereum Ecosystem:

Capital Bridge: Bringing billions of dollars from mainstream finance into the crypto space, providing the necessary funding for project development.

Risk Filtering: Using traditional due diligence methods to filter projects, reducing information asymmetry for retail investors.

Ecosystem Construction: Accelerate the development of the Ethereum application layer through the synergies among portfolio companies.

However, Lubin's core point is that these functions can ultimately be replaced by decentralized on-chain tools. Venture capital is a temporary necessity, not a permanent fixture. Venture capital is helping to transform crypto innovation into something that traditional markets can understand, but Ethereum is ultimately committed to creating a world where people can invest in blockchain projects without going through venture capital.

on-chain investment platform: the ultimate form of decentralized investment

Looking to the future, Lubin believes that ultimately people will be able to use “fairer on-chain investment platforms” to directly invest in blockchain projects without the help of venture capital. These platforms will allow anyone in the world to participate and will use tokens and smart contracts to bypass the need for large companies and intermediaries. “Soon, we will have better and more accessible on-chain investment platforms with healthy token economics,” Lubin said, “venture capital firms will have to adapt to this.”

This vision is not a castle in the air; there are already some early forms of on-chain investment platforms in operation. DAO (Decentralized Autonomous Organization) is the most typical example, where community members can propose ideas, vote on fund allocation, and automatically execute investment decisions through smart contracts. DAOs such as The LAO and MetaCartel Ventures have already completed millions of dollars in investments, proving the viability of this model.

However, the current DAO investment model still faces many challenges. The unclear legal status makes it difficult for many DAOs to sign investment agreements with traditional companies, the efficiency of investment decision-making is low (large-scale voting often leads to slow decision-making), and there is a lack of professional due diligence capabilities. The “healthy token economics” envisioned by Lubin needs to address these issues, which may involve more complex governance mechanisms, reputation systems, and automated risk assessment tools.

He believes that the strength of Ethereum lies in its independence, transparency, and openness—this allows anyone to contribute and invest here without going through the old gatekeepers. The ultimate realization of this openness will be that retail investors can participate in early project investments with a very low threshold, enjoying return opportunities traditionally limited to venture capital and institutional investors. Tokenization allows equity to be divided into very small units, and smart contracts ensure the automatic execution and transparency of investment terms.

Paradigm controversy ignites concerns over centralization

At the time Lubin made this statement, the Ethereum community was engaged in intense debates regarding Paradigm's rising influence. The debate reached its peak because two top Ethereum researchers recently joined Tempo, a blockchain project supported by Paradigm that focuses on payments and stablecoins. One of those who left to join Tempo is Dankrad Feist, a senior figure at the Ethereum Foundation, while Mallesh Pai, who previously worked at ConsenSys, is now a consultant at Paradigm and will join Tempo full-time in September.

These personnel changes have sparked strong reactions within the Ethereum community. Dankrad Feist is one of the core designers of Ethereum Danksharding (data availability sampling technology), and his departure means that the Ethereum Foundation has lost key technical talent. Mallesh Pai has worked for years at ConsenSys (the company founded by Lubin), and has a deep understanding of the Ethereum ecosystem. The simultaneous transition of both individuals to Paradigm-supported projects has raised concerns among some community members that Paradigm is “poaching” core talent from Ethereum.

Some people in the community are concerned that Paradigm's influence could lead to centralization and allow influential figures outside the community to sway the development direction of Ethereum. Critics point out that Paradigm, as a venture capital giant holding a large amount of ETH and investing in multiple Ethereum projects, may have interests that are not fully aligned with the long-term interests of the Ethereum community. If core developers are absorbed by Paradigm, it could result in the technical roadmap being influenced by commercial interests.

Others believe that the funding from Paradigm will actually accelerate innovation, as it will provide these individuals with more resources to explore new blockchain models. Supporters point out that Tempo focuses on payments and stablecoins, which are precisely the areas where Ethereum needs improvement. The work of Dankrad Feist and Mallesh Pai at Tempo may bring new technological breakthroughs to the Ethereum ecosystem, even if these innovations are initially developed in independent projects.

Core Issues of Paradigm Influence Controversy:

Talent Drain: Core developers leaving the Ethereum Foundation weaken the technical capabilities of the open-source community.

Conflict of Interest: Projects supported by Paradigm may compete with the Ethereum main chain.

Centralized Risk: The control of multiple key projects by a single venture capital contradicts the principle of decentralization.

Lubin stated that he does not think there is anything to worry about—he believes that Paradigm's activities indicate that the Ethereum ecosystem is maturing rather than showing signs of being taken over. From his perspective, the flow of talent between open-source communities, foundations, and commercial companies is healthy, as this flow promotes knowledge dissemination and technology diffusion. As long as the core protocol development of Ethereum remains open and transparent, the influence of individual venture capital firms will not pose systemic risks.

The Dilemma of Ethereum: Balancing Ideal and Reality

The debate about the role of venture capital actually reflects a deeper issue facing the Ethereum ecosystem: how to attract enough capital and talent to compete with centralized rivals while maintaining the ideal of decentralization. Solana has received strong support from FTX and Jump Crypto (although FTX has collapsed), while Avalanche and BNB Chain are backed by venture capital and Binance exchange respectively. If Ethereum completely rejects venture capital, it may lag behind in the speed of ecosystem expansion.

Lubin's position represents a pragmatic middle ground: acknowledging the necessity of venture capital at the current stage, but clearly stating that this is not the endpoint. This discourse provides the Ethereum community with a narrative framework to collaborate with traditional finance without abandoning the ideals of decentralization. The key is to ensure that this collaboration is instrumental and temporary, rather than structural and permanent.

If the future on-chain investment platform can truly realize Lubin's vision, it will completely change the paradigm of startup financing, not only in the crypto space but potentially extending to the traditional startup sector. At that time, the role of venture capitalists may shift from being providers of funds to providers of professional services, with their value derived from expertise and network resources, rather than a monopoly on capital.