A Betrayal, Or Just Business As Usual?
Talk about a gut-punch. Axelar (AXL) token holders woke up Monday to news that had them screaming “scam!” across social media. Stablecoin titan Circle snapped up Interop Labs, the primary developer behind the Axelar crypto bridge. The catch? The deal explicitly cut out the Axelar network itself and, crucially, its $120 million AXL token. Ouch.
Investors piled into AXL, assuming Interop Labs would keep building the project they’d invested in. Instead, Circle cherry-picked the development team, leaving the token holders feeling utterly abandoned. Simon Dedic, founder of Moonrock Capital, didn’t mince words on X: “Circle acquiring Axelar while explicitly excluding the foundation and the AXL token is outright criminal. If not legally, then morally.” Strong words, but perfectly understandable when your investment gets effectively hollowed out.
The market’s reaction was immediate and brutal. AXL had rallied a respectable 45% in the run-up to the announcement, fueled by acquisition rumors. But the moment those pesky details hit—the ones confirming the token was *not* included—the price plunged, erasing every single gain. This isn’t just about a bad day at the races; it’s about a deeper, more unsettling question for the decentralized dream: Who truly owns what, and who gets left holding the bag?
The Blurry Lines: Protocols, Tokens, and For-Profit Firms
This whole debacle isn’t a one-off. It’s a stark reminder of the messy, often misaligned incentives between decentralized blockchain projects and the centralized, for-profit entities that develop them. Remember the Aave DAO spat? Back in December, Aave DAO members and Aave Labs, the for-profit firm behind the lending protocol, had a public spat after a delegate claimed a recent integration diverted potential revenue from the DAO to the dev firm. Sound familiar?
Axelar, a decentralized crypto bridge, has always aimed to allow seamless token and data transfer between different blockchains. Founded in 2020, it raked in nearly $94 million in venture funding, plus another $50 million from an initial coin offering (ICO) in 2022. It certainly had pedigree. Investors saw it as a critical piece of the cross-chain puzzle. But the distinction between “Axelar the protocol” and “Interop Labs the developer” just became a very expensive lesson for many.
For token holders, this separation feels like a bait-and-switch. You invest in a token, betting on the team’s continued innovation and commitment. When the team gets bought out, but the token doesn’t, the value proposition vanishes faster than a bull market rally. It forces us to ask: Are we investing in a decentralized vision, or just a venture-backed tech startup with a fancy token attached?
“Standard Behavior”? A Cynical View of Web3
Not everyone sees this as a crime. Avichal Garg, co-founder of early-stage venture firm Electric Capital, dismissed the outrage on X. “This is standard behaviour,” he said. “No company wants to pay investors if all value is created going forward by the team. It’s up to the CEO/founder to fight for investors.” Garg’s perspective highlights a deeply cynical, yet perhaps realistic, view of how traditional venture capital often operates within the crypto space. Why pay for what you can get for free, or at least cheaper, by only acquiring the team and technology?
It’s worth noting that Electric Capital participated in a strategic $30 million token sale by the Axelar Foundation in March 2023. Yet, Axelar isn’t even listed among Electric Capital’s investments on its website. This raises uncomfortable questions about transparency and accountability. If even your backers don’t proudly display their association, what does that say about the perceived long-term value of the token itself?
This isn’t just some abstract philosophical debate. This is money, livelihoods, and the very trust that underpins the crypto ecosystem. If “standard behavior” means separating the team from the token to avoid paying out investors, then Web3 has a serious PR problem, and a fundamental alignment problem, on its hands.
Axelar’s Decline: A Pre-Existing Condition
To be fair, Axelar wasn’t exactly riding high before Circle came knocking. Once hailed as one of the most promising crypto bridging protocols, it hit an all-time high market value of almost $1.4 billion in March 2022. But that peak was short-lived. Over the past year and a half, the AXL token has plummeted by a staggering 95%, now trading barely above its all-time low.
Slow adoption, early investor profit-taking, and a general lack of significant value accrual had already weighed heavily on the protocol. Was Circle acquiring a struggling project’s brain trust and tech, rather than its entire, floundering ecosystem? Perhaps. It highlights the brutal reality that even with millions in funding and a promising narrative, a project’s token can still lose almost all its value if adoption lags and market sentiment turns. This acquisition, then, isn’t just a standalone event; it’s a dramatic end to a long, slow bleed for AXL holders.
The Hard Lessons For Web3’s Future
This whole saga leaves a bitter taste and some crucial questions hanging in the air. How do projects truly align the interests of their token holders, who provide capital and often governance, with the for-profit firms responsible for development? Will we see more explicit legal frameworks to protect token investors in future M&A deals? Or will this become the new normal, where the team is the valuable asset, and the token is just a speculative gamble that can be discarded?
For crypto traders and Web3 enthusiasts, the Axelar-Circle deal is a harsh wake-up call. Due diligence needs to go beyond just the whitepaper and the team’s reputation. Investors need to scrutinize the legal structures, the funding mechanisms, and the explicit agreements that bind (or fail to bind) development firms to their protocols. Because in this wild west, sometimes the sheriffs buy out the blacksmith and leave the townspeople without a single nail.
