The Two Cap Tables of Crypto Companies: What They Are and How They Relate to Each Other

The Two Cap Tables of Crypto Companies: What They Are and How They Relate to Each Other

In the world of cryptocurrency, there are two types of cap tables that play a crucial role in the success of a company. These cap tables are the equity cap table and the token cap table. Understanding the differences between these two tables and how they relate to each other is essential for anyone involved in the crypto space.

The equity cap table is a familiar concept for those who are familiar with traditional companies. It represents the ownership structure of a company and outlines the distribution of equity among its shareholders. The treasury's ownership is typically dictated by the equity cap table and distributed pro-rata across the equity cap table. This means that the ownership of tokens held in the treasury is divided among the shareholders in proportion to their equity holdings.

On the other hand, the token cap table is unique to the world of cryptocurrencies. It represents the ownership structure of a company's tokens and outlines the distribution of tokens among various stakeholders. While the equity cap table focuses on shareholders, the token cap table focuses on token holders. This includes not only investors but also other participants in the network, such as validators and stakers.

One key difference between the two cap tables is the dominance of the community allocation in the token cap table. The community tokens are designed to incentivize network participants, such as validators and stakers, to contribute to the growth and development of the network. These tokens are often distributed to community members in a fair and transparent manner, allowing them to benefit from the success of the network.

Another important element found in crypto cap tables is the treasury. The treasury captures tokens from the foundation's efforts to participate in the community, such as running validators or stakers. This treasury serves as a reserve of tokens that can be used for various purposes, such as funding development, supporting the ecosystem, or rewarding community members.

It is worth noting that most deals in the crypto space are bespoke, meaning that they are tailored to the specific needs and goals of the company and its stakeholders. Investor token ownership rights may take the form of a warrant, which grants equity investors the right, but not the obligation, to purchase tokens at a discounted price to the market in an early round. This allows investors to benefit from the potential upside of the tokens without being obligated to invest at the current market price.

Understanding the relationship between the equity cap table and the token cap table is crucial for anyone involved in the crypto space. These two tables are interconnected, as the ownership of tokens in the treasury is typically determined by the equity holdings of the shareholders. By having a clear understanding of these cap tables, stakeholders can make informed decisions and navigate the complex world of cryptocurrencies more effectively.

To conclude, here are three actionable pieces of advice for anyone involved in the crypto space:

• 1. Familiarize yourself with the concepts of equity cap tables and token cap tables. Understanding the differences between these two tables and how they relate to each other is essential for making informed decisions in the crypto space.

• 2. Stay updated on the latest trends and developments in the crypto space. The world of cryptocurrencies is constantly evolving, and staying informed about new protocols, projects, and regulations will help you navigate the market more effectively.

• 3. Seek professional advice when dealing with complex crypto transactions. The bespoke nature of deals in the crypto space can make it challenging to navigate legal and regulatory requirements. Consulting with experts who specialize in crypto law and finance can help you avoid potential pitfalls and ensure compliance.

In conclusion, the two cap tables of crypto companies, the equity cap table, and the token cap table, play a crucial role in determining ownership and distribution of assets. Understanding their interconnections and the unique elements of crypto cap tables is essential for anyone involved in the crypto space. By staying informed and seeking professional advice, stakeholders can navigate this complex landscape more effectively and make informed decisions.