"Woke up to find it's worthless"...What's the real story behind the successive closures of virtual asset projects?

▲ Cryptocurrency decline, virtual asset projects / AI generated image

Virtual asset projects are successively choosing to close down as their token fundraising capabilities weaken and they encounter fragmented structural limitations.

According to a report by Cointelegraph, a specialized virtual asset media outlet, on April 28 (local time), a wave of closures is sweeping across the virtual asset industry this year. Projects in various sectors, from trading platforms to analytical tools, are being affected. In April, Dmail, a decentralized email service, announced the suspension of its operations due to high infrastructure costs and a failure to secure funding. This is a result of the weakening utility of tokens, which prevented the creation of a sustainable structure.

In past bull markets, projects could extend their business life through new token issuance or venture capital support. However, these avenues are now virtually blocked. Roshan Dharia, a virtual asset restructuring advisor and CEO of Echo Base, stated, "Unlike in the past, there is a growing number of cases where projects choose closure rather than recovery." While the virtual asset system has enabled rapid capital raising through tokens, it still lacks a framework for resolving issues when they arise.

Recent closures tend to show a gradual decline rather than a sudden collapse, as in the past. User activity decreases, and existing assets weaken, narrowing the options. Tally, a DAO (Decentralized Autonomous Organization) tooling platform, decided to wind down its business when the governance tool market did not grow as expected. Step Finance also decided to cease operations after failing to secure funding following a hack.

Projects have historically utilized tokens as their primary means of fundraising. However, structural flaws, where token holders do not have clear rights, are becoming apparent in crisis situations. Risk Labs concluded that token and DAO structures have limitations in executing transactions with corporations or institutions. Therefore, they proposed a buyout plan to convert tokens into equity. This is interpreted as an attempt to overcome the limitations faced by the virtual asset model.

Most virtual asset projects lack a clear path to recovery when they face financial difficulties. Unlike traditional corporate bankruptcy procedures, there is a lack of legal mechanisms to negotiate with creditors or restructure capital. Token holders often do not have official claims to assets or cash flows. When liquidity tightens, it often leads to asset sales or closures rather than collaborative recovery.

The virtual asset market is currently experiencing the limitations of token-based governance models and is seeking change. Some projects have begun exploring ways to consolidate ownership and introduce more formal structures. The process of projects with low capital availability and weak foundational strength being wound down is seen as growing pains for the market's maturation. Unless new frameworks are established to overcome structural flaws, the wave of closures is expected to continue for some time.

*Disclaimer: This article is for investment reference only, and we are not responsible for investment losses based on it. The content should be interpreted for informational purposes only.*