Omid Malekan, an author and professor at the Columbia Business School, has expressed concerns that a tokenomics practice among newly launched layer-1 blockchains like Aptos and Celestia may eventually draw the attention of regulators and face crackdowns.
This “Insider” Practice By Crypto Projects Like Aptos And Celestia Is Unfair
Taking to X on January 7, Malekan noted the habit of projects allowing insiders with locked tokens to stake and earn rewards. Though the professor acknowledges that more staking can enhance network security, allowing “insiders” to stake and earn rewards on their locked tokens is “unfair” because retail token holders must pay full price for the assets.
Typically, insiders, most of whom tend to be early adopters participating in seed sales or other funding rounds, receive token prices at massive discounts, giving them an “advantage,” even an opportunity to become whales or hold massive amounts of the asset. It is especially so if the project becomes a market leader commanding huge valuations.
Malekan also expressed concerns about allowing insiders to sell their staking rewards immediately, sometimes years before their tokens vest. “This is just wrong,” the professor protested on X, adding that this practice is a “backdoor unlock that allows privileged insiders to dump on ordinary users for a quick profit.”
In light of what new projects, including Celestia and Aptos, tend to do, the professor advises upcoming and existing platforms to adjust their tokenomics strategy. Specifically, their goal should prioritize long-term sustainability and a path to neutrality, chiefly for all token holders, rather than rewarding insiders and early investors.
The author says there are “many red flags” and is “chronologically disappointed” with what’s happening in the current setup.
SEC And Other Regulators May Soon Step In
If these projects fail to address this concern, the professor warns that regulators, like the strict US Securities and Exchange Commission (SEC) and others, will likely intervene. This is noteworthy, considering that most agencies, especially the SEC, have been careful in their commentary of altcoins besides Bitcoin (BTC).
Some SEC officials have clarified that only Bitcoin is a commodity. However, in their assessment, the rest may be classified as securities under their preview.
To emphasize the importance of this classification, which could seriously impact staking and, by extension, network security, Gary Gensler avoided answering questions as to whether the world’s most capitalized altcoin, Ethereum, is a security or a commodity like Bitcoin.