The Value Capture Dilemma in Web3: Transforming Community Engagement through Treasury Management

Web3 has revolutionized the digital landscape, yet it grapples with a significant issue: value capture. Despite the impressive capital generated by many crypto projects, they often extract value from their communities rather than returning it. Venture capitalists and founding teams frequently reap substantial rewards through token sales, while early adopters and community members—who are pivotal for actual adoption—experience diminishing returns. This article advocates for a shift towards community-governed treasury management as a solution to rebalance this dynamic.

Rethinking Value Distribution in the Crypto Space

Historically, the crypto space has operated on an extractive model. Projects often dilute token value by increasing supply through various mechanisms such as grants and incentives, leaving communities burdened with inflation. Unfortunately, revenue generated from gas fees, sequencer income, and application fees rarely returns to those who contributed to a project’s success. The absence of a structured method for distributing value can lead to waning engagement and diminishing loyalty among community members. Increasingly, the industry recognizes the need for novel treasury management practices that prioritize community benefits.

Community-First Approach to Treasury Management

Projects must ethically return value to its community once they achieve a stable and scalable status. The individuals who facilitated early liquidity or built foundational applications deserve to benefit from the success of the project. One effective way to address this obligation is through strategic buybacks. For example, Offchain Labs’ strategic purchase of ARB tokens was initially misconstrued as merely a price support mechanism. However, it actually fostered a constructive relationship between network usage and community value by acquiring tokens based on predetermined parameters. Similarly, Movement Labs’ strategic reserve initiative has committed funds to a transparent buyback program, emphasizing the importance of community-centric financial operations. Every blockchain community should consider adapting similar models for financial accountability.

From Theory to Real-World Application

At the core of community-governed finance is a dedicated governance body that transforms untapped treasury resources into sustainable value. Relying solely on a small team for treasury management can lead to inefficiencies and a lack of accountability. Instead, ecosystems should establish structured committees that include diverse representatives, such as a core foundation and an inclusive council. This governance structure ensures strategic financial decisions are made transparently, allowing the entire community to hold it accountable. Each committee member brings their expertise to the table, while public reporting and access to multisig transactions enhance transparency and collective trust in treasury operations.

Moving Toward Self-Sustaining Ecosystems

The traditional grant model prevalent in crypto has served its purpose in initiating activity; however, there comes a time when these "training wheels" should be removed. Community-governed treasury management stands as a more advanced stage in tokenomics. By implementing transparent value-return mechanisms—ranging from asset buybacks to ecosystem investments—projects can foster self-sustaining systems that provide benefits to all participants. This transition creates a unique form of collaborative economics that is innate to Web3, facilitating inclusive growth and shared success.

Transparency: A Non-Negotiable Tenet

For any treasury management initiative to succeed, transparency is imperative. Projects must explicitly communicate the origins of treasury funds, parameters for timing and execution, and governance mechanisms that promote community oversight. Monthly and quarterly reporting, combined with publicly accessible multisig wallets, can assure the community that every action taken is verifiable. When users see that sequencer revenue or protocol fees are being directed toward buybacks through transparent, on-chain transactions, it fosters a sense of trust in the ecosystem, distinguishing genuine value-return initiatives from those that seek to manipulate market dynamics.

A Call for Industry-Wide Change

Every blockchain project that generates significant revenue and values sustainability should adopt some form of community-governed treasury management. The trailblazers adopting these practices today will set the standard for the future. By creating transparent, community-centric mechanisms for value return, they establish a logical connection between network success and community welfare. While no approach will resolve all the challenges in Web3, these initiatives address a critical gap by linking the success of ecosystems directly to community benefits. It’s time to genuinely appreciate and reward the communities that have driven the success of these networks, ensuring they receive tangible returns governed by their own participation.

By implementing these essential changes, Web3 stands to redefine its future, making the system more sustainable, equitable, and community-oriented.