# The path to decentralization: self-destructing companies

By [The Slow Hunch by Nick Grossman](https://paragraph.com/@nickgrossman) · 2018-07-02

crypto-decentralization, strategery

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In June, the SEC gave some of its [most concrete guidance](https://www.sec.gov/news/speech/speech-hinman-061418) to date that cryptoassets can start out as centralized projects, possibly initially sold under securities laws, and eventually become "decentralized" and thus no longer sponsor-controlled, and no longer sold or transferred under securities laws. It makes sense that a decentralized protocol does not fit the definition of a security.  There's not a clear single issue or promoter (for purposes of reporting, etc); tokens are often generated on an ongoing basis (which would constitute a "continuous offering" and related registration requirements); tokens are generated on a fully peer-to-peer basis in the protocol (potentially implicating independent nodes as transfer agents or broker dealers, or requiring those as middlemen); not to mention how all of the above are complicated by new issues like forking. Of course, all of this leaves some open questions on [what exactly constitutes decentralization](https://coincenter.org/entry/what-could-decentralization-mean-in-the-context-of-the-law), but I am confident we will work through those to come to a usable definition.  For example, "is the network forkable" is one simple (but incomplete) heuristic.  Another is: "would the network continue operating if the initial sponsor went out of business". This second one is perhaps the most concrete, and I believe the the net effect of the SEC guidance is that we will begin to see protocol development companies (the initial "sponsors" of cryptonetworks) set a course to intentionally self-destruct. How this is done, exactly, will remain to be seen. Already we have seen a company / foundation split as one way of setting the protocol in the hands of a long-term custodian that is not the initial sponsor.  Some projects may bake self-destruction into their initial charter (and any associated coin offerings or distributions); others may make self-destruction part of the protocol software development roadmap. But regardless of mechanism, I believe many projects will begin to contemplate their "path to decentralization" -- that is the takeaway from the SEC guidance, and a self-destructing company (leaving behind only an autonomous, decentralized protocol) is the logical result. This is going to be a messy process. For example, the recent launch of the EOS network demonstrated [some of the challenges](https://block.one/news/block-ones-proposal-for-eos-constitution-v2-0/) of handing off a protocol and network to the community.  But luckily we will get to see many more real-world experiments as projects move out of the fundraising phase and into the build->ship->decentralize phase.

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*Originally published on [The Slow Hunch by Nick Grossman](https://paragraph.com/@nickgrossman/the-path-to-decentralization-self-destructing-companies)*