Why They’re Increasing and What an Orderly Wind-Down Looks Like
The Web3 industry is no longer operating under the same conditions that defined the previous cycle. The environment that enabled rapid formation, long runways, and loosely structured foundations has changed materially.
Many of the ideologists, speculators, and short-term participants that shaped earlier market behavior have exited. What remains is a smaller, more pragmatic ecosystem focused on execution, sustainability, and accountability. In this environment, projects that were built for perpetual growth without durable foundations are increasingly confronting hard operational realities.
As a result, the number of foundations and token issuers entering distress or considering formal wind-down is expected to rise significantly.
This is not an anomaly. It is a natural market correction.
Why Foundation Liquidations Are Increasing
A large number of foundations were established during periods of excess optimism, often with assumptions of continued expansion, sustained token demand, and indefinite community engagement. As those assumptions fall away, many entities are discovering that their structures are no longer fit for purpose.
Common drivers of liquidation include:
- Treasury depletion without sustainable inflows
- Loss of developer activity or ecosystem participation
- Governance paralysis or inactive boards
- Token models that no longer support ongoing operations
- Operational overhead that exceeds remaining runway
In these circumstances, continuing operations can create unnecessary risk and cost. An orderly liquidation is often the most responsible outcome for directors and stakeholders.
What Liquidation Actually Involves
Liquidation is a structured governance and operational process, not simply the cessation of activity. For foundations and token issuers, it requires careful coordination across multiple dimensions.
This typically includes:
- Appointment of an experienced independent or interim director that specializes in liquidations to oversee the process
- Review and wind-down of service provider and commercial agreements
- Assessment of current assets and outstanding liabilities
- Treasury reconciliation across fiat and digital assets
- Execution of formal governance actions in line with the foundation’s constitutional documents
Handled poorly, liquidation can expose directors to unnecessary risk and create friction with counterparties. Handled correctly, it provides clarity, closure, and protection for all parties involved.
How Mugen Supports Foundation and Token Issuer Liquidations
Mugen supports foundation and token issuer liquidations in collaboration with Verdant, which can provide independent and interim distress directorship where required.
Mugen’s role is focused on execution and coordination, including:
- Supporting interim distress directors across governance and operational matters
- Managing the orderly wind-down of service provider and commercial agreements
- Coordinating accounting reviews of assets and liabilities
- Assisting with treasury documentation and reconciliation
- Ensuring governance actions are properly documented and defensible
The objective is not speed for its own sake, but a controlled, well-documented process that minimizes risk and avoids unnecessary escalation.
A Necessary Function of a Maturing Market
As the industry evolves, responsible wind-downs are becoming as important as responsible launches. Liquidation is not a failure of decentralization. It is part of building a healthier, more durable ecosystem.
Foundations that address distress early preserve optionality and reduce downstream risk. Those that delay often compound the problem.
Mugen’s liquidation services exist to support projects through this phase with clarity, structure, and accountability when continuation is no longer the right path forward.
