“ShapeShift has begun decentralizing,” the Colorado-based exchange’s CEO, Erik Voorhees, said in an announcement on Wednesday detailing the company’s decision to dissolve the corporate model and evolve into a decentralized autonomous organization (DAO). 

The disclosure lit a fire under ShapeShift’s governance FOX token, sending its price higher by over 300% to $1.16 in a matter of hours. And while the cryptocurrency has retraced to $0.55 in the past 24 hours, it’s still up almost 200% this week – a stellar performance considering the broader market lull. 

Analysts stand divided on whether the rally represents an ever-intensifying search for yield or investors cheering ShapeShift’s early-mover advantage as a DAO.

“The FOX token moved higher because people bought the token to provide liquidity in the new FOX/ETH pool to receive liquidity provider tokens,” said Nick Hotz, senior analyst at the U.S.-based investment management firm Arca. 

Read more: Voorhees Applauds Crypto’s Hyper-Capitalism as ShapeShift Goes ‘Gray’

ShapeShift was scheduled to start its initial liquidity mining program Friday. The program allows FOX holders to provide liquidity on the decentralized exchange Uniswap v2 and stake their liquidity provider tokens in the ShapeShift Staking Rewards contract for a proportional share in 15,768,000 FOX tokens that will be distributed over the following three months. 

Hotz told CoinDesk the program was paying a ridiculously high annual percentage yield (APY) of 20,000% on Wednesday. While the APY has slipped below 1,100% since then, it is still well above the yield offered by liquidity pools of the top decentralized finance (DeFi)-protocols like Venus, Curve, SushiSwap, according to CryptoCompare. The ultra-high returns may have enticed traders into buying the FOX tokens.

A DAO giveaway like the FOX airdrop has several advantages over traditional market initial public offers and may have attracted some value buyers. 

“ShapeShift users will become financially invested in the success of the project, incentivized to use the platform more frequently and recruit friends,” Arca’s Hotz said. “In comparison, IPO investors don’t have a voice in the companies’ decision-making unless they purchased stock. They have little incentive to evangelize for the company.” 

ShapeShift has earmarked extra tokens for paying people to use its products, incentivizing further customer acquisition, a feature never available to initial public offering subscribers.

Dennis Hui, a DeFi portfolio manager at DAO Ventures, voiced a similar opinion, adding the price rally also shows “everyone wants the piece of an exchange” that has already established a niche. 

“ShapeShift has existed as a business for many years, has been generating revenue and is a leader in decentralized ownership,” Hui said in a LinkedIn chat. “So it is very different from many regular DAOs who only set up operations in the past year.”

Denis Vinokourov, head of research at Synergia Capital, said FOX’s reaction to ShapeShift’s decision reflects markets’ craving for a DAO – a democratized decision-making system using cryptocurrency and blockchains. 

While the decentralized finance space has seen explosive growth over the past 12 months with an influx of venture capital, achieving complete democratization has proven to be challenging. 

“DAO is a great idea on paper, but turning that into reality by unwinding various links to the foundation has proven difficult to achieve,” Vinokourov said. “The significant influence of venture capitalists over decision making has been particularly highlighted during the recent Uniswap approval of the $20 million education fund.”

Read more: DeFi Gets Proactive About Policy Thanks to a $20M Grant From the Uniswap Community

Recently, a DeFi education fund promoted by Harvard Law’s Blockchain and Fintech Initiative requested and received 1 million UNI tokens (the native coin of Uniswap) from the decentralized exchange’s treasury. Per the Reddit post, most of the Uniswap community opposed the idea of granting approximately $17 million, as of this writing, to the DeFi fund. However, the proposal was approved based on the votes of a few large UNI token holders. 

“Almost the total margin of victory came from the proposer itself and Penn Blockchain, which is sponsored by [venture capital fund] a16z and helped write the [World Economic Forum] report with several of the board members who will now hand out the UNI that left the treasury,” one of the Uniswap community members called “hlspunk” noted, according to Decrypt. 

The episode raises questions about decentralized token-based governance when large holders call the shots and probably explains the market’s reaction to ShapeShift’s plans to decentralize itself out of existence via one of the largest airdrops in history. 

As CoinDesk’s Brady Dale noted, “Many companies in crypto build a decentralized protocol but leave a business standing that takes part in creating profit atop their blockchain creation (case in point, Compound Labs just launched Treasury to do precisely that).”

ShapeShift, however, is going a step further by airdropping 340 million FOX tokens to all past users of the exchange (around 900,000 addresses) and 120,000 addresses on several well-known DeFi protocols.

“This is why the reaction by ShapeShift’s token has been so dramatic after it took steps to become a DAO,” Vinokourov said. “PR stunt or not, the reaction shows that it is exactly what markets want.”

UPDATE (July 16, 2021, 15:35 UTC): Corrects to say the Harvard initiative received 1 million UNI tokens worth approximately $17 million at press time.