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Industry Shock: Leading Crypto Company Winds Down, Pays Back Holders

TL;DR

• The crypto startup Entropy will shut down operations and return unused capital after raising nearly $27 million, including $25 million from a seed round.
• The startup developed a decentralized custody system based on multiparty computation and threshold cryptography.
• In 2025, the company worked on a crypto automation platform similar to Zapier, but the project failed to reach commercial scale and never went into production.

The crypto startup Entropy will shut down its operations and return the remaining capital to investors, according to an announcement by its founder and CEO, Tux Pacific. Founded in 2021, the firm operated for four years as a provider of decentralized custody built on advanced cryptography and raised a total of nearly $27 million in funding.

The company secured $25 million in a seed round in June 2022, led by Andreessen Horowitz through a16z crypto. Participants included Dragonfly Capital, Ethereal Ventures, Variant, Coinbase Ventures, Robot Ventures, Inflection, and Komerabi Fund. Earlier, in January 2022, Entropy closed a $1.95 million pre-seed round. Following the shutdown announcement, Pacific confirmed that unused funds will be returned to investors.

Entropy Failed to Scale in the Market

Entropy positioned itself as a decentralized alternative to centralized custodians. Its architecture relied on multiparty computation and threshold cryptography to enable the management of assets across multiple blockchains without a single point of control. The design allowed users to define custom rules governing fund usage, including time-based restrictions or programmed conditions for transaction signing.

During 2025, the company worked on a new product focused on crypto automations. The effort targeted a platform similar to Zapier or n8n, adapted to the blockchain ecosystem, featuring programmable workflows, automated signing, the use of trusted execution environments, and artificial intelligence components. The project did not progress to commercial production before the final shutdown.

Venture Capital Pulls Back From the Crypto Industry

Pacific said the company went through several strategic pivots and carried out two rounds of layoffs over its lifetime. After reviewing early feedback on the latest product, management concluded that the model did not reach a scale compatible with venture capital. Based on that assessment, the company began an orderly wind-down process.

Entropy’s founder previously worked at NuCypher. After the closure, he plans to take a break and focus on research outside the crypto sector. Among his next interests, he mentioned the development of pharmaceutical formulations related to hormone therapies.

A series of exits and cutbacks was recorded across the industry throughout 2025 and early 2026. During that period, multiple startups scaled back operations or shut down entirely amid a decline in investment flows