Entropy, a decentralized crypto custody startup backed by Andreessen Horowitz (a16z), is shutting down its operations and returning the remaining funds to investors. The announcement was made by founder and CEO Tux Pacific on January 25, 2026, marking the end of a four-year journey for the company.
Founded in 2021, Entropy aimed to provide cryptographic asset management solutions based on multi-party computation. The company garnered significant attention and financial backing, raising approximately $27 million in total funding. This included a $25 million seed round led by a16z crypto in June 2022, along with participation from Dragonfly Capital, Ethereal Ventures, Variant, Coinbase Ventures, Robot Ventures, Inflection, and the Komerabi Fund. Prior to that, Entropy secured a $1.95 million pre-seed round earlier in January 2022.
Despite the initial promise and substantial funding, Entropy struggled to find a sustainable and scalable business model. According to Pacific, the decision to shut down came after "multiple business pivots and two rounds of layoffs". The company's most recent endeavor involved developing a crypto automations platform, envisioned as a crypto-native alternative to services like n8n or Zapier. This platform featured automated signing using threshold cryptography, secure computation via trusted execution environments (TEEs), and AI integrations. However, initial feedback indicated that this business model would not achieve venture-scale growth.
Faced with the choice of pursuing yet another pivot or closing down, Pacific decided to end the project. In a statement on X, Pacific explained that after four years in the crypto space, they felt they had exhausted all viable options. The decision reflects the challenges faced by early-stage crypto startups in a rapidly evolving market. Investors are increasingly prioritizing companies with clear regulatory compliance and real-world utility, favoring late-stage ventures with proven scalability over more experimental models.
Pacific, a self-taught cryptographer and college dropout, previously worked at NuCypher. Described as an "anti-capitalist anarchist" who believes in free-market principles rooted in Bitcoin's early days, Pacific's unconventional background drew attention when Entropy first raised capital. Following the shutdown of Entropy, Pacific plans to take a break before shifting focus to pharmaceutical research, with a particular interest in hormone delivery.
The closure of Entropy and the return of capital to investors highlights the increasing difficulties in the crypto venture landscape. The company's inability to find a scalable business model, despite significant funding and multiple pivots, underscores the need for crypto startups to demonstrate clear value and sustainable growth potential to attract and retain investment.
