Entropy, a decentralized crypto custody startup backed by Andreessen Horowitz (a16z), is winding down and plans to return remaining capital to investors, according to founder and chief executive Tux Pacific.Pacific wrote on X over the weekend, “I am winding-up Entropy.” They added, “After four years, several pivots, and two rounds of layoffs, I’ve decided to wind-up Entropy and return capital to our investors.”Crypto Automation Bet Fell Short After Investor FeedbackThe shutdown follows a late-stage push in 2025 to reposition the company around a crypto automations platform, which Pacific described as “basically n8n/zapier/etc for crypto,” with automated signing via threshold cryptography, secure computation using trusted execution environments, and “deep AI integrations.” I am winding-up Entropy.After four years, several pivots, and two rounds of layoffs, I’ve decided to wind-up Entropy and return capital to our investors.For the latter half of 2025, the Entropy team was hard at work on a crypto automations platform (basically n8n/zapier/etc…— tux pacific (@__tux) January 24, 2026 That product direction still failed to clear a venture-style growth bar. “After an initial feedback request revealed that the business model wasn’t venture scale, I was left with the choice to find a creative way forward or pivot once more,” Pacific wrote.Entropy first drew attention in 2022 when it raised $25M in a seed round led by a16z crypto, with participation including Dragonfly Capital, Coinbase Ventures, Robot Ventures, Ethereal Ventures, Variant and Inflection. The company had earlier raised a $1.95M pre-seed round.Founder Looks Beyond Digital Assets Toward Pharmaceuticals ResearchAt launch, Entropy pitched itself as a decentralized alternative to custody providers such as Fireblocks and Coinbase, leaning on cryptographic approaches like multi-party computation to let users control how funds could move, including rule-based constraints.Pacific also thanked a16z crypto and Guy Wuollet for helping steer the wind-down, calling their guidance “invaluable.”The closure lands in a tougher funding climate for early-stage crypto startups. Crypto venture deal count fell about 60% year-on-year in 2025, dropping to roughly 1,200 transactions from more than 2,900 in 2024.Next, Pacific said they plan to step back before deciding what comes after Entropy. “My time in crypto might be coming to an end, as I feel myself drawn specifically into pharmaceuticals,” they wrote, adding they want to work on hormone delivery and validate research on new estradiol drug formulations.The post a16z-Backed Crypto Custody Startup to Shut Down, Return Investor Funds appeared first on Cryptonews.

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