Original title: The Cure
Original author: Arthur Hayes
Compiled by: Lawrence, Mars Finance
Tension and pressure can sometimes infect both genders, leading to irrational behavior. Unfortunately, many companies in the Maelstrom portfolio have contracted the 'disease spread by centralized exchanges (CEXually Transmitted Disease)'. The affected founders believe they must fully comply with the directives of certain well-known centralized exchanges, or else the path to massive returns will be blocked. These centralized exchanges demand: boost this metric, hire this person, allocate me this portion of tokens, launch your token on this date... and so on; never mind, just wait for us to notify you to launch. These 'patients' obsessed with exchange desires have almost completely forgotten the original intention of users and cryptocurrencies. Come to my clinic, and I can cure you. This prescription is ICO. Let me explain...
I have a three-point theory on why cryptocurrencies have become one of the fastest-growing networks in human history:
Governments have been captured
Large enterprises, big tech, big pharma, the military-industrial complex, and other 'big XX' use their wealth and power to control most major governments and economies. Since the end of World War II, although improvements in living standards and life expectancy have been rapid and consistent, this improvement has slowed for the 90% of the population that has very few financial assets and almost no political voice. Decentralization is the antidote to the highly concentrated wealth and power.
Amazing technology
The Bitcoin blockchain and many subsequent derived blockchains are epoch-making magical technologies. From a humble beginning, Bitcoin has proven to be one of the most resilient monetary systems. For anyone who can breach the Bitcoin network, that nearly $20 trillion in Bitcoin could be double-spent, like a massive bounty for a vulnerability.
Greed
The growth of fiat and energy value of blockchain-driven cryptocurrencies and their tokens has made users wealthy. The wealth of the cryptocurrency community was evident in the November elections in the U.S. The U.S. (and most other countries) operates on a 'money for power' political system. Cryptocurrency 'bandits' are among the industries donating the most to political candidates, helping pro-crypto candidates win. Crypto voters can be generous in political campaigns because Bitcoin is the fastest-growing asset in human history.
Memory lapses in capital formation
Most cryptocurrency practitioners instinctively understand the reasons for success in the industry; however, there are occasional lapses in memory. This phenomenon is reflected in the changes in cryptocurrency capital formation. Sometimes, those seeking crypto capital cater to the greed of the community and achieve great success. At other times, underfunded founders forget why users flock to cryptocurrencies. Yes, they may believe in a government of 'by the people, for the people', or they may create stunning technology, but if users cannot get rich from it, the promotion speed of any crypto-related product or service will be too slow.
Since the end of the ICO craze in 2017, capital formation has become less pure, gradually deviating from the path that ignited community greed. Instead, it has shifted to tokens with high fully diluted valuations (FDV), low circulating supplies, or those backed by venture capital (VC). However, VC-backed tokens have performed poorly in this bull market (2023 to present). In my article (PvP), I pointed out that the median performance of tokens issued in 2024 was about 50% lower than mainstream assets (Bitcoin, Ethereum, or Solana). Ordinary investors ultimately face high prices when buying these projects upon listing on centralized exchanges (CEX), leading to high costs. Consequently, the internal market-making teams of exchanges, airdrop recipients, and third-party market makers dump tokens into illiquid markets, resulting in disastrous performances.
Why has our entire industry forgotten the third pillar of cryptocurrency's value proposition... to make ordinary investors 'filthy rich'?
The antidote to meme coins
The new issuance market for cryptocurrencies has turned into the traditional model it was supposed to replace—a system similar to the interest chain of Initial Public Offerings (IPOs) in traditional finance (TradFi). In this system, ordinary investors ultimately become the bag holders of tokens supported by venture capital (VC). However, in the crypto space, there are always alternatives. Meme coins are a type of token that has no real utility other than spreading meme content virally through the internet. If the meme goes viral enough, you buy it in hopes that someone else will take over later. The capital formation of meme coins is egalitarian. Teams release the entire supply at issuance, with the starting fully diluted valuation (FDV) typically only in the millions of dollars. By going live on decentralized exchanges (DEXs), speculators make extremely high-risk bets on which meme can enter the industry's collective consciousness, thus creating demand for the token.
From the perspective of ordinary speculators, the most attractive aspect of meme coins is that if you enter early, you might leap several levels up the wealth ladder. But every participant knows that the meme coins they buy have no real value and generate no cash flow, so their intrinsic value is zero. Therefore, they fully accept the risk of potentially losing all their funds in pursuit of financial dreams. Most importantly, there are no barriers or gatekeepers telling them whether they can buy a certain meme coin, nor are there any shadowy capital pools waiting to dump newly unlocked supplies when prices rise high enough.
I want to create a simple taxonomy to understand different types of tokens and why they are valuable. Let's start with meme coins.
Intrinsic value of meme coins = Virality of meme content
This concept is very intuitive. As long as you are an active individual in any online or offline community, you can understand the meaning of memes.
If this is a meme coin, then what are VC tokens?
The essence of VC tokens and the culture of traditional finance
Followers of traditional finance (TradFi) actually do not possess real skills. I know this well because I recall my experiences working in investment banking, where the skills required were minimal, summarized as: almost none. Many people want to enter traditional finance because you can make a lot of money without mastering substantive knowledge. Just give me a young person who understands a bit of high school algebra and has a good work ethic, and I can train them to handle any front-office financial service job. This does not apply to the following professions, such as doctors, lawyers, plumbers, electricians, mechanical engineers, etc. Entering these professions requires time and skills, but the average income is often lower than that of a junior investment banker, salesperson, or trader. The waste of intellectual resources in the financial services industry is frustrating, but I and others are simply responding to the societal incentives.
Because traditional finance is a low-skill but high-income industry, the threshold for entering this rare club often relies on other social factors. Your family background and the university or boarding school you attended are more important than your actual intelligence. Stereotypes related to race and social class are more influential in traditional finance than in other professions. Once you are included in this unique circle, you perpetuate these norms to give more value to the traits you have acquired or have not acquired. For example, if you worked hard and took on massive debt to attend a prestigious university, you are likely to hire people from the same university because you believe it is the best choice. If you don't, you would be admitting that the time and effort you spent to obtain those qualifications were not worth it. In psychology, this is referred to as 'Effort Justification Bias'.
Let's use this framework to understand how novice venture capitalists (VCs) raise funds and allocate resources.
To raise enough capital to invest in enough companies in hopes of finding a winner (e.g., Facebook, Google, Tencent, ByteDance, etc.), top venture capital firms require a large amount of capital. This funding primarily comes from endowments, pension funds, insurance companies, sovereign wealth funds, and family offices. And these capital pools are managed by traditional finance (TradFi) professionals. These managers need to fulfill their fiduciary duties to their clients and can only invest in 'appropriate' VC funds. This means they mostly have to invest in venture capital funds managed by 'qualified' and 'experienced' professionals.
These subjective requirements have led to a phenomenon: these venture capital partners often graduate from that small portion of elite universities around the world (like Harvard, Oxford, Peking University, etc.), and their careers typically begin at large investment banks (like JPMorgan, Goldman Sachs), asset management firms (like BlackRock, Fidelity), or large tech companies (like Microsoft, Google, Facebook, Tencent, etc.). If you don't have such a background, the gatekeepers of traditional finance will consider you to lack the necessary experience and qualifications, and therefore not capable of managing other people's funds. Thus, this circle has formed a highly homogeneous group—they look similar, speak similarly, dress alike, and even live in the same global elite community.
For managers who need to allocate funds to venture capital funds, the dilemma is: if they take the risk of investing in funds managed by people from non-traditional backgrounds and that fund fails, they may lose their jobs. But if they choose the safe route, allocating funds to funds managed by 'appropriate and decent' people, even if the fund fails, they can blame it on bad luck and thus keep their positions in the asset management industry. If you fail alone, you will be unemployed; but if you fail with everyone else, your job is usually not affected. Since the primary goal of traditional finance professionals is to keep their high-paying, low-skill jobs, they minimize career risk by choosing seemingly 'appropriate' background managers, ensuring their own safety.
If the selection criteria for venture capital funds is to see whether the managing partners fit a certain accepted stereotype, then these managers will only invest in companies or projects whose founders meet the 'founder' stereotype. For business-oriented founders, their resume must include experience at large consulting firms or investment banks and they are expected to have attended certain specific global elite universities. Technical founders, on the other hand, need to have experience working at highly successful large tech companies and hold advanced degrees from universities known for producing excellent engineers. Ultimately, because humans have a social attribute, we tend to invest in those who are closer to us. Therefore, Silicon Valley VCs only invest in companies located in the California Bay Area, while Chinese VCs prefer companies headquartered in Beijing or Shenzhen.
The result is a homogenized environment that resembles an echo chamber. Everyone looks, speaks, thinks, believes, and lives similarly. Therefore, everyone either succeeds together or fails together. This environment is precisely the ideal state for traditional finance venture capitalists because their goal is to minimize career risk.
After the ICO boom bubble burst, when crypto project founders were scurrying around to raise venture capital, they were essentially making deals with the 'devil'. To obtain funding from venture capital firms primarily based in San Francisco, New York, London, and Beijing, crypto project founders had to make changes.
Intrinsic value of VC tokens = Founder's school background, employment history, family background, geographic location
Venture capital allocators primarily focus on the team, followed by the product. If the founders fit the stereotype, funding will flow in abundantly. Because these founders inherently have the 'right' backgrounds, a small portion of the team will find product-market fit after spending hundreds of millions of dollars, giving birth to the next Ethereum. Since most teams ultimately fail, the decision-making logic of venture capital allocators remains unquestioned because the founders they support are all recognized as likely to succeed.
It is evident that when selecting an investment team, the professional competence in cryptocurrency is only a distant cause that is considered afterwards. This is where the disconnect between venture capital and retail investors begins. The primary goal of novice venture capitalists is to keep their jobs, while ordinary retail investors hope to reverse their fortunes by buying into coins that skyrocket. A 10,000x return was once possible. If you bought ETH during the Ethereum presale at around $0.33, you would have realized a 9,000x return at the current price. However, the current mechanism of capital formation in crypto makes such returns nearly impossible.
Venture capital investors make money by flipping those crappy, illiquid SAFTs (Simple Agreements for Future Tokens) between funds, raising valuations with each flip. When these troubled crypto projects eventually land on centralized exchanges (CEX) for their initial listing, their fully diluted valuations (FDV) often exceed $1 billion. To achieve a 10,000x return, FDV needs to grow to an extremely exaggerated number—one that exceeds the total value of all fiat-denominated assets... and we're only discussing one project here. This is why retail investors are more willing to gamble on a meme coin with a market cap of $1 million rather than a project supported by the 'most respected' venture capital group with an FDV of $1 billion. The behavior of retail investors actually aligns with the logic of maximizing expected returns.
If retail investors are starting to reject the VC token model, what makes ICOs inherently more attractive?
Intrinsic value of ICO = Virality of disseminated content + Potential technology
Meme:
A project team that can launch a product that aligns with the current cryptocurrency trend, with a visual appeal, feel, and clear goals, possesses 'meme value'. When this 'meme' is attractive and spreads, the project gains attention. The goal of the project is to attract users at the lowest possible cost and then sell them products or services. A deeply resonant project can quickly bring users to the top of its growth funnel.
Potential technology:
ICOs (Initial Coin Offerings) typically occur early in the project lifecycle. Ethereum raised funds before developing its product. In this model, the community's trust in the project team is implicit, believing that by providing funding, they can create valuable products. Therefore, potential technology can be evaluated in several ways:
1. Has the team developed meaningful products in the Web2 or Web3 space?
2. Is the technology the team plans to develop technically feasible?
3. Can this potential technology solve a globally significant problem and ultimately attract millions or even billions of users?
Technical founders who meet the above criteria are not necessarily the same type of people that venture capital firms would invest in. The cryptocurrency community does not place as much importance on family background, past work experience, or specific educational qualifications. These conditions may be nice to have, but they are meaningless if those backgrounds have not led the founding team to deliver great code in the past. The community is more willing to support Andre Cronje than some former Google employee with a Stanford degree and a Battery Club membership.
Although most ICOs (99.99%) will almost go to zero after one cycle, there are still a few teams that can develop user-attractive technologies based on their 'meme effect'. Early investors in these ICOs have the opportunity to achieve 1,000x or even 10,000x returns. This is exactly the game they want to play. The speculation and volatility of ICOs are a feature, not a flaw. If retail investors want safe, boring investments, they can choose stock trading platforms in the global traditional finance sector. In most jurisdictions, IPOs (Initial Public Offerings) require companies to achieve profitability, and management must make various statements to the public to assure that there will be no fraud. However, the problem with IPOs for ordinary retail investors is that they cannot bring life-changing returns because venture capital firms have already divided up the benefits in the early stages.
If ICOs can obviously provide funding for technologies with the potential for viral spread and global impact, how can we make them 'great again'?
ICO roadmap
In its purest form, an ICO allows any team with an internet connection to showcase its project to the crypto community and obtain funding. The team launches a website detailing team members, the product or service they plan to build, why they are qualified, and why the market needs their product or service. Subsequently, investors—well, or 'speculators'—can send cryptocurrency through an on-chain address and receive distributed tokens after a certain time. All aspects of the ICO, such as timing, fundraising amount, token price, type of technology developed, team composition, and the location of investors, are entirely decided by the ICO team, not controlled by any gatekeepers (such as VC funds or centralized exchanges). This is precisely why centralized intermediaries hate ICOs—because they have no reason to exist. However, the community loves ICOs because they offer a diverse array of projects initiated by people from various backgrounds, giving those willing to take high risks the chance to achieve the highest returns.
ICOs are making a comeback because the entire industry has gone through a complete cycle. We enjoyed freedom but burned our wings in the process; then, we felt the oppression of the dictatorial control of VCs and centralized exchanges (CEXs), resenting the overvalued junk projects they forced upon us. Now, amid the budding bull market driven by massive money printing in the U.S., China, Japan, and the EU, cryptocurrency market speculators are indulging in useless meme coin speculative trading, and the community is ready to fully engage in high-risk ICO trading again. Now is the time for 'almost wealthy' crypto speculators to cast a wide net with their capital, hoping to catch the next Ethereum.
The next question is: what will be different this time?
Timeline:
Nowadays, with frameworks like Pump.fun, tokens can be launched in just a few minutes, coupled with more liquid decentralized exchanges (DEXs), allowing teams to raise funds through ICOs and complete token distribution within days. This is in stark contrast to the previous ICO cycle, where the time from subscription to token distribution could take several months or even years. Now, investors can trade newly issued tokens immediately on platforms like Uniswap or Raydium.
Due to Maelstrom's investment in the Oyl wallet, we have had the privilege of previewing some potential game-changing smart contract technologies built on the Bitcoin blockchain. Alkanes is a brand new meta-protocol designed to introduce smart contracts to Bitcoin through the UTXO model. I cannot fully understand how it works, but I hope those who are smarter and more skilled than I will take a look at their GitHub repository and decide for themselves if it is worth building on. I am very much looking forward to Alkanes driving explosive growth in ICO issuance within the Bitcoin ecosystem.
Liquidity:
Due to retail crypto speculators' obsession with meme coins, they have a strong desire to trade highly speculative assets on decentralized exchanges (DEX). This means that after tokens are delivered to investors, unverified project ICO tokens can be traded immediately, thereby achieving true price discovery.
Although I don't like Solana, I have to admit that Pump.fun has indeed brought a positive impact to the industry because the protocol allows non-technical users to issue their own meme coins and start trading within minutes. Continuing this trend of democratizing finance and crypto trading, Maelstrom has invested in a project aimed at becoming the preferred platform for spot trading meme coins, all cryptocurrencies, and newly issued ICOs.
Spot.dog is building a meme coin trading platform to attract Web2 users. Their 'secret sauce' lies not in technology, but in distribution channels. Most current meme coin trading platforms are designed for crypto traders. For example, Pump.fun requires users to have certain knowledge about Solana wallets, token swaps, slippage, etc. In contrast, ordinary users who follow Barstool Sports, subscribe to r/wsb, trade stocks on Robinhood, and bet on their favorite teams through DraftKings will choose to trade on Spot.dog.
Spot.dog initially secured some excellent partnerships. For example, the 'cryptocurrency buy button' on the social trading platform Stocktwits (with 1.2 million monthly active users) is powered by Spot.dog. Additionally, Iggy Azalea's **$MOTHER Telegram trading bot**'s sole partner is—yes, Spot.dog.
I bet you speculators are eager to know when your tokens will launch, right? Don’t worry, when the time is right, if you're interested in 'going all in' on Spot.dog's governance token, I will let you know the timing!
UI/UX:
The crypto community is already very familiar with non-custodial browser wallets like Metamask and Phantom. Crypto investors are accustomed to loading their crypto browser wallets, connecting them to dApps, and then purchasing assets. This usage habit will make it easier for ICOs to raise funds.
Blockchain speed:
In 2017, popular ICOs often led to the paralysis of the Ethereum network. Gas fees skyrocketed, and ordinary users could not use the network at reasonable costs. By 2025, the block space costs of Ethereum, Solana, Aptos, and other Layer-1 blockchains will be very low. Current order processing capacity has improved by several orders of magnitude compared to 2017. If a team can attract a large number of speculative 'degen' supporters, their fundraising ability will no longer be constrained by slow and expensive blockchains.
Due to the extremely low cost of each transaction on Aptos, it has the opportunity to become the preferred blockchain platform for ICOs.
Average transaction cost (USD):
• Aptos: $0.0016
• Solana: $0.05
• Ethereum: $5.22
The necessity of saying 'no'
I proposed a solution to the 'CEX-related disease'—ICOs. However, now project parties need to make the right choices. But to prevent them from misunderstanding this, ordinary crypto investors need to firmly 'say no'.
Say no to the following situations:
• VC-backed, high FDV (fully diluted valuation), low circulation projects
• Tokens that are overvalued upon initial listing on centralized exchanges
• Those who advocate for so-called 'irrational' trading behaviors
Indeed, there were many obvious 'junk projects' in the ICOs of 2017. Among the most damaging ICOs was EOS. Block.one raised $4.1 billion in cryptocurrency to build EOS, but after its launch, EOS almost disappeared. Actually, this is not entirely accurate; EOS still has a market cap of $1.2 billion. This indicates that even 'junk projects' like EOS, which were issued at the peak of the bubble, still retain significant value. As someone who loves financial markets, I must admit that the structural design and execution of the EOS ICO were a 'work of art'. Project founders should study how Block.one raised the most funds in history through ICOs or token sales.
I mention these to illustrate the risk-adjusted investment logic: if investment shares are allocated correctly, even projects that should go to zero may retain some value after the ICO. Early investment in ICOs is the only way to obtain 10,000x returns, but there is no heaven without hell. To pursue a 10,000x return, you must accept that most investments may approach zero in value post-ICO. However, this is much better than the current VC token model. Nowadays, in VC tokens, achieving a 10,000x return is nearly impossible, but it is common to see a 75% loss a month after going live on a CEX. Ordinary investors have subconsciously recognized the poor risk-return ratio of VC tokens, thus turning to memecoins. Let's create fervent support for new projects through ICOs again, giving investors the possibility of acquiring immense wealth and bringing ICOs back to their peak!
