Author: Arthur Hayes
Compiled by: ShenChao TechFlow
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Any opinions expressed in this article are those of the author and should not be taken as the basis for investment decisions or be considered investment advice.
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People sometimes behave irrationally due to desire or blindness. Unfortunately, many Maelstrom portfolio companies seem to have contracted a 'CEX transmission disease'. Some affected founders mistakenly believe that by following the directives of certain well-known centralized exchanges (CEX), they can achieve so-called 'extreme returns'. These directives include: pushing up certain metrics, hiring certain individuals, allocating a certain number of tokens, launching tokens on designated dates, or even temporarily changing launch plans. These desire-driven companies have forgotten user needs and the original purpose of cryptocurrencies. If you are also suffering from this disease, please come to my clinic; I have the antidote—ICOs. Let me explain it to you in detail.
I believe there are three main reasons why cryptocurrency has become one of the fastest-growing networks in human history:
Government control - giants in big business, big tech, big pharma, and big military control most major governments and economies through their vast wealth and power. While global living standards and life expectancy have significantly improved since World War II, this growth has stagnated or even regressed for the 90% of the population who possess very few financial assets and have almost no political voice. The decentralized nature of cryptocurrencies is precisely the antidote to this concentration of wealth and power.
Revolutionary technology – The Bitcoin blockchain and the various blockchain technologies that subsequently emerged can be considered a revolutionary innovation. Starting from a humble beginning, Bitcoin has proven to be one of the most stable and secure monetary systems globally. The Bitcoin network itself offers nearly $20 trillion in bug bounties (by obtaining Bitcoin through double-spending attacks), yet no one has been able to breach the security of this system.
Wealth effect - The value growth of cryptocurrencies and their derivative tokens has made many users rich overnight. In the upcoming November elections in the US, the economic power of cryptocurrency supporters has been fully demonstrated. Like many countries, the American political system also relies on the 'money game'. Practitioners in the cryptocurrency industry have become one of the groups contributing the most to political candidates, which directly contributed to the victory of candidates supporting cryptocurrencies. Bitcoin, as the fastest-growing asset in human history, has enabled the cryptocurrency community to play a significant role in political activities.
Although most people in the cryptocurrency community understand why this movement is successful, there are occasional bouts of 'amnesia'. This amnesia is reflected in the changing methods of raising capital. Sometimes, project founders achieve tremendous success by catering to the community's desire for wealth; at other times, cash-strapped founders forget why users chose cryptocurrencies. Yes, they may believe in the ethos of 'by the people, for the people'; yes, they may create amazing technology. But if users cannot profit from it, the promotion speed of any cryptocurrency product or service will slow down.
Since the ICO boom faded in 2017, the methods of raising capital have gradually deviated from their original intent. In the past, capital formation relied on stimulating community enthusiasm and wealth desires, but now it has been replaced by high fully diluted valuations (FDV), low circulating supply, and venture capital (VC)-backed tokens. However, these VC-backed tokens have performed poorly in this bull market (from 2023 onward). In my article PvP, I mentioned that the median performance of tokens issued in 2024 is about 50% lower than mainstream coins (such as Bitcoin, Ethereum, or Solana). Although retail investors can finally buy these projects through centralized exchanges (CEX), they are unwilling to pay their high prices. As a result, the internal market-making teams of exchanges, airdrop token recipients, and third-party market makers are dumping these tokens into illiquid markets, leading to poor price performance. As an industry, why have we forgotten the third pillar of cryptocurrency's value proposition—helping retail investors create wealth?
The antidote for Memecoins
The current cryptocurrency issuance market has become similar to the initial public offering (IPO) system of traditional finance (TradFi). Retail investors often become the 'bag holders' of VC tokens. However, in the cryptocurrency space, there is always an alternative—Memecoin. Memecoins are tokens with no real utility, their only function is to spread meme content over the internet. If the meme is attractive enough, users will buy it, hoping that someone will follow up with purchases.
The capital formation of Memecoins is more equitable. Teams often release the entire token supply at issuance, with an initial FDV typically only in the millions. They usually start trading on decentralized exchanges (DEXs), and speculators bet on which meme will attract attention in the industry and drive up token demand.
For ordinary speculators, the most attractive thing about Memecoins is that if they can participate early, they might leap up one or two tiers on the wealth ladder. Nevertheless, every participant is aware that Memecoins inherently have no intrinsic value and do not generate any cash flow, thus fully accepting the risk of potentially losing all funds just for the dream of chasing wealth. More importantly, there are no institutions preventing them from buying these tokens, nor are there hidden capital pools waiting to sell unlocked token supplies at high prices.
To better understand the different types of tokens and their sources of value, I hope to establish a simple classification framework. First, let's start with Memecoins:
Intrinsic value of Memecoins = The influence of meme dissemination
This point is very intuitive. As long as you are active in any community (online or offline), you can understand the viral power of memes.
So, what are VC tokens?
Practitioners in the traditional finance (TradFi) industry often lack real professional skills. I have deep experience with this, as I found that the skills required for the job in investment banking are quite limited. Many choose to enter TradFi because it offers handsome compensation without requiring much substantive knowledge. As long as a young person has basic high school algebra knowledge and a good work attitude, I can train them to handle any front-office financial service job. However, professions like doctors, lawyers, and engineers require time and technical accumulation, even though the average income of these professions is far lower than that of those in finance.
The attractive salaries of TradFi make the entry barriers to this industry rely more on social background rather than individual capability. For example, your family background, the reputation of your college or boarding school, often matters more than intelligence level. Such a system turns the TradFi industry into a closed elite club, further entrenching existing social classes and racial biases.
Let’s apply this framework to analyze how VCs raise funds and allocate resources.
To find winners like Facebook, Google, Tencent, or ByteDance, top venture capital (VC) firms need to raise massive amounts of capital. This capital primarily comes from endowment funds, pensions, insurance companies, sovereign wealth funds, and family offices, which are typically managed by traditional finance (TradFi) professionals. As fund managers, they must fulfill their fiduciary duty to clients and can only invest in what is deemed 'suitable' venture capital funds. This 'suitable' standard usually means these funds need to be managed by 'qualified' and 'experienced' professionals. And these 'qualified' definitions are often closely related to the manager's educational background and work experience: they usually graduate from a few of the top global universities (like Harvard, Oxford, Peking University, etc.) and enter large investment banks (like JPMorgan, Goldman Sachs), asset management companies (like BlackRock, Fidelity), or tech giants (like Microsoft, Google, Facebook, Tencent) early in their careers. Without such backgrounds, TradFi's gatekeepers will consider you lack the ability to manage others' funds.
This screening mechanism has led to a highly homogeneous group: they look similar, speak similarly, dress similarly, and even live in the same global elite circles.
For fund allocators, the greatest dilemma is professional risk. If they choose a fund with a non-traditional background and it fails, they may lose their job; but if they choose a fund that meets traditional standards, even if it fails, they can attribute it to 'bad luck' and keep their position. Therefore, to reduce professional risk, they tend to choose funds that meet traditional standards rather than risk trying new possibilities.
This logic extends to the selection of entrepreneurial projects. Venture capital firms are more inclined to support projects whose founders fit the stereotype of 'successful founders'. Business-oriented founders need to have experience in large consulting firms or investment banks and graduate from top global universities; technical founders need to have experience in successful tech companies and hold advanced degrees from well-known universities. Geographic location also becomes a consideration: Silicon Valley venture capital firms prefer to invest in companies located in the California Bay Area, while Chinese venture capital firms focus more on projects in Beijing or Shenzhen.
Ultimately, this model has created a highly homogeneous investment environment: everyone’s background, way of thinking, values, and even geographic location are highly similar. This environment both restricts innovation and makes venture capital decisions more conservative.
After the bubble burst of the ICO boom, the founders of crypto projects had to compromise to obtain venture capital (VC). To raise funds from VCs primarily located in San Francisco, New York, London, and Beijing, they had to cater to the VCs' preferences.
Token value in the eyes of VCs = Founder's educational background, work experience, family background, and geographic location
For venture capitalists, the importance of the team far outweighs the product. If the founders fit a certain stereotype of a 'successful founder', funding will easily be secured. Because these founders are perceived to inherently possess the 'right' qualifications, even if they have to burn through hundreds of millions to find product-market fit, there will always be a few teams that succeed and give birth to the next Ethereum. And for those failed teams, the decisions of VCs will not be questioned, as the founders they supported are generally considered to be the most likely to succeed.
Clearly, when VCs choose whom to fund, professional expertise in the crypto field is not a key consideration. This selection criterion has led to a disconnect between VC-backed projects and retail investors. VCs' goal is to keep their jobs, while retail investors aim for financial freedom by betting on tokens that could soar 10,000 times. In the early days, such returns were possible. For example, if you bought ETH at about $0.33 during the Ethereum presale, your investment has grown 9,000 times at the current price. However, the current capital operation model in crypto makes such returns almost impossible.
Venture capital profits by flipping worthless and illiquid SAFTs (Simple Agreements for Future Tokens) between funds, with each flip accompanied by an increase in valuation. When a troubled crypto project finally lists on a centralized exchange (CEX), its fully diluted valuation (FDV) often exceeds $1 billion. To achieve a 10,000x return, this project’s FDV must grow to an extremely large number—surpassing the total value of all fiat assets, and this is just the case for one project.
If the VC token model is rejected by ordinary users, then what is the inherent significance of ICOs?
Intrinsic value of ICO = Viral spread of content + Technical potential
Meme - A project that can align its design and targeting with the current trends in the crypto space possesses meme value. If its meme content is attractive enough and can spread rapidly, it can bring widespread attention to the project. The core goal of the project is to attract users at the lowest cost and monetize through these users for the product or service. A project that is widely discussed can often quickly attract users into its marketing funnel.
Technical potential - ICOs usually occur in the early stages of a project, such as Ethereum, which raised funds before development. This model relies on the community's trust in the team, that as long as the community provides funding, the team can develop valuable technology. The assessment of potential technology can start from the following aspects:
Does the team have experience developing significant products in Web2 or Web3?
Is the proposed technical solution feasible?
Can this technology solve a problem of global significance, thereby attracting millions or even billions of users?
Technical founders can achieve the above goals, but they are not necessarily the ones favored by venture capitalists (VCs). The crypto community does not place much importance on family background, work history, or prestigious university degrees. While these conditions are advantageous, they are meaningless if the team has not actually developed excellent code. The community is more willing to support Andre Cronje rather than some 'elite' who graduated from Stanford, worked at Google, and is a member of The Battery.
While most ICOs (initial coin offerings) — 99.99% of them — will approach zero after a cycle, there are still a few teams that can develop technology and gain value by attracting users, because their viral effect (memetic) is strong enough. Early investors in these ICOs may achieve returns of 1,000 times or even 10,000 times. This is precisely the target they pursue. The speculative nature and volatility of ICOs are features, not flaws. If retail investors want stable and conservative investments, they can choose to trade on global traditional finance (TradFi) stock exchanges. In most countries, IPOs (initial public offerings) require companies to be profitable, and management must make various statements to ensure financial transparency. However, for most retail investors, the problem with IPOs is that they cannot bring life-changing returns, as early venture capitalists have already drained most of the profits from the process.
If ICOs can provide funding for technology projects with strong viral effects and potential global impact, how can we revitalize them again?
ICO roadmap
In its purest form, ICOs allow any team with an internet connection to present their projects to the crypto community and raise funds. Teams will launch a website detailing who they are, what they plan to build, why they are qualified, and why the market needs their product or service. Investors can send cryptocurrency to an on-chain address, and after a certain time, they will receive tokens. All details of the ICO, such as timing, raised amount, token price, technical type, team composition, and geographic location of investors, are entirely determined by the team conducting the ICO, without any involvement from intermediaries (like venture capital funds or centralized exchanges). This is precisely why centralized intermediaries hate ICOs—because they are completely bypassed. However, the community is very supportive of ICOs, as they provide opportunities for people from different backgrounds, allowing those willing to take high risks to have a chance for high returns.
ICOs are making a comeback because the crypto industry has completed a cycle. We once enjoyed the freedom of the past decentralization, but at a cost. Then, we experienced extreme control from venture capital and centralized exchanges and grew to despise the high-valuation garbage they imposed on us. Now, driven by monetary easing policies in the US, China, Japan, and the EU, the crypto market is entering a new bull market, accompanied by a frenzy for meme coin speculative trading; the community is once again ready to dive into high-risk ICO trading. It’s time for those yet to get rich to broadly invest in the market, hoping to find the next Ethereum.
The next question is, what will be different this time?
Timeline
Thanks to tools like Pump.fun, it now takes just a few minutes to launch a token, while we also have decentralized exchanges (DEXs) that are more liquid. Teams can raise funds through ICOs and deliver tokens within days. This is different from previous ICO cycles, where it could take months or even years from subscription to token delivery. Nowadays, investors can immediately trade newly issued tokens on platforms like Uniswap and Raydium.
Thanks to Maelstrom's investment in the Oyl wallet, we have had a sneak peek at some potentially disruptive smart contract technologies being developed using the Bitcoin blockchain. Alkanes is a new meta-protocol aimed at bringing smart contracts to Bitcoin through the UTXO model. I cannot claim to fully understand how it works. But I hope those more capable can check out their GitHub repository and decide for themselves whether they are willing to develop based on this. I hope Alkanes can drive explosive growth in ICO issuance on Bitcoin.
Wiki, code repository (repo), technical specifications (specifications) of Alkanes.
Liquidity
Today, retail crypto enthusiasts show great interest in Memecoins, hoping to trade these highly speculative assets on decentralized exchanges (DEXs). This demand allows unverified ICO projects to trade immediately after token delivery, thereby enabling the market to freely price their value.
Although I have always been critical of Solana, I must admit that Pump.fun has had a positive impact on the industry. This protocol allows ordinary users to issue their own meme coins and start trading within minutes without a technical background. Continuing this trend of 'democratizing finance and crypto trading', Maelstrom invested in a new platform that could become the go-to for spot trading of meme coins, cryptocurrencies, and even newly issued ICOs.
Spot.dog is building a meme coin trading platform designed specifically for Web2 users. Its core advantage lies not in technology, but in its strong promotional capabilities. Currently, most meme coin trading platforms are designed for seasoned cryptocurrency users. For example, Pump.fun requires users to have a certain understanding of using Solana wallets, token swaps, slippage settings, etc. Ordinary users who are accustomed to browsing Barstool Sports, following r/wsb, trading stocks on Robinhood, or even betting on their favorite teams through DraftKings are more likely to choose Spot.dog as their trading platform.
Spot.dog has already partnered with several heavyweight partners. For example, the 'Buy Cryptocurrency Button' on the social trading platform Stocktwits (which has 1.2 million unique visitors monthly) is supported by Spot.dog. Additionally, Iggy Azalea's $MOTHER Telegram trading bot has also chosen Spot.dog as its sole partner. I know you speculators are eager to find out when Spot.dog’s token will launch? Don’t worry, if you’re interested, I will let you know how to participate in Spot.dog's governance token investment at the right time.
User interface and user experience
The crypto community is already familiar with using non-custodial browser wallets, such as Metamask and Phantom. Investors are accustomed to loading crypto assets into browser wallets, connecting to decentralized applications (dApps), and making asset purchases. This familiarity will significantly lower the technical barriers for ICOs to raise funds.
Blockchain speed
Looking back at 2017, a popular ICO project often led to heavy load and even paralysis of the Ethereum network. Gas fees skyrocketed, making network usage costly, and many people could not afford it. By 2025, regardless of whether on Ethereum, Solana, Aptos, or other Layer-1 blockchains, the cost of using blockchain space will become extremely low. The current transaction throughput has improved by an order of magnitude compared to 2017. If a team can attract a large number of enthusiastic speculative supporters, their ability to raise funds will no longer be hindered by the blockchain's slow speed and high fees.
Especially Aptos, with its extremely low transaction costs, is expected to become the preferred blockchain for ICO projects.
Here are the average transaction fees for some blockchains (in USD):
Aptos: $0.0016 (source)
Solana: $0.05 (source)
Ethereum: $5.22 (source)
Rejecting bad investments
I have proposed solutions to address the issues of centralized exchanges (CEX) through ICOs. Next, project founders need to make the right choices. But if they fail to grasp this point, retail crypto investors also need to take action to 'reject bad investments' in practice.
‘Rejecting bad investments’ means:
Reject projects with VC backing, overly high fully diluted valuations (FDV), but very low actual circulation.
Reject tokens that are listed for the first time at high valuations on centralized exchanges (CEX).
Reject those who criticize so-called 'irrational' trading behavior.
Looking back at 2017, there were many low-quality ICO projects. Among them, the most destructive was EOS. Block.one raised $4.1 billion in cryptocurrency through ICO for developing EOS. However, after launching, EOS virtually disappeared. In fact, this statement is not entirely accurate; surprisingly, even a failed project like EOS still maintains a market value of $1.2 billion. This indicates that even projects like EOS, which once marked the peak of the bubble, still hold value far above zero. As someone who loves financial markets, I must admit that EOS's ICO structure and execution are classic case studies. Project founders should seriously study how Block.one raised the most funds in history through ICOs or token sales.
I mention this to illustrate that from a risk-adjusted perspective, if you allocate your investment ratios reasonably, even those projects that ultimately fail may retain some value post-ICO. Early investment in ICOs is the only way to achieve 10,000 times return, but without significant risks, there are no significant rewards. To pursue a 10,000-fold investment return, you must accept the reality that most investments will approach zero after the ICO. However, this is still much better than the current venture capital token model. In the venture capital token model, a 10,000x return is nearly impossible, but you might lose 75% a month after listing on a CEX. Retail investors have subconsciously realized the terrible risk-return ratio of venture capital tokens, so they have turned to Memecoins. It is time to create fervent support for new crypto projects again by giving users the opportunity to gain substantial wealth and let ICOs regain their glory!
