Author: Ryan Zurrer, CoinDesk; Translated by: Deng Tong, Jinse Finance
By 2025, regulatory reforms in the US and the easing of global cryptocurrency confrontations will usher in a new generation of decentralized capital formation, which first gained popularity in 2017 in the form of 'ICOs' (Initial Coin Offerings).
In the 2010s, cryptocurrency had yet to establish effective use cases for Bitcoin and altcoins until Ethereum smart contracts enabled early teams to raise funds from supporters dispersed worldwide. We saw Ethereum guide a global decentralized computer, giving rise to DeFi, NFTs, and various crypto primitives, with these funds raised from a global community of less than $20 million.
Many other projects quickly followed suit, and we observed a new dynamic where raising early funds from decentralized communities almost always brings more value to projects and entrepreneurs than the best and most well-meaning venture capitalists can provide. Through decentralized investor groups, entrepreneurs can gain free work contributions from evangelists, beta testers, and code contributors for their projects at hand. Additionally, shorter liquidity time frames provide better risk returns for early investors.
Unfortunately, ICOs are slowly being stifled and are deemed 'non-compliant' with regulations that have never been clearly articulated. By 2020, their pace had slowed down, with 88% of ICO tokens trading below the issue price.
Fast forward to 2025, we can see a fusion of significant inputs that make compelling investment opportunities re-emerge, but characterized in stark contrast to ICO 1.0.
ICO 2.0
1. Update Regulatory Stance
I predict that value accumulation will be the fundamental reason for this round of investment tokens. Entrepreneurs and investors in the field have matured and are ready to collectively acknowledge that most tokens have profit expectations. In fact, one might argue that the confusion around how token holders are compensated, as a manual attempt to evade the Howey Test, is the primary issue that has arisen for the first time.
KYC/AML will focus on entrances and exits such as exchanges and L2 bridges, and reasonably concentrate on the issue of converting profits back to fiat, which is a proper attempt to satisfy reasonable regulatory authorities.
2. Market Trading Volume
We see certain mid-market companies rapidly declining, which could reshape their business models through community-led and decentralized approaches. For example, mid-sized media companies, including newspapers and magazines, are a clear business model that could be greatly improved by utilizing a token economy, pushing journalists towards higher professionalism.
3. Progress of Cryptocurrency
In 2017, we conducted ICO click competitions on a very rough UI/UX interface, with pre-launch SAFT (Simple Agreement for Future Tokens) rounds involving a handful of venture capital firms and waiting years to go live on the network. The nature of emerging technologies is such that most technologies will fade away, but a few surviving technologies will continue to create immense value (spoiler alert: >90% of AI projects will also disappear).
Cryptocurrency now has a decent entry barrier and good user-facing applications. Most importantly, the community has demonstrated an incredible ability to publicly point out nonsense and root out bad actors, with effects far surpassing government oversight. The brilliance of open decentralized ledgers is a particularly powerful force.
Impact and Predictions
So what does all this mean for the crypto community?
In the coming years, we will see the total capital formation of DeFi, NFTs, RWAs, and numerous other crypto primitives reach hundreds of billions of dollars.
M&A activities will become an important component of on-chain capital formation activities. Whether traditional companies take cryptocurrency seriously and reclaim lost ground, such as the Stripe-Bridge deal, or EVM L2s team up realizing that only a few businesses can survive, we will see M&A activities worth billions of dollars.
Moreover, mid-market Web2 and traditional companies will seek to reshape their business models as they can use token incentives in a less hostile environment. We see companies in energy, media, arts, and mobile communications taking token incentives seriously, transforming their value chains into open markets, rapidly acquiring customers, and using cheaper labor.
I am also optimistic that regenerative financing, which merges capitalist and charitable missions, will find its place. I am very excited about how cryptocurrency could change paradigms in a more compelling way than we have seen so far, linking reasonable capital returns with social goals.
I predict we will see a series of new ways to select ICO participants, whether as rewards for LPs, relying on on-chain activity-based reputations, or through the use of certain proofs. The byproduct of this will be a better balance between retail and institutional/venture investors.
Ultimately, as in the cryptocurrency space, we will continue to see constant innovation and new ideas, leading to more early-stage financing opportunities. Many exciting new teams clearly see that the natural trading medium for artificial intelligence will be through cryptocurrency and are making corresponding preparations. AI agents will guide themselves through a token-supported fundraising mechanism that merges debt and equity principles.
Overall, I am optimistic that the cryptocurrency community has internalized the lessons learned along the path of resilient evolution to this point. With a series of opportunities for capital allocation emerging next year, I encourage everyone in the cryptocurrency space to dare to speak out, publicly highlight the warning signs of due diligence, and steer the industry towards open access, fair launches, and projects that directly create value for society.
Fair launches are a better way forward, and we should all strive for more equitable and transparent fundraising. There are still many issues to be addressed, and as we move forward, there will be some stunning failures, but decentralized capital formation was the original killer application of cryptocurrency, and it deserves to continue evolving.
