Author: Ryan Zurrer, CoinDesk; Translated by: Deng Tong, Jinse Finance
In 2025, regulatory reforms in the U.S. 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 not yet determined effective use cases for Bitcoin and altcoins until Ethereum smart contracts enabled early teams to raise funds from supporters spread across the globe. We saw Ethereum guide a global decentralized computer, spawning DeFi, NFTs, and various crypto primitives, with less than $20 million raised from the global community.
Many other projects will soon follow suit, and we observe a new dynamic where raising early funds from decentralized communities almost always brings more value to projects and entrepreneurs than the best-intentioned 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 timeframes provide better risk-return ratios for early investors.
Unfortunately, ICOs are slowly being curtailed and considered 'not compliant' with regulations that have never been clearly articulated. By 2020, their pace had slowed, with 88% of ICO tokens trading below their issue price.
Fast forward to 2025, we can see the convergence of some significant inputs that make compelling investment opportunities reappear, but characterized very differently from 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 this space have matured and are ready to collectively acknowledge that most tokens have profit expectations. In fact, one might argue that the confusion over how token holders are compensated, as a manual attempt to evade the Howey test, is the primary issue that has emerged 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 turning profits back into fiat currency, which is a proper attempt to meet the expectations of reasonable regulatory agencies.
2. Market trading volume
We see certain mid-market companies rapidly declining, which can reshape their business models through community-led and decentralized efforts. For example, mid-sized media companies, including newspapers and magazines, represent a clear business model that could be greatly improved by employing a token economy to elevate journalists to higher professional standards.
3. Progress of cryptocurrency
In 2017, we held an ICO click contest on a very rough UI/UX interface, where the pre-launch SAFT (Simple Agreement for Future Tokens) rounds were participated in by a handful of venture capital firms, waiting years to go live on the network. The nature of any emerging technology is such that most technologies will perish, 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 threshold and good user-facing applications. Most importantly, the community has demonstrated an incredible ability to publicly point out charlatans and root out bad actors, with effects far superior to 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 activity 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 adversarial environment. We see companies in energy, media, art, and mobile communications taking token incentives seriously, transforming their value chains into open markets, rapidly acquiring customers and utilizing cheaper labor.
I am also optimistic that regenerative financing, which merges capitalist and philanthropic missions, will find its place. I am very excited about how cryptocurrency will change paradigms in more compelling ways than we have seen so far, connecting reasonable capital returns with social goals.
I predict we will see a range of new ways to select ICO participants, whether as rewards for LPs, relying on reputation based on on-chain activity, or through the use of certain proofs. A byproduct of this is that we will see 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 that bring more early financing opportunities. Many exciting new teams clearly see that the natural trading medium of artificial intelligence will be conducted through cryptocurrency and are making the necessary preparations. AI agents will guide themselves through token-supported fundraising mechanisms that merge debt and equity principles.
Overall, I am optimistic that the cryptocurrency community has internalized the lessons learned along the resilient path of evolution to this point. With a series of capital allocation opportunities emerging next year, I encourage everyone in the cryptocurrency space to be bold in speaking out, publicly highlighting the warning signs of due diligence, and steering the industry towards open access, fair launches, and projects that create direct value for society.
Fair launches are a better path forward, and we should all strive for more equitable and transparent fundraising. Many issues remain to be solved, and as we move forward, there will be some astonishing failures, but decentralized capital formation is the original killer app of cryptocurrency, and it deserves to continue to evolve.
