Regulatory overhaul in America and a thawing of crypto antagonism globally in 2025 will usher in a new generation of decentralized capital formation, which was first popularized in 2017 as “ICOs” (initial coin offerings).
During the 2010s, crypto hadn’t settled on a productive use case for Bitcoin and altcoins until Ethereum smart contracts enabled early-stage teams to raise capital from supporters dispersed around the world. We saw Ethereum bootstrap a global decentralized computer which spawned DeFi, NFTs and various crypto primitives funded by less than $20 million raised from a global community.
Many other projects soon followed suit and we observed a new dynamic in which raising early-stage capital from a decentralized community almost always resulted in more value-add for the project and entrepreneurs than even the best, most well-intentioned venture capitalists could offer. With a decentralized investor group, entrepreneurs get free evangelists, beta testers and code contributors — i.e. free work that contributed to the project at hand. Also, the shorter liquidity time frame allowed for better risk-return profiles for early-stage investors.
Unfortunately, ICOs were slowly choked off and signalled as “not in compliance” with regulations that were never exactly spelled out. By 2020, they had slowed to a trickle and 88% of ICO tokens were trading at below issuance price.
Fast forward to 2025 and we can see the convergence of some important inputs that allow for the re-emergence of compelling investment opportunities, but with very different characteristics from ICO 1.0.
The ingredients of ICO 2.0
1. Updated regulatory stance
I predict that value accrual will be a fundamental part of the “why” of investing in tokens this time around. Entrepreneurs and investors in the space have matured and are ready to collectively admit that there is an expectation of profit with most tokens. In fact, one could argue that the obfuscation of how token holders would be compensated as a hand-wavey attempt to sidestep the Howey test was the primary problem the first time around.
KYC/AML will be focused on on-ramps and off-ramps such as exchanges and L2 bridges, and reasonably concentrate
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Author: Ryan Zurrer
