The Resurgence of ICOs in 2025: A New Era of Decentralized Capital Formation

The regulatory landscape in the United States is undergoing a significant transformation, and the global sentiment towards cryptocurrency is becoming increasingly favorable. This shift is expected to pave the way for a new generation of decentralized capital formation, an concept that initially gained popularity in 2017 under the term 'ICOs' or Initial Coin Offerings. In the 2010s, the crypto space had not yet discovered a viable use case for Bitcoin and alternative coins until the introduction of Ethereum smart contracts. These contracts enabled early-stage teams to secure funding from a global community of supporters, thereby giving rise to a decentralized computer that spawned DeFi, NFTs, and various other crypto primitives, all funded by less than $20 million raised from a global community. Many projects followed suit, and a new dynamic emerged where raising early-stage capital from a decentralized community consistently resulted in more value for projects and entrepreneurs than traditional venture capital investments. Decentralized investor groups provided entrepreneurs with free evangelists, beta testers, and code contributors, essentially free labor that contributed to the project's success. Moreover, the shorter liquidity timeframe allowed for better risk-return profiles for early-stage investors. Unfortunately, ICOs were gradually stifled due to regulatory non-compliance. By 2020, they had slowed down significantly, with 88% of ICO tokens trading below their issuance price. Fast forward to 2025, and we can see the convergence of several key factors that will enable the re-emergence of compelling investment opportunities, albeit with distinct characteristics from the initial ICOs. The primary components of ICO 2.0 include: 1. An updated regulatory stance: Value accrual will be a fundamental aspect of investing in tokens this time around. Entrepreneurs and investors have matured and are now willing to acknowledge the expectation of profit associated with most tokens. The previous attempt to sidestep the Howey test by obfuscating how token holders would be compensated was a primary issue with the first generation of ICOs. KYC/AML regulations will focus on on-ramps and off-ramps, such as exchanges and L2 bridges, and will reasonably concentrate on the point of realization of gains back into fiat, which should satisfy reasonable regulators. 2. Market turnover: We are witnessing the rapid decline of certain mid-market companies that could revamp their business models by becoming community-led and decentralized. For instance, mid-size media companies, including newspapers and magazines, could greatly benefit from a token economy that drives citizen journalists towards greater professionalism. 3. Crypto's progression: In 2017, we had ICO-click-races on rough UI/UX interfaces, pre-launch SAFT rounds going to a handful of VCs, and years of waiting until a live network launch. It is no surprise that most ICO projects failed. The Darwinian nature of emerging technology is such that most will perish, but the few that survive will create significant value. Crypto now has decent on-boarding and good user-facing apps, and the community has demonstrated an ability to publicly call out nonsense and root out bad actors more effectively than government oversight. The transparency of open decentralized ledgers is a strong disinfectant. Implications and predictions: The new wave of decentralized capital formation will surpass the approximately $20 billion of capital allocated in ICO 1.0 in 2017 and 2018. Over the coming years, we will see hundreds of billions in total capital formation across DeFi, NFTs, RWAs, and various other crypto primitives. M&A activity will represent a significant component of on-chain capital formation. Traditional businesses will get serious about crypto and buy up lost ground, while EVM L2s will join forces as they recognize that only a handful will survive to be significant. We will see billions of dollars worth of M&A activity in the coming year. Mid-market Web2 and legacy companies will seek to reinvent their business models using token-incentivization under less hostile circumstances. Companies in energy, media, art, and cellular communications are getting serious about token-incentivization to turn their value chain into an open marketplace and rapidly acquire customers and use cheaper labor. I am optimistic that regenerative financing, which combines a capitalistic mandate with a philanthropic mandate, will find its place. I am excited about how crypto can change paradigms in bridging reasonable returns on capital with social goals in more compelling ways than we've seen to date. I predict that we will see novel ways to choose ICO participants, whether as a reward to LPs, relying on reputation based on on-chain activity, or via the usage of certain proofs. This will lead to a better balance between retail and institutional/VC investors. Finally, as always with crypto, we will continue to see relentless innovation and new ideas that give rise to more early-stage funding opportunities. Many exciting new teams recognize that AI's natural transaction medium will be via crypto and are preparing accordingly. AI agents will bootstrap themselves with token-backed fundraising mechanisms that blend debt and equity principles. Overall, I am optimistic that the crypto community has internalized the lessons learned along the path of evolution to this point. As numerous opportunities for capital allocation emerge next year, I encourage everyone in crypto to be vocal and open in highlighting due diligence red flags and bend the arc of this industry towards open access, fair launches, and projects that are forthright in accruing value to token holders. Fair launches are a superior path forward, and we should all work towards more equitable and transparent fundraising practices. There are still many issues to resolve, and there will be some spectacular failures as we move forward, but decentralized capital formation is crypto's original killer app, and it deserves to continue to evolve.