Author: Anita
On December 10, 2025, a16z Crypto announced the opening of an office in Seoul. The press release called it an “offensive,” but if you look deeper, seeing a16z’s extreme reliance on liquidity exits, regulatory liabilities surging, you will realize this might be a16z’s “escape.”
U.S. extraterritorial jurisdiction has cornered Crypto.
SEC’s ongoing lawsuits against Uniswap Labs and the large-scale blocking of DeFi frontends have turned Silicon Valley from an innovation hotbed into a compliance prison. In contrast, Paradigm had already established a shadow network in Singapore two years ago, and Binance has never left its Asian main stage.
In 2011, Marc Andreessen wrote the Silicon Valley Bible, proclaiming “Code is Law” and “Software is eating the world” as geek mantras—now dead. Replacing them are traditional asset management giants skilled in calculations, investing only in “regulatory arbitrage plays.”
1. Prediction Markets: High-priced, compliant casinos disconnected from liquidity
Kalshi’s victory is not a technological victory but a franchise victory. The cost is that users must endure extremely low capital efficiency.
a16z’s bet on Kalshi is essentially going long on regulatory barriers. But compliance has a price, paid by users.
1. Spread = Justice
Comparing the order books of Kalshi (compliant) and Polymarket (offshore), clear structural differences emerge.
- Bid-Ask Spread (: Polymarket: During active periods in popular markets, typical spreads are around 1%–3%, with highly liquid order books sometimes narrowing to close to 1%. In less active or unpopular periods, spreads widen significantly (relying on AMM + high-frequency arbitrage). Kalshi: In hot markets like macro and elections, spreads are generally around 2%–5%, narrower for niche contracts, overall slightly higher than Polymarket, reflecting the costs of liquidity and compliance borne by designated/professional market makers under regulation.
- Kalshi’s liquidity is artificially created by institutions, not organically generated. For retail traders, every trade on Kalshi effectively pays an invisible tax on “compliance costs.”
- Public disclosures admit that most participants are retail (advanced retail), but there are also dedicated market-making entities (like Kalshi Trading and later professional market makers). To make the market “user-friendly,” someone must place orders 24/7, continuously quote bid/ask prices, and handle retail orders—typically done by professional market makers or affiliates, not retail traders naturally forming the order book. Early institutional market makers like Susquehanna are cited as examples.
)# 2. Data’s walled garden
When introducing Kalshi, a16z positions it as a price discovery and hedging infrastructure for real-world events, somewhat like a “regulated oracle layer”; from the author’s perspective, calling a centralized, licensed exchange “Oracle 2.0” confuses oracle functions with exchange functions, more like narrative packaging than a true “oracle upgrade.”
Polymarket’s API is open, allowing any DeFi protocol to call its odds data to build derivatives. But Kalshi’s data is closed, attempting to sell it as SaaS to Bloomberg and traditional hedge funds.
This is not Web3’s open interoperability; it’s Web2’s data monopoly model. a16z is not investing in Crypto but in a blockchain-keeping CME.
2. RWA: Yield traps caused by non-composability
RWA are the “dead weight assets” in DeFi. They look attractive but are nearly illiquid on-chain.
In “State of Crypto 2025,” a16z notes “on-chain RWA has reached hundreds of millions or even billions of dollars,” but almost no discussion of their on-chain turnover (Asset Velocity), utilization, or how much DeFi actually calls these assets. This creates an impression of “large scale” but downplays the key dimension of capital efficiency.
1. Collateral dilemma: Why doesn’t MakerDAO dare to hold full RWA?
MakerDAO has significantly increased the proportion of RWA (including government bonds, bank deposits, etc.) in collateral pools in recent years, but governance always limits single RWA types and emphasizes diversification and counterparty risk management. This shows mainstream DeFi protocols do not believe assets off-chain can be used to replace native on-chain collateral without limits.
The biggest issue with RWA is the non-instantaneous liquidation (T+1/T+2).
- ETH / WBTC: 24/7 trading, liquidation time <12 seconds (block time). LTV ###Loan-to-Value( can reach 80%+. Tokenized T-Bills )Ondo/BlackRock(: Market closed on weekends and bank holidays. In a black swan event over the weekend, on-chain protocols cannot liquidate collateral. LTV is limited to 50%-60% or requires permissioned counterparties.
)# 2. Real data: astonishing idle rates
Based on multiple 2025 RWA reports and Dune dashboards, the total on-chain RWA is roughly in the range of a few billion to tens of billions of dollars TVL (depending on whether stablecoins are included). However, only a small portion, about 10% or less, of these assets are used in high-turnover DeFi lending, structured products, and derivatives protocols.
- Total issued RWA: ~###* Actual RWA in DeFi lending/derivatives: <$3.5B $53B
, only 6.6% of total
- This means most RWA assets are still mainly used as “tokenized deposits/notes”—quietly earning interest on-chain or in custody wallets, not being multi-layered re-used in open finance. Asset turnover (Asset Velocity) is far below native on-chain collateral. They are largely not truly “financialized” nor have significant credit or liquidity multiplier effects.
- Based on this reality, the narrative of “deep integration of RWA and DeFi, unleashing multiplier effects” remains more a forward-looking vision than a fact; structurally, current mainstream RWA models often incorporate US dollar sovereignty, traditional finance timelines, and compliance restrictions on-chain, but support for permissionless, composable open finance is limited—more like “digitizing USD assets onto the chain” rather than fully leveraging blockchain’s advantages.
( 3. a16z vs. Paradigm
a16z tries to be “the agent of government,” while Paradigm aims to be “the agent of code.”
Their alpha generation logic has somewhat decoupled: the former relies more on policy and networks, the latter emphasizes technical depth and infrastructure innovation.
- a16z’s script: Political capital expenditure: huge funds for lobbying in Washington, legal counsel, media control. Moat: licensing and relationships. Their investments (like Worldcoin, Kalshi) often require strong government ties to survive. Weakness: if regulatory winds shift (e.g., SEC chair change), their moat could collapse overnight.
- Paradigm’s script: Technical capital expenditure: top-tier research teams (Reth, Foundry developers). Moat: mechanism design and code efficiency. Their projects (like Monad, Flashbots) focus on solving throughput and MEV issues at the protocol level. Advantage: regardless of policy changes, high-performance trading demand always exists.
a16z is like the East India Company, profiting from licenses and trade monopolies; Paradigm is like TCP/IP, profiting from becoming the underlying standard.
In the 2025 wave of decentralization resurgence, the East India Company’s fleet appears bulky and vulnerable, while protocol layers are ubiquitous.
) 4. Retail traders flip the table, VC no longer in control
Retail traders finally realize they are not users but exit liquidity. So they flip the table.
The biggest black swan of 2025 is not macroeconomics but the complete collapse of valuation inversion between VCs and retail.
1. Valuation inversion: The FDV scam
Comparing the financial ratios of top VC-backed L2s and fair launch perp DEXs in 2025 is more convincing than any words.
- Typical VC-backed L2 projects (like top optimistic rollups or similar):
- FDV (Fully Diluted Valuation): about $10–20 billion (current top L2 market cap range)
- Monthly Revenue: about $200k–$1M (on-chain fee income after sequencer costs)
- P/S ratio: about 1000x–5000x
- Tokenomics: circulating supply usually 5–15%, remaining 85–95% locked (mostly VC/team shares, linearly or cliff released over 2–4 years)
- Hyperliquid FDV: about $3–5 billion (mid-2025 typical market cap)
- Monthly Revenue: about $30–50 million (mainly trading fees, high turnover)
- P/S ratio: about 6x–10x
- Tokenomics: nearly 100% circulating, no pre-mined VC shares, no unlock selling pressure
(# 2. Refusing to take over
In Q3 2025, high FDV VC-backed new tokens launched on Binance and other CEXs generally experienced sharp corrections within 3 months of listing, with most dropping over 30–50% (some extreme cases 70–90%). Meanwhile, on-chain fair launch projects (like Hyperliquid ecosystem, some utility meme tokens) performed strongly, with average gains of 50–150%, and top projects even returning 3–5 times.
The market is punishing projects with high FDV, low circulation, and VC unlock pressures. The traditional game of “institutions buy low, retail buy high” is failing. a16z and others still try to sustain valuation bubbles with glossy reports and compliance narratives, but the rise of fair launch projects like Hyperliquid proves: when product quality is strong and tokenomics are fair, VC backing is no longer necessary to dominate the market.
The market is punishing the VC model.
The game of “institutions enter at $0.01, retail take over at $1.00” is over. a16z still attempts to maintain the bubble with polished reports and compliance backing, but Hyperliquid’s rise shows: when the product is good enough, you don’t need VC anymore.
The crypto landscape of 2025 is not simply “East vs. West,” but “Privileged vs. Free.”
a16z is building a moat in Seoul, trying to turn the crypto world into a compliant, controllable, low-efficiency “on-chain Nasdaq.”
Meanwhile, Paradigm and Hyperliquid are outside the city walls, building a wild, high-efficiency, even risky “free market” with code and math.
For investors, there is only one choice: do you want to earn meager returns inside a16z’s walled garden after compliance costs, or dare to step outside the walls into the real wilderness to seek the Alpha belonging to the brave?
References:
https://news.kalshi.com/p/kalshi-designation
- “Kalshi Wins CFTC Approval…” )2025-08-18(
https://www.reddit.com/r/Kalshi/comments/1phk94l/trading_fees/
- “Trading Fees” )2025-12-08###
https://www.financemagnates.com/forex/retail-traders-flock-to-prediction-platforms-kalshi-hits-44-billion-volume-in-october/
- “Kalshi Hits $4.4 Billion Volume…” ###2025-11-05(
https://www.cfbenchmarks.com/blog/kalshi-leads-surging-crypto-event-contract-market-powered-by-cf-benchmarks
- “Kalshi Leads Surging Crypto…” )2025-12-10(
https://sacra.com/research/polymarket-vs-kalshi/
- “Polymarket vs Kalshi - Sacra” )2024-10-31###
https://en.wikipedia.org/wiki/Andreessen_Horowitz
- “Andreessen Horowitz - Wikipedia” (2010-11-02)
https://www.privatecharterx.blog/rwa-tokenization-2025-guide/
- “RWA Tokenization 2025…” (2025-11-29)
https://magazine.mindplex.ai/post/ten-real-world-asset-projects-to-watch-in-2025
- “Ten Real-World Asset Projects…” (2025-03-05)
https://research.canhav.com/p/tracking-top-crypto-vc-funds-a16z
- “Tracking Top Crypto VC Funds…” (2025-09-26)
https://theonchainquery.com/top-blockchain-data-platforms-for-investment-research-teams-in-2025/
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https://www.gate.com/zh/learn/articles/crypto-funds-have-seen-their-principal-halved-after-four-years-of-investing-in-top-tier-v
… - “Investing in Top VCs with Four Years of Principal Loss…” (2025-11-11)
https://www.panewslab.com/zh/articles/ffbf290f-65c6-48f5-bbb0-6b42c793c271
- “Comparison of Digital Asset Funds and Crypto Venture Capital in 2025” (2025-08-24)
