Starting from a16z's retreat from Asia, let's talk about the twilight of the VC empire and the rise of the new kings.

Author: Anita @anitahityou

On December 10, 2025, a16z Crypto announced the establishment of an office in Seoul. The press release referred to it as an "offensive," but if you dig a little deeper and see a16z's extreme reliance on liquidity exits and the surge in regulatory liabilities, you might realize this could be a16z's "escape."

The long arm of U.S. jurisdiction has cornered Crypto.

The SEC's ongoing lawsuit against Uniswap Labs and the massive crackdown on DeFi frontends have turned Silicon Valley from a breeding ground for innovation into a cage of compliance. In contrast, Paradigm established a shadow network in Singapore two years ago, and Binance has never left its Asian stronghold.

In 2011, Marc Andreessen wrote the Silicon Valley Bible, shouting "Code is Law" and "Software is eating the world," but that geek fund is dead, replaced by a traditional asset management giant that is skilled in calculations and only invests in "regulatory arbitrage plays."

1. Prediction Markets: A High-Priced Casino of Compliance and Liquidity Disconnection

Kalshi's victory is not a victory of technology, but a victory of franchise rights. The cost is that users must endure extremely low capital efficiency.

a16z's bet on Kalshi is essentially a long position on regulatory barriers. But compliance comes at a price, and that price is paid by the users.

1. Spread is Justice

If you compare the order books of Kalshi (compliant) and Polymarket (offshore), you will find significant structural differences.

Bid-Ask Spread: Polymarket: During active periods in popular markets, typical spreads are around 1%–3%, with extremely high liquidity sometimes compressing to nearly 1%. In less popular or inactive periods, spreads widen significantly (relying on AMM + high-frequency arbitrage participants). Kalshi: In popular markets like macro and elections, common spreads are roughly in the 2%–5% range, wider for niche contracts, overall slightly higher than Polymarket, partly reflecting the structure where designated/professional market makers bear liquidity and compliance costs in a regulated environment.
Kalshi's liquidity is artificially created by institutions, not organically generated. For retail investors, every trade you make on Kalshi is essentially paying an invisible tax on "compliance costs."
Public information shows that Kalshi itself admits: most participants on the platform are retail (advanced retail), but there are also specialized market-making entities (like Kalshi Trading and subsequently introduced professional market makers). To make the market "usable," someone must be placing orders 24/7, constantly quoting buy/sell prices, and taking retail orders, typically borne by professional market makers or affiliates, not formed naturally by retail. Susquehanna is named as an early example of institutional market makers.

2. The Walled Garden of Data

When a16z introduces Kalshi, it positions it as a price discovery and hedging infrastructure for real-world events, somewhat akin to a "regulated oracle layer"; from the author's perspective, calling a centralized, licensed exchange "Oracle 2.0" conceptually confuses the functions of oracles and exchanges, thus appearing more like narrative packaging rather than a strict "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; it attempts to sell its data as a SaaS service to Bloomberg and traditional hedge funds.

This is not the open interoperability of Web3; it is the data monopoly model of Web2. a16z is not investing in Crypto; it is merely investing in a CME that uses blockchain for accounting.

2. RWA: Yield Traps Caused by Incompatibility

RWA is the "dead weight asset" of the DeFi world. It looks beautiful but is almost illiquid on-chain.

a16z points out in "State of Crypto 2025" that "the scale of on-chain RWA has reached the billion to several billion dollar level," but it hardly discusses the turnover rate (Asset Velocity), utilization, and the extent to which these assets are truly called upon by DeFi, which gives readers the impression of "large scale" while downplaying the critical dimension of capital efficiency.

1. Collateral Dilemma: Why doesn't MakerDAO dare to fully collateralize with RWA? MakerDAO has indeed significantly increased the proportion of RWA (including government bonds, bank deposits, etc.) in its collateral pool in recent years, but governance has always set limits on single types of RWA and emphasized diversification and counterparty risk management, indicating that mainstream DeFi protocols do not believe that off-chain assets can indefinitely replace on-chain native collateral.

The biggest problem with RWA is the non-instantaneous nature of liquidation (T+1/T+2).

ETH / WBTC: 24/7 trading, liquidation takes 12 seconds (Block time). LTV (Loan-to-Value) can reach over 80%. Tokenized T-Bills (Ondo/BlackRock): Closed on weekends, closed on bank holidays. If a black swan event occurs over the weekend, on-chain protocols cannot liquidate collateral. LTV is limited to 50%-60% or requires a licensed counterparty.

2. Real Data: Astonishing Idle Rates

According to multiple RWA data reports and Dune dashboards for 2025, the current scale of on-chain RWA is roughly in the range of several billion to tens of billions of dollars in TVL (depending on whether stablecoins are included), while the RWA that truly enters high-turnover scenarios like DeFi lending, structured products, and derivatives protocols accounts for only a small portion, generally estimated at around 10% or even lower.

Total issued RWA: ~$53B
RWA actually entering DeFi lending/derivatives protocols: $3.5B (only 6.6%)
This means that the vast majority of RWA assets currently have the mainstream use of "tokenized deposits/bills"—quietly lying on-chain or in custodial wallets earning interest, rather than being multi-layered and reused in the open financial system, with asset turnover (Asset Velocity) far below that of on-chain native collateral. They have largely not been truly "financialized" and have not formed significant credit and liquidity multiplier effects.
Based on this reality, the narrative of "deep integration of RWA and DeFi, releasing multiplier effects" is more of a forward-looking vision than a fait accompli; structurally, the current mainstream RWA model often brings the timelines and compliance constraints of dollar sovereignty and traditional finance on-chain, but offers limited support for permissionless, composable open finance, resembling more of "digitizing dollar assets onto the chain" rather than fully leveraging the advantages of blockchain.

3. a16z vs. Paradigm

a16z tries to be the "agent of the government," while Paradigm tries to be the "agent of code."

The alpha generation logic of a16z and Paradigm has to some extent diverged; the former relies more on policy and relational networks, while the latter emphasizes technical depth and infrastructure innovation.

a16z's script: Political Capital expenditure structure: Huge funds for lobbying in Washington, legal advisors, media control. Moat: licenses and relationships. The projects they invest in (like Worldcoin, Kalshi) typically require strong government relations to survive. Weakness: Once regulatory winds change (like a change in SEC chair), their moat could collapse overnight.
Paradigm's script: Technical Capital expenditure structure: Internally possesses top research teams (Reth, Foundry developers). Moat: mechanism design and code efficiency. The projects they invest in (like Monad, Flashbots) focus on solving underlying throughput and MEV issues. Advantage: Regardless of policy changes, high-performance trading demand will always exist.

a16z is like the East India Company, profiting from franchise rights and trade monopolies; Paradigm is like the TCP/IP protocol, profiting from becoming the underlying standard.

In the decentralized wave of 2025, the East India Company's fleet appears cumbersome and vulnerable, while the protocol layer is ubiquitous.

4. Retail Investors Flip the Table, VCs No Longer Matter

Retail investors have finally realized that they are not users but exit liquidity. So, they flipped the table.

The biggest black swan of 2025 is not the macro economy, but the complete rupture of the valuation inversion between VCs and retail investors.

1. Valuation Inversion: The FDV Scam

We compare the financial ratios of top VC-backed L2s with Fair Launch perp DEXs in 2025, which is more persuasive than any words.

Typical VC-Backed L2 projects (like leading Optimistic Rollups or similar):
FDV (Fully Diluted Valuation): about $10–20 Billion (current leading L2 market cap range)
Monthly Revenue: about $200k–$1M (on-chain fee revenue, after deducting sequencer costs)
Price-to-Sales (P/S) Ratio: about 1000x–5000x
Tokenomics: Circulation rate usually 5–15%, with 85–95% locked (mostly VC/team shares, released linearly or cliff over the next 2–4 years)
Hyperliquid FDV: about $3–5 Billion (typical market cap in mid-2025)
Monthly Revenue: about $30–50 Million (dominated by trading fees, high turnover)
Price-to-Sales (P/S) Ratio: about 6x–10x
Tokenomics: Nearly 100% fully circulated, no pre-mined VC shares, no unlocking sell pressure

2. Refusal to Take Over

In Q3 2025, new high FDV VC-backed coins launched on CEXs like Binance generally experienced significant corrections within three months of their opening, with most declines exceeding 30–50% (some extreme cases reaching 70–90%). During the same period, on-chain Fair Launch projects (such as the Hyperliquid ecosystem and some utility-based Memes) performed strongly overall, with average increases in the range of 50–150%, and leading projects even achieving 3–5 times returns.

The market is indeed punishing the project model of high FDV, low circulation, and VC unlocking pressure. The traditional game of "institutions entering at $0.01 and retail investors taking over at $1.00" is failing. Institutions like a16z are still trying to maintain the valuation bubble with polished research reports and compliance narratives, but the rise of Fair Launch projects like Hyperliquid proves that when product strength is sufficient and tokenomics are fair, there is no need for VC endorsement to dominate the market.

The market is punishing the VC model.

The game of "institutions entering at $0.01 and retail investors taking over at $1.00" is over. a16z is still trying to maintain this bubble with shiny research reports and compliance endorsements, but the rise of Hyperliquid proves that when the product is good enough, you simply do not need VCs.

The crypto landscape of 2025 is not simply "East vs. West," but "privilege vs. freedom."

a16z is building a moat in Seoul, attempting to transform the crypto world into a compliant, controllable, and inefficient "on-chain Nasdaq."

Meanwhile, Paradigm and Hyperliquid are outside the walls, building a wild-growing, high-efficiency, and even dangerous "free market" with code and mathematics.

For investors, there is only one choice: do you want to earn meager returns after compliance costs in a16z's walled garden? Or do you dare to step outside the walls and seek the Alpha that belongs to the brave in the real wilderness?

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