a16z Escapes America: The Twilight of the VC Empire and the New King

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 and see a16z's extreme reliance on liquidity exits and its soaring regulatory liabilities, you'll realize that this could be a "flight" for a16z.

The United States' long-arm jurisdiction has cornered Crypto.

The SEC's ongoing lawsuit against Uniswap Labs and its massive blockade of DeFi front-ends have turned Silicon Valley from a hotbed of 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 home turf.

In 2011, Marc Andreessen wrote the Silicon Valley Bible, declaring that the geek fund that shouted "Code is Law" and "Software is eating the world" was dead, and in its place was a traditional asset management giant that was good at calculations and only invested in "regulatory arbitrage".

I. Market Forecasting: The Disconnect Between Compliant High-Priced Casinos and Liquidity

a16z's bet on Kalshi is essentially about building up 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 obvious structural differences.

• Bid-Ask Spread: Polymarket: During active trading hours in popular markets, typical spreads range from approximately 1% to 3%, sometimes compressing to close to 1% in extremely liquid markets. Spreads widen significantly during less popular or inactive periods (relying on AMMs and high-frequency arbitrage participants). Kalshi: In popular markets such as macroeconomics and elections, common spreads generally fall between 2% and 5%, with wider spreads for niche contracts. Overall, spreads are slightly higher than Polymarket, partly reflecting the structure where designated/professional market makers bear the liquidity and compliance costs under regulated environments.

• Kalshi's liquidity is artificially created by institutions, rather than organically generated. For retail investors, every transaction on Kalshi is essentially a hidden tax on "compliance costs."

• In its publicly available information, Kalshi itself acknowledges that while most participants on its platform are advanced retail investors, there are also dedicated market-making entities (such as Kalshi Trading, and later, professional institutional market makers). For the market to be "user-friendly," someone must be available 24/7 to place orders, continuously quote bid/ask prices, and accept orders from retail investors. This is typically handled by professional market makers or related parties, rather than being generated naturally by retail investors. Susquehanna and others are cited as early examples of institutional market makers.

2. The Walled Garden of Data

When introducing Kalshi, a16z positioned it as a price discovery and hedging infrastructure for real-world events, somewhat similar to a "regulated oracle layer." From the author's perspective, calling a centralized, licensed exchange "Oracle 2.0" conceptually confuses the functions of oracles with those of exchanges, and is therefore more of a narrative packaging than a "strict oracle upgrade."

Polymarket's API is open, allowing any DeFi protocol to call its odds data to build derivatives. Kalshi, however, has closed data and attempts to sell it as a SaaS service to Bloomberg and traditional hedge funds.

This isn't the open interoperability of Web3; it's the data monopoly model of Web2. a16z isn't investing in Crypto; it's only investing in CME, a company that uses blockchain for ledger management.

II. RWA: The Return Trap Caused by Incomposability

RWA is a "dead weight asset" in the DeFi world. It looks attractive, but it is almost impossible to circulate on-chain.

In "State of Crypto 2025", a16z points out that "the scale of on-chain RWA has reached billions or even tens of billions of dollars", but he hardly discusses the on-chain asset velocity, utilization and the extent to which these assets are actually used by DeFi. This gives readers the impression that the scale is "very large", but weakens the key dimension of capital efficiency.

1. Collateral Dilemma: Why is MakerDAO hesitant to fully invest in RWA?

MakerDAO has indeed significantly increased the proportion of RWAs (including government bonds, bank deposits, etc.) in its collateral pools in recent years, but its governance has always set a cap on single types of RWAs and emphasized decentralization and counterparty risk management. This shows that mainstream DeFi protocols do not believe that off-chain assets can be used to replace native on-chain collateral without restriction.

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

• ETH/WBTC: 24/7 trading, with a clearing time of <12 seconds (block time). LTV (Loan-to-Value) can reach 80%+. Tokenized T-Bills (Ondo/BlackRock): Closed on weekends and bank holidays. In the event of a black swan event over the weekend, the on-chain protocol cannot liquidate the collateral. LTV is limited to 50%-60% or requires permission from a counterparty.

2. Real data: The idle rate is astonishing.

Based on a combined estimate from multiple 2025 RWA data reports and the Dune dashboard, the current on-chain RWA size is roughly in the range of several billion to several billion US dollars in TVL (depending on whether stablecoins are included). However, only a small portion of RWA is actually used in "high-turnover scenarios" such as DeFi lending, structured products, and derivatives protocols, generally estimated to be around 10% or even lower.

• Total RWA issued: ~$53B

• The actual RWA (Revenue Value) entering DeFi lending/derivatives protocols is less than $3.5 billion ( only 6.6% ).

• This means that the vast majority of RWA assets are currently used primarily as "tokenized deposits/notes"—quietly lying on-chain or in custodial wallets earning coupon income, rather than being multi-layered and reused within an open financial system. Their asset velocity is far lower than that of native on-chain collateral. To a large extent, they have not yet been truly "financialized," nor have they generated a significant credit and liquidity multiplier effect.

• Based on this reality, the narrative of "deep integration of RWA and DeFi, releasing a multiplier effect" is more of a forward-looking vision than a fait accompli. Structurally, the current mainstream RWA model often introduces the sovereign dollar, the timetable of traditional finance, and compliance restrictions onto the chain, but has limited support for permissionless and composable open finance. It is more like "digitally moving dollar assets onto the chain" rather than making full use of the full advantages of blockchain.

III. a16z vs. Paradigm

a16z attempts to become "an agent of the government," while Paradigm attempts to become "an agent of the code."

The alpha generation logics of a16z and Paradigm have become somewhat decoupled; the former relies more on policy and relationship networks, while the latter emphasizes technological depth and infrastructure innovation.

• a16z's script: Political Capital. Expenditure structure: Huge sums allocated to lobbying in Washington, legal counsel, and media control. Moat: Licenses and relationships. Projects they invest in (such as Worldcoin and Kalshi) typically require extremely strong government connections to survive. Weakness: Their moat could collapse overnight should regulatory trends change drastically (such as a change in SEC chairman).

• Paradigm's playbook: Technical Capital spending structure: It boasts a top-tier internal research team (Reth, Foundry developers). Its competitive advantage lies in mechanism design and code efficiency. Their investments (such as Monad and Flashbots) focus on solving underlying throughput and MEV issues. Its strength: The demand for high-performance transactions will always exist, regardless of policy changes.

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

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

IV. Retail investors are furious; venture capital is no longer effective.

The biggest black swan event of 2025 will not be the macroeconomy, but the complete collapse of the valuation gap between venture capital firms and retail investors .

1. Valuation Inversion: The FDV Scam

Our comparison of the financial ratios of top VC-backed L2 firms in 2025 with those of Fair Launch perp DEX firms speaks volumes more than any words.

• Typical VC-Backed L2 projects (such as header Optimistic Rollup or similar):

• FDV (Full Float Market Cap): Approximately $10–20 Billion (Current top-tier Level 2 market cap range)

• Monthly Revenue: Approximately $200k–$1M (on-chain fee revenue, after deducting sequencer costs)

• Price-to-Sales (P/S) Ratio: Approximately 1000x–5000x

• Tokenomics: Liquidity is typically 5-15%, with the remaining 85-95% locked (mostly VC/team shares, to be released linearly or by the close over the next 2-4 years).

• Hyperliquid FDV: Approximately $3–5 Billion (Typical market capitalization in mid-2025)

• Monthly Revenue: Approximately $30–50 Million (Driven by transaction fees, high turnover)

• Price-to-Sales (P/S) Ratio: approximately 6x–10x

• Tokenomics: Nearly 100% fully circulated, no pre-mined VC shares, no unlocking selling pressure.

2. Refuse to take over.

In Q3 2025, high-FDV, VC-backed new coins listed on centralized exchanges like Binance generally experienced significant pullbacks within three months of launch, with most falling by more than 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 memes) performed strongly overall, with average gains ranging from 50-150%, and top projects even achieving 3-5x returns.

The market is indeed punishing projects with high FDV, low liquidity, and high VC unlocking pressure. The traditional game of "institutions entering at low prices and retail investors buying at high prices" is failing. Institutions like a16z are still trying to maintain valuation bubbles with elaborate research reports and compliance narratives, but the rise of Fair Launch projects like Hyperliquid proves that when the product is strong enough and tokenomics is fair, VC endorsement is not necessary 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 impressive research reports and compliance endorsements, but the rise of Hyperliquid proves that when the product is good enough, you don't need VC at all.

The crypto landscape in 2025 is not simply "East vs. West," but rather "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 city walls, using code and mathematics to build a wildly growing, highly efficient, and even dangerous "free market."

For investors, there is only one choice: do you want to earn meager profits after deducting compliance costs within the walled garden of a16z? Or do you dare to step out of the walls and venture into the real wilderness to seek the Alpha that belongs to the brave?

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