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

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 surging regulatory liabilities, you might realize this could be a "retreat" for a16z.
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."

I. 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. The cost is that users must endure extremely low capital efficiency.
a16z's bet on Kalshi is essentially a long on regulatory barriers. But compliance comes at a price, and that price is paid by 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 usually 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 generally fall in the 2%--5% range, with niche contracts wider, 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 rather than organically generated. For retail investors, every trade you make on Kalshi is essentially paying an invisible tax for "compliance costs."

• Public information shows that Kalshi admits: most participants on the platform are retail (advanced retail), but there are also dedicated market-making entities (such as Kalshi Trading and subsequently introduced professional market makers). To make the market "usable," someone must be on the order book 24/7, continuously quoting buy/sell prices and taking retail orders, typically borne by professional market makers or affiliates, rather than formed naturally by retail. Susquehanna and others are named as early institutional market maker cases.

2. Data's Walled Garden

When a16z introduces Kalshi, it positions 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 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.

II. 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 the "State of Crypto 2025" that "the scale of on-chain RWA has reached billions or even tens of billions of dollars," but it hardly discusses the turnover rate (Asset Velocity), utilization, and the extent to which these assets are genuinely 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 lies in the non-instantaneous nature of liquidation (T+1/T+2).

• ETH / WBTC: 24/7 trading, liquidation takes less than 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 TVL (depending on whether stablecoins are included), while the RWA that actually 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 layered and reused in the open financial system, with asset turnover (Asset Velocity) far lower than on-chain native collateral. They have largely not been truly "financialized" and have not formed significant credit and liquidity multiplier effects.

• On this realistic basis, the narrative of "deep integration of RWA with DeFi, releasing multiplier effects" is more of a forward-looking vision rather than a fact; structurally, the current mainstream RWA model often brings the timeline and compliance restrictions of dollar sovereignty and traditional finance on-chain, but supports limited permissionless, composable open finance, more like "digitizing dollar assets onto the chain" rather than fully leveraging all the advantages of blockchain.

III. 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 decoupled; the former relies more on policies and networks of relationships, 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 franchises and trade monopolies; Paradigm is like the TCP/IP protocol, profiting by 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.

IV. 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, linear or cliff release 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: Close to 100% fully circulated, no pre-mined VC shares, no unlock selling pressure

2. Refusal to Take the Bait

In Q3 2025, new high FDV VC-backed coins launched on CEXs like Binance generally saw significant corrections within three months of opening, with most declines exceeding 30--50% (some extreme cases reaching 70--90%). During the same period, on-chain Fair Launch projects (like the Hyperliquid ecosystem and some practical Memes) performed strongly overall, with average increases in the 50--150% range, and leading projects even achieving 3--5 times returns.
The market is indeed punishing the project model of high FDV, low circulation, and VC unlock pressure. The traditional game of "institutions entering at low prices, retail investors taking the bait at high prices" is failing. Institutions like a16z still try to maintain the valuation bubble with polished research reports and compliance narratives, but the rise of 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, retail investors taking the bait at $1.00" is over. a16z still tries 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 don't need VCs at all.
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, the choice is only once: do you want to earn meager returns after compliance costs in a16z's walled garden? Or dare to step outside the walls into the real wilderness, seeking the Alpha that belongs to the brave?
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https://news.kalshi.com/p/kalshi-designation

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https://www.reddit.com/r/Kalshi/comments/1phk94l/trading_fees/

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… - "Investing in Top VCs Halved Principal After Four Years…" (2025-11-11)
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- "Comparison of Digital Asset Treasury and Cryptocurrency Venture Capital in 2025" (2025-08-24)