The outbreak of DeFi 2.0 under disorderly restructuring in 2026

Dec 29, 2025 23:47:27

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In Q4 2025, driven by a combination of market and policy factors, traditional finance and emerging open finance collided violently in an increasingly chaotic environment, leading to drastic changes that cleared most of the residual heat of the first curve (Note 1). The emotional wreckage is difficult to digest in a short time. Meanwhile, traditional finance, isolated in a bubble narrative of AI and the chaos of a golden age, has reached the end of its tether. Central banks around the world have had to rigidly satisfy the market's rigid aesthetic with textbook monetary and fiscal policies, forcing everyone to believe that these outdated economic inertia can still sustain for a little while longer.

In several previous articles, I have detailed the failure of conventional economic models at the intersection of the Kondratiev wave cycle, but experiencing it firsthand is even more tangible. Amidst the noise, only the market outlook report from Coinbase at the end of the year, <2026 Crypto Market Outlook>, objectively summarized and predicted the current market and industry. In fact, the big trends are not hard to see; it’s just that too many emotions and aesthetic inertia have covered the brief gaps. From my current perspective, I am mainly concerned with three questions:

i) The current global situation shows a high similarity in entropy increase trends compared to the period from 1910 to 1935 (Note 2). How long is the corresponding window period today, and how can we make comparisons during this process instead of mechanically borrowing historical experiences to assess risks and make decisions?

ii) The native development speed of Crypto and Open Finance, and the contradictions arising from their compliance collision with traditional finance in a positive market— which potential will become the main contradiction and restrain the other’s secondary contradiction?

iii) The combination of the first two forms a nonlinear problem: Will chaos create a turning point in 2026, becoming an independent growth factor that promotes Crypto and Open Finance to rapidly bridge the gap (Note 3) and enter the mainstream world and financial markets?

Coinbase's report <2026 Crypto Market Outlook> mentioned many impressive data points, one of which about stablecoins is particularly striking: by Q4 2025, the total global supply of stablecoins had reached $305 billion, with a total transaction volume of $47.6 trillion. We can roughly compare this data with the current global M0 total supply of $15 trillion and the total transaction volume of global currency usage at $1500 trillion (Note 4). It can be seen that the supply of stablecoins accounts for 2.0%, while its application ratio has reached 3.2% (note that this indicates the average activity of stablecoins is greater than that of traditional fiat by 160%). Coupled with the report's indication of a continuous annualized compound growth of 65% over four years, along with various foreshadowing laid out in 2025, we have reason to believe that Open Finance will bridge the gap and enter the Early Majority stage within the next year.

tl;dr

1011 ended the first curve of Crypto, and 2025 ended the last Kondratiev wave cycle.
The end of traditional finance's aesthetic inertia and social failure under strong data regulation.
The issue behind the resurgence of RWA becoming the mainstream narrative in 2025.
Emerging developing economies and global new geopolitics.
DeFi 2.0, DAT 2.0, Tokenomics 2.0.
Review of 2025 and analysis outlook for 2026.

1. 1011 ended the first curve of Crypto, 2025 ended the last Kondratiev wave cycle

In the January 2025 article , we discussed the unsustainability of the past Crypto market in the logic of speculation and narrative. Looking back at the year, only one giant remains at the table, fighting alone and seeking alternative paths, while various players in the original market have almost completely exited or have transformed to solidly begin developing the second curve.

1011 triggered the largest single-day liquidation in Crypto history, amounting to $19.3 billion, and over the following days, a total of approximately $40 billion was liquidated. ++On the surface, this appears to be the extreme leverage structure of the first curve market being concentratedly liquidated in a low liquidity environment, but essentially, it is due to too few players in the zero-sum game market leading to the platform's failure to control the loss and profit++ . When only two people remain at the table, all cooperative strategies will fail, and the opponent's dilemma is the inevitable cause of the end of the first curve.

Similar to the harvesting of the market by the $TRUMP coin, 1011 fundamentally dismantled the faith foundation of the first curve, destroying the residual heat expectations based solely on narrative, indicating that mere gambling-style speculative consensus will come to an end (Note 5); conversely, the second curve further grew in this process, with all remaining ecological enterprises transforming or innovating to pursue more pragmatic long-term development routes. The DeFi 2.0 market, based on Onchain Asset Management, RWA Finance, and Tokenization, has become the inevitable direction for the next phase of the market, including CEX, public chains, and Top Infra, all rapidly transforming towards PayFi and RWA.

On the other hand, by the end of 2025, global economic inflation had completely transitioned to stagflation, with many central banks' fiscal and monetary policy adjustments failing, leaving only the emotional value of adjustment. The ultimate involution of traditional economics and the sense of powerlessness in pushing AI expectations have completely equated to the Rockefeller era of 1910, marking the complete end of the last Kondratiev wave cycle (Note 6).

On October 29, 2025, Nvidia's market value surpassed $5 trillion, becoming the first company in history to reach this level. While many continue to be bullish about how much more room this price has, without comparing it to the Rockefeller Standard Oil Company of 1910, I just want to say you can rationally look at the fact that the entire GDP of the African continent is only about half of this size.

Entering H2 2025, more and more rating agencies, hedge funds, and investment banks began to closely monitor Nvidia's financial situation. Setting aside its upstream and downstream production capacity and profitability, purely from the perspective of systemic risk proportion, the comparison of long and short positions on Nvidia has completely become unbalanced; in other words, even if the fundamentals continue to show positive news, this trend will be hard to maintain; moreover, it is evident that the reality of the AI industry is not so optimistic.

It is worth noting that when Standard Oil was antitrust broken into 34 companies in 1911, the global understanding of the application demand for oil energy in automobiles, airplanes, and the next generation of automated industries had already entered a very clear recognition. However, this did not successfully prevent the chaos, depression, and systemic reorganization that lasted for 30 years after 1911, because the essence of chaos and disorder is the result of the failure of the production relations of the previous stage, manifested in severe monopolies, widespread poverty, imbalanced development, and continuous contradictions, etc., which are irreversible phenomena of social entropy increase.

At the intersection of large cycles, economic policies and short-cycle common sense will fail, and the factors hindering social and economic development and environmental health are absolutely not due to a lack of feasible growth, but rather ++the inertia of the monopolistic production relations from the previous cycle obstructing or failing to support the fair and effective combination of the next stage's productivity and labor++ . Focusing on today, the development of AI is inevitable, but ++the globally prevalent management mechanism of semi-feudal and semi-monopolistic capitalism can no longer support and adapt++ (Note 7).

2. The end of traditional finance's aesthetic inertia and social failure under strong data regulation

Even so, one of the surprises that exceeded my expectations is that there are still so many economists and industry experts today who are fixated on the calculation of interest rate cuts. Comparing the period from February 2020 before the pandemic to the peak in April 2022, the U.S. M2 increment accumulated over 40%. Faced with such a massive monetary volume, every subsequent QT and QE, in my understanding, is merely a formalistic emotional massage; whether it’s 25bp or 100bp, it has long lost its original economic value (Note 8).

Interest rate cuts have become a ++perfect combination of the emotional aesthetic expectations of recipients and the coercive decision-making of policymakers++ in the current environment. In simple terms, this is a dual inertia of spiritual kidnapping, a tool to influence the market through emotional value. It is commendable that countries have made their utmost efforts to delay the global entry into chaos and disorder while trying to use the inertia of aesthetic finance and policy tools.

However, the process of entropy increase cannot slow down as a result. Half a year later, revisiting what I mentioned earlier about Greenspan's prediction: "We must accept that monetary and fiscal policy cannot permanently boost economic growth in the presence of deeply rooted structural constraints." We can find that many policies under the traditional system have rapidly failed.

In mid-December 2025, Nasdaq publicly stated that it would submit an application to the SEC to change stock trading hours to 24/7. This move essentially represents traditional finance's defensive pressure on Crypto and the Onchain Market in the face of significant changes while simultaneously testing the waters with regulators. In fact, many traditional financial institutions in North America and East Asia have been adjusting their positions since the Genius Act in mid-2025, ++struggling repeatedly between how to face the challenges of++ ++Crypto Finance++ ++and how to maintain their previous barrier advantages to preserve the status quo.++

An interesting phenomenon is that this contradiction was very intense among various institutions in Q2 this year; it seemed that the Genius Act suddenly broke the original game equilibrium and cartel alliance moat (Note 9), with everyone feeling anxious, knowing that this trend is inevitable, and that the traditional financial system is about to be completely changed; as time progressed to Q3, everyone realized that the market's reaction was overblown, and the market iteration process would not be as fast as imagined. Traditional finance practitioners and policymakers miraculously reached a short-term reverse equilibrium, with the main logic being: change is inevitable, but policy compliance will become the anchor for everyone to smoothly transition to the new equilibrium and moat. As long as the licensed parties and policymakers jointly upgrade, they can successfully complete the transition; ++the Q3 phase is very subtle, akin to everyone participating in a prisoner's dilemma, and midway agreeing to temporarily reverse their decisions to cope with greater external pressure; this is merely a psychological illusion before the cartel alliance truly collapses++ ; as we enter Q4, the most advanced players know that with methods like Hyperliquid and Robinhood, the complete collapse of the traditional financial cartel alliance will soon arrive. Therefore, both Nasdaq and Coinbase will further step forward to speak the truth, facing more realistic transformative changes, such as changing trading hours and building their own RWA tokenization system, to gain real advantages in the next phase.

++The above process is actually very classic, as all players form a ++ ++Gartner Curve++ ++ psychological sandbox before facing a major transformation and engage in a process of gaming.++

The end of traditional finance's aesthetic inertia does not imply the failure of economic principles. On the contrary, the Crypto Economy and Open Finance are a further development based entirely on economic principles. However, the bottleneck lies in the systemic issues of the production relations mechanism in managing economics and markets, especially after fully entering the digital age, where the original management system can no longer adapt to finding a balance between regulation and freedom. The world has fallen into a significant misunderstanding of the erroneous use of strong digital regulation, leading to the accelerated deterioration of entropy within just a decade.

In the past decade, various regions around the world have entered the huge misunderstanding of "utilizing data when available and regulating when methods exist" at different times. The cost of rules and threshold costs in the outdated system has far exceeded opportunity costs and risk costs; ++the rigidity of data management makes reliance on historical paths not only unbreakable but also incurs greater costs or payments, forming a terrifying "Data Medieval" effect++.

This phenomenon permeates every corner of various industries globally, with excessive digital abuse and financial restrictions hindering development in every sector. To give a simple example, from my experience in VC for over 15 years, if you rigidly use one person's bank KYC to judge whether they can obtain financing, then 99% of businesses and innovations in this world will be extinguished.

Faced with the entropy increase failure of the global financial system and social management environment, 2026 will inevitably enter further disorder and reorganization, with many rules and industries being rewritten, and it will be difficult to avoid falling into a chaotic transition period lasting at least 10 years.

3. The issue behind the resurgence of RWA becoming the mainstream narrative in 2025

The narrative of RWA made a remarkable comeback in 2025, and the reason is simple: the credit collapse of the first curve, and the second curve temporarily lacks a new term with consensus, so RWA stepped in as a substitute to win this year's MVP.

Two months ago, while communicating with an industry OG friend in Silicon Valley, he suggested that I focus on RWA Finance after learning about Cicada Finance's upcoming announcement of its listing plan. I followed his advice and also retained Onchain Asset Management as the main body, leading to today's Onchain Asset Management for RWA Finance. Undoubtedly, both Onchain Asset Management and RWA Finance will remain strong mainstream tracks in the market in 2026.

Aside from the name RWA, it is not a revival but a complete reconstruction. The problem lies in the varying interpretations of the term RWA by those who use it. ++As of++ ++H2 2025++ , the understanding in most parts of the world is still close to: a crowdfunding behavior that tokenizes assets++ .

Most people who find their way into RWA do so not from an industry-building perspective but from their own needs, which is understandable. However, just like the issues faced by P2P and crowdfunding during the E-commerce era, a demand-driven market will force platforms, channels, and the market itself to present a one-sided issue, causing the industry to rapidly develop in the wrong direction.

What is the difference between RWA without fair value and the equity crowdfunding of the past? Is there a necessity for tokenization of illiquid RWA assets? Conversely, do all RWA assets really need liquidity? These questions have evidently not been thoroughly considered or reached a consensus within the overall market in 2025, and some deeper commercial confidentiality issues cannot be discussed here for the time being.

The current asset distribution data of RWA is provided with a relatively detailed analysis in Coinbase's report. ++T-Bills, Commodities, Liquid Funds++ ++and++ ++Credit Loans++ ++remain the four mainstays++, indicating the importance of quantifiable financial assets in RWA. In our view, the RWA landscape in 2026 will undergo a certain proportion of changes; the above assets will still exist, but the actual business brought by DeFi and Crypto Finance from emerging developing economies will be consolidated into the RWA market as asset suppliers, with Stablecoin Payment and SupplyChainFi becoming rapid growth directions.

4. Emerging developing economies and global new geopolitics

In 2025, while developed countries and regions in the global economy and finance are struggling to formulate management policies regarding Stablecoins and Crypto Finance, the development speed of emerging developing countries and regions is astonishing and beyond imagination.

"What they all want is stablecoins, or platform tokens will do." This is the consistent feedback from cross-border trade and payment companies this year. In addition to Nigeria, India, Brazil, Indonesia, and Bangladesh, many other countries and regions in Africa, South America, South Asia, Southeast Asia, Eastern Europe, and the Middle East have also shown exponential growth in the application of Stablecoins and Crypto Finance for three consecutive years, with actual proportions far exceeding those of developed economies, many even surpassing or catching up with the usage volume of local mainstream fiat currencies (Note 10).

These numerous new economic entities in emerging developing countries are rapidly expanding in the form of "off-balance-sheet assets," forming a stark contrast to the management dilemmas in the current mainstream world environment. Although due to historical accumulation, there are still significant differences in economic strength and consumption capacity across different regions globally, it is evident that the analytical data of the global mainstream economy has long been completely distorted. Faced with the stagflation of excessive regulation on one side and the rapidly growing new environment on the other, it will take no more than five years for the global economic landscape to be reshaped, and geopolitical relationships will undergo dramatic changes.

Regarding the initial question ii), I clearly have an answer. The true Nash equilibrium reshaping will not occur by breaking and reshaping within the original global economic system, but will certainly be formed by external forces breaking the global new pattern. The native development speed of Crypto and Open Finance will far exceed the speed at which traditional economic entities and markets accept and understand, and 2026 is likely to become a crucial turning point for this disorderly reconstruction.

5. DeFi 2.0, DAT 2.0, Tokenomics 2.0

In this report, Coinbase began to bet on some new terms, including DAT 2.0 and Tokenomics 2.0, which are essentially branches of DeFi 2.0 that the industry is already familiar with. The definitions of these concepts are quite good, and I will elaborate on them here.

In 2025, the DAT concept successfully spread from MSTR to the global mainstream financial market, and its essential logic is very simple: DAT premium multiple = market capitalization of the stock ÷ NAV (Net Asset Value) of its held BTC (or other mainstream Crypto); however, this premium multiple rapidly declined or even inverted from Q3 to Q4, quickly ending this year's global DAT 1.0 craze.

The fundamental reason for the decline in DAT 1.0 value and the end of its financial effect is that the capital multiplier's friction coefficient is too small, the story is simple, and price transparency expectations are limited. The Davis double hit and double kill are too direct; once the confidence shifts between bull and bear, it will quickly dissipate.

The industry value of the DAT concept in 2025 lies in the fact that the traditional financial stock market concept has exhausted the bubble, and the EV is difficult to sustain, while the bubble and credit collapse of the Crypto first curve have led both markets to shift their focus and huddle together for warmth.

Why can DAT 2.0 continue the value of the linkage between coins and stocks? Simply put, DAT 1.0 is the value transfer from the Crypto first curve to traditional finance, while DAT 2.0 is the value integration from the Crypto second curve to traditional finance. Unlike the former, the latter's value is sustainable for long-term development. In 2025, Ondo, Ethena, Maple, Robinhood, and Figure have already made good samples in DAT 2.0, and more emerging enterprises will rapidly develop within this framework in 2026.

Tokenomics 2.0 is a broader concept. This year, we proposed various derivative products related to Tokenomics, such as Liquid Engineering and Yield Engineering, which are actually further evolutions of Financial Engineering. In different actual financial cases, Tokenomics continuously corrects and optimizes each financial scenario like a financial circuit (Note 11), with each case being different, but in the overall evolution of the industry, it will gradually form innovative universal protocols with overall impact significance, like the PT-YT provided by Pendle.

In mentioning Tokenomics 2.0, Coinbase's report only briefly touched on a few issues: Value Capture, Token Buybacks, Financial Engineering, Regulatory Clarify as Catalyst, and Protocol P&L, without logical connections or detailed elaboration.

Here’s a simple breakdown:

Value Capture is actually unrelated to Tokenomics 2.0; it is merely a necessary condition in the application and promotion of assets in the second curve. Tokenomics exists independently of value capture; in other words, Tokenomics without sustainable value capture has already proven to be Ponzinomics in the first curve and will no longer be mainstream in the Crypto Market and Open Finance after this year;

Token Buybacks are an important condition for Asset Tokenization in RWA and DAT 2.0, and in my view, it is a necessary condition. More precisely, Asset Clearing Capability is a necessary condition for all asset investments, and the healthy development of RWA Finance next year will largely depend on whether the market can reach a consensus on this point;

Regarding Regulatory Clarify, after discussing Chapters 2 and 4 of this article, it should be objectively expressed as Pros and Cons. Coinbase's discussion has its particular perspective, but as discussed, the larger and faster flexible development is actually taking place in emerging developing countries and new economic entities;

Additionally, the process of financial protocolization is not determined by Regulatory Clarify; it is only highly correlated in some financially developed regions of North America and East Asia. The P&L of Protocol Finance is entirely a trading phenomenon of an upgraded Open Finance Market, determined by the objective market itself.

Whether it’s DAT 2.0 or Tokenomics 2.0, they are merely temporary terms; the second curve and DeFi 2.0 are the same, describing the essential shift and inevitable trend of the current Crypto Market and Open Finance after experiencing 2025.

6. Review of 2025 and analysis outlook for 2026

As 2025 comes to an end, let’s review and summarize the predictions and analyses from this year:

February \<Crypto The Second Curve of Growth >

"Zero-sum game and the seven giants at the table," "The trend of RYA/RWA and the rise of PayFi," "Crossing the Chasm: The Second Curve of Crypto Growth," "The development pattern of Crypto under compliance issues and the situations of various countries";

April \<Trump Tariff policies will trigger the end of the Kondratiev wave and the qualitative change of Bitcoin >

"The triple kill issue of bonds, stocks, and currencies and the failure of the Merrill Clock," "The Thucydides Trap and the comparison of the endings of five Kondratiev wave cycles in history," "Greenspan's prediction and the significance of Crypto at the intersection of the Kondratiev wave cycle," "The correlation shift between Bitcoin and chaos: the shift in inertia cognition and similarities with the Merrill Clock issue";

May \<GENIUS The Act and Onchain Shadow Currency >
"The essence of the decline in traditional dollar control," "The nominal and substantive purposes of the GENIUS Act," "DeFi Restaking's implications for the fiat world and the currency multiplier of shadow currencies," "Gold, the dollar, and Crypto stablecoins";

September \< The trend of asset on-chainization under stablecoin pricing methods >
"The essence of the Genius Act is to delegate the rights of currency issuance and settlement, thereby obtaining enhanced currency pricing power," "Stablecoins have triggered reforms in global financial on-chainization and asset on-chainization through changes in currency pricing forms," "Reforms are rapidly dismantling the long-standing cartel alliance of traditional finance, bringing opportunities for interest reorganization under chaos," "The two directions of coin-stock linkage: securitization and tokenization, and market characteristics," "The industry characteristics and issues of stablecoins, DAT, stock tokenization, RWA, and on-chain asset management."

The outlook for 2026 has already been extensively discussed in this article, and aside from question i), I believe sufficient viewpoint analysis has been provided. The further disorderly reorganization of the macro environment and the consequent promotion of DeFi 2.0's explosion are both clear trends and inevitabilities.

Question i) is indeed a headache. Whether in social economics or financial assets, trends and directions are always easier to judge compared to time and degree. Unlike the two Kondratiev wave cycles of the last century, the main differences in a similar paradigm environment are as follows:

a) The speed of information interaction to situation evolution is much faster, with differences of over 2.5-5 times from various aspects (Note 12);

b) The spillover space of global geopolitical contradictions is completely different, increasing the inevitability of conflict outbreaks;

c) The nonlinear effects brought by AI and Crypto far exceed those of industrial electrical automation.

On the other hand, many aspects remain largely unchanged compared to a hundred years ago, such as the hardware conditions for social management, the natural lifespan of humans, the ability of a generation to digest long-term emotions, and the political and economic management cycles under different social forms still being broadly similar.

In this context, in the management of enterprises over the past two years, I have often discussed with partners and gradually accepted a fact: to pay attention to nonlinear issues, learn to cope with and master triggering nonlinear situations, and integrate unexpected changes into part of the plan.

Note 1: The first curve refers to the speculative environment created by consensus expectations during the 16 years of Crypto's past development, continuously driving up expectations to form a wealth effect.

Note 2: The choice of 1935 instead of the end of World War II in 1945 is because the price of gold experienced a cliff-like rise in 1934 after decades.

Note 3: is a classic paradigm of the development of innovative things, metaphorically indicating that in the past few years, Crypto and Open Finance were still in the Early Adopter stage.

Note 4: The estimate of $1500 trillion here uses the annual trading volume of the foreign exchange market and securities commodity market as a rough calculation basis for financial magnitude.

Note 5: The prediction market is essentially a transformation extension of the first curve; when the consensus based on vague expectations can no longer support a consensus credit, a short-term pragmatic event-based bet becomes the new consensus credit soil for this type of risk preference.

Note 6: The end of the Kondratiev wave cycle and the intersection point has been mentioned multiple times in previous articles, such as in the chapter of Tariff policies will trigger the end of the Kondratiev wave and the qualitative change of Bitcoin. From 2020 to 2025, the world is in the transitional process between the end of the last Kondratiev wave cycle and the beginning of the next. The main difference this time refers to the end of 2025 and the accompanying social and economic phenomena marking the completion of the last Kondratiev wave cycle.

Note 7: In the Post-election Pattern Shift in November 2024, I first mentioned that "by the end of 2024, most countries and interest entities are still in a semi-feudal and semi-decentralized state capitalist environment," this adjustment is made to describe "semi-feudal and semi-monopolistic capitalism."

Note 8: Objectively speaking, emotional value itself has already become an important factor in today's global secondary financial market, with economic policies and market confidence being mutually causal under emotional value.

Note 9: Regarding the issue of the traditional financial cartel alliance being broken, detailed explanations were provided in Chapter 3 of the The trend of asset on-chainization under stablecoin pricing methods in May 2025.

Note 10: Economic data from underdeveloped emerging economies lacks publicly available and clear data materials; relevant information is based on non-public enterprise confidential data.

Note 11: Financial Circuit and Web3 Tokenomics Theory was written in October 2022, detailing the underlying framework mechanism for constructing the Web3 Tokenomics financial system.

Note 12: This multiple has only relatively narrow reference significance: macroscopically 2.5 times = Merrill Clock cycle of 10 years / Bitcoin cycle of 4 years; microscopically 5 times = 7x24 hours trading / 5x6.5 hours trading; it cannot effectively represent the actual differences in production and social iteration.