Why ICOs Will Make a Comeback in 2025

By Ryan Zurrer, CoinDesk; Translated by Deng Tong, Golden Finance

In 2025, regulatory reforms in the U.S. and the easing of global cryptocurrency confrontations will usher in a new generation of decentralized capital formation, which first became popular in 2017 in the form of "ICOs" (initial coin offerings).

In the 2010s, cryptocurrencies had not yet established valid use cases for Bitcoin and altcoins, until Ethereum smart contracts enabled early teams to raise funds from backers scattered around the world. We saw Ethereum bootstrap a global decentralized computer, giving birth to DeFi, NFTs, and various crypto primitives, all from less than $20 million raised by the global community.

Many other projects soon followed suit, and we observed a new dynamic where raising early funds from decentralized communities almost always brings more value-added to projects and entrepreneurs than the best and most well-intentioned venture capitalists could provide. Through decentralized investor groups, entrepreneurs can get free work from evangelists, beta testers, and code contributors to contribute to the project at hand. Additionally, the shorter liquidity timeframe provides a better risk-reward for early investors.

Unfortunately, ICOs are slowly being curbed and deemed “non-compliant” with regulations that were never clearly spelled out. By 2020, their pace has slowed, with 88% of ICO tokens trading below their offering price.

Fast forward to 2025, we could see a convergence of some important inputs that allow compelling investment opportunities to re-emerge, but with characteristics that are very different from ICO 1.0.

ICO 2.0

1. Updated Regulatory Stance

I predict that value accumulation will be the fundamental reason to invest in tokens this time around.

Entrepreneurs and investors in the space have matured and are ready to collectively acknowledge that most tokens have an expectation of profitability. In fact, one could argue that obfuscation of how token holders will be compensated, as a manual attempt to sidestep the Howey test, was the primary issue the first time around.

KYC/AML will focus on on- and off-ramps such as exchanges and L2 bridges, and reasonably focus on the issue of converting proceeds back into fiat, as an appropriate attempt that should satisfy reasonable regulators.

2. Market Volume

We are seeing a rapid decline in certain mid-market companies that could reinvent their business models by becoming community-led and decentralized.For example, mid-sized media companies including newspapers and magazines are an obvious business model that could be greatly improved by using a token economy to drive journalists toward a higher level of professionalism.

3. Cryptocurrency Progress

In 2017, we had ICO click-through races on very crude UI/UX interfaces, pre-launch SAFT (Simple Agreement for Future Tokens) rounds with participation from a handful of VCs, and waits for years to go live. The nature of any emerging technology is this: most will die, but the few that survive will continue to create huge value (spoiler alert: > 90% of AI projects will also die).

Cryptocurrencies now have decent barriers to entry, good user-facing applications, and most importantly, the community has demonstrated an uncanny ability to publicly call out nonsense and root out bad actors far better than government oversight. The glow of open decentralized ledgers is a particularly powerful force.

Impact and Predictions

So what does all this mean for the crypto community?

We will see hundreds of billions of dollars in total capital formation for DeFi, NFTs, RWAs, and numerous other crypto primitives in the coming years.

M&A activity will become a significant component of on-chain capital formation activity. Whether it’s traditional businesses getting serious about crypto and reclaiming lost ground, such as the Stripe-Bridge deal, or EVM L2s joining forces in recognition that only a few businesses will survive, we will see billions of dollars worth of M&A activity.

In addition, mid-market Web2 and traditional companies will seek to reinvent their business models as they can use token incentives in a less hostile environment. We are seeing companies in energy, media, art, and mobile communications taking token incentives seriously, transforming their value chains into open markets, and acquiring customers quickly and using cheaper labor.

I am also optimistic that regenerative finance that fuses capitalist and philanthropic missions will find its place. I am very excited about how crypto can shift the paradigm, tying reasonable returns on capital to social goals in a more dramatic way than we have seen to date.

I predict that we will see a range of new ways to select ICO participants, whether as rewards to LPs, relying on reputation based on on-chain activity, or through the use of certain proofs. A byproduct of this is that we will see a better balance between retail and institutional/venture investors.

Finally, as always in the crypto space, we will continue to see constant innovation and new ideas, leading to more opportunities for early-stage funding. Many exciting new teams clearly see that the natural medium of exchange for AI will be through cryptocurrency and are preparing accordingly. AI agents will bootstrap themselves through token-backed fundraising mechanisms that blend debt and equity principles.

Overall, I am optimistic that the crypto community has internalized the lessons learned along the stoic evolutionary path to this point. As a range of opportunities for capital allocation emerge over the next year, I encourage everyone in the crypto space to be vocal, publicly highlight due diligence red flags, and move the industry toward open access, fair launches, and projects that directly create value for society.

Fair launches are a better path forward, and we should all strive for more fair and transparent fundraising. There are still many problems to be solved, and there will be some spectacular failures as we move forward, but decentralized capital formation is crypto’s original killer app, and it deserves continued development.