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Author: Anita On December 10, 2025, a16z Crypto announced the establishment of an office in Seoul. The press release called it an “offensive,” but if you look deeper, seeing a16z’s extreme reliance on liquidity exits and surging regulatory liabilities, you’ll realize this might actually be an “escape” for a16z. US long-arm jurisdiction has pushed Crypto into a corner. The SEC’s ongoing litigation against Uniswap Labs and large-scale blocking of DeFi frontends 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 certain exchanges have never left their Asian home base. In 2011, Marc Andreessen wrote the Silicon Valley bible,the geek fund that once shouted “Code is Law” and “Software is eating the world” is dead, replaced by a traditional asset management giant skilled in calculation and only investing in “regulatory arbitrage plays.” I. Prediction Markets: High-Priced Casinos of Compliance and Liquidity Fragmentation Kalshi’s victory is not a victory of technology, but a victory of franchise. The price is that users must endure extremely low capital efficiency. a16z’s bet on Kalshi is essentially a long position on regulatory barriers. But compliance has 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’ll find obvious structural differences. Bid-Ask Spread:Polymarket: In active periods of popular markets, typical spreads are around 1%–3%, with highly liquid books sometimes compressed to nearly 1%. Spreads widen significantly in less active periods or illiquid markets (relying on AMM + high-frequency arbitrageurs). Kalshi: In macro and election markets, common spreads are roughly 2%–5%, 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 institutionally manufactured, not organically generated. For retail, every trade on Kalshi is essentially paying an invisible tax for “compliance costs.” In public information, Kalshi itself admits: most platform participants are advanced retail, but there are also dedicated market-making entities (such as Kalshi Trading and subsequently introduced professional institutional market makers). To make the market “usable,” someone must post bids/asks 24/7 and take retail orders—this is typically handled by professional market makers or affiliates, not organically by retail. Susquehanna is named as an early institutional market maker example. 2. Data Walled Gardens When introducing Kalshi, a16z positions it as 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 roles of oracle and exchange, making it more of a narrative package than a true “oracle upgrade.” Polymarket’s API is open; any DeFi protocol can call its odds data to build derivatives. But Kalshi’s data is closed, attempting to sell it as a SaaS service to Bloomberg and traditional hedge funds. This is not Web3’s open interoperability; it’s Web2’s data monopoly model. a16z is not investing in Crypto, it’s investing in a CME that uses blockchain for bookkeeping. II. RWA: Yield Traps Caused by Non-Composability RWA are the “dead weight assets” of the DeFi world. They look attractive, but are almost illiquid on-chain. a16z pointed out in “State of Crypto 2025” that “on-chain RWA scale has reached the billion or even tens of billions of dollars level,” but barely discusses the asset velocity, utilization rate, or the extent to which these assets are actually used by DeFi. This gives readers an impression of “large scale” while downplaying the key dimension of capital efficiency. 1. Collateral Dilemma: Why Doesn’t MakerDAO Dare to Go All-In on RWA? MakerDAO has indeed significantly increased the proportion of RWA (including treasuries, bank deposits, etc.) in its collateral pool in recent years, but governance always sets caps on single RWA types and emphasizes diversification and counterparty risk management. This shows that mainstream DeFi protocols do not believe off-chain assets can infinitely replace on-chain native collateral. The biggest problem with RWA isthe non-instantaneous nature of liquidation (T+1/T+2). ETH / WBTC:24/7 trading, liquidation time < 12 seconds (block time).LTV (Loan-to-Value) can reach 80%+. Tokenized T-Bills (Ondo/BlackRock):Closed on weekends, closed on bank holidays. If a black swan event occurs on weekends, on-chain protocols cannot realize collateral.LTV is limited to 50%-60% or must go through permissioned counterparties. 2. Real Data: Astonishing Idle Rate According to multiple 2025 RWA data reports and Dune dashboards, the current on-chain RWA scale is roughly in the range of tens of billions of dollars TVL (depending on whether stablecoins are included), but the portion actually entering high-turnover scenarios such as DeFi lending, structured products, and derivatives protocols is only a small part, 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 are still mainly used as “tokenized deposits/notes”—lying quietly on-chain or in custodial wallets earning yield, rather than being recombined and reused in open financial systems. Asset velocity is far lower than on-chain native collateral. They have not been truly “financialized” and have not formed significant credit or liquidity multiplier effects.​ On this reality, the narrative of “deep integration of RWA and DeFi, unleashing multiplier effects” is more of a forward-looking vision than an established fact. Structurally, current mainstream RWA models often bring US dollar sovereignty, traditional finance timelines, and compliance restrictions on-chain, but offer limited support for permissionless, composable open finance. It’s more like “digitizing US dollar assets onto the chain” than fully leveraging all the advantages of blockchain. III. a16z vs. Paradigm a16z tries to be the “agent of 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 policy and relationship networks, the latter emphasizes technical depth and infrastructure innovation. a16z’s playbook: Political Capital expenditure structure:Huge funds spent on Washington lobbying, legal counsel, media control.Moat:Licenses and relationships.Their invested projects (such as Worldcoin, Kalshi) usually require extremely strong government relations to survive.Weakness:If regulatory winds shift (such as a change in SEC chair), their moat could collapse overnight. Paradigm’s playbook: Technical Capital expenditure structure:Internally owns top research teams (Reth, Foundry developers).Moat:Mechanism design and code efficiency.Their invested projects (such as Monad, Flashbots) focus on solving underlying throughput and MEV issues.Advantage:No matter how policies change, demand for high-performance trading will always exist. a16z is like the East India Company, profiting from franchise and trade monopoly; 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 bulky and vulnerable, while the protocol layer is everywhere. IV. Retail Investors Flip the Table, VCs No Longer Work Retail investors have finally realized they are not users, butexit liquidity. So, they flipped the table. The biggest black swan of 2025 is not macroeconomics, but the complete breakdown ofthe valuation inversion between VCs and retail. 1. Valuation Inversion: The FDV Scam Let’s compare the financial ratios of top VC-backed L2s and Fair Launch perp DEXs in 2025—this is more convincing than any words. Typical VC-Backed L2 project (such as leading Optimistic Rollup or similar): FDV (Fully Diluted Valuation): about $10–20 Billion (current leading L2 market cap range)​ Monthly Revenue: about $200k–$1M (on-chain fee income, after sequencer costs)​ Price-to-Sales (P/S) Ratio: about 1000x–5000x Tokenomics: Circulating supply usually 5–15%, remaining 85–95% locked (mostly VC/team shares, linear or cliff vesting over the next 2–4 years)​ Hyperliquid FDV: about $3–5 Billion (typical 2025 mid-year market cap)​ Monthly Revenue: about $30–50 Million (mainly trading fees, high turnover)​ Price-to-Sales (P/S) Ratio: about 6x–10x Tokenomics: nearly 100% fully circulating, no pre-mined VC shares, no unlock sell pressure​ 2. Refusing to Take the Bag In Q3 2025, high FDV VC-backed new coins listed on CEXs such as certain exchanges saw sharp pullbacks within three months of launch, with most dropping more than 30–50% (some extreme cases as much as 70–90%). Meanwhile, on-chain Fair Launch projects (such as Hyperliquid ecosystem and some utility Memes) performed strongly, with average gains in the 50–150% range, and top projects even achieving 3–5x returns.​ The market is indeed punishing projects with high FDV, low circulation, and VC unlock pressure. The traditional game of “institutions entering at low prices, retail taking the bag at the top” is failing. Institutions like a16z still try to maintain the valuation bubble with fancy research reports and compliance narratives, but the rise of Fair Launch projects like Hyperliquid proves: when the product is strong enough and tokenomics are fair, there’s 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 taking the bag at $1.00” is over. a16z still tries to maintain this bubble with glossy research and compliance endorsements, but the rise of Hyperliquid proves: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, trying to turn the crypto world into a compliant, controllable, low-efficiency “on-chain Nasdaq.” Meanwhile, Paradigm and Hyperliquid are outside the walls, building a wild, high-efficiency, even dangerous “free market” with code and math. 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 fight for 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 - "Andreessen Horowitz - Wikipedia" (2010-11-02)​ https://www.privatecharterx.blog/rwa-tokenization-2025-guide/ - "RWA Tokenization 2025..." (2025-11-29)​ https://magazine.mindplex.ai/post/ten-real-world-asset-projects-to-watch-in-2025 - "Ten Real-World Asset Projects..." (2025-03-05)​ https://research.canhav.com/p/tracking-top-crypto-vc-funds-a16z - "Tracking Top Crypto VC Funds..." (2025-09-26)​ https://theonchainquery.com/top-blockchain-data-platforms-for-investment-research-teams-in-2025/ - "Top Blockchain Data Platforms..." (2025-11-24)​ https://www.gate.com/zh/learn/articles/crypto-funds-have-seen-their-principal-halved-after-four-years-of-investing-in-top-tier-v ... - "After Four Years of Investing in Top VC, Principal Halved..." (2025-11-11)​ https://www.panewslab.com/zh/articles/ffbf290f-65c6-48f5-bbb0-6b42c793c271 - "2025 Digital Asset Treasury and Crypto VC Comparison" (2025-08-24)​