Arthur Hayes' new article: ICOs are the cure for the current crypto fundraising dilemma
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Arthur Hayes' new article: ICOs are the cure for the current crypto fundraising dilemma
Early investment in ICOs is the only way to achieve 10,000x returns; without significant risk, there is no substantial reward.
Navigating Web3 tides with focused insightsAuthor: Arthur Hayes
Translation: TechFlow
Disclaimer
Any views expressed in this article are the author's personal opinions and should not be taken as investment decisions or considered financial advice.
Main Content
Sometimes people act irrationally due to desire or blindness. Unfortunately, many Maelstrom portfolio companies appear to have contracted a kind of "CEXually Transmitted Disease" (CEX STD). Some affected founders mistakenly believe they can only achieve so-called "extreme returns" by following instructions from certain well-known centralized exchanges (CEXs). These directives include inflating specific metrics, hiring particular individuals, allocating a fixed number of tokens, launching tokens on specified dates—or even temporarily changing launch plans. Driven by greed, these companies have forgotten user needs and the original purpose of cryptocurrency. If you're suffering from this illness too, come to my clinic—I have the cure: ICOs. Let me explain.
I believe there are three main reasons why cryptocurrency has become one of the fastest-growing networks in human history:
Government Control – Large corporations—Big Business, Big Tech, Big Pharma, Big Military—use their immense wealth and power to control most major governments and economies. While global living standards and life expectancy have significantly improved since the end of WWII, for the 90% of people with minimal financial assets and almost no political voice, this growth has stagnated or even reversed. The decentralized nature of cryptocurrency is precisely the antidote to such concentration of wealth and power.
Revolutionary Technology – Bitcoin’s blockchain, and the various blockchains that followed, represent a revolutionary innovation. Starting from humble beginnings, Bitcoin has proven itself to be one of the most stable and secure monetary systems globally. The Bitcoin network offers an effective bug bounty of nearly $2 trillion (via double-spend attacks), yet its security remains unbroken to this day.
Wealth Effect – The value appreciation of cryptocurrencies and their derivative tokens has made many users instant millionaires. In the U.S. elections this past November, the economic strength of crypto supporters was clearly demonstrated. Like many countries, America’s political system runs on a “money game.” Practitioners from the crypto industry became among the top contributors to political candidates, directly contributing to victories for pro-crypto candidates. As the fastest-growing asset in human history, Bitcoin enables the crypto community to wield significant influence in politics.
While most in the crypto community understand why this movement succeeded, occasional bouts of “amnesia” occur—particularly evident in shifts in fundraising methods. Sometimes projects succeed by appealing to the community's desire for wealth; at other times, cash-strapped founders forget why users chose crypto in the first place. Yes, they may believe in the idea of “by the people, for the people”; yes, they may build impressive technology. But if users cannot profit from it, adoption of any crypto product or service will remain slow.
Since the ICO frenzy faded in 2017, capital formation has gradually drifted from its original intent. Previously, capital formation relied on sparking community participation and wealth aspirations. Now, it’s been replaced by high fully diluted valuations (FDVs), low circulating supplies, and venture capital (VC)-backed tokens. Yet, VC-backed tokens have performed terribly in this bull market (since 2023). In my article PvP, I noted that the median performance of tokens launched in 2024 underperformed major coins like Bitcoin, Ethereum, or Solana by about 50%. Retail investors, though finally able to buy these projects via centralized exchanges (CEXs), are unwilling to pay premium prices. As a result, exchange internal market makers, airdrop recipients, and third-party market makers dump these tokens into illiquid markets, leading to dismal price performance. Why has our industry forgotten the third pillar of crypto’s value proposition—helping retail investors build wealth?
The Memecoin Cure
Today’s crypto issuance market has become similar to traditional finance (TradFi) IPO systems. Retail investors often end up as bagholders for VC tokens. However, in crypto, alternatives always emerge—Memecoins. A memecoin is a token with no utility, whose sole function is spreading meme content across the internet. If the meme resonates strongly enough, users buy in, hoping others will follow.
Capital formation in memecoins is more equitable. Teams typically release the entire token supply at launch, with initial FDVs often just a few million dollars. They usually begin trading on decentralized exchanges (DEXs), where speculators bet on which meme will gain traction and drive demand.
For ordinary speculators, the most attractive feature of memecoins is the potential to leapfrog one or two wealth percentiles if they enter early. Still, every participant understands that memecoins lack intrinsic value and generate no cash flow—so they fully accept the risk of losing everything, all in pursuit of wealth dreams. Crucially, no institutions block access to these tokens, nor are there hidden capital pools waiting to unlock and dump supply at higher prices.
To better understand different types of tokens and their value sources, I propose a simple classification framework. Let’s start with memecoins:
Memecoin Intrinsic Value = Meme Propagation Power
This is intuitive. Anyone active in any community (online or offline) understands the power of memes.
What About VC Tokens?
Professionals in traditional finance (TradFi) often lack real expertise. I know this firsthand—from working in investment banking, I realized the required skills were actually quite limited. Many enter TradFi because it offers high pay without requiring deep knowledge. With basic high school algebra and a good work ethic, I could train anyone to handle front-office financial services jobs. Yet doctors, lawyers, engineers require years of technical training, despite earning far less on average than finance professionals.
The high salaries in TradFi make entry barriers more social than skill-based. Your family background, university, or boarding school reputation often matter more than intellect. This makes TradFi a closed elite club, reinforcing existing class and racial biases.
Let’s apply this framework to how VCs raise funds and allocate capital.
To find winners like Facebook, Google, Tencent, or ByteDance, top-tier venture capital firms must raise massive funds. These primarily come from endowments, pensions, insurers, sovereign wealth funds, and family offices—typically managed by TradFi professionals. As fiduciaries, they must only invest in funds deemed “appropriate.” This “appropriateness” usually means being run by “qualified” and “experienced” professionals—criteria tied closely to education and career history: graduates of a handful of elite universities (Harvard, Oxford, Peking University, etc.), who started careers at major banks (JPMorgan, Goldman Sachs), asset managers (BlackRock, Fidelity), or tech giants (Microsoft, Google, Facebook, Tencent). Without such credentials, TradFi gatekeepers deem you unfit to manage others’ money.
This filtering creates a highly homogenous group—similar looks, speech patterns, clothing, and lifestyles—all part of the same global elite circles.
For capital allocators, the biggest challenge is career risk. If they back a non-traditional fund and it fails, they might lose their job. But if they choose a conventional fund and it fails, they can blame “bad luck” and keep their position. Thus, to minimize career risk, they favor traditionally credible funds over risky innovations.
This logic extends to startup selection. VCs prefer founders who fit the stereotype of a “successful founder.” Business founders need experience at top consultancies or banks and degrees from elite universities; technical founders need experience at successful tech companies and advanced degrees from prestigious schools. Geography matters too: Silicon Valley VCs favor Bay Area startups; Chinese VCs focus on Beijing or Shenzhen.
Ultimately, this creates a highly homogenous investment environment—where backgrounds, thinking styles, values, and even locations are strikingly similar. This limits innovation and makes VC decisions increasingly conservative.
After the ICO bubble burst, crypto founders seeking VC funding had to compromise. To raise capital from VCs concentrated in San Francisco, New York, London, and Beijing, they had to cater to VC preferences.
VC-perceived Token Value = Founder’s Education, Career History, Family Background, and Geography
To VCs, team matters far more than product. If a founder fits the “successful founder” stereotype, funding flows easily. Such founders are seen as inherently “qualified,” so even burning hundreds of millions before finding product-market fit is acceptable—because a few will succeed and create the next Ethereum. And when teams fail, VCs face little criticism, since they backed those deemed most likely to succeed.
Clearly, crypto-specific expertise isn’t key in VC funding decisions. This disconnects VC-backed projects from retail investors. VCs aim to protect their jobs; retail investors seek financial freedom through 10,000x token gains. Early on, such returns were possible: buying ETH at ~$0.33 during Ethereum’s presale would yield ~9,000x today. But current crypto capital structures make such returns nearly impossible.
Venture capitalists profit by flipping worthless, illiquid SAFTs (Simple Agreements for Future Tokens) between funds, each time increasing valuation. When a flawed crypto project finally lists on a CEX, its FDV often exceeds $1 billion. For a 10,000x return, its FDV would need to grow to an astronomical figure—exceeding total fiat asset value—and that’s for just one project.
If the VC coin model is rejected by regular users, what gives ICOs their essential meaning?
ICO Intrinsic Value = Viral Content Power + Technical Potential
Meme – A project gains meme value if its design and positioning align with current crypto trends. If the meme is compelling and spreads quickly, it brings widespread attention. The goal is to attract users at the lowest cost and monetize them through products or services. A widely discussed project rapidly fills its marketing funnel.
Technical Potential – ICOs usually happen early—Ethereum raised funds before development. This model relies on community trust: given funding, the team will build valuable tech. Technical potential can be assessed through:
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Does the team have experience building major products in Web2 or Web3?
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Is the proposed technical solution feasible?
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Can the technology solve a globally significant problem, attracting millions or billions of users?
Technical founders can meet these criteria without fitting VC stereotypes. The crypto community doesn’t prioritize family background, résumés, or Ivy League degrees. These help, but mean nothing without strong code. The community supports Andre Cronje over a Stanford graduate, ex-Google employee, and Battery Club member.
While most ICOs—99.99%—tend toward zero after one cycle, a few teams do build technologies that gain value through user adoption, powered by strong virality (memetic effect). Early investors in such ICOs may see 1,000x or even 10,000x returns—the very outcome they seek. The speculation and volatility of ICOs are features, not bugs. If retail investors want stable, conservative investments, they can trade on global TradFi stock exchanges. In most countries, IPOs require profitability and management disclosures to ensure transparency. But for most retail investors, the problem with IPOs is they don’t offer life-changing returns—because early risk investors have already captured most of the upside.
If ICOs can fund technically promising projects with strong viral potential and global impact, how can we revive them?
ICO Roadmap
In its purest form, an ICO allows any internet-connected team to present a project to the crypto community and raise funds. The team launches a website explaining who they are, what they plan to build, why they’re qualified, and why the market needs their product or service. Investors then send crypto to an on-chain address and receive tokens after a set period. Every detail—timing, amount raised, token price, tech type, team composition, investor location—is decided solely by the team, with no intermediaries like VCs or CEXs involved. This is exactly why centralized middlemen hate ICOs—they’re completely bypassed. Yet communities love ICOs because they offer opportunity regardless of background, giving high-risk takers a shot at high rewards.
ICOs are returning because the industry has come full circle. We once enjoyed decentralization but paid the price. Then we endured extreme control by VCs and CEXs, disgusted by the overvalued junk they forced upon us. Now, fueled by loose monetary policies in the U.S., China, Japan, and the EU, the crypto market is entering a new bull run, accompanied by狂热 speculation in memecoins. The community is ready again for high-risk ICO investing. It’s time for the yet-to-be-rich crypto speculators to widely deploy capital, hunting for the next Ethereum.
The next question is: What’s different this time?
Timing
Thanks to tools like Pump.fun, launching a token now takes minutes, and we now have more liquid DEXs. Teams can raise funds via ICO and deliver tokens within days. This differs from previous cycles, where delivery could take months or even years after subscription. Today, investors can immediately trade newly issued tokens on platforms like Uniswap and Raydium.
Due to Maelstrom’s investment in the Oyl wallet, we’ve gained early access to some potentially disruptive smart contract technologies being built on the Bitcoin blockchain. Alkanes is a new meta-protocol aiming to bring smart contracts to Bitcoin via the UTXO model. I can’t claim to fully understand how it works—but I hope more capable minds will review their GitHub repositories and decide whether to build on it. I hope Alkanes sparks an explosion of ICOs on Bitcoin.
Alkanes wiki, code repo (repo), technical specifications (specifications).
Liquidity
Today, retail crypto enthusiasts show intense interest in memecoins, eager to trade these highly speculative assets on DEXs. This demand allows unvetted ICO projects to be traded immediately after token delivery, enabling free market pricing.
Though I’ve long criticized Solana, I must acknowledge Pump.fun brought positive change. This protocol lets ordinary users launch and trade their own memecoins in minutes—no technical skills needed. Continuing this trend of democratizing finance and crypto trading, Maelstrom has invested in a new platform that could become the go-to spot for trading memecoins, cryptocurrencies, and newly issued ICOs.
Spot.dog is building a memecoin trading platform designed for Web2 users. Its core advantage isn’t technical—it’s powerful distribution. Most current memecoin platforms target experienced crypto users. For example, Pump.fun requires understanding Solana wallets, token swaps, slippage settings, etc. But users who browse Barstool Sports, follow r/wsb, trade stocks on Robinhood, or bet on their favorite teams via DraftKings are far more likely to use Spot.dog.
Spot.dog has partnered with several heavyweight players. For instance, the “Buy Crypto” button on Stocktwits—which gets 1.2 million monthly unique visitors—is powered by Spot.dog. Additionally, Iggy Azalea’s $MOTHER Telegram trading bot has chosen Spot.dog as its exclusive partner. I know you speculators are dying to know when Spot.dog’s token launches? Be patient—if you’re interested, I’ll tell you how to participate in Spot.dog’s governance token sale at the right time.
User Interface and Experience
The crypto community is already familiar with non-custodial browser wallets like Metamask and Phantom. Investors are used to loading crypto into browser wallets, connecting to dApps, and making purchases. This familiarity drastically lowers the technical barrier for ICOs to raise funds.
Blockchain Speed
Back in 2017, a hot ICO could overload and even paralyze the Ethereum network. Skyrocketing gas fees made transactions prohibitively expensive. By 2025, blockspace costs on Ethereum, Solana, Aptos, and other Layer-1 blockchains will be extremely low. Transaction throughput has increased by orders of magnitude compared to 2017. If a team attracts a large base of speculative supporters, their ability to raise funds will no longer be hindered by slow speeds or high fees.
Aptos, in particular, with its ultra-low per-transaction cost, is poised to become the preferred blockchain for ICO projects.
Here are average transaction fees (in USD) for select blockchains:
Rejecting Bad Investments
I've presented the ICO solution to the CEX problem. Next, project founders must make the right choices. But if they don’t get it, retail crypto investors must also act—by actively “rejecting bad investments.”
“Rejecting bad investments” means:
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Rejecting VC-backed projects with excessively high fully diluted valuations (FDVs) but minimal circulating supply.
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Rejecting tokens launching at high valuations on centralized exchanges (CEXs).
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Rejecting those who criticize so-called “irrational” trading behaviors.
Looking back at 2017, many ICOs were of terrible quality. Among the most destructive was EOS. Block.one raised $4.1 billion in crypto via ICO to develop EOS. Yet after launch, EOS nearly vanished. Well, not entirely true—surprisingly, even this failed project still maintains a $1.2 billion market cap. This shows that even projects like EOS, once symbols of peak bubble excess, retain value far above zero. As someone passionate about financial markets, I must admit EOS’s ICO structure and execution were textbook examples. Founders should study how Block.one raised the largest amount ever through an ICO or token sale.
I mention this to illustrate that, from a risk-adjusted perspective, if you size your investments properly, even failed projects may retain some post-ICO value. Investing early in ICOs remains the only path to 10,000x returns—but no huge reward comes without huge risk. To chase 10,000x gains, you must accept that most of your investments will approach zero after ICO. Yet this is still far better than the current VC token model, where 10,000x returns are nearly impossible, but losing 75% within a month of CEX listing is common. Retail investors have subconsciously recognized the poor risk-reward ratio of VC tokens, hence their shift to memecoins. Now is the time to reignite excitement for new crypto projects by offering retail users a real chance at extraordinary wealth—and bring ICOs back to glory!
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Arthur Hayes
