Ethereum's New Era of Internet Capital Formation! The Return of the ICO

This episode dives into the hidden economics of GPU scarcity—how AI and crypto are colliding over compute power, and what this means for investors.

The Resurgence of ICOs: A New Era for Onchain Capital Formation

• The crypto market is witnessing a significant return of Initial Coin Offerings (ICOs)—a method of fundraising where new cryptocurrencies are sold to early investors. Five prominent, high-quality projects—Mega ETH, Monad, Aztec, Infinex, and Zama—are conducting public token sales within a short timeframe. This trend is particularly notable as some projects are proactively classifying their tokens as "consumptive goods" rather than securities, enabling unaccredited investors to participate alongside institutional players. David highlights this as a "very big deal" with substantial implications for crypto and Ethereum's future.
• Strategic Implication: The return of high-quality ICOs, especially those accessible to unaccredited investors, signals a maturing market and potential for broader retail participation in early-stage crypto projects. Investors should monitor projects pursuing "consumptive good" classifications for regulatory clarity and wider access.

From ICO Mania to Regulatory Arbitrage: Lessons Learned

• David recounts his entry into crypto during the 2017 "ICO mania," where Ethereum's primary use case was facilitating these speculative investments. While powerful for enabling global capital formation, this period was marred by "shenanigans" and a high failure rate, leading to many investors getting "burnt." Ryan notes that the subsequent regulatory crackdown by the SEC (Securities and Exchange Commission)—a U.S. government agency responsible for regulating securities markets—under Gary Gensler, forced the industry into "regulatory arbitrage" tactics like "points meta" and retroactive airdrops. These were convoluted workarounds for what should have been direct token sales.
• Actionable Insight: Researchers should analyze the historical performance of ICOs versus airdrops/points programs to understand which distribution models foster long-term project health and investor alignment. The shift back to ICOs suggests a preference for direct investment over gamified incentives.

Pioneering Fair Auctions: The SpankChain Model

• David shares his personal experience participating in the SpankChain ICO, led by Amin Solimani. He praises its innovative "strike price mechanism." which allowed for natural demand-supply equilibrium by only accepting bids within a specific price range. This early example of sophisticated auction design in crypto demonstrated a fairer approach to price discovery, a concept now being refined and leveraged by modern ICOs, including those using Uniswap's CCA model.
• Strategic Implication: The evolution of auction mechanisms, from early experiments like SpankChain to today's sophisticated models, indicates a focus on fair and efficient capital allocation. Crypto AI investors should prioritize projects utilizing transparent and robust onchain price discovery tools.

Mega ETH: Discounted Access and Opinionated Allocation

• The Mega ETH sale, conducted on Coinbase's Echo platform, offered 5% of its token supply at a $999 million valuation, significantly below its private market valuation. The 72-hour public auction, capped at $186,000 per wallet, was massively oversubscribed (28x), with $1.4 billion in Tether (USDT)—a stablecoin pegged to the U.S. dollar—locked in escrow. Participants underwent a KYC (Know Your Customer) process—a procedure for verifying client identity—and a rigorous financial questionnaire, self-certifying as an accredited investor. Mega ETH prioritized community distribution through a "U-shaped allocation" and even revoked allocations from those publicly expressing intent to "hedge," emphasizing alignment with project believers over short-term gains.
• Actionable Insight: The Mega ETH sale demonstrates a trend of offering public investors tokens at a discount to VC valuations, fostering community loyalty. Crypto AI investors should look for projects that prioritize broad, aligned distribution and transparently communicate their allocation strategies.

Monad: Coinbase's Regulatory Confidence and Full-Cycle Offering

• Monad, a Layer 1 (L1)—a base blockchain network—EVM (Ethereum Virtual Machine) compatible chain, conducted its ICO directly through Coinbase. This move by Coinbase, a major exchange, signals increased regulatory comfort and a "full-cycle" token offering pipeline, from compliance (via acquired firm Liquify) to trading. Monad sold 7.5% of its supply at a $2.5 billion network valuation, which was 18% lower than its last VC round. The sale quickly garnered $43 million in 23 minutes and ultimately sold out, with early investors seeing a 13% gain. Notably, ICO participants are among the first to have their tokens unlocked, contrasting with longer vesting schedules for earlier, higher-risk investors.
• Strategic Implication: Coinbase's direct involvement in ICOs, coupled with discounted public valuations, suggests a growing institutional acceptance and a more structured approach to token launches. Investors should track projects leveraging established platforms for potentially more compliant and accessible opportunities.

Aztec: Onchain Innovation Meets Regulatory Clarity with ZK-KYC

• The Aztec ICO stands out for its cryptonative approach and regulatory innovation. Aztec, a Layer 2 (L2)—a secondary framework built on an existing blockchain—secured legal opinions classifying its token as a "consumptive good," allowing unaccredited US investors to participate without geographical restrictions. The sale utilized Uniswap's Continuous Clearing Auction (CCA)—an auction mechanism that continuously clears bids and offers over a set period—over four days, ensuring fair price discovery without a "race condition" or whale advantage. For KYC, Aztec implemented a ZK (Zero-Knowledge) passport system, a privacy-preserving method of identity verification, which whitelisted ETH addresses without revealing sensitive personal data. Proceeds from the sale went into a Uniswap V4 LP (Liquidity Provider) position, owned by Aztec governance and locked for a year, while ICO participants' tokens have a shorter 90-day lockup.
• Actionable Insight: Aztec's pioneering legal work for "consumptive good" classification and ZK-KYC sets a precedent for regulatory-compliant, privacy-preserving, and globally accessible onchain capital formation. Crypto AI researchers should explore the technical and legal frameworks enabling such innovations for future project development.

Zama: Privacy-First Capital Formation with Shielded Bids

• The upcoming Zama public auction, scheduled for January 2026, will sell 10% of its token supply via a sealed-bid Dutch auction on Ethereum. Zama, an FHE (Fully Homomorphic Encryption) platform—an encryption method allowing computations on encrypted data—requires participants to "shield" stablecoins (USDC, USDT, DAI) using the Zama protocol to submit private bids. This mechanism ensures privacy and demonstrates the protocol's utility. The sealed-bid Dutch auction, similar to SpankChain's strike price, determines a single clearing price for all successful bidders, promoting fair price discovery in a privacy-preserving manner.
• Strategic Implication: Zama's approach highlights the growing demand for privacy-preserving capital formation. Crypto AI investors and researchers should investigate FHE and ZK technologies as critical infrastructure for future decentralized and compliant financial systems.

Infinex: High-Reputation App Leveraging Established Platforms

• Infinex, a high-reputation app-based project led by Kane Warwick, plans a $50 million raise at a $300 million Fully Diluted Valuation (FDV) through the Sonar platform (similar to Mega ETH). This sale, also in January 2026, demonstrates that ICOs are not limited to mainnet launches but extend to fully functioning applications, indicating a broader application of this capital formation model.
• Actionable Insight: The Infinex sale underscores that the ICO trend encompasses mature applications, not just foundational blockchains. Investors should broaden their scope to include well-developed dApps utilizing established token sale platforms.

Strategic Takeaways: The Future of Internet Capital Formation on Ethereum

• The current wave of ICOs presents several critical themes: consistent public discounts relative to VC valuations, sophisticated onchain price discovery mechanisms (like Uniswap CCA and Dutch auctions) surpassing TradFi (Traditional Finance) IPOs, and significantly improved UI/UX that abstracts away blockchain complexity. Regulatory favorability, exemplified by Aztec's "consumptive good" classification and the SEC's current stance, is paving the way for broader US investor participation. This shift marks a potential end to the "points meta" and a return to direct, skin-in-the-game token distribution.
• The convergence of robust onchain capital formation tools with the burgeoning tokenization revolution—where real-world assets are represented on a blockchain—creates a massive "white space" for innovation. This could position Ethereum as the central hub for global capital formation, offering fair, orderly, and globally accessible markets that outcompete traditional finance.

Conclusion:

The resurgence of ICOs, driven by regulatory clarity and advanced onchain mechanisms, marks a pivotal moment for internet capital formation. Crypto AI investors and researchers should prioritize projects leveraging fair price discovery, privacy-preserving compliance, and discounted public access, as these trends are shaping Ethereum into a global capital market powerhouse.