Original Article Title: "The Debunked Year of the Tokenomics"

Original Article Authors: Kaori, Sleepy.txt, Dynamic Observation Beating

When the Bitcoin ETF was approved in early 2024, many cryptocurrency practitioners jokingly referred to each other as "esteemed Wall Street traders." However, when the New York Stock Exchange actually planned to develop on-chain stocks, enable 24/7 trading, and integrate tokens into the traditional financial agenda, the crypto community belatedly realized that the crypto industry had not taken over Wall Street.

On the contrary, Wall Street had been betting on convergence from the beginning and has now slowly transitioned into an era of mutual acquisitions, with crypto companies buying traditional finance's licenses, clients, and regulatory capabilities, and traditional finance acquiring crypto's technology, pipelines, and innovation capabilities. Both sides are permeating each other, and the boundaries are gradually disappearing. In three to five years, there may be no distinction between crypto companies and traditional financial institutions, only financial companies.

This assimilation and integration are being legally facilitated by the "Clear Market Regulation for Digital Assets Act" (hereinafter referred to as the CLARITY Act), transforming a wildly growing crypto space into a shape familiar to Wall Street at the institutional level. The first thing to be reformed is the concept of token rights, which is unlike stablecoins and less popular in the pure crypto space.

The Era of Binary Choices

For a long time, crypto practitioners and investors have been in an uneasy state of anxiety, often subjected to enforcement-style regulation by government agencies worldwide. This tension has not only stifled innovation but has also left token holders with token rights in an awkward position. Unlike stockholders in the traditional financial market, token holders not only lack legal protection for information rights but also lack the right to recourse for insider trading by project teams.

Therefore, when the CLARITY Act was overwhelmingly passed in the U.S. House of Representatives last July, the entire industry pinned high hopes on it. The market's core demand was very clear: to define whether a token is a digital commodity or a security, ending the years-long jurisdictional tug-of-war between the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).

The Act stipulates that only assets that are completely decentralized and have no actual controllers can be considered digital commodities under CFTC jurisdiction, akin to gold or soybeans. Any assets showing traces of centralization and raising funds through promised returns are all classified as restricted digital assets or securities, falling under the iron-fisted jurisdiction of the SEC.

For networks like Bitcoin and Ethereum that have long had no actual controllers, this is a good thing. But for the vast majority of DeFi projects and DAOs, this is almost a catastrophe.

The bill requires any intermediary involved in digital asset transactions to register and implement strict Anti-Money Laundering (AML) and Know Your Customer (KYC) procedures. For DeFi protocols running on smart contracts, this is an impossible task.

The bill summary expressly states that some decentralized financial activities related to maintaining the blockchain network will be exempted, but enforcement authority for anti-fraud and anti-manipulation will still apply. This is a typical regulatory compromise, allowing behavior such as code writing and frontend interface creation to exist, but once it involves transaction matching, revenue distribution, and intermediation services, it must be brought into a heavier regulatory framework.

It is precisely because of this compromise that the CLARITY Act did not truly reassure the industry after the summer of 2025, as it forces all projects to answer a brutal question—what are you really?

If you claim to be a decentralized protocol and comply with the CLARITY Act, your token cannot have actual value. If you don't want to mistreat token holders, you must acknowledge the importance of the equity structure and subject the token to scrutiny under securities law.

People Over Coins

This dilemma replayed itself in 2025.

In December 2025, a merger announcement triggered vastly different reactions in Wall Street and the crypto community.

Global stablecoin issuer Circle announced the acquisition of the core development team of the cross-chain protocol Axelar at Interop Labs. In the eyes of traditional financial media, this was a standard talent acquisition case where Circle gained a top cross-chain technology team to enhance the circulation capabilities of its stablecoin USDC in the multi-chain ecosystem. Circle's valuation was thus strengthened, and Interop Labs' founders and early equity investors exited satisfactorily with cash or Circle's shares.

However, in the cryptocurrency secondary market, this news sparked panic selling.

Investors, upon dissecting the transaction terms, discovered that Circle's acquisition was limited to the development team, explicitly excluding the AXL token, the Axelar network, and the Axelar Foundation. This discovery instantly shattered previous bullish expectations. After the announcement, the AXL token not only erased all previous gains from the acquisition rumors but also plunged even further into a deep sell-off.

For a long time, cryptocurrency project investors had implicitly assumed a narrative where buying tokens was equivalent to investing in the startup. With the efforts of the development team, protocol usage would increase, and the token's value would consequently rise.

The Circle acquisition shattered this illusion, declaring from a legal and practical standpoint that the development company (Labs) and the protocol network (Network) are two completely separate entities.

"This is legalized robbery," wrote an investor who had held AXL for over two years on social media. But he couldn't sue anyone because in the legal disclaimers of the IPO prospectus and white paper, the token was never promised residual claim rights to the development company.

Looking back at the 2025 wave of acquisitions of tokenized crypto projects, these acquisitions typically involve the transfer of the technical team and underlying architecture but do not include token equity, causing significant repercussions for investors.

In July, Kraken's Layer 2 network Ink acquired the engineering team of Vertex Protocol and its underlying trading architecture. Subsequently, Vertex Protocol announced the closure of services, and its token VRTX was abandoned.

In October, Pump.fun acquired the trading terminal Padre. At the same time as the announcement, the project team declared the token PADRE deprecated with no future plans.

In November, Coinbase acquired the trading terminal technology built by Tensor Labs, a move that similarly did not involve token TNSR equity.

At least in the 2025 M&A wave, more and more acquisitions tend to only buy the team and technology, disregarding the tokens. This has increasingly angered many investors in the crypto industry, with some saying, "Either give tokens the same value as stocks, or don't issue them at all."

The DeFi Dividend Dilemma

If we say that the Circle acquisition was a tragedy caused by external M&A, then Uniswap and Aave have shown the ongoing internal conflicts faced at different stages of development in the crypto market.

Aave, long seen as the king of the DeFi lending sector, found itself embroiled in a fierce internal battle over who gets the money at the end of 2025, with the conflict centered around frontend revenue of the protocol.

Most users do not directly interact with smart contracts on the blockchain but instead operate through the web interface developed by Aave Labs. In December 2025, the community keenly noticed that Aave Labs quietly modified the frontend code to redirect the high fees generated by users' token exchange transactions on the website to Labs' own company account instead of the decentralized autonomous organization (DAO) Aave treasury.

The rationale behind Aave Labs aligns with traditional business logic — we built the website, we pay for the servers, we shoulder the compliance risks, and the traffic monetization should rightfully belong to the company. However, to token holders, this is seen as a betrayal.

“Users came for the decentralized Aave protocol, not for your HTML webpage.” This debate led to a $5 billion evaporation of Aave’s token market value in a short period.

Although both parties eventually reached some form of compromise under immense public pressure, Labs pledged to put forth a proposal to share non-protocol revenue with token holders, but the crack was irreparable. While the protocol may be decentralized, the traffic entry point is always centralized. Whoever controls the entry holds the actual taxation power over the protocol’s economy.

Meanwhile, in order to comply, the decentralized exchange behemoth Uniswap also had to opt for self-censorship.

Between 2024 and 2025, Uniswap finally advanced its highly-anticipated fee switch proposal, which aimed to allocate a portion of the protocol’s trading fees to buy back and burn UNI tokens, attempting to transform the token from a dormant governance vote into a deflationary yield-bearing asset.

However, to evade SEC security classification, Uniswap had to undergo an incredibly intricate architectural split, physically isolating the entity responsible for dividends from the development team. They even registered a new entity in Wyoming called DUNA, a decentralized non-person non-profit association, in an attempt to find a compliant haven on the edge.

On December 26, Uniswap’s fee switch proposal governance vote was finally passed, with key elements including the burning of 1 billion UNI tokens and Uniswap Labs shutting down frontend fees, further focusing on protocol-layer development, etc.

The struggles of Uniswap and the internal conflict of Aave collectively point to an awkward reality — the dividends that investors crave are precisely the core basis for regulatory agencies to deem something a security. Striving to give value to a token invites a penalty from the SEC; seeking to circumvent regulations requires the token to remain in a state of no actual value.

Having the right to map out, and then what?

As we seek to understand the token rights crisis of 2025, we may cast our eyes to a more mature capital market. There lies a highly instructive reference point, the American Depositary Receipts (ADRs) of Chinese concept stocks and the Variable Interest Entity (VIE) structure.

If you buy Alibaba (BABA) stock on the Nasdaq, seasoned traders will tell you that you are not buying direct ownership of the entity company operating Taobao in Hangzhou, China. Due to legal restrictions, what you hold is an equity interest in a holding company based in the Cayman Islands, which, through a series of complex agreements, controls the operating entity in China.

This sounds a lot like some altcoins, where you are buying a representation rather than the actual asset itself.

But the lesson of 2025 tells us that there is a significant difference between ADS and tokens: legal recourse.

While the ADS structure may be circuitous, it is built on decades of international commercial law trust, a robust auditing system, and a tacit understanding between Wall Street and regulators. Most importantly, ADS holders have residual claim rights under the law. This means that if Alibaba were to be acquired or taken private, the acquirer must, through a legal process, swap your ADS for cash or the equivalent.

In contrast, tokens, especially those governance tokens that were once highly anticipated, exposed their nature in the 2025 merger frenzy—they are neither on the liability side of the balance sheet nor on the owner's equity side.

Prior to the enactment of the CLARITY Act, this fragile relationship was maintained through community consensus and bull market faith. Developers implied that tokens were akin to stocks, and investors pretended they were VCs. Yet, when the hammer of 2025 compliance struck, everyone began to realize that, within the traditional corporate law framework, token holders are neither creditors nor shareholders; they are more like fans who have purchased an expensive membership card.

When assets can be traded, rights can be divided. When rights are divided, value gravitates toward the end most recognizable by the law, most capable of cash flow, and most enforceable.

In this sense, the crypto industry of 2025 has not failed but has been integrated into financial history. It has begun, like all mature financial markets, to undergo judgment in terms of capital structure, legal texts, and regulatory boundaries.

As crypto converges with traditional finance in an irreversible trend, a sharper question arises: where will the industry's value flow next?

Many believe that fusion implies victory, but historical experience often suggests the opposite. When a new technology is embraced by the old system, it gains scale but may not preserve the original promised distribution. The old system excels at domesticating innovation into a form that is regulatory compliant, accountable, and balance-sheetable, firmly anchoring residual claim rights to existing structures of power.

The compliance of crypto may not necessarily return value to token holders but is more likely to return value to familiar legal entities—companies, equities, licenses, regulated accounts, and contracts that can be liquidated and enforced in court.

The rights of the coin will continue to exist, just as ADS will continue to exist. They are both rights mappings allowed to trade in financial engineering. But the question is, which layer of mapping are you actually buying?

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