Gary Yang: DeFi 2.0 in the Era of Disorderly Reorganization (2026)

Written December 28, 2025, Singapore

In Q4 2025, the convergence of market forces and shifting policy drove a dramatic clash between global traditional finance and emerging open finance amid an increasingly chaotic landscape. This upheaval wiped out most of the lingering momentum from the first curve (see Note 1), leaving behind emotional fallout that cannot be quickly absorbed. At the same time, traditional finance, isolated within the AI bubble narrative and the “gold in troubled times” mindset, has reached its breaking point. Central banks worldwide have been forced to rigidly apply textbook monetary and fiscal policies, struggling to satisfy public expectations and compelling belief in the continued relevance of outdated economic habits, if only for a little longer.

In previous articles, I detailed the breakdown of conventional economic models at the turning points of the Kondratieff cycle. Yet actually living through this transition is a visceral experience. Amid the noise, only Coinbase’s year-end report, <2026 Crypto Market Outlook>, managed to objectively summarize and forecast the market and industry. The major trends are clear; it’s the overwhelming emotions and entrenched biases that obscure the fleeting gap. From today’s vantage, three questions stand out:

i) The current global situation mirrors the entropy-driven trajectory of 1910–1935 (see Note 2) to a striking degree. How long will this window last, and how can we compare processes—rather than mechanically borrowing from history—to assess risk and make decisions?

ii) Between the native growth momentum of crypto and open finance and their regulatory collision with traditional finance, which force will dominate and suppress the other?

iii) These two factors combine into a nonlinear question: Will disorder in 2026 become a turning point, serving as an independent growth driver that propels crypto and open finance to cross the chasm (see Note 3) and rapidly enter mainstream financial markets?

Coinbase’s <2026 Crypto Market Outlook> highlighted several key data points, most notably that by Q4 2025, global stablecoin supply had reached $305B with total transaction volume at $47.6T. When compared to the global M0 supply of $15T and total global monetary transaction volume of $1,500T (see Note 4), stablecoins now account for 2.0% of supply and 3.2% of usage—meaning stablecoins are, on average, 160% more active than traditional fiat. Combined with the report’s 65% four-year CAGR and the groundwork laid in 2025, it’s reasonable to believe open finance is poised to cross the chasm and reach the early majority within the coming year.

tl;dr

1. 10/11 ended crypto’s first curve; 2025 marked the end of the previous Kondratieff cycle
2. The final phase of traditional finance’s entrenched mindset and the breakdown of society under intensive data regulation
3. The underlying issues behind RWA’s resurgence as the dominant narrative in 2025
4. Emerging economies and the new global geopolitical landscape
5. DeFi2.0, DAT2.0, Tokenomics2.0
6. 2025 retrospective and 2026 outlook

1. 10/11 Ends Crypto’s First Curve; 2025 Marks the End of the Previous Kondratieff Cycle

In my January 2025 article <The Second Curve of Crypto Growth>, I discussed the unsustainability of the crypto market’s speculative and narrative-driven logic. Looking back over the year, of the seven giants at the table, only the first remains, fighting alone and forging a new path. The rest have exited or transformed, shifting to pragmatic development along the second curve.

On October 11, the crypto market experienced its largest-ever single-day liquidation: $19.3B, with total liquidations over several days reaching $40B. On the surface, this was the unwinding of extreme leverage at the end of the first curve in a low-liquidity environment. Fundamentally, it resulted from too few players in a zero-sum market, causing platforms to lose the ability to manage and balance risk. When only two players are left at the table, all cooperative strategies collapse—the adversarial dilemma inevitably ends the first curve.

Much like the extraction seen with the $TRUMP token, October 11 shattered the foundational faith of the first curve and destroyed the residual momentum built solely on narrative. This marks the end of pure, gambling-style consensus (see Note 5). By contrast, the second curve has grown through this process. Remaining ecosystem players are shifting toward pragmatic, long-term development. DeFi2.0—centered on onchain asset management, RWA finance, and tokenization—has become the next market direction. Major players, including CEXs, public chains, and leading infrastructure, are pivoting toward PayFi and RWA.

Meanwhile, by the end of 2025, global inflation has fully transitioned to stagflation. Central banks’ fiscal and monetary policies have lost effectiveness, with only emotional value left to manage. The relentless internal competition of traditional economies and the inability to force AI-driven expectations now mirrors the Rockefeller era of 1910, marking the definitive end of the previous Kondratieff cycle (see Note 6).

On October 29, 2025, Nvidia’s market cap surpassed $5T, making it the first company in history to reach this level. While many remain bullish on further upside, consider this: Africa’s entire annual GDP is only half that amount.

In H2 2025, more rating agencies, hedge funds, and investment banks began closely monitoring Nvidia’s financials. Ignoring supply chain and profitability, the systemic risk exposure alone has made the risk-reward for long and short positions completely unbalanced. Even with strong fundamentals, this trend is unsustainable—especially since the realities of the AI industry are not nearly as optimistic as many believe.

It’s worth noting that when Standard Oil was broken up into 34 companies in 1911, global demand for oil in automobiles, airplanes, and next-generation automation was already clear. Yet this did not prevent 30 years of chaos, depression, and systemic restructuring. The root cause was that disorder and entropy were the inevitable result of failed production relationships from the previous era—manifested as monopolies, widespread poverty, development imbalances, and persistent conflict—an irreversible social entropy effect.

At major cycle intersections, economic policy and short-cycle logic both fail. What hinders social and economic progress is not a lack of growth potential, but rather the inertia of monopolistic production relationships from the previous cycle, which obstruct or cannot support the fair and effective integration of productivity and labor in the next stage. Today, AI development is inevitable, but the prevailing semi-feudal, semi-monopolistic capitalist global management model is no longer viable (see Note 7).

2. The Last Phase of Traditional Finance’s Entrenched Mindset and Societal Breakdown under Intensive Data Regulation

Even so, it’s remarkable how many economists and industry experts remain fixated on rate cuts. From February 2020 (pre-pandemic) to April 2022 (pandemic peak), US M2 grew by over 40%. Against this enormous monetary base, each subsequent QT and QE seems little more than performative emotional management—whether 25bp or 100bp, these moves have long lost their original economic significance (see Note 8).

In today’s environment, rate cuts have become a perfect marriage of recipient emotional expectation and policymaker’s forced decision-making. It’s a two-way inertia-driven psychological bind—a tool to influence markets through emotional value. To their credit, countries have done everything possible to delay the onset of chaos and disorder, using entrenched financial and policy tools.

However, entropy can’t be slowed. Revisiting Greenspan’s prediction: “We must accept that monetary and fiscal policy cannot permanently boost economic growth in the presence of deeply rooted structural constraints.” Many policies under the traditional system have rapidly lost effectiveness.

In December 2025, Nasdaq announced it would apply to the SEC to extend trading hours to 24/7. This move essentially represents traditional finance trying to exert reverse pressure on crypto and onchain markets while simultaneously testing regulatory defenses. In fact, since the Genius Act mid-year, many North American and East Asian traditional financial institutions have been adjusting their strategies, struggling to balance embracing the risks of crypto finance with maintaining their old advantages.

This tension was especially acute in Q2, as the Genius Act seemed to shatter the previous balance and cartel moat (see Note 9), leaving everyone anxious and aware that systemic change was inevitable. By Q3, it became clear that the market had overreacted and the iteration process would not be as rapid as feared. Traditional finance professionals and policymakers reached a short-term reversed equilibrium: change is inevitable, but regulatory compliance will be the stabilizer for a smooth transition. As long as license holders and policymakers upgrade together, the transition can be managed. This Q3 phase was subtle—everyone was engaged in a prisoner’s dilemma and collectively agreed to temporarily reverse their decisions to cope with greater external pressures. This was merely a psychological illusion before the real dissolution of the cartel. By Q4, the leading players realized that, with entities like Hyperliquid and Robinhood forging ahead, the collapse of the traditional financial cartel was imminent. Thus, Nasdaq and Coinbase stepped up, embracing real-world change—such as extending trading hours and building their own RWA tokenization systems—to secure true advantages in the next phase.

This process is a classic example of all players constructing a psychological sandbox akin to the Gartner Curve when facing a major transformation and engaging in strategic gameplay.

The exhaustion of traditional finance’s entrenched mindset does not signal the failure of economic principles. On the contrary, the crypto economy and open finance are natural extensions of economic fundamentals. The real bottleneck lies in management economics and market production relationships, especially in the digital age, where legacy management systems cannot balance regulation and freedom. The world has fallen into the trap of misusing digital regulation, causing entropy to worsen rapidly within just a decade.

Over the past decade, the world has fallen into the trap of “if there’s data, use it; if there’s a method, regulate it.” The cost of legacy system rules and barriers now far exceeds the opportunity and risk costs. The rigidity of data management has led to dogmatic reliance on historical paths, which not only fails to break old patterns but actually increases costs and risks—a frightening “data Middle Ages” effect.

This phenomenon permeates every industry worldwide. Excessive digital overreach and financial restrictions have hindered development across sectors. In my 15 years in VC, if you rigidly use a person’s bank KYC to determine financing eligibility, 99% of businesses and innovations would be wiped out.

Faced with the entropy-driven dysfunction of global financial systems and social management, 2026 will inevitably bring further disorder and restructuring. Many rules and industries will be rewritten, and a prolonged period of chaos—likely at least a decade—will be unavoidable.

3. The Issues Behind RWA’s Resurgence as the Dominant Narrative in 2025

The RWA narrative staged a remarkable comeback in 2025 for a simple reason: the collapse of first-curve credit and the lack of a new consensus term for the second curve allowed RWA to step in as this year’s MVP.

Two months ago, a Silicon Valley industry OG advised me—after learning Cicada Finance planned to go public—to focus on RWA finance. I took his advice while also retaining onchain asset management as the core, leading to today’s “Onchain Asset Management for RWA Finance.” Without question, both onchain asset management and RWA finance will remain major sectors in 2026.

Beyond the name, RWA is not being revived but rebuilt from scratch. The problem is that people interpret “RWA” very differently. As of H2 2025, most regions still see it as a form of asset tokenization for crowdfunding.

Most participants are motivated by their own needs, not by industry-building, which is understandable. But, as with P2P and e-commerce era crowdfunding, demand-driven markets force platforms, channels, and the market toward one-sided problems, pushing the sector in the wrong direction.

How is an RWA without fair value different from equity crowdfunding? Does an illiquid RWA asset need tokenization? Conversely, do all RWA assets actually require liquidity? These questions remain unresolved in 2025, with no consensus reached—deeper commercial issues cannot be discussed here.

Coinbase’s report provides detailed data on RWA asset distribution. T-Bills, commodities, liquid funds, and credit loans remain the four main types, highlighting the importance of quantifiable financial assets in RWA. In our view, the RWA landscape will shift in 2026: these asset classes will persist, but emerging economies’ DeFi and crypto finance businesses will join the RWA market as asset suppliers. Stablecoin payments and SupplyChainFi will be fast-growing areas.

4. Emerging Economies and the New Global Geopolitical Landscape

In 2025, while developed economies struggled with policies for stablecoins and crypto finance, emerging markets grew at an astonishing and unexpected pace.

“They all want stablecoins, or at least platform tokens.” This was the unanimous feedback from cross-border trade and payment companies this year. Beyond Nigeria, India, Brazil, Indonesia, and Bangladesh, many other countries and regions in Africa, South America, South Asia, Southeast Asia, Eastern Europe, and the Middle East have seen exponential growth in stablecoin and crypto finance adoption for three consecutive years. Their actual usage has surpassed or caught up with local fiat in many cases (see Note 10).

These new economies are rapidly expanding via “off-balance-sheet assets,” contrasting sharply with the management dilemmas of the mainstream world. Persistent historical differences in economic and consumer strength remain, but it is clear that mainstream economic data is now completely distorted. With overregulation and stagflation on one side and explosive growth on the other, the global economic and geopolitical order will be reshaped within five years.

Regarding question ii) from the introduction, my answer is clear. The real Nash equilibrium will be rebuilt not within the old system, but through external shocks in the new global order. The intrinsic growth rate of crypto and open finance will far outpace traditional economies’ ability to adapt. 2026 is likely to be a critical inflection point for this transition.

5. DeFi2.0, DAT2.0, Tokenomics2.0

Coinbase’s latest report introduced new terms like DAT2.0 and Tokenomics2.0, both essentially branches of the familiar DeFi2.0 evolution. Let’s break down these concepts.

The DAT concept was successfully spread to mainstream financial markets by MSTR in 2025. The logic is simple: DAT premium multiple = stock market cap ÷ NAV of BTC (or other major crypto) held. However, this premium fell sharply and even inverted from Q3 to Q4, quickly ending the global DAT1.0 boom.

The decline of DAT1.0 was due to too little capital multiplier friction, overly transparent pricing, and direct Davis double-whammy effects. When sentiment turned, confidence evaporated quickly.

DAT’s industry value in 2025 was that traditional financial stocks had exhausted their bubble, while the first curve of crypto collapsed. Both markets shifted focus for mutual support.

Why can DAT2.0 sustain the token-stock linkage? Simply put, DAT1.0 was the transfer of value from crypto’s first curve to traditional finance, while DAT2.0 is the integration of crypto’s second curve into traditional finance. Unlike the former, the latter has long-term sustainability. In 2025, Ondo, Ethena, Maple, Robinhood, and Figure all provided strong models for DAT2.0, and more companies will emerge in 2026.

Tokenomics2.0 is a broader concept. This year, we introduced derivative products like Liquid Engineering and Yield Engineering—all further evolutions of financial engineering. In practice, tokenomics continuously refines each financial scenario, case by case, much like a financial circuit (see Note 11). Over time, industry-wide innovation protocols like Pendle’s PT-YT will emerge.

Coinbase’s report only briefly touched on Tokenomics2.0 issues: value capture, token buybacks, financial engineering, regulatory clarity as catalyst, and protocol P&L—without much detail or logic.

Here’s a quick breakdown:

Value capture is not directly related to Tokenomics2.0; it’s simply a prerequisite for asset application and adoption on the second curve. Tokenomics is independent of value capture. Without sustainable value capture, tokenomics becomes ponzinomics—no longer viable in today’s crypto and open finance markets.

Token buybacks are essential for asset tokenization in RWA and DAT2.0. More precisely, asset clearing capability is a necessary condition for all asset investment. The healthy development of RWA finance next year largely depends on whether the market can reach consensus on this point.

On regulatory clarity, as discussed in Chapters 2 and 4, this should be objectively expressed as “pros and cons.” Coinbase’s perspective is unique, but as noted, faster and larger-scale development is actually happening in emerging economies and new economic entities.

Moreover, the protocolization of finance is not decided by regulatory clarity alone. It is highly correlated only in North America and East Asia. Protocol finance P&L is a phenomenon of the upgraded open finance market, determined by the objective market itself.

DAT2.0 and Tokenomics2.0 are just temporary terms. The second curve and DeFi2.0 describe the fundamental shift and inevitable trend of the crypto and open finance market after 2025.

6. 2025 Retrospective and 2026 Outlook

As 2025 ends, here is a review of this year’s forecasts and analyses:

February < The Second Curve of Crypto Growth >

“Zero-sum games and the seven giants at the table,” “RYA/RWA trends and the rise of PayFi,” “Crossing the Chasm: The Second Curve of Crypto Growth,” “Crypto’s regulatory landscape and the situation in various countries.”

April < Trump’s Tariff Policy Will End the Kondratieff Cycle and Transform Bitcoin >

“Triple-kill in bonds, stocks, and FX and the failure of the Merrill Lynch clock,” “The Thucydides Trap and the end of five Kondratieff cycles in history,” “Greenspan’s prophecy and the significance of crypto at the cycle intersection,” “The correlation between Bitcoin and chaos: shifting perceptions and parallels with the Merrill Lynch clock.”

May < The GENIUS Act and Onchain Shadow Currencies >

“The real reason for the decline of US dollar hegemony,” “The stated and actual purposes of the GENIUS Act,” “DeFi Restaking’s lessons for fiat and the monetary multiplier of shadow currencies,” “Gold, the dollar, and crypto stablecoins.”

September < Asset Onchainization under Stablecoin Pricing >

“The essence of the Genius Act is delegating currency issuance and settlement rights to strengthen pricing power,” “Stablecoins drive global financial and asset onchainization by changing pricing mechanisms,” “Reforms are rapidly dismantling the traditional financial cartel and creating opportunities for interest realignment amid chaos,” “Two directions for token-stock linkage: securitization and tokenization, and their market characteristics,” “Stablecoins, DAT, tokenized stocks, RWA, and onchain asset management: industry features and challenges.”

The 2026 outlook has been discussed extensively in this article. Aside from question (i), most points have been analyzed in depth. The further disorder and restructuring of the macro environment, and the resulting DeFi2.0 boom, are clear trends.

Question (i) is truly a difficult one. For both socioeconomic and financial assets, trends and directions are easier to judge than timing and scale. Unlike the previous two Kondratieff cycles, there are three key differences in this paradigm:

a) The speed of information exchange and situation evolution is much faster—2.5–5x in various respects (see Note 12);

b) The spillover space for global geopolitical conflicts is completely different, making conflict outbreaks more likely;

c) The nonlinear effects of AI and crypto far exceed those of industrial automation.

In other respects, little has changed compared to a century ago: the hardware conditions of social management, human life expectancy, emotional digestion capacity across generations, and political-economic management cycles in different societies all remain largely similar.

Against this backdrop, I often discuss with partners the importance of nonlinear thinking in business management and have gradually accepted the need to anticipate and incorporate nonlinear events into planning.

Author: Gary Yang

Date: December 28, 2025

X: https://x.com/gary_yangge

E: gary_yangge@ hotmail.com

BX: https://x.com/CicadaFinance

BW: https://cicada.finance

Note 1: The first curve refers to the 16-year period in crypto’s development, where consensus-driven expectations created a speculative environment and continually drove up perceived wealth effects.

Note 2: 1935 is chosen instead of WWII’s end in 1945 because gold prices experienced a dramatic surge in 1934.

Note 3: <Crossing the Chasm> is a classic paradigm for the adoption of innovation, used here to describe how crypto and open finance are still at the early adopter stage.

Note 4: The $1,500T estimate uses annualized FX and securities/commodities trading volumes as a rough proxy for global financial scale.

Note 5: Prediction markets are actually an extension of the first curve. When speculative consensus no longer supports credit, short-term, event-driven betting becomes the new consensus for risk appetite.

Note 6: Previous articles have discussed the end and transition points of the Kondratieff cycle, such as Chapter 2 of <Trump’s Tariff Policy Will End the Kondratieff Cycle and Transform Bitcoin>. From 2020 to 2025, the world has been at the end of one Kondratieff cycle and the beginning of the next. The distinctive point here is that 2025’s conclusion and accompanying socioeconomic phenomena mark the definitive end of the previous cycle.

Note 7: In the November 2024 article <Dramatic Changes After Trump’s Election Victory>, I first mentioned that, by the end of 2024, most countries and stakeholders globally were still in a semi-feudal, semi-centralized state capitalist environment. This is now described as “semi-feudal, semi-monopolistic capitalism.”

Note 8: Objectively, emotional value has become a key factor in global secondary financial markets. Economic policy and market confidence are now mutually reinforcing through emotional value.

Note 9: For more on the breaking of the traditional financial cartel, see Chapter 3 of the May 2025 article <Asset Onchainization under Stablecoin Pricing>.

Note 10: There are no publicly available statistics for emerging economies with underdeveloped economies; data is based on confidential enterprise sources.

Note 11: <Financial Circuit and Web3 Tokenomics Theory>, written in October 2022, details the foundational framework for building Web3 tokenomics financial systems.

Note 12: This multiple is only a narrow reference: macro 2.5x = 10-year Merrill Lynch cycle / 4-year Bitcoin cycle; micro 5x = 24/7 trading / 5 x 6.5-hour trading; it does not reflect actual differences in production or social iteration.

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