Gary Yang: DeFi 2.0 Eruption Amidst Disorderly Restructuring in 2026

In Q4 2025, driven by the combined forces of market dynamics and policy shifts, the global traditional financial system and the emerging open finance ecosystem collided violently within an increasingly disordered environment. The resulting dramatic changes liquidated most of the residual heat from the First Curve (Note 1), leaving emotional wreckage difficult to digest in the short term. Simultaneously, traditional finance found itself isolated within a besieged city, caught between the bubble narrative of AI and the haven of gold in troubled times, reaching the end of its tether. Central banks worldwide were forced to rigidly cater to the rigid aesthetic expectations of the market masses using textbook monetary and fiscal policies, compelling everyone to believe these outdated economic inertia could be maintained for a little while longer.

In previous articles, I have detailed the failure of conventional economic models at the juncture of Kondratieff cycles. However, experiencing it firsthand provides a more visceral understanding. Amidst the cacophony of noise, only the year-end market outlook report <2026 Crypto Market Outlook> from Coinbase offered a relatively objective summary and forecast of the current market and industry. In truth, the macro trends are not difficult to discern; it's just that excessive emotion and inertial aesthetics have obscured the brief gaps. From today's vantage point, I am primarily concerned with three questions:

i) The current global situation bears a striking resemblance to the entropy-increasing trend of the 1910-1935 period (Note 2). How long is the corresponding window period today? How should we compare and contrast the process rather than mechanically applying historical experience to assess risks and make decisions?

ii) Between the native development speed of Crypto and Open Finance and the friction arising from their collision with traditional finance in the formal market under compliance pressures, which momentum is greater and will become the principal contradiction, thereby restraining the other as the secondary contradiction?

iii) The combination of the first two forms a nonlinear problem: Will the chaos form an inflection point in 2026, becoming an independent growth factor that promotes Crypto and Open Finance to cross the chasm (Note 3) and rapidly enter the mainstream world and financial markets?

Coinbase's report <2026 Crypto Market Outlook> mentions many interesting data points, one of which is particularly noteworthy regarding stablecoins: As of Q4 2025, the global stablecoin supply has reached $305B, with a total transaction volume of $47.6T. We can roughly compare this data with the current global M0 money supply of approximately $15T and the estimated global total monetary transaction volume of $1500T (Note 4). This shows that stablecoin supply accounts for about 2.0% of the total, while its usage ratio has reached 3.2% (note this indicates stablecoins' average activity is 160% greater than that of traditional fiat). Combined with the report's mention of a 65% year-over-year compound annual growth rate for four consecutive years, and considering the various foreshadowing events of 2025, we have reason to believe that the node for Open Finance to cross the chasm and enter the Early Majority phase is within the next year or so.

tl;dr

1. The 1011 event ended Crypto's First Curve; 2025 ended the last Kondratieff cycle.

2. The end of traditional finance's inertial aesthetic and societal failure under heavy data regulation.

3. Issues behind the 2025 RWA revival becoming the mainstream narrative.

4. Emerging developing economies and the new global geopolitical landscape.

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

6. Review and summary of 2025; analysis and outlook for 2026.

1. The 1011 Event Ended Crypto's First Curve; 2025 Ended the Last Kondratieff Cycle

In the January 2025 article <Crypto's Second Curve of Growth>, we discussed the unsustainable nature of the past Crypto market driven by speculation and narratives. Looking back at the entire year, of the seven giants once at the table, only the player in position #1 remains, fighting alone and forging a new path. Almost all other players from the old market have left the scene or transformed, beginning to develop the Second Curve with their feet firmly on the ground.

The "1011" event triggered the largest single-day liquidation in Crypto history at $19.3 billion, with subsequent days bringing the total liquidation to approximately $40 billion. Superficially, it was the concentrated liquidation of extreme leverage structures in the late stage of the First Curve's speculative market under low liquidity conditions. Essentially, it was the failure of platforms to manage and mitigate client losses and gains due to too few players in a zero-sum game market. When only two players remain at the table, all cooperative strategies fail. The counterparty dilemma is the inevitable cause of the First Curve's demise.

Similar to how the $TRUMP token harvested the market, the 1011 event fundamentally dismantled the belief cornerstone of the First Curve, destroying residual expectations based purely on narratives. It signaled that consensus built solely on gambling-style speculative talk would come to an end (Note 5). Conversely, the Second Curve grew further during this process. All surviving ecosystem companies are transforming or innovating towards more pragmatic, long-term development paths. The DeFi2.0 market, based on Onchain Asset Management, RWA Finance, and Tokenization, has become the inevitable direction for the next phase. This includes CEXs, public chains, and top infrastructure projects, all adapting and rapidly pivoting towards PayFi and RWA.

On the other hand, by the end of 2025, the global economy had fully transitioned from inflation to stagflation. The regulatory efficacy of fiscal and monetary policies in many countries had failed, leaving only the scheduling of emotional value. The ultimate internal competition of the traditional economy and the powerlessness of pushing the AI narrative to its limits have become completely equivalent to the Rockefeller era of 1910, marking the complete end of the previous Kondratieff cycle (Note 6).

On October 29, 2025, Nvidia's market capitalization broke through $5 trillion, becoming the first company in history to reach that scale globally. While many continue to be bullish on how much further its price can multiply, without even comparing it to Rockefeller's Standard Oil in 1910, I would suggest first rationally considering that the entire annual GDP of the African continent is only about half that size.

Entering H2 2025, more and more rating agencies, hedge funds, and investment bank consultancies began closely scrutinizing Nvidia's financials. Setting aside the production capacity and profitability of its upstream and downstream industrial chains, simply from the perspective of its proportion of systemic risk, the comparative Expected Value (EV) for being long or short on Nvidia has become completely imbalanced. In other words, even with consecutive fundamental positive news, this trend is difficult to sustain. Moreover, the actual state of the AI industry is clearly not that optimistic.

It is worth noting that when Standard Oil was broken up into 34 companies in 1911 due to antitrust actions, the global understanding of the application demand for petroleum energy in automobiles, airplanes, and the next generation of automated industries was already very clear. However, this did not successfully prevent the ensuing 30 years of chaos, depression, and systemic restructuring. The reason is that the essence of chaotic disorder is the result of the failure of the production relations from the previous stage, manifested in severe monopolies, widespread poverty, developmental imbalances, and continuous conflicts—an irreversible phenomenon of social entropy increase.

At the juncture of major cycles, economic policies and short-cycle common sense become ineffective. The factors hindering socio-economic development and environmental improvement are not the lack of viable growth paths, but rather the inertial obstruction by the monopolistic production relations principles from the previous cycle, which cannot support the fair and effective combination of next-stage productive forces and labor. Focusing on today, the development of AI is inevitable. However, the globally prevalent management mechanism of semi-feudal, semi-monopolistic capitalism can no longer support and adapt to it (Note 7).

2. The End of Traditional Finance's Inertial Aesthetic and Societal Failure Under Heavy Data Regulation

Even so, one of the surprises that exceeded my expectations is that so many economists and industry experts today are still fixated on the calculus of interest rate cuts. Compared to February 2020 (pre-pandemic) to April 2022 (the peak of the pandemic), the cumulative increase in the US M2 money supply exceeded 40%. Faced with such a massive monetary expansion, each subsequent QT (Quantitative Tightening) or QE (Quantitative Easing) measure, in my understanding, is merely a formalistic emotional massage. Whether it's 25 basis points or 100 basis points, they have long lost their original economic measurement value (Note 8).

In the current environment, interest rate cuts have become a perfect combination of the recipient's emotional aesthetic expectation and the policymaker's coerced, forced decision-making. Frankly, this is a two-way inertial psychological bind, a tool to influence the market through emotional value. One point worthy of respect is that in delaying the global descent into chaotic confrontation and complete disorder by desperately using the financial and policy tools of inertial aesthetics, countries have made their utmost efforts.

However, the process of entropy increase cannot be decelerated by this. Looking back six months later at Greenspan's prophecy mentioned in my previous article: "We must accept that monetary and fiscal policy cannot permanently boost economic growth in the presence of deeply rooted structural constraints." We can observe that a large number of policies within the traditional system have rapidly become ineffective.

In mid-December 2025, Nasdaq publicly stated it would submit an application to the SEC to change stock trading hours to 7x24. This move essentially represents a defensive protection measure by traditional finance, applying reverse pressure on Crypto and Onchain Markets while testing regulatory waters in the face of massive change. In fact, many traditional financial institutions in North America and East Asia have been constantly adjusting their stance since the Genius Act around mid-year, struggling repeatedly between how to welcome the challenge of Crypto Finance, face the risks of transformation head-on, and how to preserve their previous moats and maintain the status quo as much as possible.

An interesting phenomenon is: This contradiction elicited strong reactions from various institutions in Q2, as if the Genius Act instantly shattered the original game equilibrium and the cartel alliance's moat (Note 9). Everyone felt insecure, knowing this trend was inevitable and the traditional financial system was about to be completely changed. By Q3, they realized the market reaction was overblown; the market iteration process wouldn't be as fast as imagined. Traditional financial practitioners and policymakers miraculously reached a short-term reverse equilibrium. The main logic was: Change is inevitable, but policy compliance will become the reassurance pill guarding everyone's smooth transition to a new equilibrium and moat. As long as license holders and policymakers upgrade together, they can complete the transition smoothly. This Q3 phase was very微妙 (subtle), equivalent to everyone participating in a prisoner's dilemma and all agreeing midway to temporarily reverse their decisions to cope with greater external pressure. This was merely a psychological illusion before the real disintegration of the cartel alliance. By Q4, the most forward-looking players knew that with methods like those of Hyperliquid and Robinhood, the complete disintegration of the traditional financial cartel alliance would still arrive soon. Therefore, whether it was Nasdaq or Coinbase, they stepped forward again to speak the truth. By facing more tangible changes, such as altering trading hours and building their own RWA tokenization systems, they sought to secure their real advantages in the next phase.

The process described above is actually a classic one. It involves all players forming a psychological sandbox of the Gartner Curve and participating in a game within it before a major transformation.

The end of traditional finance's inertial aesthetic does not refer to the failure of economic principles. On the contrary, Crypto Economy and Open Finance are further developments entirely based on economic principles. The point of blockage lies in the systemic issues of the management economics and the production relations mechanisms governing the market, especially after fully entering the digital age. The original management systems are completely unable to adapt to finding a balance between regulation and freedom. The world has fallen into a significant misconception regarding the erroneous use of heavy digital regulation, leading to an accelerated worsening of entropy increase within just a decade.

Over the past decade, regions worldwide, sooner or later, entered the huge misconception of "if there's data, use it; if there's a method, regulate it." The rule costs and threshold costs of outdated systems have far exceeded opportunity costs and risk costs. The rigidity of data management has made dogmatic reliance on historical paths not only unbreakable but also something one must pay for or incur even greater costs, forming a terrifying "Data Medieval" effect.

This phenomenon permeates every industry and corner of the globe from top to bottom. Excessive digital abuse and financial restrictions have created developmental obstacles for every industry. To give a simple example, from my over 15 years of experience in VC, if you dogmatically use someone's bank KYC to judge whether they can receive funding, then 99% of the world's enterprises and innovations will be extinguished.

Faced with the entropy-increasing failure of the globalized financial system and social management environment, 2026 is destined to enter further disorder and restructuring. A large number of rules and industries will be rewritten, while also inevitably falling into a chaotic transition period lasting at least a decade or more.

3. Issues Behind the 2025 RWA Revival Becoming the Mainstream Narrative

The RWA narrative made a remarkable comeback in 2025 for a simple reason: the credit collapse of the First Curve, and the temporary lack of a new term with consensus for the Second Curve, allowed RWA to step in as a substitute and win this year's MVP.

Two months ago, while communicating with an industry OG friend in Silicon Valley who learned about Cicada Finance's upcoming announcement of its listing plan, he advised me to strongly position ourselves as RWA Finance. I followed his advice while also retaining Onchain Asset Management as the main theme, leading to today's "Onchain Asset Management for RWA Finance." Undoubtedly, both Onchain Asset Management and RWA Finance will remain strong mainstream tracks in the 2026 market.

Apart from the name, RWA is not experiencing a revival; it is being built from the ground up. The problem lies in the vastly different understandings people have of the term "RWA." As of H2 2025, the understanding in most parts of the world still approximates: a crowdfunding behavior that tokenizes assets.

Most people approaching RWA are not doing so from an industry-building perspective but from their own needs, which is understandable. However, similar to the problems faced by Crowd Funding during the P2P and E-commerce eras, demand-driven markets will force platforms, channels, and the market itself to present one-sided issues, rapidly pushing the industry in the wrong direction.

What's the difference between RWA without fair value and the equity crowdfunding of the past? Is there a necessity for tokenizing RWA assets without liquidity? Conversely, do all RWA assets truly need liquidity? Clearly, the overall market had not thought these issues through or reached a consensus within 2025. Some deeper, commercially sensitive issues cannot be discussed here for now.

Coinbase's report provides a relatively detailed analysis of the current asset distribution data for RWA. T-Bills, Commodities, Liquid Funds, and Credit Loans remain the four major categories, indicating the importance of quantifiable financial assets in RWA. In our view, the RWA landscape in 2026 will undergo proportional changes. While the aforementioned assets will persist, the actual business of DeFi and Crypto Finance brought by emerging developing economies will be consolidated into the RWA market as asset suppliers. Among these, Stablecoin Payment and SupplyChainFi will become fast-growing directions.

4. Emerging Developing Economies and the New Global Geopolitical Landscape

In 2025, while economically and financially developed countries and regions worldwide were struggling with how to formulate management policies for Stablecoins and Crypto Finance, the development speed in emerging developing countries and regions globally was astonishing and beyond imagination.

"What they all want are stablecoins, or platform tokens are also acceptable." This was the consistent feedback from cross-border trading and payment companies this year. Beyond Nigeria, India, Brazil, Indonesia, and Bangladesh, numerous other countries and regions in Africa, South America, South Asia, Southeast Asia, Eastern Europe, and the Middle East have also shown exponential year-over-year growth in the application of Stablecoins and Crypto Finance for three consecutive years. Their actual adoption rates are also far higher than in developed economies, with many exceeding or catching up to the usage volume of local mainstream fiat currencies (Note 10).

These numerous nascent economies within emerging developing countries are rapidly expanding in the form of "off-balance-sheet assets," forming a stark contrast with the aforementioned management dilemmas in the current mainstream world environment. Although, due to long-term historical accumulation, significant differences in economic strength and consumption capacity still temporarily exist across different global regions, it is evident that the analytical data of the global mainstream economy has long been completely distorted. Faced with stagflation from over-regulation on one side and a rapidly growing new environment on the other, in no more than 5 years, the global economic landscape will be reshaped, and geopolitical relations will undergo drastic changes accordingly.

Regarding question ii) from the introduction, I clearly have a definite answer. The true reshaping of the Nash equilibrium will not occur by breaking and remolding within the original global economic system. It will inevitably be a complex new reshaping formed by being broken by external forces under the new global格局 (structure). The native development speed of Crypto and Open Finance will far exceed the speed at which traditional economies and markets can accept and understand them. 2026 will likely become the important inflection point for this承接 (undertaking) of disorderly reconstruction.

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

In this report, Coinbase began betting on some new terms, including DAT2.0 and Tokenomics2.0, which are essentially developmental branches of the already familiar DeFi2.0. The definitions of these concepts are quite good; let's elaborate on each here.

In 2025, the DAT concept was