Pantera Partner: The Current State and Future of the Internet Capital Market

Original Article: "Internet Capital Markets - From the Trenches to Wall Street"

Compiled by: Ken, Chaincatcher

"Internet Capital Markets" (ICM) has been one of the hottest buzzwords of the past year. But what exactly does it mean? People often lump everything together into this broad concept—from Pumpfun to Sonar to xStocks, and sometimes even stablecoin payments, new types of banks, and lending protocols! But this confuses fundamentally different financial instruments with different value capture logics and ownership structures.

In my view, "Internet Capital Markets" is simply another way of saying "fundraising using tokens"—whether the fundraising target is Memecoin or tokenized stocks.

I suggest classifying ICM asset classes according to their "lifecycle" based on the following points: How mature are the tokenized projects? What kind of asset is the fundraising activity endorsing (attention, reputation, product, revenue, or governance)? How does value flow and accumulate between the platform and the asset itself? 1 - The Lifecycle of the ICM Platform The appeal of public blockchains lies in the fact that anyone can issue tokens, regardless of the project's maturity. Therefore, various issuance and tokenization platforms have emerged to meet the needs of projects at different stages. I believe ICM projects can generally be divided into the following five maturity stages:

Stage 1 - Anonymous Stage

• Representative Platforms: Pumpfun, Bonk Launchpad

• Representative Assets: Fartcoin, WIF, MOODENG

In this stage, most tokens issued are pure Meme coins.

Tokens issued on Pumpfun or Bonk typically lack any strong "fundamentals" or "team" backing. Token pricing at this stage is entirely driven by zeitgeist, financial engineering, and the "animal spirits" of the attention market.

Second Stage - Creator Stage

• Representative Platforms: Zora, Believe App

• Representative Assets: JESSE, BALAJI, PASTERNAK

In the creator stage, there is usually a well-known creator or team behind them. The token can be seen as a financialized form of the token creator's (or claimed creator's) "attention" or "reputation." For example, on Zora, the top two tokens, JESSE and BALAJI, are associated with specific real-world figures.

Third Stage - Venture Capital Stage

• Representative Platforms: MetaDAO, StreetApp

• Representative Assets: Avici, Umbra, Kled

At the venture capital stage, these tokens no longer resemble "meme coins" but are closer to traditional venture capital fundraising mechanisms.

Projects on MetaDAO and Street (such as Avici, Umbra, and Kled) are similar in quality to projects typically backed by blue-chip VCs in their seed to Series A rounds. They have established teams, roadmaps, viable product proposals, and potential governance rights. The real tension and issue here gradually evolves into how to balance the relationship between equity holders (and traditional VCs) and token issuance—while token issuance expands capital access, it cannot provide equivalent legal protection and governance oversight. Phase Four - The "ICO" Phase

• Representative Platforms: Binance, Upbit, Sonar

• Representative Assets: MegaETH, Plasma, Octra

The fourth phase is the "ICO" phase. At this stage, projects typically have significant market traction, have secured venture capital funding, and may have a stable revenue stream. Similar to an "IPO," token issuance at this stage represents the launch of a more mature and stable product that has demonstrated some market performance. Centralized exchanges such as Binance, Coinbase, and Upbit, as well as professional ICO platforms like Sonar, typically operate at this stage.

In this stage, the tension between tokens and equity becomes more pronounced—existing venture capitalists often acquire token rights, but these tokens may only grant governance rights to specific revenue streams, IP, or contracts, rather than equity. This leads to a fragmentation of asset ownership, and tokens are often treated as "second-class citizens" compared to equity. The fifth stage - Public Asset Stage. Representative platforms: xStocks, NYSE Tokenized Securities. Representative assets: xNVIDIA, BENJI, PAXG. The final stage is the public asset stage, which involves the tokenization of existing financial instruments. Discussions about RWA are numerous and will not be elaborated upon here. The core logic is that "tokenized" assets (such as xNVIDIA, BENJI, and PAXG) are "mirrors" of existing "real" financial instruments. Tokenized versions broaden the accessibility of on-chain audiences, while "real" assets retain all governance and legal rights. 2 - Where Does Value Go in the Internet Capital Market? After analyzing platforms and assets at various "stages" of the internet capital market, a natural question arises—where does value actually accumulate? My working hypothesis is that this actually depends on the stage of the market—the earlier the stage, the more value tends to belong to the platform; the later the stage, the more value tends to belong to the asset. In the early stages (stages one and two), I believe value will flow to the platform itself—such as Pumpfun or Zora. This is because tokenized assets themselves have no fundamental support, and their viral spread has a certain degree of randomness. The rules of the game in the early stages lie in the frequency and massive scale of project issuance on the platform. Pumpfun has generated over $800 million in revenue through its transaction fees and "graduation fees," thanks to the sheer number of tokens issued on its platform. However, in the later stages of the internet capital market lifecycle (Phase III and beyond), I believe holding the actual assets themselves (such as Avici, Kled, MegaETH, xNVIDIA) may capture more value than holding the underlying tokenized platform. In these later stages, projects typically have strong fundamentals, a clear roadmap, product, and potential monetization paths, and holding the assets (rather than platform tokens) allows them to capture these upside gains. In this context, the issuing platform is merely an access point, and often not the only way to gain exposure to the asset during the "ICO" and "public asset" phases. Furthermore, the stronger the asset's fundamentals, the stronger the bargaining power over the issuing platform. For example, Kled, a groundbreaking crowdsourced AI data marketplace project, initially launched on Believe but migrated to Street after token controversies, illustrates this point. However, centralized exchanges (CEXs) are an exception to this rule, and they are typically highly profitable businesses. However, for major CEXs like Binance and Coinbase, their competitive advantage lies not only in listing tokens, but more importantly in the liquidity and trading volume of specific assets. In other words, their moat lies in having a large potential user base to trade your tokens (and thus earn fees), not just the listing process itself. 3 - What's Next for ICM Projects? Over the past year, I believe innovation in the ICM space has generally exhibited a "dumbbell" structure. On one end are Launchpads like Pumpfun industrially mass-producing tokens and driving on-chain trading volume on chains like Solana; on the other end are banks and other traditional financial institutions tokenizing traditional assets (from money market instruments to stocks to commodities) to leverage access to global liquidity. However, in my view, a more interesting observation lies in how these two phenomena converge in the middle of the ICM lifecycle—namely, the third and fourth stages (venture capital and ICO stages). Currently, through mechanisms such as Street's ERC-S mechanism and MetaDAO's ownership token based on Futarchy, we have seen how token financing expands upside exposure to venture capital-stage projects (such as Umbra, Avici, and Kled) and has the potential to capture the value of projects with social productivity use cases. Admittedly, how this "venture capital-ownership-token" relationship will evolve in the long term remains uncertain, depending on multiple legal, economic, and governance uncertainties. For example, I am still not convinced that Futarchy is a necessary or scalable solution for the governance of "ownership token" projects, and Street's SPV structure for ERC-S remains legally experimental. Given the choice, I might still prefer to hold equity for regulatory peace of mind. However, in my view, the trend indicates that tokens will increasingly be tied to productive venture capital, helping to create companies with real-world value. As this process progresses, they may ultimately help the internet capital markets realize Silicon Valley's creed—"Making the world a better place." Disclaimer: The information presented in this article represents only the personal views of Jay Yu and does not reflect the views of Pantera Capital or any other individual or entity. The information provided is believed to be from reliable sources, but no liability is assumed for any inaccuracies. This article is for informational purposes only and should not be considered investment advice.