Author: Jesse Walden
Compiled by: Shen Chao TechFlow
Over the past two years, the crypto industry has gone through a period I refer to as the 'integration phase.' During this phase, the industry's focus has been more on optimizing existing technologies rather than on new innovations from 0 to 1.
This integration and optimization is primarily reflected in three key areas of the crypto industry:
Infrastructure: Improvement and Optimization of Underlying Technologies.
Application Scenarios: Clarifying and Deepening Existing Core Use Cases.
Long-Term Winners: Emerging Projects and Technologies with Sustained Competitiveness.
Infrastructure Optimization: Moving Towards 2024
The infrastructure of the crypto industry has matured through continuous optimization, no longer being a major barrier to industry development. This maturity benefits from ongoing technical optimization rather than a completely disruptive architectural revolution. These optimizations lay the foundation for the industry to welcome the possible next round of a 'bull market,' in which:
The transaction storage space of the blockchain (Blockspace) is abundant, capable of accommodating more transactions.
Development tools are more refined, providing convenient support for developers.
User transaction fees are close to zero or completely free.
The complexity of wallet usage has been effectively simplified, lowering the user threshold.
The user experience of on-chain applications is now comparable to that of traditional Web2 applications.
In fact, the abstraction of infrastructure, performance improvements, and enhanced reliability during this phase have only developed over the past 12-18 months. For example, Ethereum L2s (Ethereum Layer 2 scaling solutions), improvements in the reliability of the Solana network, and wallet abstraction technologies have only recently reached production-level maturity.
Integration of Application Scenarios and Long-Term Winners: Trends for 2024
Currently, there are two core application scenarios that have entered a mature phase: speculation and stablecoins.
These two scenarios have existed since the inception of the crypto industry. Bitcoin has been the first speculative asset in the crypto industry since its launch in 2009. Stablecoins, on the other hand, are among the earliest realized token applications (for example, USDT launched in 2014). Today, the development of these two fields is entering a golden phase, closely related to the optimization of infrastructure.
For example, Memecoins, as the most direct manifestation of speculative behavior, now have extremely low and simple costs for creation and trading. Similarly, the issuance and trading of stablecoins have also become more convenient due to advancements in technical tools. Tools like Bridge have greatly simplified the issuance and trading processes of stablecoins, making these operations easy and efficient.
In the extension areas of the two core application scenarios of speculation and stablecoins, another integration trend is gradually emerging: those 'long-term winners' that have performed well recently are continuously expanding their advantages and achieving greater success. These projects include blockchains (such as Solana and Ethereum), wallets (such as Phantom), and decentralized exchanges (DEXs) (such as Uniswap and Raydium). They not only benefit from the rapid growth of the stablecoin and speculation markets but can also quickly adapt to popular speculation hotspots in the market (whether it is Memecoins or NFTs).
The Next Phase of the Crypto Industry: Breaking Through Bottlenecks and Embracing Transformation
As infrastructure bottlenecks gradually become a thing of the past, two major bottlenecks facing the industry also urgently need to be overcome. These two bottlenecks are not only the reasons for the integration-optimization phase but also hinder the industry's new innovations from 0 to 1.
The first bottleneck is a challenging and uncertain regulatory environment. However, this situation may be changing. The crypto industry may soon welcome a clear regulatory framework in the U.S., which will provide fertile ground for excellent projects within the industry while clearing out bad actors.
High-performance infrastructure and a clear regulatory environment are two key factors driving the transformation of the industry, and the core of this transformation lies in addressing the last and most important bottleneck: talent.
Since 2022, the number of new talents entering the crypto industry has significantly decreased. This phenomenon is not hard to understand, as the negative public opinion environment and the risks faced by founders under uncertain regulatory frameworks have deterred many. However, the lack of new talent directly limits the emergence of new ideas within the industry.
I believe that as the industry environment improves, this trend will reverse next year and be divided into two phases:
Long-term winners that have performed well during the integration phase will continue to expand their advantages and achieve unexpected success. For example, Polymarket has stood out during this election cycle, and similar cases will continue to emerge in the future. This trend will benefit from the mainstream application of on-chain technology, both at the consumer and institutional levels. Startups will experience a wave of IPOs, and more projects will launch their own tokens. These developments will redefine people's perception of the crypto industry's influence and inspire a new generation of builders to join this field, injecting fresh vitality into the industry.
A whole new group of entrepreneurs will enter the crypto field. They will start from the most basic principles (i.e., first principles) and will no longer be constrained by traditional infrastructure and outdated ideas. Under clear regulatory rules, experiments around a user ownership-centric new product experience will become feasible. This will bring a whole new wave of innovation to the industry.
Although price volatility in the crypto market will continue, with new rules, new talents, and new ideas constantly emerging, we hope to clarify within the next five years whether the crypto industry can transcend speculation and stablecoins to provide more profound value. At the same time, we also look forward to 'user ownership' becoming the core of new products and networks, driving faster growth by aligning with users' economic interests. The successful validation of breakthrough applications will be a key pathway to reducing long-term market volatility. I am personally very much looking forward to witnessing the development of this process, as I believe the next few years are a critical window for the development of the crypto industry.
At Tuesday's annual meeting, I shared these views with Variant's investors. But I also need to add one point: I am most concerned that before the industry shifts from the integration-optimization model to the 0 to 1 innovation model, we may experience another rapid cycle of price volatility. If this happens, it could delay the pace of innovation in the industry—yet even so, I still believe the next five years will be a critical window for the development of the crypto industry.
