Original Article: (Crypto's Waning Ambition)
Author: Ignas
Compiled by: Zombit
On the surface, the crypto industry appears to be doing exceptionally well:
After years of rejection, spot ETFs were finally approved, with ETFs for Bitcoin and Ethereum seeing record inflows.
Trump’s victory pushed the crypto industry into the center of American politics, with its lobbying power gradually replacing skeptics like Gary Gensler.
The cryptocurrency industry has been recognized as an independent industry, and Bitcoin has even become an option for some countries to consider including it as a national reserve asset.
I remain optimistic about the market price of cryptocurrencies, but I have to admit that most of the gains are actually driven by external macro factors rather than innovation within the industry.
The Crypto Industry’s Internal Innovation Engine Is Slowing
As an industry matures, the rate of innovation will naturally decrease. But even as innovation slows, prices can continue to rise.
But I boldly claim: the slowdown in innovation is not the underlying problem, but a symptom. The real problem is that our ambitions are fading and risk appetite is declining. The cryptocurrency industry was once driven by radical ideas with the goal of revolutionizing the world. Today, the industry seems content with pursuing regulatory approval and institutional adoption.
Can't believe this account has been reduced to tweeting about tradfi. Kinda disgusted with myself but also the lack of innovation in crypto
— btcnft420 (@btcnft420) September 26, 2024
Don’t just take my word for it, take a look at what Vitalik wrote in his 2023 blog post (Bringing Ethereum Back to the Cyberpunk Spirit): “The purpose of our existence is not just to create isolated tools and games, but to comprehensively Build a freer and more open social and economic system where different parts of technology, society and economy complement each other.”
Ask yourself what is the innovation of this cycle?
"AI x Encryption" is one. However, it must be pointed out that AI is an external innovation, and without it, this cycle may just continue to focus on Memecoin trading. But I don’t like meme coins because their only real ambition is to get rich quick and never really set out to change the world. Make enough money so that the problems of the outside world stop bothering you.
Please note that we have rarely used this classic quote from the last cycle: "'Project Name' is the most egalitarian thing we have ever seen. This vision is extremely ambitious and, if successful, will truly reshape the fabric of society."
In contrast, during the last bull market (2020-2021) we witnessed a variety of radical innovations:
Decentralized Finance (DeFi)
Non-Fungible Tokens (NFTs)
DeFi Liquidity Mining
Play-to-earn (P2E) games like Axie Infinity
Metaverse
Thoughts post-Devcon:I am seeing practically 0 innovation in the DeFi space compared to 3 years ago. DeFi rn is 7 killer teams working on viable products together. Everyone else will run out of funds in 12 months DeFi has never been more competitive
— Seraphim (@MacroMate8) November 19, 2024
The 2020-2021 cycle is also the pinnacle of innovation in “Tokenomics”:
Heavy base token (Ampleforth)
veTokenomics
(3,3) Ponzi model
Liquidity mining
SNX as sUSD collateral
Multiple algorithmic stablecoins
Nowadays, project parties and the teams behind their venture capital (VC) prefer to use mature and robust token economics models because they only have one opportunity for the initial token offering (TGE).
$EIGEN’s “Intersubjectivity Token” is a rare exception to current innovation.
Are the days of madness over?
Strictly speaking, the ICO mania era of 2017 represented the pinnacle of the cryptocurrency industry’s ambitions. It was an era of fanaticism and paranoia, and many crazy ideas were too far removed from reality to survive. But those projects that survived had to temper their vision.
These are crazy ideas that may not even get funded in today’s more conservative cryptocurrency industry.
However, these crazy concepts have attracted a group of people, including myself, who dream of revolutionizing the world.
I am currently reading (Boom: Bubbles and the End of Stagnation) by B. Hobart and T. Huber. They argue that significant progress often comes from a small group of people with a unified vision, ample funding, and surprisingly low accountability.
Their conclusion: Financial bubbles, despite their negative reputation, have driven countless technological and social breakthroughs throughout history and will do so in the future.
Our era of "low accountability" is not entirely over, but as regulation tightens, risk aversion is deepening. Perhaps, this cycle is the last time we have a bubble that generates substantial innovation.
I hope that the AI x encryption bubble will spawn at least one or two killer applications that really change the world.
The most ambitious cryptocurrency projects currently
Ethena: Fusion of DeFi, CeFi, and TradFi
Chainlink: Connecting on-chain and real-world data
Pudgy Penguins: Web3 Brand Expands to Web2
WorldCoin: Let everyone get on the chain, and even realize AI-funded UBI
Liquity/RAI: The Last Decentralized Stablecoin
Arweave/Filecoin: Permanent Storage and Censorship Resistance
Farcaster/Lens: Reimagining social media
Polymarket: Providing the truth in a world of fake news
Bio Protocol (Decentralized Science): Redesigning the Scientific Incentive System
Bitcoin: Digital Gold, the Monetary Revolution
You may think that WorldCoin’s eye-scanning ball (Orb) is too radical, or that Liquity v2’s stablecoin BOLD does not live up to its name and is difficult to succeed. But that's the risk ambitious deals are willing to take. They are some of the most egalitarian things we have ever seen, and their vision is incredibly ambitious and, if successful, will literally reshape the fabric of society.
Sadly, Ethereum is no longer on this list.
Maybe I'm a little harsh on Ethereum, but Vitalik's vision of a "cyberpunk Ethereum" is already hard to feel on X (formerly Twitter).
The upcoming hard fork will only bring minor upgrades (at least for non-developers). Ethereum has given up on sharding technology (Sharding) and L1 scalability. All we can expect in the short term may be a slight increase in the block gas limit.
It appears that Ethereum has shifted execution and ambition to Layer 2 (second-layer solutions). ETH’s North Star remains unclear.
I really hope to make Ethereum great again, and I also hope to see some radical and new ideas emerge.
IWANT single slot finalityIWANT faster block timesIWANT to increase the gas limitIWANT to make Ethereum great again
— Max Resnick (@MaxResnick1) November 14, 2024
On the contrary, Ethereum seems to have accepted the reality that "modular blockchain" cannot achieve large-scale expansion.
Solana, on the other hand, chose to do the opposite and boldly said, “F*ck that!”
Solana adheres to the Monolithic Blockchain model and continues to move forward. Of course, future Network Extensions may ultimately prove that Ethereum’s “modularization” path is correct.
But now, Ethereum’s ambitions and vision seem to be gradually blurring, losing their former glory.
Humanity needs new frontiers
The world, especially the Western world, seems to be at a standstill. This phenomenon is obvious:
Wages have stagnated.
The new iPhones every year no longer feel “novel”.
Even the music becomes repetitive and boring.
The film industry is littered with remakes of classic IPs because launching a brand new movie is far more risky than remaking an already successful one.
In some ways, we've even gone backwards:
For example, the flight time from London to New York is now longer than it was in the 1970s because the Concorde was grounded. However, the cryptocurrency industry remains one of the fastest growing and most innovative industries in the world, perhaps second only to artificial intelligence (AI). But I can’t ignore the fact that our pace and ambition of innovation are slowly fading.
Part of this is due to the maturation of the cryptocurrency industry, but part of it is that we have come to accept many technical limitations without challenging them.
Decentralized finance (DeFi) and decentralized autonomous organizations (DAOs) no longer need to be fully decentralized. We simply repackaged DeFi as “Onchain Finance” to directly solve the problem.
It doesn’t seem to matter that Ethereum cannot scale massively on Layer 1. It doesn’t matter that innovation in tokenomics stagnates.
LQTY's low market cap versus ENA's high market cap clearly demonstrates this:
"It seems that we no longer need decentralized stablecoins, because high returns are the better choice."
Perhaps, with every cycle, the ambition to push the boundaries is fading, and with it, the cryptocurrency industry is becoming more and more boring.
General observation from @ethcc is that VCs are incredibly bored.There just hasn’t been any innovation for the past few months — only more restaking, LRT, L2’s, AI, BTC L2’s with small differences with each other.
— donn (@tzedonn) July 11, 2024
At the end of the day, if the price of our tokens continues to rise, why take the risk and pursue innovation?
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