Starting from the current state of the crypto market, exploring the essence and future direction of the crypto world.
Written by: Brook
Translated by: Sissi & Leia, TEDAO
Introduction: The chaos and lack of innovation in the crypto world raise the question: are we making substantial progress towards an ideal future? (Protocol Revolution and DigiLaw Project) The preface discusses the essence of the crypto world, the bottlenecks in its development, and the infinite possibilities for future construction from a systematic perspective, providing important considerations for understanding the true nature of this new planet.
This article is part of the preface content series, starting from the current state of the crypto market, exploring the essence and future direction of the crypto world. More Chinese translated content will be released soon, please stay tuned.
In September 2023, an article by Matt Huang titled 'Casino on Mars' reignited the long-dormant hope from the crypto bear market. He likened the crypto world to a new planet being settled, reminding everyone that despite the various chaos in the crypto universe, it still cannot hide its vibrant development and the infinite possibilities for future construction. He also rationally analyzed the dual nature of speculative behavior in the crypto casino, objectively acknowledging the existence of fraud, scams, and other malicious spaces on the planet. This article served as a shot of adrenaline at a time when many were generally skeptical and frustrated, injecting new hope into the crypto world.
In 2024, the crypto world welcomed several significant historic moments: the U.S. Securities and Exchange Commission (SEC) successively approved the spot ETFs for BTC and ETH; the U.S. House of Representatives passed the FIT21 bill, officially establishing a regulatory framework for digital assets; BTC experienced its fourth halving; and so on. With numerous positive factors converging, the crypto world welcomed a small wave of growth as desired.
However, during this small bull run, market fluctuations remain severe, casino speculation is still rampant, Ponzi schemes and rug pulls continue to emerge, and hacker attacks and scams rise and fall. What are the truly essential innovations? At the very least, we nurtured DeFi and NFTs during the last wave of enthusiasm; what about this time? Meme frenzy? Engraving? Why does everyone’s sense of value seem to diminish, even leading to 'crypto shame'? Are we truly making substantial progress towards an ideal future?
When writing this preface, nearly a year has passed since the publication of 'Casino on Mars,' and the market seems to have fallen into a similar moment of silence again. A recent tweet from Péter Szilágyi about 'self-reflection' has also sparked an industry-wide debate about 'the meaning of crypto existence.' He bluntly stated: 'It's past time this industry creates something genuinely useful that people want to use, or should just close up shop.'
Although he believes that many great things are being created, the undeniable objective fact is that looking down on the entire crypto planet, we still have not established a prosperous crypto civilization. If we view blockchain protocols as urban infrastructure and smart contract protocols as city buildings, it must be said that apart from the untapped wasteland, the cities under construction on this planet are also largely ruins and abandoned projects. The normal operation of these cities is still maintained by established structures like MakerDAO, AAVE, Compound, Uniswap, etc. It is undeniable that many projects currently under construction appear grand and vigorous, but how many of them can ultimately withstand the trials of time, human nature, and market fluctuations to become significant landmark buildings? Why can't we build skyscrapers? What gives us the right to attract the next billion users? What are the bottlenecks in development? Or more fundamentally, what is the true nature of the crypto world we are striving to build?
The SEC's thrilling passing of the 3:2 vote, the market's rise and fall, and the fluctuating mindset of participants somewhat confirm my current thoughts:
The crypto world is not a binary dichotomy of black and white, but rather a superposition of 'endless future,' 'open casino,' and 'breeding ground for wrongdoing.' Different people see vastly different aspects of the crypto world from various angles and levels.
In terms of market capitalization, high-value projects represented by Bitcoin and Ethereum contribute over 80% of the crypto market value, indicating that the crypto market as a whole is healthy. The crypto world has evolved from being ignored to once surpassing Apple in market capitalization, and now starting to gain recognition from mainstream financial markets. Given this development trend, it is very likely to gradually surpass gold and even real estate in the next decade. The rise of decentralized finance (DeFi), the popularity of non-fungible tokens (NFTs), the emergence of digital identity (DID) and decentralized autonomous organizations (DAOs), as well as gradual regulatory implementation and recognition of legal status, all indicate that the 'endless future' of the crypto world is accelerating its unfoldment.
From the perspective of project quantity, among the tens of thousands of cryptocurrencies in the market (including memes, it will exceed hundreds of thousands), only a few hundred projects may ultimately possess value, while the vast majority are still primarily focused on 'making money.' They resemble 'open casinos' unrestricted by time and space, where anyone can participate. This new type of casino is 'openly evolving,' as project parties seize the greed inherent in speculators, continuously updating the casino gameplay through technological upgrades, creating endless and varied new betting games, which continuously attract batches of speculators to invest their 'chips.' The influx of resources further drives technological and commercial innovation, and the 'casino ecosystem' evolves openly in this cycle.
From the perspective of malicious events, in areas yet to be reached by regulation, criminals often use cryptocurrencies for money laundering and other crimes, as well as for dark web transactions involving drugs, weapons, etc., attempting to evade sanctions; fraudulent schemes, scams, and runaway operations are also rampant in the crypto world; decentralized finance platforms and wallets frequently fall victim to hacker attacks. All of this is an objective reality, primarily due to the relative freedom and openness of innovation in the crypto world, where the pace of ecological evolution far exceeds the pace of regulatory implementation. Those 'blank areas' yet to be touched by regulators naturally become the 'breeding ground for criminals.' Meanwhile, the iteration of encryption technology also takes time; it is difficult for us to create a 'perfect' underlying architecture in the early stages of new developments. 'Vulnerabilities' are constantly repaired through trial and error, but this also provides potential opportunities for hackers to attack, inevitably becoming a breeding ground for wrongdoing.
Three mixed states overlap, making it undoubtedly difficult for the vast majority to unravel the true nature of the crypto world. Some people only see the 'endless future,' thus blindly worshiping; some only see the 'breeding ground for wrongdoing,' thus fearing and avoiding; some only see the 'open casino,' thus wholeheartedly seeking profit, stopping the thought of the true meaning of the crypto world.
Chris Dixon pointed out in his work, 'Read Write Own,' that blockchain networks can combine the social benefits of protocol networks with the competitive advantages of enterprise networks, ultimately reshaping the internet into a more open, democratic, and innovative 'endless future.' This book is concise and easy to understand, making it worthwhile for anyone who wants to better understand the true potential of blockchain and Web3 to read.
However, possibly due to space limitations, Chris Dixon only made some brief acknowledgments to skeptics in his book and did not delve deeper. To help more people see the true nature of the crypto world, I believe we need to clarify the following core issues:
First, what is the essential value of the crypto world?
Matt Huang pointed out in 'Casino on Mars' that the crypto world is a new planet worth building because it offers a blank slate where we have the opportunity to establish a new property rights system and construct an upgraded financial system and internet platform. This is a more macro perspective; if we approach it from a more microscopic and first-principle perspective, what is the essential value of the crypto world? What is its most fundamental difference from the existing world system? What are the unchanging foundations and driving forces behind its vigorous development?
Second, why, after 16 years, is our understanding of the crypto world still in a fragmented state?
The emergence of new technologies often comes with tremendous skepticism and uncertainty, not only because they reshape our way of life but also challenge our cognition and values. However, the fragmented perception of the iPhone and Tesla cars quickly reached a consensus. Yet today, the crypto industry led by Bitcoin has made significant progress, so why is there still a large amount of positive and negative controversy intertwined? Why is the public's understanding of the crypto world still filled with confusion and conflict? Why do many people still not see the bright future of the crypto world?
Third, why is wrongdoing in the crypto world so rampant and persistent?
Why, after over a decade of development in the crypto world, does chaos and disorder still abound? People often attribute this to 'the emergence of any new financial market will be accompanied by various problems.' However, there is a very contradictory point, which I call the 'Crypto Paradox': the original intention of the crypto world was to hope to build a new system from 'do not do evil' to 'cannot do evil' using blockchain technology and decentralized concepts, yet it has now fallen into the absurd dilemma of 'widespread wrongdoing.' This raises the question: does wrongdoing in today's crypto world possess some kind of specificity?
Fourth, how to realize the original intention of the crypto world and maintain a safe and ethical development environment?
The crypto world is still in its early stages of development, with many orders gradually being established. Newcomers who recklessly enter can easily end up with 'nothing to show for their efforts.' When existing infrastructure cannot adequately support the crypto world in achieving its original intention of decentralization, can we collaborate with traditional regulatory bodies and the community to establish a mechanism that can spontaneously monitor and compress the space for wrongdoing, building an 'immune system' for the crypto world, purifying the development environment comprehensively? At the same time, can we also enable ordinary people caught in it to gain a broader perspective, allowing them to see the full picture of the crypto world's development?
However, these issues cannot be clearly explained through just a few articles.
Since encountering Bitcoin and Ethereum in 2016, I have personally experienced two massive cycles of bull and bear markets in the crypto market, witnessing the rise and fall of hundreds of crypto projects in the process. Some projects can transcend cycles and still firmly hold their ground today; others may thrive during a bull market but collapse in an instant during a bear market; some projects directly use the guise of Web3 and decentralization to engage in Ponzi schemes and scams. When stripping away the halo bestowed by 'crypto' and 'decentralization,' turning off the beauty filter, what is the true nature of each project? Crypto entrepreneurship? Crypto business? Or just making money with crypto? My past experiences have deeply impressed upon me the complex and chaotic nature of the crypto world, which is both dangerous and alluring, and the importance and urgency of understanding and collectively addressing these challenges at this stage.
I have always wanted to write a book that gathers those rational and profound frontier insights that have been drowned in a sea of information, exploring the underlying laws behind common issues, and attempting to connect existing wisdom with a relatively scientific and rigorous logical framework. I plan to name this book (Protocol Revolution and DigiLaw Project), not only from a cognitive perspective using a more first-principle approach to understand the aforementioned issues but also to outline a systematic and comprehensive practical methodology, hoping to reduce the blind and chaotic exploration of participants and lower unnecessary trial and error costs.
The desire to write this book does not imply that my answers are correct and profound, but rather that in the still chaotic early stages of the crypto world, there is indeed a need for effective sorting and summarizing. Thus, the 1.0 version of this book is temporarily completed by a centralized small team led by myself. But this is merely a beginning; I hope that in the future it can become an open community for exchange, where everyone can freely discuss, share ideas, and collaboratively create the 2.0 version of this book.
It should be noted that when describing this field, I prefer to use the term 'crypto.' As the industry evolves, the possibilities built on blockchain in the coming decades will far exceed the current imagination space, and buzzwords like 'Web3' and 'metaverse' may likely be replaced by emerging concepts that keep appearing. Today, the consensus around the 'crypto world' typically refers specifically to this new digital ecosystem built on decentralized public chain technology after the advent of Bitcoin and blockchain, which also includes the infinite possibilities generated when some entirely new encryption technologies (such as zk and homomorphic encryption) combine with blockchain technology. At least at this stage, I believe that referring to it as the 'crypto world' is still relatively appropriate.
This book will focus more on exploring and consolidating the universally applicable principles that have been verified by the market, which can help participants navigate through bull and bear markets to address more long-term problems and challenges. As for the current phenomena and cutting-edge hotspots, there is no intention to discuss them extensively, as they may not withstand the test of time. This article will serve as the preface to (Protocol Revolution and DigiLaw Project), briefly explaining my thoughts on the four questions mentioned above and providing an overview of the vision and content of this book.
The content of this book strives for simplicity and clarity, making it suitable for a broad audience seeking to gain a deeper understanding of the crypto world.
For bystanders and newcomers, this book will introduce the complex concepts, technologies, and development summaries of the crypto world through rich examples, allowing you to quickly gain a relatively objective and rational understanding of the crypto world at minimal cost.
For active participants, this book will summarize the historical development patterns of the industry and the characteristics of quality projects that have navigated through bull and bear markets, providing a perspective on the 'trust economy' to help rationally analyze and select truly valuable crypto projects, rather than relying entirely on 'luck' and 'industry dividends.'
For innovative builders, this book focuses on discussing business models, rapidly scanning the industry, and sharing a theoretical framework and engineered smart solutions designed for the DigiLaw ecosystem. These are 'core courses' on the growth path of every builder.
For regulators and policymakers, this book aims to provide a new understanding of the complexity of the crypto world and its rapidly evolving ecological mechanisms, hoping that through the analysis of the DigiLaw ecosystem, you can find the boundaries of regulatory scope, thus formulating more comprehensive and long-term effective policies to jointly create a healthy, fair, transparent, and innovative digital natural environment.
