Written by: Huang Shiliang
The blockchain industry has been a bit sluggish recently, and prices have been low, but compared to worrying about prices, I think the entire blockchain community seems to have lost its direction of development, which is more worrying.
I feel that one of the longest and most intensely discussed topics at X this year was whether MEME coin is reasonable. Vitalik, major mainstream VCs, KOLs, etc. have all joined the debate.
The main point of view is that one side believes that MEME is noise in the blockchain or even something negative; the other side believes that meme represents the essence of encrypted digital currency and blockchain.
Another major focus is that organizations such as the Federal Reserve, SEC, and Wall Street have become the core focus of the cryptocurrency circle. Regardless of whether the original intention of cryptocurrency was to oppose these institutions, the fact that the industry revolves around these institutions seems to mean that the industry has lost its backbone and has become a policy tool of the United States.
I don’t want to get involved in the discussion of the rights and wrongs of these two major focuses. I just use these two phenomena to prove that the blockchain community seems to have lost its development direction and is getting caught up in some unimportant disputes over details.
N years ago (around 2016), Bitcoin expansion became almost the only important thing in the entire blockchain industry, but Ethereum secretly developed and successfully completed a series of the most significant innovations in blockchain, including smart contracts, DeFi, Rollup, and other inventions that have significantly changed the industry.
Looking back at the discussion on Bitcoin expansion at that time, it was actually not an important matter at all, just a small episode in the development of the industry. In those years, the development of smart contracts, DEFI, etc. was the authentic main theme.
I feel that the blockchain industry is now focusing on MEME, and spending so much energy on the Federal Reserve, which are just small episodes on the road of industry development. The main themes are as follows.
I think the real direction of the industry and the goals that are likely to be successfully achieved in the next five years are the following three.
1. Stablecoins will occupy a very important position in global economic activities. If I have to guess based on data, I think it could be
1) The total amount of stablecoins will exceed 1 trillion US dollars; 2) The transaction volume of stablecoins can account for 10% of global trade settlements.
The on-chain stablecoin is so easy to use. It has the dual advantages of blockchain and fiat currency, and also eliminates the major defects of fiat currency.
The most important advantage of stablecoins is their high efficiency, which is far higher than bank transfers. Especially when faced with the restriction of national borders, the advantage of on-chain stablecoins is almost instant.
The transaction costs of stablecoins are also very obvious compared to fiat currencies.
Another major advantage is the NoKyc set, of course this is a bit politically incorrect.
I think these advantages are more than 10 times better than legal currency in international trade.
On the one hand, the total amount of stablecoins will increase significantly, and it should not be difficult to reach 1 trillion US dollars within 5 years.
On the other hand, there will be more types of stablecoins, and they will most likely replicate the types of mainstream currencies used in existing international trade. For example, in addition to the US dollar stablecoin, which occupies an absolute dominant position, there will also be euro stablecoins, RMB stablecoins, British pound sterling and yen stablecoins.
This is a goal that is very worth pursuing in the blockchain industry.
2. I think another direction in which the blockchain industry will have great development in the next five years is that more existing assets will be put on the chain, that is, RWA. In fact, it means that stocks, funds, bonds and insurance products that are traded on the current stock exchange can be traded on the chain.
Comparing it with the current BTC and ETH ETFs, I think it is better to call it an inverse ETF of stocks, bonds, etc. rather than RWA.
The ETFs of BTC and ETH turn on-chain assets into products that can be traded on current stock exchanges, and the tokenization of stocks can also adopt a similar ETF mechanism, except that it is the opposite of ETFs, where stocks are entrusted to a fund company and then the corresponding tokens are issued on the chain.
The benefits of on-chain assets vs. assets on stock exchanges are ten times better.
On-chain assets can thrive in DeFi.
Stocks have been developed for hundreds of years and have accumulated some endogenous problems. For most people, buying stocks means they can only sell them at a higher price, and stocks have no other use. Solving these problems requires introducing external innovation, and blockchain is one of the forces that can be borrowed.
Tokens can participate in various DeFi mechanisms. In particular, users can mint liquidity pools such as Lptoken to earn transaction fees, and can inject tokens into loan funds to earn interest.
Let me ask you, when can you lend your stocks to others to earn some interest?
In fact, after using blockchain, the current way of doing things in stock exchanges is completely outdated.
Nasdaq should issue a rollup on Ethereum and then build a Nasdaq dex on the chain.
3. I think the third major direction and goal of the industry is to strengthen privacy protection, which is already imminent.
Blockchain has achieved the ultimate in transparency, but this brings trouble to privacy protection.
With the implementation of ETFs, the entire industry is becoming more and more Americanized. Blockchain may become a tool for the US dollar, and US law enforcement forces may fully penetrate the chain. The decentralized, anti-censorship, and permissionless features that blockchain promises to users may be forcibly deprived in the context of dollarization.
One direction of privacy protection is ZK, which is the strength of the Ethereum ecosystem.
However, I feel that the Ethereum ecosystem is becoming more and more perfunctory in this direction. Now they use ZK to do Rollup, which is not privacy protection. The real privacy protection is to use ZK to hide or confuse transaction details, making transactions more difficult to track and making the transaction content less transparent.
Since the Tornado project was investigated by law enforcement, the Ethereum ecosystem seems to have not seen any real projects that take up the banner of privacy protection. Instead, it has become more and more obedient in cooperating with censorship. For example, MakerDao's DAI, after being upgraded to Sky's USDS, has a blacklist function.
Another direction of privacy protection is the development of the UTXO ecosystem represented by Bitcoin. The UTXO technology is still better than the account system of Ethereum in terms of privacy protection. At least, no UTXO blacklist technology has been seen so far.
Privacy protection is something that Bitcoin Core developers pay special attention to, but Core’s conservatism also brings about the disadvantage that Bitcoin’s programmability is too weak, which means that Tokenize and DeFi cannot be implemented.
Although we often see various asset issuance schemes and various second layers emerging in the Bitcoin ecosystem to improve programmability, I think these are just strong wishes expressed by the community, and we have not seen a truly decentralized solution so far.
As for other UTXO chains, only the BCH ecosystem is willing to develop these technologies, and there is still a glimmer of hope, while others such as LTC, Doge, etc. have no sense of competition.
Without tokenization technology and DeFi, the entire ecosystem would not be prosperous enough.
In general, UTXO faction technology does not take all this seriously. It is likely that hope will still lie on Ethereum.
Of the three areas mentioned above, I think the only thing worth worrying about is privacy protection. It seems that there is no strong force pushing this direction.
Stablecoins reaching $1 trillion, inverse ETF movement, I think this is inevitable in the next five years.
And there is a high probability that privacy protection will eventually succeed.
You ask why? The answer is the belief in decentralization.
