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The following takes you on the path of asking if we need more infrastructure to get more crypto users, realizing only that we actually might need less tech. All the while the tech narrative is there to extract more value. In pursuit of this narrative extractable value, we find ourselves in the era of cryptotainment and everyone, including institutions, wants in.

Tired of hearing about the new hot infrastructure that’s getting funded left and right? Is crypto’s technological friction a true barrier to mainstream adoption? Or do we just postpone answering the truly hard questions?

I saw a video where the founder of Shopify was saying those VCs who missed out on funding his company claimed the TAM at the time was too small. At the time they counted around 50k online stores. Today Shopify alone counts 1M merchants. 

Shopify’s solution created a new market by solving the technological friction of creating online stores. So the question for the onchain economy is: do we need more use cases to attract users or do we need better tech? Or do we need more use cases to attract users? Or is speculating on tech the use case?

Currently, more builders are building for other builders than builders building for actual users. It’s easier to optimize for a VC pitch. The more obscure your product, the more reflexive the token. At the moment we have more tech than use cases. 

To reiterate the above (at least) one of these must be true:

1. We need better tech first to get rid of the user friction

2. Tech is irrelevant, build for users first and then build infra (see Amazon/AWS)

3. The tech is the product and VCs are the consumers and sponsors of the casino

Extrapolating Shopify’s success story to today’s state of onchain usage we could assume that the lack of useful applications can be attributed to technological friction. Shopify created the new market so there was no actual TAM before.

If that is correct I posit we need to abstract the complexity away rather than add infra. The answer seems to be less tech rather than more tech. And at the same time, we need better use cases that go beyond speculation to onboard more money.

A Case For Less Tech

Blockchains are complex by design. They’re based on redundancy which liberates state-keeping from gated databases. Blockspace, which is a vessel for updating state, is not that easy to produce and comes at costs of complexity. There is no free lunch.

Developers and entrepreneurs come forth proposing chain abstractions of various forms. These solutions should make it easier for people to interact with blockchains e.g. bundling wallets in a convenient way, bridge from chain to chain, and deploy applications cheaper and faster. In a sense, they are an intermediary between the blockspace and the user.

At a high level, chain abstraction is bundling blockspace with developer tooling/composable infra and then serving it to users. But are we possibly roundtripping centralization through over-engineered solutions? Does it mean that at the end of the day, we will end up with a fancy multisig as the “AWS of the Web3”?

If you don’t think abstracting is the solution but you’re still tech-maxi then you are probably on the lookout for the next ZK/FHE miracle that will scale and prove the proofs so our normie neighbours can use blockchains. Thus the solution for the technological friction today could be narrowed down to:

1. Less tech: Abstracting complexity (compromise)

2. More tech: Scaling & bridging (faster, cheaper, seamless tx)

That means to onboard the next 500 million users we need scalable and interoperable blockchains and/or less complex interaction for users and developers to do the blockchaining.

Builders persistently pitch wallets and generic apps touting better UX as a means of onboarding new users to crypto or stealing a portion of the Metamask market share. On the user side crypto does not need better UX - it needs new use cases. Giving people more fun or useful things to do.

Coming up with use cases is much harder than copying what has been already done and adding a marginal twist to make it look original. Many of the applications are built with “ought to” in mind - “users should want to own their data/use governance” and ”Twitter should not have this much power”, rather than embracing the actual demand.

Thus I do not think the problem is the tech, but it’s the failure of imagination when it comes to use cases. At the moment we need new applications. Given that there’s more money in crypto than ideas with proper execution we end up in a Lollapalooza of crypto cycles.

The Professionalization Of Lollapalooza

When you don’t know what to build - you build more tech. If you don’t know what to do with money - you do finance. If you are bored - you browse memes on the internet. Crypto does it all in one escapist movement.

Crypto finds itself in a macrocycle I refer to as degentropy. This is best summarized as “speculation is the wedge”. Speculation is eating crypto and crypto is eating speculation. The way I see the past and future is in the following macrocycles:

1. 2009-2014 Cypherpunk movement (conception)

2. 2014-2020 Startupization of crypto (entropy)

3. 2020-2025 Crypto entertainment (degentropy)

4. 2025+ Deployment phase (negentropy) ???

At the moment the industry is trapped in polar opposites of dystopian embracing of memes with no intrinsic value and utopian techno promises offering no solution to hard questions of the present. No one focuses on answering the hard questions (use cases). This is how degentropy looks in a picture:

While at the end of the cycle, midcurvers will be right again, it also probably means they will not make (and lose) money. Crypto becomes a reality gambling on the future; everyone is both a tech and meme investor, and everyone can participate in the zeitgeist because there is no barrier of entry.

Both the left and right curve continue to play this pretend game because it can be profitable (the midcurve gets sucked in anyways as they become the exit liquidity). The rules of the game are simple. Sell the most tokens to whoever is willing to buy. Is there something wrong with that? Is it lacking fundamentals? 

Might sound like whataboutism but how can we anchor it to realness when the economy itself hangs on an alchemy few can justify without relying on the performative economics of the kayfabe? One could argue the global consultancy market of $400BN is also a joke but the fact that it is established makes it hard for people to stop participating in this specific pretend play.

The fact is that markets have largely become an entertainment business. That’s what streaming information 24/7 does to society. Crypto offers a great product-market fit for this peak performative era. We’re blurring the lines between gaming and reality.

C'est la vie. This is not a normative analysis; me saying this is bad. I am merely pointing out how the financial game evolves. This evolution enabled something that prospectively looks valueless but could become invaluable (and most back again to valueless). 

Following the money in this day and age means following the Lollapalooza flow. If you can play this game - congratulations you have skills to sell at a faster rate than KOLs. But for now, in my book, crypto is mostly an entertainment industry. We are in the business of selling tokens.

I do not believe this is the final form of crypto. I would guess a big bust – a true disillusionment –  is still looming ahead. The crypto dotcom bubble equivalent is yet to happen. Why do I think so? 

1. Most of what we see funded is tech for the sake of the tech

2. Blockchains have not scaled to meet the mainstream demand

3. Very few consumer-oriented use cases

4. Institutional enabling and TradFi adoption will be premature and ultimately act as dumb money 

Despite what you think, we’re not ready or worthy to meaningfully absorb trillions of institutional inflows. That is the last piece of my puzzle. If the flows are enabled and blessed via ETFs we’re allowing the final degen boss to enter the last leg of the macrocycle that began in 2020.

At a high level, the success of crypto depends only on onboarding more money into the game. In the short run, its success could become a self-fulfilling prophecy in which the financial degeneracy sets the very system crypto sought to replace on fire. In the long run…