Author: 菠菜菠菜｜bocaibocai
Recently, the industry has been discussing the FUD around Ethereum intensely. A while ago, Sword Brother@jason_chen998, Teacher Haotian@tmel0211 and Teacher NingNing@ningning hosted a 3-hour Space discussion on "What's Going on with Ethereum?". I participated in the entire discussion and heard many insightful perspectives, from the game between Ethereum and Layer2, to the ideological, organizational, and historical lessons, comprehensively understanding the dilemma Ethereum and the industry are currently facing, and feeling the "deep love and deep concern" everyone has for Ethereum.
During the Space, I had already been brewing some ideas, but I was very hesitant, because I knew my views were clearly different from the majority of Web3 Native views, and I was afraid of being attacked (deeply aware of the gloomy industry atmosphere). So I did not express my opinions throughout the discussion. But afterwards, I still decided to stand up and express my views, trying to provide a new perspective for everyone to observe the challenges facing Ethereum and the entire industry from the perspective of applications, which is a common topic. Although this view may not be mainstream, I believe that only through rational and honest discussion can we drive the industry to develop in a healthier direction.
This article is not FUD against Ethereum and the industry, I don't want to stir up any confrontation, it's just to provide a different perspective for everyone to criticize and think about. If you don't agree with my views, just laugh it off, don't spray, thank you! The article is quite long, so I've summarized it with an AI for those who don't want to read the long text.
Background
Before presenting my views, let me first introduce my current work background. Many of you who follow me should have noticed that my output frequency has decreased a lot in the past period, and I have also rarely expressed my views on the industry.
This is because over the past year, as a founding member of the Singapore FinTech startup Ample FinTech, I have been deeply involved in project collaborations with the central banks of three countries on tokenization and cross-border payments. This experience has also made my mindset and focus no longer limited to the pure Web3 circle, but turned my gaze to the strategic trends of global central banks and traditional financial institutions.
During this period, I started to spend a lot of time studying the research reports and papers on blockchain and tokenization published by traditional forces, understanding the projects they are doing, while also keeping track of industry dynamics on Twitter and exchanging with friends to understand the development trends of the Web3 industry. By focusing on the application development trajectories of both the Web3 circle and the traditional financial system, I have been able to establish a more comprehensive cognitive framework, which has also given me a different perspective on the future of the industry.
A Divided Parallel World
It is this dual perspective of being in two different worlds that has made me increasingly aware of the disconnection between the atmospheres and development paths of the two domains. In the Web3 world, the common complaint is: more and more technical infrastructure is emerging, more and more new concepts and new terminologies are emerging, deliberately creating complexity and raising the threshold of understanding, with the ultimate goal mostly oriented towards Vitalik and exchange startups, and after TGE they almost become "ghost towns", as for whether there is real use value, who really cares?
And the recent focus of discussion has also turned to questioning Vitalik and the Ethereum Foundation. More and more voices are complaining: Vitalik and the Foundation seem to be too obsessed with "technical discourse" and "idealistic pursuit", investing a lot of energy in exploring technical details, but seem to be indifferent to users' actual needs and business exploration. This tendency has caused widespread concern in the industry.
In this Space, Teacher Meng Yan @myanTokenGeek borrowed from the historical experience of Internet development, and pointed out incisively: this kind of development path of detachment from the market and alienation is unsustainable. If Ethereum continues to maintain this "technology-first" development orientation, then the industry's concerns are not unfounded.
However, when we turn our gaze to the world outside the Crypto circle, we find a completely different landscape: the traditional financial forces and governments of various countries are undergoing a significant change in their attitude towards Web3 technology. They not only see blockchain and tokenization as an important upgrade opportunity for the existing payment and financial system, but are also actively exploring the path of transformation. This change is certainly rooted in the recognition of new technologies, but the deeper motivation may be the sense of the impact and threat that Web3 technology poses to the existing order.
And in 2024, a milestone turning point occurred - the Bank for International Settlements (BIS), known as the "central bank of central banks", formally proposed the concept of "Finternet" (Financial Internet).
This move is of far-reaching significance - it positions tokenization and blockchain technology as the next paradigm of the human financial and monetary system, instantly causing a huge stir in the traditional financial world, becoming one of the most closely watched topics.
This is not just the introduction of a new concept, but an important endorsement of blockchain and tokenization technology by the traditional financial community. Its impact quickly spread: financial institutions and central banks around the world are accelerating their pace, embarking on unprecedented active exploration in areas such as tokenization infrastructure, asset digitization, and payment application implementation.
Behind this series of major initiatives, it is not a hasty decision made by the Bank for International Settlements on a whim, but a strategic choice based on years of in-depth research. I have spent a lot of time tracing and studying the decision-making trajectory of the Bank for International Settlements, and found a gradual development trajectory: as early as 2018, the institution began to systematically study Web3 technology, and has since published dozens of highly professional research papers.
In 2019, the Bank for International Settlements took a critical step - establishing the BIS Innovation Center to systematically carry out experimental projects related to blockchain and tokenization. This series of in-depth research and practice has ultimately led them to recognize an important fact: the blockchain technology and tokenization revolution contain the potential to reshape the global financial landscape.
Among the many experimental projects of the Bank for International Settlements, the most iconic one is mBridge - this CBDC cross-border payment bridge was jointly launched in 2019 by its Hong Kong Innovation Center, the central banks of China, Hong Kong, Thailand and the UAE. From the technical architecture, mBridge is essentially an EVM-based permissioned chain, with the central banks of the participating countries as the nodes, supporting the direct settlement of the central bank digital currencies (CBDCs) of each country on the chain.
However, history is always full of dramatic twists and turns. In the current complex geopolitical landscape, especially after the outbreak of the Russia-Ukraine conflict, this project, which was originally intended to improve cross-border payment efficiency, has unexpectedly become an important tool for the BRICS countries to avoid SWIFT international sanctions.
This situation has forced the Bank for International Settlements to withdraw from the mBridge project at this stage. And recently, Russia has even formally launched the BRICS Pay international payment settlement system based on blockchain technology, taking blockchain technology to the forefront of geopolitical competition.
One of the major initiatives of the Bank for International Settlements is the launch of Project Agora, the largest public-private cooperation project in the history of blockchain. This project has an unprecedented participation lineup: the seven major central banks (the Federal Reserve, the Banque de France representing the EU, the Bank of Japan, the Bank of Korea, the Bank of Mexico, the Swiss National Bank, and the Bank of England), as well as more than 40 global financial giants including SWIFT, VISA, MasterCard, and HSBC.
The goal of this large-scale transnational collaboration is surprisingly clear: to utilize blockchain technology and smart contracts to build a unified global ledger system, thereby optimizing the existing financial and monetary system, while maintaining the existing financial order. This initiative itself is a strong signal: the development momentum of blockchain technology is unstoppable, and traditional financial forces have shifted from observation to full embrace, actively promoting its application in real scenarios.
In contrast, the Web3 industry, while constantly shouting the slogan of "Mass Adoption", is actually obsessed with speculating on meme coins and immersed in the short-term attention economy. This stark contrast inevitably makes one ponder: as traditional financial institutions are taking concrete actions to drive the large-scale application of blockchain technology, should the Web3 industry also rethink its development direction?
Mass Adoption: Casino or Application?
In this fragmented development trend, we have to consider a fundamental question: "What is the true meaning of Mass Adoption?" Although this term is frequently mentioned in the discussions of the Web3 industry, it seems that everyone has a significant difference in their understanding of it.
Reviewing the so-called "hit projects" in the Web3 field in recent years, a thought-provoking pattern emerges: those projects that claim to achieve "Mass Adoption" are essentially speculative games disguised as innovations. Whether it's the endless MEME coins, the "P2E" model under the banner of GameFi (such as the once-popular "sneaker" projects), or the SocialFi projects that claim to be social innovations (such as http://Friend.tech), their essence is nothing more than "digital casinos" carefully packaged. Although these projects have attracted a large number of users in the short term, they are not truly solving the actual needs and pain points of users.
If allowing more and more people to participate in speculative trading and driving up coin prices is considered Mass Adoption, then this "Adoption" is merely a zero-sum game of wealth concentration to a few, and its unsustainability is evident.
I have personally witnessed too many cases of friends outside the crypto circle losing everything after entering the crypto world, and only a few lucky ones have actually profited. This phenomenon is also confirmed by recent data: a recent on-chain data analyst's research shows that on the http://pump.fun platform, only 3% of users have earned more than $1,000, and this cold figure reflects that profiting from crypto trading is a game for only a small minority.
Even more worrying is that the entire industry has become a breeding ground for hackers, phishing, and fraud, and we can often see on Twitter that some whales have suffered heavy losses due to Permit phishing. Not to mention ordinary retail investors, according to the latest FBI report, American citizens suffered over $5.6 billion in crypto fraud losses in 2023 alone, and victims aged 60 and above accounted for 50% of the total, with the interests of many ordinary investors unprotected in this "dark forest".
The speculation and increasingly serious hacking activities have led to a deteriorating industry environment, which inevitably makes us ponder: are we pursuing the wrong direction of "Mass Adoption"? In the frenzy of speculation, have we overlooked the truly sustainable value creation?
It needs to be clarified that I am not trying to completely negate the speculative nature of Web3. After all, the vast majority of participants entered this field with the intention of obtaining investment returns, and this profit-seeking motive is understandable, and the speculative nature will continue to exist. However, Web3 should not and cannot just be a global casino. It needs to develop truly sustainable and valuable applications.
Among them, payments and finance are undoubtedly the application areas with the greatest potential for Web3 technology to take root. This point has already reached a consensus from traditional financial forces, national governments, and the market: we have seen traditional financial forces are exploring various innovative applications on a large scale, including payment system innovation, tokenization of real-world assets (RWA), the integration of DeFi and traditional finance, and the emerging concept of PayFi. These positive explorations and practices clearly point to the most urgent needs in the current market.
In my personal view, the core issue for Ethereum or the industry may not be whether the technical direction is correct, but whether we truly understand what valuable applications are. When we are overly focused on technological innovation but neglect market demand, and when we are obsessed with creating concepts but far from real scenarios, is this really the right development direction?
This reflection has triggered a deeper concern: if we continue down this path, will the traditional financial system or the SWIFT network that we once aspired to disrupt, end up becoming the main force driving the large-scale adoption of blockchain? Furthermore, could it be possible that the scenario where the traditional financial forces and government-led permissioned blockchain systems dominate the majority of real-world application scenarios, while the public chains are marginalized as a "speculative playground" for the minority?
While the Web3 industry's attention is still focused on Ethereum "challengers" like Solana, it seems that no one is paying attention to the fact that traditional financial forces have also sounded the bugle to march into this field. Faced with this profound change, the question for Ethereum or the entire industry may not only be the current development strategy, but also how to position and define their value proposition in the upcoming wave of industry compliance. This may be the real challenge the industry is facing.
After observing these trends, I have the following thoughts on the path to true and sustainable Mass Adoption for the industry:
The primary goal is to solve real problems:
Whether in infrastructure or applications, we should be based on real-world needs, focusing on solving genuine pain points, such as the lack of access to financial services for many ordinary people and small and medium-sized enterprises, or the privacy issues faced by enterprises using blockchain, etc. The value of technological innovation must ultimately be manifested through solving real problems.
Secondly, reduce the usage threshold:
The ultimate goal of technology is to serve users, not create barriers. The endless jargon and complex concepts in the current Web3 world have to some extent hindered true mass adoption. We need to make technology more user-friendly, such as using (Based Chain Abstraction) chain abstraction technology to solve user experience issues.
Thirdly, create sustained value:
The healthy development of the industry must be built on sustainable business models, rather than relying too heavily on speculative trading. Only projects that truly create value can survive the market test in the long run, such as Web3 payments, PayFi, and RWA, etc.
The importance of technological innovation is undeniable, but we also need to recognize that applications are the primary productive force. Without real-world applications as a foundation, no matter how much infrastructure or advanced technology, it will ultimately be just castles in the air.
The Inflection Point of Web3 Application Mass Adoption Has Arrived
Throughout history, attempts to integrate blockchain with the real world have never ceased, but they have often failed to truly take root due to factors such as untimely timing, regulatory constraints, or technological bottlenecks. However, the current situation presents unprecedented opportunities: the technological infrastructure is becoming increasingly mature, traditional financial forces are actively embracing innovation and exploring real-world applications, and the regulatory frameworks of countries around the world are also gradually improving. These signs all indicate that the next few years are likely to become a critical turning point for Web3 applications to achieve large-scale adoption.
At this critical juncture, regulatory compliance is both the biggest challenge and the greatest opportunity. Increasingly, signals indicate that the Web3 industry is gradually transitioning from the initial "wild west" era to a "new era of compliance". This transformation not only means a more standardized market environment, but also heralds the beginning of truly sustainable development.
The signals of this transformation are reflected on multiple levels:
1. Regulatory framework is becoming more comprehensive
- Hong Kong has launched a comprehensive regulatory regime for Virtual Asset Service Providers (VASPs)
- The EU's MiCA legislation has been formally implemented
- The US FIT21 bill is expected to pass in the House in 2024
- Japan has revised the Payment Services Act, providing a clear definition for crypto assets
2. Mainstream financial institutions are participating in a more standardized manner
- Large asset management firms like BlackRock have launched BTC and ETH ETFs
- Traditional banks have started providing custody services for crypto companies and issuing tokenized bank deposits
- Mainstream payment companies have launched compliant stablecoins
- Investment banks have established digital asset trading divisions
3. Compliance-driven upgrades of infrastructure
- More exchanges are proactively applying for compliant licenses
- Widespread adoption of KYC/AML solutions
- The rise of compliance-focused stablecoins
- Application of privacy computing technologies in compliance scenarios
- Launch of central bank-level blockchains (CBDC currency bridge mBridge, Singapore's Global Layer 1, BIS Project Agora, etc.)
4. Regulatory pressure on Web3 and compliance transformation of projects
- The largest decentralized stablecoin project MakerDAO has transformed to embrace compliance as Sky
- FBI sting operation on the MeMe project market maker
- DeFi projects are increasingly introducing KYC/AML mechanisms
In this trend, we are seeing:
- More traditional financial institutions entering the Web3 space through acquisitions or partnerships
- Traditional financial powers are constantly gaining more control over BTC's price narrative through BTC ETFs
- A new generation of compliant Web3 applications is rapidly emerging
- The entire industry is gradually establishing order under regulatory pressure, with fewer opportunities for overnight wealth
- The application scenarios of stablecoins are shifting from speculation to substantive uses like international trade
Undoubtedly, the future battleground of blockchain technology will focus on several key areas: payment system innovation, tokenization of physical assets (RWA), the emerging concept of PayFi, and the deep integration of DeFi and traditional finance (CeFi). This reality brings an unavoidable proposition: if the industry is to achieve breakthrough development at the level of real-world applications, it must face the interaction with regulatory authorities and traditional financial institutions. This is not a choice, but an inevitable path of development.
The reality is that regulation has always been at the top of the industry ecosystem. This is not only an objective fact, but also an iron law repeatedly verified in the development history of the crypto industry over the past decade. Every major industry turning point has been closely related to regulatory policies.
Therefore, we need to seriously consider several fundamental questions: Do we choose to embrace regulation and seek a symbiotic path with the existing financial system, or do we cling to the "decentralization" ideology and continue to linger in the regulatory gray area? Do we pursue a purely "casino-like" Mass Adoption, repeating the speculative-driven path of the past decade, or do we strive to create real, sustainable value and truly realize the innovative potential of blockchain technology?
Currently, the Ethereum ecosystem is facing a significant structural imbalance: on the one hand, there is a continuous accumulation of infrastructure and an endless stream of technological innovations, while on the other hand, the application ecosystem development is relatively lagging. In the face of this contrast, Ethereum is facing a dual challenge: it not only has to deal with the strong offensive of emerging public chains like Solana in terms of performance and user experience, but also needs to be wary of the encroachment of compliant public permissioned chains led by traditional financial powers in the actual application market.
Even more troublesome is that Ethereum also has to face competitive pressure from two directions: on one side, public chains like Solana are capturing an increasing market share and user attention in the meme market thanks to their performance advantages; on the other side, public permissioned chains led by traditional financial institutions are gradually deploying in payment, asset tokenization and other real-world application scenarios, and may potentially occupy the first-mover advantage in these key areas in the future.
How to seek a breakthrough in the face of this dual squeeze, maintaining technological innovation while not losing market competitiveness, are the key challenges that Ethereum must directly confront in its quest for a breakthrough.
The above views only represent my personal perspective, hoping to spark more constructive thinking and discussion within the industry. As industry participants, we should all contribute to pushing Web3 towards a healthier and more valuable direction.
Due to the limitations of my own understanding, I welcome friendly discussions from everyone to jointly explore the future development direction of the industry. Additionally, I also trade crypto and want to make money. On-chain meme players and decentralization devotees, please don't flame me. My viewpoint is simply that the industry should not only have speculation and trading, but also some positive elements.
