Author: Ignas
Compiled by: Yuliya, PANews
On the surface, cryptocurrencies seem to be thriving: after years of exclusion, spot ETFs have finally launched, with BTC and ETH ETFs setting new records for inflows. Trump's victory has brought cryptocurrencies closer to the American mainstream, and crypto lobbying groups have successfully pushed for the ousting of Gary Gensler and skeptics. Cryptocurrencies are now an accepted industry, and Bitcoin may even be viewed as a national reserve asset by some countries.
While the price outlook for cryptocurrencies is positive, most of the upside is driven by external macroeconomic factors. However, the internal innovation engine of the cryptocurrency industry is gradually slowing down. As the industry matures, innovation naturally slows, but even with slower innovation, prices can still rise.
However, the slowdown in innovation is not the root problem, but a symptom. The real issue is the waning of ambition and the growing risk-averse mentality. Cryptocurrencies were once driven by radical ideas aimed at changing the world. But now, the entire industry seems content to pursue regulatory approval and institutional adoption.
This is supported by Vitalik Buterin in his 2023 blog post "Reclaiming the Cypherpunk Spirit of Ethereum": "We are not just creating isolated tools and games, but building a more free and open society and economy, where technology, society, and economics can all intertwine."
Think about it: what is the innovation in the current cycle? AI x Crypto is one of them. But AI is an external innovation, and without it, this cycle might have been different, perhaps continuing to focus on MEME tokens.
MEME tokens have the sole true goal of getting rich quickly, not changing the world. After achieving wealth, the problems of the outside world seem to no longer trouble their participants. Notably, the declarations of "[project name] is the most egalitarian thing we've ever seen. It's ambitious, and if successful, could truly reshape the social structure" are no longer as frequent.
In comparison, the previous cycle witnessed multiple radical innovations:
• Decentralized Finance (DeFi)
• Non-Fungible Tokens (NFTs)
• DeFi yield farms
• P2E games (like Axie Infinity)
• Metaverse
The 2020-2021 cycle was also the peak of token economics innovation, with concepts like Ampleforth's Rebasing Tokens, veTokenomics, (3,3) models, liquidity mining, and SNX as collateral for sUSD, as well as various algorithmic stablecoins.
However, current crypto projects and their underlying venture capital firms tend to favor verified, simple economic models to reduce risk, as they usually only have one Token Generation Event (TGE) opportunity. $EIGEN's Intersubjective Token is a rare innovative exception.
In comparison, the 2017 ICO craze was considered the peak of ambition in the crypto industry, with many projects attempting to decentralize everything, but most failed due to being too radical, and only a few survived, having to scale down their visions.
These crazy ideas would now struggle to secure funding in the more risk-averse cryptocurrency industry today. However, these radical concepts once attracted a group of people dreaming of changing the world.
B. Hobart and T. Huber, in their book "Prosperity: The End of Bubbles and Busts", point out that transformative progress often comes from small groups with a unified vision, who typically have ample financial backing but lack strict accountability. They argue that while financial bubbles are often seen as negative, history shows that many important breakthroughs have been driven by bubbles.
While the days of low accountability are not over, regulation has brought more risk aversion, and this cycle may be the last big bubble opportunity to generate substantive innovation. The AI x Crypto bubble could at least produce one or two killer applications.
The Most Ambitious Cryptocurrency Projects Today
Nevertheless, there are still many ambitious cryptocurrency projects today, including:
• Ethena: Integrating DeFi, CeFi, and TradFi
• Chainlink: Bridging blockchains to the real-world data for tamper-proof smart contracts
• Pudgy Penguins: Leading Web3 IP brand, expanding to Web2
• WorldCoin: Onboarding everyone to the chain, potentially enabling AI-funded UBI
• Liquity/RAI: The last decentralized stablecoins
• Arweave/Filecoin: Permanent storage and censorship resistance
• Farcaster/Lens: Reimagining social media
• Polymarket: A source of truth in a world of misinformation
• Bio protocol (DeSci): Revolutionizing science by changing incentive structures
• Bitcoin: The revolutionary currency, digital gold
Among these, projects like WorldCoin's eye-scanning Orb and Liquity v2 and $BOLD stablecoin, though radical, are the risks that ambitious protocols are willing to take. These projects showcase the most egalitarian ideas, are ambitious, and could potentially reshape the social structure if successful.
The Dilemma of Ethereum
Ethereum seems absent from this list of innovative projects. Perhaps the assessment of Ethereum is a bit harsh, but Vitalik's vision of a "Cypherpunk Ethereum" is hardly felt on social media platforms.
The upcoming forks (upgrades) are just minor changes for the average user, as Ethereum has abandoned sharding and mainchain scaling, and will at most slightly increase the gas limit of blocks in the near future.
It appears that Ethereum has delegated transaction execution and ambition to Layer 2 networks (L2s). The future development direction of Ethereum remains unclear.
In contrast, Solana has taken a more radical approach, choosing to continue pushing the "monolithic blockchain" model, refusing to compromise.
However, Ethereum's upcoming network scaling solutions may prove that its modular path is the right one. Hopefully, Ethereum will regain its greatness, and we'll see the emergence of radical new ideas.
Humanity Needs Boundaries
The world, especially the West, seems to be in a state of stagnation. From stagnant wages, repetitive music, the no longer novel new iPhones, to the constant remakes of movies, people seem to be afraid of innovation, as new content often means greater risk. In some ways, we are actually regressing. For example, due to the grounding of Concorde, the flight time from London to New York is now longer than in the 1970s.
However, cryptocurrencies remain one of the fastest-growing and most innovative industries globally, perhaps second only to AI.
Nevertheless, the industry's pace of innovation and ambition are clearly waning. Part of the reason is the maturity of the industry, but a deeper reason is that the limitations of many technologies seem to have been accepted and not challenged enough. For example:
It seems acceptable that DeFi and DAOs are no longer fully decentralized. Rather than making DeFi decentralized, it's easier to redefine it as on-chain finance, and the problem is solved.
It seems acceptable that Ethereum cannot scale at Layer 1, and that token economics lacks innovation.
In the current market, the low market cap of $LQTY compared to $ENA suggests that decentralized stablecoins are no longer truly needed, and higher yields are better.
Perhaps, the passage of each cycle is slowly eroding the ambition that drives the frontier, and the result is a crypto industry that is becoming more mundane. In any case, if token prices continue to rise, why take the risk?
