This article is from: Zeus
Compiled by | Odaily Planet Daily (@OdailyChina); Translator | Azuma (@azuma_eth)
In the previous article, I discussed how the cryptocurrency industry has gradually deviated from its original vision - overly focusing on infrastructure innovation while neglecting the basic monetary attributes needed to achieve financial sovereignty. This deviation has led to a disconnect between the delivered technological achievements and sustainable value creation.
However, what I have not yet delved into is which applications the industry fundamentally misjudged as worthy of building, and how this misjudgment is the core of the current dilemma in the crypto realm, also hinting at the direction where true value might emerge.
Application Layer Illusion
The narrative of the cryptocurrency industry has gone through multiple stages, but has always been underpinned by a vision of creating revolutionary applications beyond finance. Smart contract platforms boast themselves as the infrastructure of a new digital economy, envisioning that value would flow back from the application layer to the underlying protocol. This narrative was accelerated by the spread of the "fat protocol theory" - which argues that unlike the internet era where TCP/IP protocols had minimal value while Facebook and Google billions, value blockchain protocols would accumulate the vast majority of value.
This formed a specific mindset: Layer 1 public chains would increase in value by cultivating diverse diverse application ecosystems, similar to how Apple's App Store or Microsoft Windows create value through third-party software. However, the fundamental misunderstanding is that - strong the cryptocurrency industry attempts attempt to impose financialization on scenarios that are neither suitable nor capable of creating real value.
But reality is entirely different:
Token-based social applications generally fail to achieve mainstream adoption, with user participation primarily driven by token incentives rather than product value;
Game applications continuously face resistance from traditional gaming communities, with players believing financial mechanisms harm rather than enhance gaming experience;
Identity and reputation systems involving token economics have never demonstrated significant advantages over traditional solutions.
These issues cannot be explained away simply by "we are still early". They reveal a logic - the essence of finance is a resource allocation tool, not an ultimate goal. Financializing social interactions or entertainment activities fundamentally misunderstands finance's core function in society.
<>Essential Difference from Game Item Marketsmarkets like CS:GO skinsns or in-game item purchase systems in popular games might seem to refute the previous point, but they actually yet they difference exists.These markets are essentially optional decorative or collectible trading ecosystems on the game's periphery, not financial a financial transformation of core gameplay. They are closer to peripheral merchandise or memorabilia markets and do not change the game's basic operational logic.
When crypto games attempt to financialize core gameplay mechanisms - making playing games directly equivalent to earning money - they completely alter the player experience and often destroy the most fundamental fun of the game. The most critical issue is not whether a market can be built around games, but that transforming game behavior into financial activity would distort its essence.
The Essential Differenceference Between Blockchain Technology and "Trustlessness"
A core concept often confused in cryptocurrency discussions is the difference between blockchain technology and trustless attributes - they are by no means synonymous.
Blockchain technology: A set of technical tools for creating distributed, irreversible consensus ledgers;
Trustless attributes: Specifically referring to the ability to execute transactions without relying on third-party intermediaries.
Achieving trustlessness comes with clear costs - including efficiency losses, system complexity, and resource consumption. These costs must receive reasonable compensation, which only exists in specific domains.
Taking Dubai's use of distributed ledger technology for property registration as an example: They primarily leverage the technology's efficiency and transparency advantages, not trustlessness. The land management bureau remains the authoritative center, with blockchain serving merely as a more efficient database. This distinction is crucial as it reveals the true value of such systems.
conclusion Trusthas practical value in few domains.Cost-Benefit Analysis
Will the platform truly benefit from trustlessness?
Will these benefits outweigh the cost of achieving trustlessness?
This explains why institutional blockchain technology adoption mainly focuses on efficiency improvements rather than trustlessness. When When traditional financial institutions tokenize assets on Ethereum (a growing trend), trend), leverage the network's operational market entry while maintaining traditional trust models. Blockchain here serves as improved infrastructure, not a trust replacement mechanism.
From an investment perspective, this creates a contradiction. The most valuable part of blockchain (blockchain can be widely adopted yet may not necessarily create value for specific public chains or tokens. Traditional institutions can build private chains or use public chains as infrastructure while firmly controlling the most core value layer - asset issuance rights and monetary policy.
Adaptive EvolutionAs this reality becomes increasingly clear, we are witnessing a natural adaptation process:
Technology adoption skadoptionoidance of Traditional institutions only adopt blockchain technology, speculative token systems, using it as upgrade "pipeline" for financial activities;
Efficiency prioritized over revolution: Focus shifts from disrudisrupting toual improvement;
<>migration: Value primarily flowsrates to specific applications with clear utility, not not infrastructure tokens;Narrative evolution: Industry readjusts value the narrative of value value creation to match technological progress.
This is actually a good development thing. Why should enablers extract all value from value value creators? If according to the "fat protocol theory" prediction, if main value were captured by TCP/IP rather than its applications, the internet's landscape would be very (almost certainly worse). The industry has not failed failed - it is facing reality. The technology itself is valuable and may continue to evolve and integrate with existing but value distribution within the ecosystem might beically what early narratives implied.
Root of Error: Forgotten Original Intention
To understand how we arrived here, we must return to the origins of cryptocurrency. Bitcoin did not initially emerge as a universal computing platform or the basis for tokenizing everything; its mission was very clear - a response to the 2008 financial crisis and the failure of centralized monetary policy.
Bitcoin's core concept was never "everything can be on-chain", but "money should not depend on trusted intermediaries".
As the industry developed, this original mission gradually faded and was ultimately abandoned by most projects. Projects like Ethereum expanded blockchain's technical capabilities but simultaneously blurred its core positioning.This led to a bizarre split in the ecosystem.
Bitcoin remains focused on monetary positioning but lacks programmability and cannot implement functions beyond basic transfers;
Smart contract platforms provide programmability but have abandoned monetary innovation, turning towards the "everything on-chain" route;
This division might be the most severe routing error in the cryptocurrency industry. The industry did not build more complex functions on Bitcoin's monetary innovation, but instead turned to financializing everything - a misguided approach that both misdiagnosed the problem and chose the wrong solution.
Future Path: Return to Monetary Essence
In my view, the industry's forward direction is to reconnect the significantly enhanced technical capabilities of blockchain with its original monetary mission. Not as a universal solution for all problems, but focused on creating better money.
Reasons why money is especially suitable for blockchain include:
Trustlessness is crucial - unlike most applications requiring external force, money can operate entirely in the digital realm, executable by code alone;
Native digital attributes - money need not map digital records to physical reality, but can exist natively in digital environments;
Clear value proposition - removing intermediaries from monetary systems can truly enhance efficiency and autonomy;
Natural connection with existing financial applications - the most successful crypto applications (trading, lending, etc.) naturally connect to monetary innovation;
Most critically, money is fundamentally an infrastructure layer requiring no deep interaction. This is precisely where cryptocurrency got things backwards - the industry did not create money that could seamlessly integrate with existing economic activities, but instead tried to rebuild all economic activities around blockchain.
The power of traditional currency lies in this "tool layer" characteristic. Businesses accept dollars without understanding the Federal Reserve, exporters manage exchange rate risks without reconstructing their entire business, individuals store value without becoming monetary theorists. Money facilitates economic activity without dominating it.
On-chain money should be the same - providing a simple interface for off-chain enterprises to use, like using digital dollars without understanding the banking system. Enterprises, institutions, and individuals can remain entirely off-chain, using blockchain money only for specific advantages, just as users currently use traditional banking systems without being part of them.
Rather than building the vague "Web3" concept attempting to financialize everything, the industry should focus on creating a better monetary system - not just a speculative asset or inflation hedge, but a complete monetary mechanism adaptable to different market conditions.
Global monetary landscape changes further highlight the urgency of this direction. The inherent fragility of the current system and geopolitical tensions have created a real demand for neutral alternatives.
The current ecosystem's tragedy is not just misallocation of resources, but missed opportunities. Incremental improvements in financial infrastructure are valuable, but pale in comparison to the transformative potential of solving fundamental monetary issues.
The next stage of cryptocurrency evolution might not lie in continuing to expand boundaries, but in returning to and fulfilling its initial mission - not a universal solution, but a reliable basic monetary infrastructure that allows other constructions without delving into its operational principles.
This is the profound innovation cryptocurrency originally promised - not financializing everything, but creating a currency worthy of being the invisible global economic infrastructure. A currency that can operate seamlessly across borders and institutions while maintaining sovereignty and stability. A foundational infrastructure that empowers rather than dominates, serves rather than restricts, and does not interfere with the human activities that give it meaning during its evolution.
