Author: Eric Wall Source: X, @ercwl Translation: Shan Ouba, Jinse Finance
My thoughts on the crypto market.
Bitcoin seems to be slowly becoming the asset many have long desired. In a world that is increasingly complex in every way, Bitcoin is starting to look simple. It’s simpler than fiat, simpler than other cryptocurrencies, and it’s beginning to have that “it’s a thing that stays the same” quality of gold that I think will keep it relevant. Yes, Bitcoin has flaws, anonymity is terrible, Lightning Network is terrible, security budget is questionable, ETFs may pose risks at the consensus level, all of that is true. But Bitcoin is a household name, people understand what it is, and it’s likely to continue to exist whether you want it to or not. If you follow cryptocurrencies, I’ve always thought that’s to your benefit.
Sorry, no serious allocator wants to treat these assets like startups, wondering “Am I investing in a project that might be replaced, like Napoleon vs. Spotify?”, “What if Ethereum is replaced by Solana?” I still firmly believe that Bitcoin’s staying number one simplifies the narrative of our entire industry, allowing it to move away from the image of pink sheets and speculative casinos. If Bitcoin were to be eliminated and become the shiny new thing, the entire industry would be in chaos. Bitcoin’s dominance allows other assets to flourish on the sidelines because they have a competitive target and status quo challenge. You can create something better, more anonymous, and more free than this trillion-dollar asset. Bitcoin’s death will only bring desolation, and your consensus puzzles and ZKPs will be reduced to libertarian technological gadgets.
Ethereum kind of failed in this cycle. The root cause is the structure of the regulatory environment, which allows retail investors to buy well-crafted projects at the highs, only to watch the price go down in the subsequent declines, because they will never understand low float market cap and only look at unit price. VCs are also unashamed to maximize this dynamic. Disappointed crypto participants therefore make rational decisions to buy useless junk assets throughout the cycle, because at least you can buy a meme with a $1 million market cap. But this dynamic is likely to be distorted by influencers who want to exploit in a similar way, and I am almost certain that these people who play this boring stuff will claim that this has happened.
You might say, but Eric, Ethereum is not the ERC20 asset we speculate on, it’s the decentralized infrastructure and ultrasonic currency we built, but the decentralized infrastructure we built is not that impressive, we still have centralized rollups, fragmentation, poor privacy, OFAC-scrutinized builders, the real magic of Ethereum is “smart young people doing smart computer financial things”, which makes this space highly investable because these young people look like they are building the future, but for anyone interested in these smart young people building the future, there are now smart young people doing generative AI, which sounds smarter and easier to understand and get actual value from, rather than the yield farms of decentralized casinos, which even Vitalik called a self-inflicted disaster. So yes, Ethereum lost this cycle to Solana, which took more of the nihilism of it all and decided to at least do better in terms of technology and community.
That being said, it would be a mistake to conflate Ethereum’s narrative failures this cycle with the conclusion that Ethereum is now useless garbage. Ethereum has come a long way. Stablecoins are my favorite way to use fiat. I use them regularly for most of my fiat transactions, and I feel safe storing large sums of money in protocols like Compound. It’s crazy to imagine that you could do this without banks ten years ago, and the system works well and is secure. Even as a privileged Westerner, I’m enjoying this. Going back to life with traditional banks is unthinkable to me. Prediction markets are also cool, driven by stablecoins.
So, is this the stage we are at now? Looking ahead, I expect AI to continue to be a bigger and bigger “problem” for the crypto market as it competes for the same attention among builders and investors, dragging more cryptocurrencies into AI tokens, and we’ll be fed the “decentralized AI” narrative for many years. These projects will be shit, but they’ll continue to exist because there will always be a real and valid vision to sell, “what if ChatGPT wasn’t so well behaved?” — the market will not be able to realize this vision, decentralized AI will try, but it will fail because doing good AI requires centralization, the most cutting-edge models will always be better, and the best we can do in uncensored AI is to fine-tune open source models to make them less woke. But this can also be solved by Erik Voorhees in Venice, which is not that different than decentralized AI projects.
One of the main reasons is that you can’t mathematically verify “proper work” in decentralized AI networks, so it all becomes redundant, meaningless overfitting, and corrupt human oracles until they start using trusted execution environments (TEEs), which will morph into the question of “is decentralized AI really decentralized?” But this will still be a big hit because the main thing the crypto market can do for AI is to provide AI startups with fast enough exit liquidity before the AI apocalypse comes — and if you think about it, you can’t even be optimistic about AI startups if you think the path to liquidity is slower than the speed at which the world changes beyond recognition. So AI has to marry crypto, but you’ll still buy garbage.
