Author: Boscai Boscai
Recently, the industry has been in an uproar about the FUD surrounding Ethereum. A few days ago, a 3-hour Space discussion was initiated on Twitter about "What's going on with Ethereum?". Boscai participated in the entire discussion and heard many insightful perspectives, from the game between Ethereum and Layer2, to the perspectives of ideology, organizational structure, and historical lessons, comprehensively learning about the current dilemma faced by Ethereum and the industry, and feeling the "deep love and deep responsibility" towards Ethereum.
During the Space, I had already brewed some ideas in my mind, but I was very hesitant, because I knew that 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 views throughout the process. But afterwards, I still decided to stand up and express my own views, trying to provide a new perspective for everyone to observe the challenges currently faced by 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 promote the industry to develop in a healthier direction.
The article is quite long, and Boscai has summarized an AI summary for friends who don't want to read the long article.
Background
Before stating my views, let me first introduce my current work background. Many of you who follow Boscai should have noticed that my output frequency has decreased a lot in the past, and I have 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 attention 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 began 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 maintaining a Twitter focus on industry dynamics and exchanging with friends to understand the development trends of the Web3 industry. By simultaneously focusing on the application development trajectories of the Web3 circle and the traditional financial system, I was able to establish a more comprehensive cognitive framework, which also gave me a different perspective on the future of the industry.
A Parallel World of Disconnection
It is this dual perspective of being in two different worlds that makes 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 of being oriented towards Vitalik and exchange startups, and after TGE, it almost becomes a "ghost town", and who really cares about whether there is real use value?
Recently, the focus of discussion has also shifted 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 showing little interest in users' actual needs and business exploration. This tendency has caused widespread concern in the industry.
In this Space, Professor Meng Yan @myanTokenGeek drew on the historical experience of Internet development, and pointed out incisively: this development path of "detachment from C and alienation from the market" 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 vision to the outside of 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 brings to the existing pattern.
And in 2024, a milestone turning point appeared - 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 concerned 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 influence has quickly spread: major financial institutions and central banks around the world are accelerating their pace, embarking on unprecedented active exploration in the construction of tokenization infrastructure, digital asset tokenization, 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. Boscai 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 successively 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 made them realize an important fact: the blockchain technology and tokenization revolution contain the huge 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 BIS Innovation Center in Hong Kong, the People's Bank of China, the Hong Kong Monetary Authority, the Bank of Thailand, and the Central Bank of the United Arab Emirates. From the technical architecture, mBridge is essentially an EVM-based permissioned blockchain, with the central banks of the participating countries as the nodes, supporting the direct settlement of the central bank digital currencies (CBDCs) of various countries on the chain.
However, history is always full of dramatic twists and turns. Under 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. Recently, Russia has even formally launched the BRICS Pay international payment settlement system based on blockchain technology, pushing blockchain technology to the forefront of geopolitical games.
Another major initiative of the Bank for International Settlements is to launch the largest public-private cooperation project in blockchain history - Project Agora. 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.
Such large-scale international cooperation has an outstandingly clear goal: to use blockchain technology and smart contracts to build a globally unified ledger system, in order to optimize 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 already shifted from observation to full embrace, and are actively promoting its application in real scenarios.
In contrast, the Web3 industry, while constantly shouting the slogan of "Mass Adoption", is actually obsessed with hyping 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 promote 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 frequently appears in the discussions of the Web3 industry, it seems that everyone has significantly different understandings of it.
Reviewing the so-called "hit projects" in the Web3 field in recent years, a thought-provoking pattern emerges: the projects that claim to achieve "Mass Adoption" are essentially speculative games disguised as innovations. Whether it's the endless MEME coins, the "P2E" model (such as the popular sneaker projects) under the banner of GameFi, or the SocialFi (such as http://Friend.tech) that claims to be social innovation, upon closer examination, they are all carefully packaged "digital casinos". 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 for a minority, 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 can truly profit. 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 profited more than $1,000, and this cold figure reflects that profiting from coin speculation is a game for a tiny 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, in 2023 alone, American citizens suffered more than $5.6 billion in cryptocurrency fraud, and victims over 60 years old actually accounted for 50% of the total, and the interests of many ordinary investors cannot be guaranteed in this "dark forest".
The deteriorating industry environment caused by speculation and increasingly serious hacking behavior inevitably makes us ponder: are we pursuing the wrong direction of "Mass Adoption"? In the frenetic speculative atmosphere, 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 stop at being a global gambling casino. It needs to develop truly sustainable and valuable application scenarios.
Among them, payments and finance are undoubtedly the application areas with the greatest potential for Web3 technology to land. This point has already reached a consensus from traditional financial forces, national governments, and the market level: 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 PayFi concept. These positive explorations and practices clearly point to the most urgent needs in the current market.
In my personal opinion, the core problem 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 are far from real scenarios, is this development direction really correct?
This reflection has triggered a deeper concern: if we continue to develop in this way, will the traditional financial system or the SWIFT network that we once aspired to disrupt become the main force driving the large-scale adoption of blockchain? Furthermore, will there be a situation where traditional financial forces and government-led permissioned blockchain systems dominate the vast majority of actual application scenarios, while public chains may be marginalized as a "speculative playground" for a niche?
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 huge change, for Ethereum or the entire industry, the question we need to think about may not only be the current development strategy, but also how to position ourselves and our value proposition in the wave of industry compliance in the future. This may be the real challenge facing the industry.
After observing these trends, I have the following thoughts on the path to truly healthy and sustainable Mass Adoption for the industry:
The primary task is to solve real problems: whether it's infrastructure or applications, we should be based on real needs, focusing on solving genuine pain points, such as the fact that many ordinary people and SMEs around the world still have difficulty accessing financial services; or the privacy issues faced by enterprises using blockchain, etc. The value of technological innovation must ultimately be reflected in solving real problems.
Secondly, we need to lower the usage threshold: the ultimate goal of technology is to serve users, not create barriers. The proliferation of jargon and complex concepts in the current Web3 world has to some extent hindered true popularization. We need to make technology more user-friendly, such as using (Based Chain Abstraction) chain abstraction technology to solve user experience issues.
Thirdly, we need to create sustained value: the healthy development of the industry must be based 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
Looking back on history, the attempts to integrate blockchain with the real world have never stopped, but they have often failed to truly land due to factors such as untimely timing, regulatory constraints, or technological bottlenecks. However, the current situation is showing unprecedented turning points: the technical 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 move towards large-scale adoption.
At this important juncture, regulatory compliance is both the biggest challenge and the most promising opportunity. Increasing 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 regulated market environment, but also heralds the beginning of truly sustainable development.
This transformation is manifested at multiple levels:
Hong Kong has introduced a comprehensive regulatory system 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 to provide a clear definition of crypto assets
2. Regulated participation of traditional financial institutions
Large asset management firms like BlackRock have launched Bitcoin and Ethereum ETFs
Traditional banks have started providing custody services for crypto companies and issuing tokenized bank deposits
Mainstream payment companies have launched compliant stablecoins
These signals all indicate that the Web3 industry is entering a new era of compliance, which not only means a more regulated market environment, but also heralds the beginning of truly sustainable development. This transition is a challenge, but also a great opportunity for the industry to achieve long-term healthy growth.
Investment banks set up digital asset trading departments
3. Compliance upgrade of infrastructure
More exchanges actively apply for compliance licenses
Widespread application of KYC/AML solutions
The rise of compliant stablecoins
Application of privacy computing technology in compliance scenarios
Launch of central bank-level blockchains (CBDC currency bridge mBridge, Singapore Global Layer 1, Bank for International Settlements Project Agora, etc.)
4. Regulatory pressure on Web3 and project compliance transformation
The largest decentralized stablecoin project MakerDAO transforms to embrace compliance
FBI sting operation on MEME project market makers
DeFi projects are increasingly introducing KYC/AML mechanisms
In this trend, we are seeing:
More traditional financial institutions entering the Web3 field through acquisitions or partnerships
Traditional financial forces constantly gaining control over the pricing discourse of BTC through BTC ETFs
A new generation of compliant Web3 applications are emerging rapidly
The entire industry is gradually establishing order under regulatory pressure, and the opportunities for overnight wealth will continue to diminish
The application scenarios of stablecoins are shifting from speculation to substantive uses such as international trade
Undoubtedly, the main battlefield for the future 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 a breakthrough in 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 is always 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 is 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?
At present, 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 development of the application ecosystem is relatively lagging. Against this contrast, Ethereum is facing a dual challenge: it not only has to deal with the strong offensive of new 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 forces in the actual application market.
Even more troublesome is that Ethereum has to face competition pressure from two directions at the same time: on one side, public chains like Solana are seizing an increasing market share and user attention in the meme market with their performance advantages; on the other side, public permissioned chains led by traditional financial institutions are gradually deploying in actual application scenarios such as payments and asset tokenization, and may occupy the first-mover advantage in these key areas in the future.
How to seek a breakthrough in the face of this double squeeze, maintain technological innovation while not losing market competitiveness, these are the key challenges that Ethereum must directly face in its quest for a breakthrough.
The above views only represent my personal perspective, hoping to inspire 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 personal knowledge, I welcome everyone to engage in friendly discussions and jointly explore the future development direction of the industry.
