Original text: 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 ouster of Gary Gensler and skeptics. Cryptocurrencies have now become a recognized industry, and Bitcoin may even be seen 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 a slowdown in innovation, prices may still rise.
However, the slowdown in innovation is not the root problem, but a symptom. The real problem lies in the diminishing ambition and the increasingly strong risk-averse mentality. At one time, cryptocurrencies were driven by radical ideas aimed at changing the world. But now, the entire industry seems to be content with pursuing regulatory approval and institutional adoption.
This is also supported by Vitalik Buterin in his 2023 blog post "Bringing Back the Cypherpunk Spirit to Ethereum": "We are not just creating isolated tools and games, but building a more free and open society and economy, where different parts of technology, society, and economics can intertwine."
Think about it: what is the innovation of the current cycle? AI x Crypto is one of them. But AI is an external innovation, without it, this cycle might have been different, perhaps continuing to focus on Meme coins.
The sole true goal of Meme coins is to get rich quickly, not to change the world. After becoming wealthy, the problems of the outside world seem to no longer trouble the participants. Notably, the proclamations of "[project name] is the most egalitarian thing we've seen. It's ambitious, and if successful, could truly reshape the social structure." are no longer as frequent.
In comparison, the previous cycle witnessed numerous radical innovations:
• Decentralized Finance (DeFi)
• Non-Fungible Tokens (NFTs)
• DeFi yield farms
• P2E games (such as Axie Infinity)
• Metaverse
The 2020-2021 cycle was also the peak of token economics innovation, with concepts such as Ampleforth's Rebasing Tokens, veTokenomics, (3,3) models, liquidity mining, and using SNX as collateral for sUSD, as well as various algorithmic stablecoins.
However, current crypto projects and their underlying venture capital firms tend to adopt 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, when many projects tried to decentralize everything, but most failed due to being too radical, with only a few surviving, and having to lower their vision.
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 Stagnation", point out that transformative progress often comes from small groups with a unified vision, who typically have ample financial support but lack strict accountability. They believe that although financial bubbles are often seen as a negative phenomenon, history shows that many important breakthroughs have been driven by bubbles.
While the days of low accountability are not yet over, regulation has brought more risk aversion, and this cycle may be the last big bubble opportunity to produce substantive innovation. The AI x Crypto bubble could at least produce one or two killer applications.
The Most Ambitious Crypto Projects Currently
Nevertheless, there are still many ambitious cryptocurrency projects today, including:
• Ethena: Integrating DeFi, CeFi, and Traditional Finance (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: Source of truth in a world of fake news
• Bio protocol (DeSci): Revolutionizing science by changing incentive mechanisms
• Bitcoin: Revolutionary money, digital gold
Among them, projects like WorldCoin's eye-scanning Orb and Liquity v2 and $BOLD stablecoin, although appearing radical, are the risks that ambitious protocols are willing to take. These projects showcase the most egalitarian ideas, are ambitious, and if successful, could potentially reshape the social structure.
The Dilemma of Ethereum
Ethereum is conspicuously 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 platforms.
The upcoming forks (upgrades) will be 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 handed over both transaction execution and ambition to the Layer 2 networks. The future development direction of Ethereum remains unclear.
In comparison, Solana's attitude is more radical, 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 will 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 are still one of the fastest growing and most innovative industries globally, perhaps second only to AI.
Nevertheless, the industry's pace of innovation and ambition has clearly been declining. Part of the reason is the maturity of the aforementioned industries, but a deeper reason is that the limitations of many technologies seem to have been accepted and not sufficiently challenged. For example:
- It seems acceptable that DeFi and DAOs are no longer fully decentralized. Rather than making DeFi decentralized, it is better to redefine it as on-chain finance, and the problem is solved.
- It seems acceptable that Ethereum cannot scale on Layer 1, and the token economics lack innovation.
- In the current market, the low market cap of $LQTY compared to $ENA indicates that there is no longer a real need for decentralized stablecoins, and high yields are better.
Perhaps the passage of each cycle is slowly eroding the ambition to push the boundaries, and the result is a crypto industry that is becoming more mundane. In short, if token prices continue to rise, why take the risk?
