Crypto Assets Industry: Choosing Between Innovation and Tradition

In the past year, the Crypto Assets industry has engaged in two-way interactions with traditional finance, tech giants, and political figures. A token launched by a political figure marks the end of crypto liquidity, but the cooperation between the two sides is just beginning.

Events such as the Pakistani advisor, the Bhutan mining site, and the large-scale financing in the Middle East ultimately became the last straw that broke the camel's back for retail investors. In this situation, it might be better to go to the wishing pool and act like a turtle, perhaps gaining some comfort.

Crypto Assets industry at a standstill

Humans seem to always repeat the mistakes of history. When a certain Crypto Assets spot ETF is approved, many believe it will change the world. However, the prevailing view now is that it is merely a mapping asset of the fiat currency supply, unable to resist inflation and preserve value, and cannot drive a bull market after being withdrawn by the ETF.

After a political figure launched a token, the market briefly surged and then returned to calm. The self-rescue actions of several crypto projects, new moves from a certain platform's wallet, and speculations about the identity of a project's founder turned into an unprofitable farce.

In the current landscape of Crypto Assets, innovation seems to be at a standstill. Ethereum, once hailed as a "civilizational-level innovation," cannot withstand the significant price drop and has to rely on new technology to regroup. If even the EVM can be revamped, why not change the consensus mechanism as well? Can Ethereum's bet on the underlying chain and new technology really save itself?

The practice of betting on the underlying chain both before and after the collapse of a public chain on the exchange is debatable. Essentially, the layer two networks or expansion layers within its ecosystem are extracting value from the public chain, rather than the public chain actively cultivating the ecosystem.

The market model we are familiar with no longer exists. Stablecoins are the true currency.

Invalid information is eroding the entire market. KOL hype will quickly evolve into institutional speculation, followed by exchange dominance. Just look at the recent popularity of a certain music festival, and you'll see that project teams, opinion leaders, and exchanges are ultimately all transaction-oriented. The exchange itself is the focal point of trading activities, and this is an inescapable situation.

This is not a criticism of opinion leaders, but rather an acknowledgment of market rules. From the early community live broadcasts and community platforms to the later battles of self-media, the peak of opinion leaders often also marks the end. Shifting to trading means the exhaustion of trust and influence.

However, this cycle has also seen a new trend of differentiation. Although they are all invalid information, they can roughly be divided into two categories: one is the garbage calls in the low-end market; the other is the promotional platforms of established capital.

Investment institutions are also facing the test of bankruptcy and perseverance. Relying on dollar capital, venture capital firms around the world are planning for the next stage. Meanwhile, some investment institutions that are fighting alone, under the dual pressure of limited partners and return rates, have become irrelevant to innovation and are rapidly transforming into market makers. Since everything will ultimately lead to trading, it is better to take matters into their own hands.

Real innovation has occurred in certain technology parks and may emerge in other emerging areas in the future. Entrepreneurs need to seek funding in Silicon Valley and Wall Street, but projects that can truly meet the next phase of market demand may not be recognized by existing investment frameworks.

The crypto assets market does not require financial analysis, and it is also difficult to short network hotspots. The reason is simple: the trading paths are too short, and exchanges are eager to capture any traffic, preferring to waste resources rather than miss out on opportunities. The only beneficiaries have become former employees who escaped from internet giants to exchanges, as they found a new stage for development.

In 2018, the average tenure at a leading internet company was only 4 months, but by 2024 it has increased to 7-8 months. However, more people still need to be sent into society, and large companies in the Crypto Assets industry only pay attention to top exchanges.

Today's perspective: The beneficiaries of venture capital are graduates from prestigious universities, while the beneficiaries of exchanges are the eliminated personnel from large companies. What they bring is not only professional knowledge and impressive resumes but also deeper operational standards and decreased capital efficiency due to increased intermediary costs.

The vibrant era of the Crypto Assets industry, where everything flourished and everyone was solely focused on making money, is long gone.

The ongoing institutionalization has become a shackle for the industry; Crypto Assets are more like the internet, and the internet is more like traditional industries.

Innovation Comes from Demand

I am not singing the blues for Crypto Assets; a more accurate mindset is "confident in the industry, worried about my own prospects." This is no longer a niche field filled with opportunities for instant wealth; practitioners are being massively replaced by the internet and the financial industry. Industry veterans either end up in prison, are relegated to a lower status, or work as subordinates for big shots after getting out.

Complaining too much can easily lead to discouragement. We should not continue discussing venture capital and exchanges; we should either start over like Ethereum or explore new ecosystems. In every crisis in the Crypto Assets industry, new asset issuance methods emerge, such as ERC-20 supporting decentralized finance and NFTs supporting a well-known project. Now we have entered the stablecoin stage.

It is worth noting that the core of the previous round of on-chain activities was Ethereum and lending, amplifying capital efficiency through a "modular" combination. However, this round's Ethereum and staking model did not replicate this miracle. On our timeline, a certain giant did not invent a groundbreaking product; instead, a certain emerging company has risen.

Yield-bearing stablecoins ( YBS ) have become a new invention, creating new demand. This is not because the market demand for stablecoins cannot be met, as some leading stablecoins are operating well, but because the YBS model is feasible. The emergence of new projects is an example.

YBS may become a new form of asset issuance, which is an expectation. Drawing on psychohistory, I have three predictions for the future:

1. YBS has become a new asset issuance method, and the Ethereum technology upgrade has been successful. ETH has replaced BTC as the new industry engine, and staking ETH has become real currency;

2. YBS has become a new asset issuance method, while Ethereum gradually falls silent. YBS will be consumed by dollar assets such as government bonds, fintech 2.0 becomes a reality, and Web 3.0 becomes a castle in the air;

3. YBS failed to become a new asset issuance method, and Ethereum quietly faded away. So will blockchain "store chain without coins"? Financial technology 1.0 is Alipay as a substitute for banks, and a certain payment company represents the electronic innovation of acquiring. Thus, a coinless blockchain is at most financial technology 1.5.

Overall, FinTech 2.0 is financial blockchain, while FinTech 1.5 is non-coin blockchain technology.

Stablecoins are becoming a new asset issuance model, something that no venture capital research report has predicted, not even the emerging projects themselves. If we believe that the market itself is the optimal solution, the biggest problem with venture capital and exchanges is not being obsessed with technology narratives, but rather disrespecting market laws.

In the current landscape, exchanges, stablecoins, and public chains essentially form a tripod. A leading exchange, a leading stablecoin, and Ethereum make up the main cast, while others serve as suppliers and distribution channels around these three. Exchanges and public chains are relatively stable, and the competition is now focused on the stablecoin sector. Not only are certain institutions entering the fray, but the on-chain answer is YBS, which is crucial to the overall situation and cannot be ignored.

Supplementary explanation, the stability of the exchange refers to the dominance of a leading exchange, while the stability of the public chain refers to the resurgence of Ethereum; the replacement path of a certain emerging public chain is still ongoing.

In the current market landscape, Ethereum and a certain public chain dominate, but a certain emerging public chain has not given up on catching up. Although there are frequent reports of a certain emerging public chain's decentralized exchange trading volume surpassing that of the Ethereum ecosystem, from the perspective of actual asset issuance volume, ETH along with a certain leading stablecoin based on Ethereum still firmly holds the top position.

This is also the main reason why I believe there are no fundamental issues with Ethereum. The market's price expectation for ETH is 10,000, while the expectation for a certain emerging public chain is 1,000, which are completely different baselines.

By comparing the growth rates of various chains, we can find that they are basically in sync, except for a certain emerging public chain that nearly collapsed in 2022. During the rest of the time, everyone has remained consistent with Ethereum. We can conclude that, in terms of correlation, the stablecoins of various chains have not developed an independent market trend, and are still influenced by the spillover effects of Ethereum.

It can be seen that the importance of pairing Ethereum with stablecoins. The significance of YBS lies in its re-anchoring; among the 230 billion market value of stablecoins, the emerging YBS project is still just a niche presence.

Reiterating, YBS must become a new asset issuance method in order to convey the asset attributes of ETH to the currency level; otherwise, the spring of real asset tokenization will be the winter of Crypto Assets.

Conclusion

Ethereum only has a technical narrative, and users only embrace stablecoins.

We hope that users embrace YBS, rather than a leading stablecoin, which is the current situation and also the divergence between us and the market.

Pursuing niche markets is quite a common thing; just look at certain design elements and the globally widespread trendy toys to understand this. Let's briefly talk about blockchain payments. There is no issue with payments themselves, but before the mainstreaming of YBS, which is supported by crypto assets, forcibly promoting blockchain payments is putting the cart before the horse; payments should be the development direction of YBS.

Crypto Assets should not become Financial Technology 2.0, and we cannot allow the development path to become increasingly narrow.