The End of the Native Encryption Era

1. Compliance Trend

The process of cryptocurrency moving from niche to mainstream has provided a regulatory wilderness for the world through decentralized blockchain. Although Satoshi Nakamoto's peer-to-peer electronic payment system did not succeed, it opened the door to a parallel world. In this world, traditional laws, governments, and social constraints are hard to reach.

The characteristics outside of regulation have become key factors driving the development of the industry. From the asset issuance that began with ICOs, the rise of DeFi, to today's super application stablecoins, all are built on this foundation. Breaking free from the constraints of traditional finance has created today's encryption industry.

However, with the development of the industry, we are beginning to see a trend towards compliance. This may have started with the approval of the BTC ETF or may stem from certain political events. In any case, native encryption seems to be entering a new stage. The industry is beginning to seek compliance, trying to meet the needs of traditional finance. Stablecoins, tokenization of real-world assets (RWA), and payments have become the mainstream directions for development.

The root of this transformation lies in the current lack of effective means to constrain the entities behind addresses in blockchain. We can only guarantee the honesty of nodes and the intermediary-free nature of DeFi, but we cannot prevent anything that might happen in this "dark forest." Many once-popular fields, such as NFT, GameFi, and SocialFi, are highly dependent on the entities behind the projects. Although blockchain has excellent fundraising capabilities, ensuring that these funds are used sensibly and turning a story into a real project remains a huge challenge.

The vision of non-financialization cannot be achieved solely through improvements in infrastructure performance. What is difficult to accomplish on centralized servers is even harder to expect on-chain. We cannot impose "proof of work" on project parties. Therefore, bowing to compliance may be a starting point for future non-financialization, even though it sounds a bit ironic.

Cryptocurrency is becoming a subset of traditional finance, and the discourse around this distributed ledger is beginning to be stripped away by the upper echelons. Bottom-up innovation is decreasing, and opportunities are being compressed. We are entering an era of on-chain hegemony.

2. The Evolution of Stablecoins

On-chain hegemony is mainly reflected in two aspects: stablecoins and the reenactment of traditional internet narratives.

In the field of stablecoins, fiat-backed stablecoins and yield-bearing stablecoins (YBS) dominate the market. The recently passed "Genius Act" has set clear requirements for the issuance and regulation of stablecoins, including definitions, issuance restrictions, reserve and transparency requirements, and regulatory and compliance frameworks. This marks the formal inclusion of stablecoins into the regulatory system, and also means that on-chain transaction mediums have been taken over by certain countries.

On the other hand, the concept of YBS stablecoins like Ethena is good, but there is currently a pathological frenzy in the market. Various traditional hedge funds, market makers, and exchanges are rushing in, trying to get a piece of the pie. This trend has deviated from its original meaning, innovation has been marginalized, and the threshold for startup projects is becoming higher and higher.

Now, technology and creativity seem to be less important, and whether it is decentralized or not has also become irrelevant. High yields and convenience have become the decisive factors. Although compared to some more speculative projects, YBS stablecoin may be a better choice, this packaging similar to centralized exchange financial products has become the only innovation in this round, reflecting that there may be problems with the development path of the past.

3. The Evolution of Asset Issuance

Public chains remain the largest asset issuance platform, starting from ICOs and undergoing multiple transformations. However, the current development trend is increasingly approaching traditional internet models. The profit models of some projects are nearly indistinguishable from Web2, with almost zero feedback to the community.

Launchpad has become a paradise for native encryption users pursuing wealth, but there are also problems here. Asset issuance has started to become complicated, and there are even phenomena of projects issuing tokens completely off-chain. Extreme speculation is continuously lowering the industry's bottom line.

Some new concepts like DeSci attempt to balance speculation and innovation, but seem to have failed to attract sustained attention. When the market cools down, various Ponzi-like schemes begin to emerge, such as the staking exchange for points and new offerings of Virtuals. This direct profit-driven model, while it may lead to a short-term increase in token prices, is unlikely to stimulate genuine innovation.

Compared to the previous cycle, the current stage of speculation seems to struggle to create treasures like DeFi. What we see more is the continuous simplification of issuance thresholds, along with various negative events that follow. This may indicate that the industry needs a new set of rules.

The Rise of Attention Economy

The success of the project increasingly relies on gaining attention. From using points to purchase attention to investing funds to form KOL teams, marketing techniques are moving closer to traditional internet methods. Compared to founders presenting technology, these methods seem more direct and effective.

Attention is undoubtedly one of the most valuable assets today, but it is difficult to quantify. Some projects attempt to quantify it, such as Kaito's "Yap-to-Earn" model. However, this model also struggles to capture long-term value, and Tokens are becoming a type of "fast-moving consumer goods".

The drawbacks of the points system have already become apparent, and if the project mainly relies on purchasing attention for development in the future, this trend is worth contemplating. While there is nothing wrong with the project striving for marketing, the current circle shows a trend of everyone pumping, which may signify the end of the old encryption era.

Conclusion

The mainstreaming of stablecoins and blockchain payments seems to be a foregone conclusion. However, as natives of this ecosystem, what we may need are on-chain native stablecoins, non-financialized applications, and the next wave of innovation. We also do not want to live in a Web3 world that merely sells traffic.

Although time seems to be validating some early BTC supporters' viewpoints, I still hope that the future can prove them wrong.