The End Times of Native Encryption

1. Bowing to Compliance

The lack of regulation has been a key factor in the success of blockchain technology as it moves from niche to mainstream. From the initial ICOs to the rise of DeFi, and now to the current super application stablecoins, all of this is built on that foundation. However, with the approval of the BTC ETF and changes in the political landscape, native encryption seems to have entered a period of decline.

The industry is starting to seek compliance, fulfilling the demands of traditional finance. Stablecoins, tokenization of physical assets, and payments have become the mainstream of development. At the same time, pure asset issuance still exists, but the form has become simpler, with a picture or a story being able to become a hot topic.

Blockchain technology currently lacks effective means to restrain the improper behavior of entities behind addresses. While it can ensure the honesty of nodes and the disintermediation of DeFi, it cannot prevent various events occurring in the "dark forest." The decline of many projects seems to be an inevitable outcome.

The vision of non-financialization cannot be achieved solely through the improvement of infrastructure performance. Tasks that are difficult to accomplish on centralized servers are even more challenging on-chain. We cannot expect project parties to implement proof of work, so bowing to compliance may be the starting point for non-financialization in the future, although this phenomenon is quite ironic.

Cryptocurrency is gradually becoming a subset of traditional finance, and the discourse power of blockchain ledgers is being stripped away by the upper echelons. Bottom-up innovations are becoming rarer, and opportunities are being compressed. We are entering the era of on-chain hegemony.

2. The New Landscape of Stablecoins

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

In the field of stablecoins, fiat-backed stablecoins and yield-bearing stablecoins (YBS) dominate. The recently passed "Genius Act" clearly stipulates regulations on the issuance and supervision of stablecoins, including definitions, issuance restrictions, reserve requirements, transparency requirements, and regulatory frameworks among other aspects. This marks the formal inclusion of stablecoins into the regulatory system, and also means that blockchain payments are about to enter the mainstream.

However, the challenges that stablecoins may face after being regulated and the countermeasures from other countries remain unknown. The United States will have greater control over the blockchain world by taking control of on-chain transaction mediums. This could lead to some unexpected situations, such as stablecoins in DeFi projects being suddenly frozen.

On the other hand, the YBS stablecoin market is also showing some unhealthy trends. From hedge funds to market makers and exchanges, all parties are scrambling to enter this field. However, this craze seems to have strayed from its original meaning. Truly innovative projects are being suppressed, and the threshold for startup projects is constantly increasing. In this competition, annualized yield and convenience have become the decisive factors.

Although compared to some controversial projects, the YBS stablecoin may be a better choice. However, when this packaging, which resembles financial products from centralized exchanges, becomes the only innovation, it raises the question of whether there are issues with the past development path.

3. The Evolution of Asset Issuance

Public chains, as the largest asset issuance platform, have undergone multiple transformations since the ICO. However, the current development trend seems to be leaning towards traditional internet. The profit models of certain projects are now very close to Web2, with almost zero returns to the community. This is contrary to the ideals of democratization, co-construction, and common prosperity that Web3 initially pursued.

The Launchpad has become the last paradise for native encryption users hoping to get rich quickly, but the environment here is also unhealthy. Users not only have to pay fees to the platform and tools but also have to endure experiences akin to a battlefield. The issuance of assets has started to become complicated, and there are even phenomena of completely off-chain projects issuing tokens.

From the AI framework to the proposal of the DeSci concept, and then to the rise of celebrity coins, the market seems to be constantly searching for new narratives. When the market cools down, some projects begin to adopt models similar to Ponzi schemes, such as staking for new token issuance. Although this naked and direct approach may bring short-term gains, it is difficult to stimulate long-term value.

Compared to the innovations in fields like DeFi during the previous cycle, the current phase of speculation seems unable to create anything truly valuable. What we observe is a continuous lowering of issuance thresholds, accompanied by an increase in various malicious events. This may indicate that the industry needs to establish new rules.

4. The Rise of Attention Economy

The rise of projects no longer relies solely on narrative and technology, but has started to purchase attention. From using points to investing real money in KOLs, various marketing strategies are widely used. Although this approach is direct and effective, it also brings some problems.

Attention, although one of the most valuable assets today, is difficult to measure. Some projects attempt to quantify the value of attention through AI, but whether this approach can truly capture long-term value remains to be seen. Tokens are becoming a "fast-moving consumer good."

The drawbacks of the points system have already become apparent, and the trend of full participation in speculation has also raised concerns. The old encryption era seems to have come to an end, and selling influence has become a mature business model. From political figures to exchanges to internet celebrities, all parties are sharing in this game, but this has not truly driven the prosperity of any project.

Conclusion

Although stablecoins and blockchain payments are becoming mainstream, the natives living in this ecosystem may not be satisfied with this. We need truly on-chain native stablecoins, we need non-financial applications, and we need the next wave of innovation. We do not want Web3 to become merely a place for traffic transactions.

Although time seems to validate some of the predictions of early Bitcoin supporters, we still hope that the future will prove them wrong.