The Alienation of the Crypto World Ecosystem: Transitioning from Innovation to a Single Model

After recently attending the Hong Kong Consensus conference, my experience of communicating with domestic peers made me deeply aware of the changes in the atmosphere of the crypto world. Although industry participants are still active, the market's "temperament" has undeniably changed. This is not a typical bull or bear market, but rather an unprecedented state of "alienation," which feels unfamiliar.

In the current environment, the crypto world seems to have only one dominant business: selling tokens.

Three Pillars of Industry Ecosystem

Looking back at the development of the crypto world, its operation has always relied on three key links:

1. Value creation: Meeting user needs through technological innovation, such as Bitcoin, Ethereum, stablecoins, Layer 2, DePIN, and other solutions.

2. Value Discovery: Discover potential assets through investment and trading pricing, driving industry development.

3. Value circulation: Build token sales channels to facilitate the flow of funds from the primary market to the secondary market.

Ideally, these three links should support each other and develop in coordination. However, the current market situation is:

The first two segments are gradually declining, while the third segment is exceptionally prosperous.

The project team no longer focuses on user needs and product development, and investment institutions no longer conduct in-depth research on industry trends. The entire market seems to be left with just one voice: "How to sell tokens?"

Unified Market Structure

A healthy market ecology should have three closely linked elements: project parties focus on product development to meet user needs, obtain profits and market premiums; investment institutions intervene and exit at appropriate times to achieve capital allocation; while the circulation link improves overall capital efficiency.

However, discussions in the current crypto world rarely involve innovation opportunities, product development, or user demand. Even in some areas where hotspots still exist, such as AI Agent, it is difficult to stimulate widespread entrepreneurial enthusiasm.

Institutional players in the secondary market generally adopt a conservative attitude, with newly launched tokens often opening high and falling low, and the liquidity of meme coins is nearly exhausted.

In this market situation, the main active players are the third type of institutions: market makers, intermediaries, and agencies. Their focus is on how to beautify data, establish relationships with major exchanges, how to market and promote to attract buying interest, and how to cooperate with buying communities to increase trading volume.

Market participants are highly homogenized, all competing for the increasingly scarce capital in the crypto world.

The Decline of Innovative Momentum

Compared to the low point after the FTX incident in 2022, a large amount of capital was still held by investment institutions at that time. This capital has the ability to generate returns, which can be invested in entrepreneurial projects, create value, and attract new capital into the market.

However, now a large amount of funds are consumed by intermediaries, and project parties often only seek to go public for arbitrage, becoming intermediaries for investment institutions and the secondary market, no longer focusing on value creation, but solely on packaging "empty shell" stories. From a business logic perspective, when downstream channels account for the majority of costs, it will inevitably compress upstream research and development and operational investment.

Many project teams simply give up product development and use all their funds for marketing and listing, as projects without substantial products and users can still succeed in going public. Today's marketing can even be packaged as "meme-driven"; the less investment in products and technology, the more funds can be reserved for listing and market manipulation.

The innovation path of the crypto world has evolved to:

"Build an appealing narrative → Quick packaging → Leverage relationships to go public → Cash out and exit."

Products, users, and value creation seem to have become a form of self-comfort for idealists.

The Dilemma of the Water Drawing Mode

On the surface, it seems that the project party invests funds into the listing and raising the coin price, and all parties appear to benefit: investment funds can exit, retail investors gain speculative opportunities, and intermediaries receive substantial profits.

However, in the long run, the loss of positive externalities will lead to serious consequences. The monopoly position of intermediaries is becoming increasingly strong, and the proportion of extraction is constantly rising. Upstream project parties are exiting due to regulatory pressures and high extraction fees, while downstream retail investors are leaving due to the increased difficulty of making profits.

Essentially, intermediaries as service providers do not directly create value and positive externalities. When the service provider and the siphoning party become the dominant forces in the market, the entire ecosystem resembles a body afflicted with cancer, which may ultimately decline due to nutrient depletion.

Periodicity and Rebuilding Hope

The crypto world is always a cyclical market.

Optimists believe that after the current low point of liquidity shortage, a true "value revival" will eventually come. Technological breakthroughs, new application scenarios, and innovative business models will reignite the passion for innovation. The spirit of innovation is indomitable, and the bubble will eventually dissipate. Even a faint glimmer of hope may become a beacon guiding the future.

Pessimists believe that the bubble has not completely burst yet, and the crypto world may still need to undergo a deeper "great reshuffle". Only when there are no coins left for the siphoners to extract, and the market structure dominated by intermediaries completely collapses, can a true reconstruction be expected.

During this transition period, practitioners will go through a difficult time filled with doubts, internal struggles, burnout, and self-doubt.

But this is the essence of the market - cycles are fate, and bubbles are also the prelude to new beginnings.

The future may be full of hope, but the road to brightness may be exceptionally long and winding.