Original: Zeus
Translator: Azuma
Editor: Hao Fangzhou
In the previous article, I explored how the cryptocurrency industry has gradually deviated from its original vision - overly emphasizing infrastructure innovation while neglecting the basic monetary attributes needed to achieve financial sovereignty. This deviation has led to a disconnect between the delivered technical achievements and sustainable value creation.
However, what I have not yet delved into is that the industry fundamentally misjudged which applications are truly worth building, and this misjudgment is the core of the current dilemma in the crypto field, also hinting at the direction where real value might emerge.
Application Layer Illusion
The narrative of the cryptocurrency industry has gone through multiple stages, but always underpinned by a vision of creating revolutionary applications beyond finance. Smart contract platforms pride themselves as infrastructure for a new digital economy, envisioning value flowing from the application layer back to the underlying protocol. This narrative was accelerated by the "fat protocol theory" - which argues that unlike the internet era where TCP/IP protocols had minimal value while Facebook and Google captured billions, blockchain protocols will accumulate most of the value.
This formed a specific mindset: Layer 1 public chains would increase in value by cultivating diverse application ecosystems, similar to how Apple's App Store or Microsoft Windows create value through third-party software. However, the fundamental misconception is that the cryptocurrency industry attempts to impose financialization onto scenarios that are neither suitable nor capable of creating real value.
Unlike the internet's ability to digitize existing human needs (business, social, entertainment), cryptocurrency attempts to inject financial mechanisms into scenarios that neither require nor welcome financialization. The presumed premise of this development direction is that all domains, from social media to gaming to identity management, can benefit from tokenization and financialization.
But reality is entirely different:
- Tokenized social applications generally fail to achieve mainstream adoption, with user participation primarily dependent on token incentives rather than product value;
- Game applications continuously face resistance from traditional gaming communities, with players believing financial mechanisms harm rather than enhance gaming experience;
- Identity and reputation systems involving token economics have never demonstrated significant advantages over traditional solutions.
These issues cannot be explained away by "we are still early". They reveal a deeper logic - the essence of finance is a resource allocation tool, not an ultimate goal. Financializing social interactions or entertainment activities fundamentally misunderstands finance's core function in society.
The rest of the translation follows the same detailed and nuanced approach, maintaining the original text's depth and critical analysis of cryptocurrency and blockchain technology's current state and potential future.
This is actually a good thing. Why should activity facilitators suck away all value from value creators? If the "fat protocol theory" predicts that the main value is captured by TCP/IP rather than its applications, the internet would look very different (almost certainly worse).The industry has not failed - it is finally facing reality. The technology itself is valuable and may continue to evolve and integrate with existing systems, but the value distribution within the ecosystem may be drastically different from what the early narrative suggested.
Root of the Error: Forgotten Original Intention
To understand how we got here, we must return to the origins of cryptocurrency. Bitcoin did not initially emerge as a general computing platform or the basis for tokenizing everything; its mission was very clear - a response to the 2008 financial crisis and the failure of centralized monetary policy.
Bitcoin's core concept was never "everything can be on-chain", but "money should not depend on trusted intermediaries".
As the industry developed, this original mission gradually faded and was ultimately abandoned by most projects. Projects like Ethereum expanded blockchain's technical capabilities but simultaneously blurred its core positioning.This led to a bizarre split in the ecosystem.
Bitcoin remains focused on monetary positioning but lacks programmability and cannot implement functions beyond basic transfers;
Smart contract platforms provide programmability but have abandoned monetary innovation, turning towards the "everything on-chain" route;
This division might be the most serious routing error in the cryptocurrency industry. Instead of building more complex functions on Bitcoin's monetary innovation, the industry turned to financializing everything - an approach that both misdiagnosed the problem and chose the wrong solution.
Future Path: Return to the Essence of Money
In my view,the industry's forward direction is to reconnect the significantly enhanced technical capabilities of blockchain with its original monetary mission.Not as a universal solution to all problems, but focusing on creating better money.
Reasons why money is especially suitable for blockchain include:
Trustlessness is crucial - unlike most applications requiring external force, money can operate entirely in the digital realm, with rules executable by code alone;
Native digital attributes - money doesn't need to map digital records to physical reality and can exist natively in the digital environment;
Clear value proposition - removing intermediaries from the monetary system can truly improve efficiency and autonomy;
Natural connection with existing financial applications - the most successful crypto applications (trading, lending, etc.) naturally connect to monetary innovation;
Most critically,money is fundamentally an infrastructure layer that doesn't require deep interaction. This is where cryptocurrency got things backwards - the industry didn't create money that could seamlessly integrate with existing economic activities, but instead tried to rebuild all economic activities around blockchain.
The power of traditional currency lies precisely in this "tool layer" characteristic. Businesses accept dollars without understanding the Federal Reserve, exporters manage exchange rate risks without reconstructing their entire business, and individuals store value without becoming monetary theorists. Money facilitates economic activity without dominating it.
On-chain currency should be the same - providing a simple interface for off-chain enterprises to use, just like using digital dollars without understanding the banking system. Businesses, institutions, and individuals can remain entirely off-chain, using blockchain currency only for specific advantages, just as users currently use traditional banking systems without being part of them.
Instead of building the vague concept of "Web3" that tries to financialize everything, the industry should focus on creating a better monetary system - not just a speculative asset or inflation hedge, but a complete monetary mechanism adaptable to different market conditions.
The changing global monetary landscape further highlights the urgency of this direction. The inherent fragility of the current system and geopolitical tensions have created a real demand for neutral alternatives.
The tragedy of the current ecosystem is not just misallocation of resources, but missed opportunities. Incremental improvements in financial infrastructure are valuable, but pale in comparison to the transformative potential of solving fundamental monetary issues.
The next stage of cryptocurrency evolution may not be about continuing to expand boundaries, but returning to and fulfilling its initial mission - not a universal solution, but a reliable basic monetary infrastructure that allows other constructions to be built without delving into its operational principles.
This is the profound innovation originally promised by cryptocurrency - not financializing everything, but creating money worthy of being the invisible global economic infrastructure.A currency that can operate seamlessly across borders and institutions while maintaining sovereignty and stability. A foundational infrastructure that empowers rather than dominates, serves rather than restricts, and does not interfere with the human activities that give it meaning during its evolution.
