Original author: YBB Capital Researcher Zeke
1. Bow to compliance
How did Crypto go from a niche to the mainstream? In the past decade or so, decentralized blockchains have provided the world with a regulatory wilderness. Satoshi Nakamotos peer-to-peer electronic payment system did not succeed, but it opened the door to a parallel world. Laws, governments, and even society and religion cannot constrain this Internet that exists on countless nodes.
Being outside of regulation is almost the only factor driving the success of this industry. The asset issuance starting from ICO and its countless subsequent variants, DeFi ignited by UNI, and todays so-called super-application stablecoins are all built on this factor. It is the elimination of the trivialities of TradFi that has made this industry what it is today.
But what’s interesting is that after the failure of exploring the New World during the Age of Exploration, people began to abandon sailing ships and return to the past. Perhaps it was from the moment when BTC ETF was passed, or from the moment when Trump won the election, that native encryption has entered the Dharma Ending Age. The industry began to seek compliance and seek to fill the needs of TradFi. Stablecoins, RWA, and payments began to become the mainstream of industry development. Apart from this, we only have pure asset issuance. A picture, a story, and a string of CAs are the only topics of conversation on weekdays. Tugoulian is no longer a derogatory term.
How did we get to this point? I have analyzed a lot in the articles of the past two years, but in the final analysis, the blockchain currently lacks effective means to constrain the various entities behind the addresses from doing evil. We can only ensure that the nodes are honest, and DeFi does not require intermediaries. In addition, we cannot prevent anything from happening in this dark forest. It is inevitable that many things will fall into desolation. NFT, GameFi, and SocialFi are all extremely dependent on the entities behind the projects. Blockchain has excellent fundraising capabilities, but who will constrain these project parties to use these funds reasonably? And make a story into a real project.
The vision of non-financialization cannot be solved by improving infrastructure performance. If these things cannot be done well in a centralized server, how can we expect to do them well on the chain? We cannot implement proof of work on the project side. Now bowing to compliance may be the beginning of future non-financialization. This is indeed ironic but helpless.
Crypto is indeed becoming a subset of tradition, and the right to speak on this ledger is beginning to be stripped away by the upper layers. There are fewer and fewer bottom-up things, and opportunities are also being compressed. We are welcoming the era of on-chain hegemony.
2. Stablecoins
What is on-chain hegemony? I think there are two aspects to it. One is stablecoins, and the other is that the story of traditional Internet is still repeating itself.
Let’s talk about the former first. Today’s stablecoins are basically dominated by FNB and YBS stablecoins. Regarding FNB, a major event has happened in recent days, which is the passage of the Genius Act. I will briefly summarize the contents of the bill here:
Definition and issuance restrictions: Payment stablecoin is defined as a digital asset used for payment or settlement, which must be fully backed by the US dollar or highly liquid assets (such as short-term government bonds) at a 1:1 ratio.
Only licensed issuers (registered and regulated) can legally issue stablecoins, and unauthorized individuals or entities are prohibited from issuing them.
Reserve and transparency requirements: Issuers must hold reserve assets (such as US dollars or high-quality liquid assets) equivalent to 1:1 of the stablecoin to ensure stability and solvency.
Requires regular disclosure of reserves, annual financial audits for issuers with a market capitalization of more than $50 billion, and compliance with anti-money laundering (AML) and counter-terrorist financing (CFT) regulations.
Regulation and Compliance: Establish a clear regulatory framework, where stablecoins are not considered securities and are subject to banking-type regulation rather than SEC regulation.
Establish a licensing process, regulate issuing institutions, and enforce anti-money laundering, asset freezing and destruction mechanisms.
Promoting Innovation and Financial Inclusion: Aims to promote the development of the stablecoin industry in the United States through a clear legal framework, enhance financial inclusion, and maintain the dominant position of the US dollar in the digital economy.
Restricting large technology companies: Prohibit large technology companies from issuing stablecoins without regulatory approval to prevent market monopoly.
The Tether crash that the industry has been worried about for many years has finally become a thing of the past. It is only a matter of time before downstream payments are included in the mainstream, and the large-scale adoption of blockchain is on the right track. But what will happen when stablecoins are included in the regulatory framework? How will other countries regulators respond to this? I dont think I need to reiterate why stablecoins are successful.
The passage of this bill also means that the transaction medium on the chain is officially taken over by the United States. American private companies are reaping the benefits of U.S. debt, and after controlling the currency, this country will also have extremely high control over the chain. Not to mention the continuation of the U.S. dollar hegemony, how can I imagine a scenario in which all stablecoins in a DeFi project are suddenly frozen.
On the other hand, there is the YBS stablecoin. The idea of Ethena is good. It can provide UST-level yields in a bull market, and has stability far beyond the stablecoin. I have mentioned in my previous articles that the native stablecoin on the chain may eventually be realized through Delta neutral hedging, such as the more complex f(x)Protocol and Resolv, which is hedged on Hyperliquid. But the strange thing is that everyone is starting to do YBS stablecoins now, first various traditional hedge funds entered the market, then the market maker DWF entered the market, and finally the exchanges also wanted to get involved. It cant become Tether, but at least it has to share the ENA cake. This ideal is spreading like a virus.
This morbid YBS stablecoin craze has obviously deviated from its original meaning. Using its own original accumulation and adding more radical strategies to grab the market, truly innovative projects are being suppressed madly, and the threshold for start-up projects is getting higher and higher. Yes, technology and ingenuity are no longer important here, and it doesn’t matter whether it is decentralized or not. Innovative projects like f(x)Protocol have not received widespread attention. Now the combination of Cex and high-end quantitative teams is right. In this war, APY and convenience are everything.
Although YBS stablecoin may be a better choice than exchanging my ETH for small pictures or various weird narratives, the fact that this Cex financial product package is the only innovation in this round can only mean that most of the past paths are wrong.
3. Asset issuance
The public chain is the largest asset issuance platform, and ICO is the beginning of this game. Everything that follows is a variant, but at least it has promoted the birth of some narratives and promoted the progress of the industry, but now it is all moving towards the traditional Internet. The profit model of Base and Pump is actually infinitely close to Web2, and the feedback to the community is almost 0, even worse than Cex in this regard. The meaning of Web3 was to democratize everything, and co-creation is also about building and enriching together, but now it has changed. This is just the first point. Now all oligarchs are studying how to build an asset issuance platform and what is innovative asset issuance.
Launchpad is now the only place where native crypto users can get rich, but it is also sick. In addition to paying fees to platforms and tools like GMGN, you also have to experience the feeling of shooting in the trenches. Asset issuance has also begun to become nested, and can even develop off-chain. Well, although NFT and GameFi are not completely decentralized strictly speaking, at least they have on-chain parts, have driven the construction of Inrfa, and have made this industry popular.
Starting from the AI framework before the year, completely off-chain projects can also issue coins, and it is even an off-chain asset issuance platform. Extreme speculation is actually lowering the bottom line of the industry. What is the meaning of all this?
CZ and Vitalik were puzzled by Meme, so they came up with the concept of DeSci, which allowed speculators to speculate and scientific research to innovate. It seemed that they had found a common ground, but how could studying mice and classical mechanics be more interesting than the memes and weird AI on the Internet today? This narrative was only popular for a while. After AI and DeSci were unpopular, celebrity coins came on the scene. From President Trump in North America to President Miller in South America, liquidity was completely squeezed out.
When the market starts to cool down and the narrative fails to take over, you have to play Ponzi in asset issuance. Virtuals combines the gameplay of Binance Launchpool+Alpha, staking in exchange for points for new shares, and staking again for new shares. Then the price of the currency really soared. Emmm, it is so naked and direct, but it can no longer arouse my interest. Whats the next step? Believe (Internet capital market concept)?
I cant be sure, but in the last cycle, DeFi was a treasure trove left in various flywheels, Ponzi, and narratives, and it did allow the industry to burst out with a lot of fresh ideas. What can speculation at this stage create? I only see the continuous simplification of the issuance threshold, and there are just as many malicious incidents that follow. Do we need a new rule?
4. Attention
In the past, the rise of a project relied on narrative and technology, and burst out after consensus was reached. Now we are buying attention, using points like Blur, or using real money to set up an MCN company for KOLs like exchanges. The combined marketing method of PDD + Douyin is widely used in the circle. Compared with the founders various meetings to talk about technology, this method seems to be much more direct and effective.
Attention is undoubtedly one of the most valuable assets of this era, but it is also difficult to measure. Kaito is now quantifying it, but Yap-to-Earn is not an innovation, which was reflected in the ancient SocialFi. Kaitos biggest innovation is to use AI to drive it, claiming to be able to identify the value of information and use AI to measure the ability to bring goods. However, this model obviously cannot really capture long-term value, and Token is becoming a fast-moving consumer product.
I think you have all experienced the drawbacks of the three-pronged points system. I have also reviewed the impact that Blur has brought to this circle in previous articles. If future projects rely on buying attention, it is difficult for me to evaluate whether this behavior is wrong. I can only say that there is nothing wrong with projects working hard on marketing, but there is a trend of everyone in the circle being pumped up. The old crypto era has indeed come to an end. Selling influence to make money has become a mature business. From the US president to Binance to todays KOLs, no project has prospered because of this. Everyone is just taking what they need.
Conclusion
Stablecoins will go global, and blockchain payments are inevitable. But the natives living here may not need these. We need stablecoins native to the chain, we need non-financialization, we need the next wave, and we don’t want to live in a Web3 that sells traffic.
Time has indeed proven that some BTC OGs were right back then, but I still hope that they will be wrong in the future.
