Author: Bocaibocai｜bocaibocai

Recently, there has been a heated discussion in the industry regarding Ethereum FUD. Not long ago, Jian Ge @jason_chen998, Teacher Haotian @tmel0211, and Teacher NingNing @ningning initiated a three-hour Space discussion titled "What is Happening to Ethereum?" I participated throughout the session and heard many insightful viewpoints, from the competitive relationship between Ethereum and Layer 2, to ideological, organizational structure, and historical lessons, gaining a comprehensive understanding of the current dilemmas faced by Ethereum and the industry. I felt the deep affection and critical concern everyone has for Ethereum.

During the Space, I had been brewing some thoughts internally, but I hesitated to share them, knowing that my views diverged significantly from those of most Web3 natives, fearing backlash (being well aware of the toxic atmosphere in the industry). Therefore, I did not express my opinions during the discussion. However, I later decided to step forward and share my perspective, attempting to provide a new angle on the challenges currently faced by Ethereum and the entire industry from the often-discussed application layer. Although this viewpoint may not be mainstream, I believe that only through rational and candid discussions can we drive the industry towards a healthier direction.

This article is not intended to FUD Ethereum or the industry, nor to provoke any opposition; it merely offers a different perspective for critique and reflection. If you disagree with my views, a smile will suffice—please refrain from harsh criticism, thank you! The article is lengthy, so I have prepared an AI summary for those who prefer not to read long texts.

Background

Before presenting my views, let me introduce my current work background. Many of my followers may have noticed that my output frequency has significantly decreased over the past long period, and I have rarely expressed opinions about the industry.

This is because, over the past year, I have been a founding member of Ample FinTech, a startup FinTech company in Singapore, deeply involved in project collaborations with the central banks of three countries regarding tokenization and cross-border payments. This experience has broadened my thinking and attention beyond the pure Web3 circle, directing my focus towards the strategic movements of global central banks and traditional financial institutions.

During this time, I began spending a lot of time researching blockchain and tokenization-related reports and papers published by traditional forces, understanding the projects they are working on. I also kept an eye on industry trends on Twitter and communicated with friends to understand the development trends in the Web3 industry. By simultaneously focusing on the application development trajectories of both the Web3 circle and the traditional financial system, I was able to establish a more comprehensive cognitive framework between the two dimensions, which has given me a different perspective on the future of the industry.

Disconnected Parallel Worlds

It is this dual perspective of being in two different worlds that has made me increasingly aware of the disconnection in the atmosphere and development paths of the two fields. In the Web3 world, the current situation that everyone is complaining about is: more and more technical infrastructures are emerging, an increasing number of new concepts and terms are popping up, deliberately creating complexity and raising the threshold for understanding, with the ultimate goal mostly aimed at Vitalik and entrepreneurial exchanges, which almost become "ghost towns" after TGE. As for whether there is real use value, who really cares?

Recently, the focus of discussions has also shifted to questioning Vitalik and the Ethereum Foundation. More and more voices are complaining that Vitalik and the Foundation seem too obsessed with "technical discourse" and "ideal pursuits," investing a lot of energy in studying technical details while showing little interest in users' actual needs and commercialization exploration. This tendency has raised widespread concerns within the industry.

During this Space, Teacher Meng Yan @myanTokenGeek, drawing on historical experiences from the development of the internet, pointed out sharply that this detachment from the market is a development path that is difficult to sustain. If Ethereum continues to maintain this "technology supremacy" development orientation, then the concerns of everyone are not without reason.

However, when we shift our gaze outside the Crypto circle, we find a completely different scene: the attitudes of traditional financial forces and governments towards Web3 technology are undergoing significant changes. They not only view blockchain and tokenization as important opportunities for upgrading the existing payment and financial systems but are also actively exploring transformation paths. This shift is certainly rooted in the recognition of new technologies, but a deeper motivation may be the realization of the impact and threat that Web3 technology poses to existing structures.

In 2024, a milestone turning point emerged when the Bank for International Settlements (BIS), known as the "central bank of central banks," officially proposed the concept of "Finternet" (Financial Internet).

This move is far-reaching—it positions tokenization and blockchain technology as the next-generation paradigm of the human financial monetary system, instantly causing a stir in the traditional financial world and becoming one of the most discussed topics.

This is not just the introduction of a new concept but also an important endorsement of blockchain and tokenization technology by the traditional financial sector. Its influence quickly spread: major financial institutions and central banks around the world accelerated their pace, embarking on unprecedented active explorations in tokenization infrastructure construction, asset digitization, and payment application implementation.

Behind this series of significant initiatives is not a hasty decision by the BIS but a strategic choice based on years of in-depth research. I spent a lot of time tracing and studying the decision-making trajectory of the BIS and discovered a gradual development path: as early as 2018, the institution began systematically researching Web3 technology and published dozens of highly professional research papers.

In 2019, the BIS took a crucial step by establishing the BIS Innovation Hub, systematically conducting experimental projects related to blockchain and tokenization. This series of in-depth research and practice ultimately led them to recognize an important fact: behind the innovation of blockchain technology and tokenization lies the potential to reshape the global financial landscape.

Among the many experimental projects of the BIS, the most iconic is mBridge—this CBDC cross-border payment bridge was jointly initiated by the BIS Hong Kong Innovation Hub, the People's Bank of China, the Hong Kong Monetary Authority, the Bank of Thailand, and the Central Bank of the UAE in 2019. From a technical architecture perspective, mBridge is essentially a public permissioned chain based on EVM, operated by the central banks of participating countries as nodes, supporting direct cross-border settlement of central bank digital currencies (CBDCs) on-chain.

However, history is always full of dramatic twists. In the current complex geopolitical landscape, especially after the outbreak of the Russia-Ukraine conflict, this project, originally aimed at enhancing cross-border payment efficiency, unexpectedly became an important tool for BRICS countries to evade SWIFT international sanctions.

This situation forced the BIS to choose to withdraw from the mBridge project at this stage. Recently, Russia has officially launched the BRICS Pay international payment settlement system based on blockchain technology, pushing blockchain technology to the forefront of geopolitical games.

Another significant initiative by the BIS is the launch of the largest public-private partnership project in blockchain history—Project Agora. This project brings together an unprecedented lineup of participants: seven major central banks (the Federal Reserve, the French central bank representing the EU, the Bank of Japan, the Bank of Korea, the Bank of Mexico, the Swiss National Bank, and the Bank of England), along with over 40 global financial giants including SWIFT, VISA, MasterCard, and HSBC.

Such a large-scale multinational collaboration has a surprisingly clear goal: to utilize blockchain technology and smart contracts to build a globally unified ledger system while maintaining the existing financial order, thereby optimizing the current financial monetary system. This initiative itself is a strong signal: the momentum of blockchain technology development is unstoppable, and traditional financial forces have shifted from observation to full embrace, actively promoting its application in real scenarios.

In contrast, the Web3 industry, while constantly shouting the slogan of Mass Adoption, is actually keen on hyping meme coins and indulging in the short-term attention economy. This stark contrast raises a thought-provoking question: as traditional financial institutions are actively driving the large-scale application of blockchain technology through concrete actions, should the Web3 industry also reconsider its development direction?

Mass Adoption: Casino or Application?

In this disconnected development situation, we must ponder a fundamental question: "What truly constitutes Mass Adoption?" Although this term frequently appears in discussions within the Web3 industry, it seems that everyone has a significantly different understanding of it.

Looking back at the so-called "hit projects" in the Web3 field over the past few years, an intriguing pattern emerges: those projects claiming to achieve "Mass Adoption" are essentially speculative games dressed in the guise of innovation. Whether it is the endless stream of MEME coins, the "P2E" models under the banner of GameFi (such as the once-popular sneaker project), or the social innovations touted by SocialFi (like http://Friend.tech), upon closer examination, they are merely well-packaged "digital casinos." While these projects have attracted a large influx of users in the short term, they do not genuinely address users' actual needs and pain points.

If getting more and more people to participate in speculative trading and driving up coin prices is considered Mass Adoption, then this "Adoption" is merely a zero-sum game of wealth concentration among a few, and its unsustainability is evident.

I have witnessed too many cases of friends from outside the circle entering the crypto space and losing everything, with only a rare few able to profit. This phenomenon has also been corroborated by recent data: a recent study by an on-chain data analyst showed that on the http://pump.fun platform, only 3% of users made profits exceeding $1,000, and behind this cold number lies the reality that profiting from trading coins is truly a game for a very small number of people.

Even more concerning is that the entire industry has seemingly become a breeding ground for hackers, phishing, and scams, with news of some whale suffering significant losses from Permit phishing frequently appearing on Twitter. Not to mention ordinary retail investors, according to the latest FBI report, in 2023 alone, American citizens suffered over $5.6 billion in losses due to cryptocurrency scams, with victims aged 60 and above accounting for 50% of the total number. Many ordinary investors' interests cannot be protected in this "dark forest."

The rampant speculation and increasingly severe hacking incidents have led to a deteriorating industry environment, prompting us to reflect: Are we chasing a misguided direction of "Mass Adoption"? In the fervent atmosphere of speculation, are we overlooking the truly sustainable value creation?

It is important to clarify that I do not intend to completely deny the speculative nature of Web3. After all, the vast majority of participants enter this field with the intention of obtaining investment returns, and this profit-seeking motivation is not inherently wrong; the speculative nature will continue to exist. However, Web3 should not, and cannot, merely stop at being a global casino. It needs to develop truly sustainable and practically valuable application scenarios.

Among these, payments and finance are undoubtedly the areas where Web3 technology has the most potential for real-world application. This has been recognized by traditional financial forces, national governments, and market levels: we see traditional financial forces actively exploring various innovative applications, including payment system innovations, real-world asset tokenization (RWA), the integration of DeFi with traditional finance, and the emerging PayFi concept. These positive explorations and practices clearly point to the most urgent needs in the current market.

In my humble opinion, the core issue for Ethereum or the industry may not lie in whether the technical direction is correct, but in whether we truly understand what constitutes valuable applications. When we focus excessively on technological innovation while neglecting market demand; when we are keen on creating concepts but drift away from real scenarios, is this development direction truly correct?

This line of thinking raises a deeper concern: if we continue to develop in this way, will the traditional financial system or SWIFT network that we once aspired to disrupt instead become the main driving force behind the large-scale adoption of blockchain? Furthermore, could we see a situation where traditional financial forces and government-led public permissioned blockchain systems dominate the vast majority of practical application scenarios, while public chains may be marginalized into niche "speculative playgrounds"?

While the Web3 industry still focuses on Ethereum "challengers" like Solana, it seems no one is paying attention to the fact that traditional financial forces have already sounded the horn for their advance. In the face of this major change, should we not consider not only the current development strategies for Ethereum or the entire industry but also how to find our positioning and value proposition in the wave of gradual compliance in the future? This may be the true test the industry faces.

After observing these trends, I have the following thoughts on the path to truly healthy and sustainable Mass Adoption in the industry:

First and foremost, solve real problems:

Whether in infrastructure or applications, we should be grounded in real needs and focus on addressing genuine pain points, such as the fact that many ordinary people and small and medium-sized enterprises around the world still struggle to access financial services; for example, the privacy issues companies face when using blockchain, etc. The value of technological innovation ultimately needs to be reflected through solving real problems.

Secondly, lower the barriers to use:

The ultimate goal of technology is to serve users, not to create obstacles. The plethora of terms and complex concepts in the current Web3 world, to some extent, hinders true adoption. We need to make technology more accessible, for example, by utilizing Chain Abstraction technology to address user experience issues.

Third, create sustained value:

The healthy development of the industry must be built on sustainable business models and cannot overly rely on speculative hype. Only projects that truly create value can survive long-term in the market, such as Web3 payments, PayFi, and RWA, etc.

The importance of technological innovation is undeniable, but we must also recognize that applications are the primary productive force. Without practical applications as a foundation, no matter how much infrastructure or how advanced the technology, it ultimately remains a castle in the air.

The Turning Point for Mass Adoption of Web3 Applications Has Arrived

Throughout history, attempts to combine blockchain with the real world have never ceased, but they often failed to materialize due to factors such as timing, regulatory restrictions, or technological bottlenecks. However, the current situation presents an unprecedented turning point: technological infrastructure is becoming increasingly mature, traditional financial forces are actively embracing innovation and exploring practical applications, and at the same time, regulatory frameworks in countries around the world are gradually improving. These signs all indicate that the next few years are likely to become a critical turning point for Web3 applications to achieve large-scale adoption.

At this important juncture, regulatory compliance is both the biggest challenge and the most promising opportunity. More and more signals indicate that the Web3 industry is gradually moving from the initial "wild west" era into a "new era of compliance." This transformation not only signifies a more regulated market environment but also heralds the beginning of truly sustainable development.

The signals of this transformation are reflected on multiple levels:

1. Regulatory frameworks are becoming more complete

• Hong Kong has launched a comprehensive regulatory system for virtual asset service providers (VASP)
• The EU's MiCA legislation has been officially implemented
• The U.S. FIT21 bill is set to pass in the House in 2024
• Japan has amended the Fund Settlement Act to provide a clear definition for crypto assets

2. Standardized participation from traditional financial institutions

• Large asset management firms like BlackRock have launched Bitcoin and Ethereum ETFs
• Traditional banks are beginning to offer custody services for crypto companies and launch tokenized bank deposits
• Mainstream payment companies are introducing compliant stablecoins
• Investment banks are establishing digital asset trading departments

3. Compliance upgrades in infrastructure

• More exchanges are proactively applying for compliance licenses
• Widespread adoption of KYC/AML solutions
• The rise of compliant stablecoins
• The application of privacy computing technology in compliance scenarios
• The launch of central bank-level blockchains (CBDC currency bridges like mBridge, Singapore's Global Layer 1, BIS's Project Agora, etc.)

4. Regulatory pressure on Web3 and the compliance transformation of projects

• The largest decentralized stablecoin project MakerDAO has transformed into Sky to embrace compliance
• The FBI has conducted phishing enforcement on the MeMe project market makers
• DeFi projects are increasingly introducing KYC/AML mechanisms

In this trend, we are seeing:

• More traditional financial institutions entering the Web3 space through acquisitions or partnerships
• Traditional financial forces continuously gaining control over Bitcoin's price discourse through BTC ETFs
• A new generation of compliant Web3 applications rapidly emerging
• The entire industry gradually establishing order under regulatory pressure, with opportunities for overnight wealth becoming increasingly rare
• The application scenarios for stablecoins shifting from speculation to substantive uses such as international trade

Undoubtedly, the future battleground for blockchain technology will focus on several key areas: payment system innovation, real asset tokenization (RWA), the emerging PayFi concept, and the deep integration of DeFi with traditional finance (CeFi). This reality brings an unavoidable proposition: if the industry is to achieve breakthrough development in real application scenarios, it must confront the interaction with regulatory agencies and traditional financial institutions. This is not a matter of choice but a necessary path for development.

The reality is that regulation always sits at the top of the industry ecosystem. This is not only an objective fact but also a repeatedly validated iron law throughout the past decade of the crypto industry's development. Every major industry turning point has been closely related to regulatory policies.

Therefore, we need to seriously consider several fundamental questions: Should we choose to embrace regulation and seek a path of coexistence with the existing financial system, or should we cling to the "decentralization" concept and continue to linger in the regulatory gray area? Should we pursue a purely "casino-like" Mass Adoption, repeating the speculative-driven path of the past decade, or should we strive to create real, sustainable value and truly realize the innovative potential of blockchain technology?

Currently, the Ethereum ecosystem faces a significant structural imbalance: on one hand, there is an ever-increasing stack of infrastructure and a plethora of technological innovations, while on the other hand, the development of the application ecosystem is relatively lagging. In this contrast, Ethereum is facing dual challenges: it must contend with the strong offensive from emerging public chains like Solana in terms of performance and user experience, while also being wary of the encroachment of compliance public permissioned chains being laid out by traditional financial forces in the practical application market.

What makes it even more challenging is that Ethereum must simultaneously respond to competitive pressures from two directions: on one side, public chains like Solana are capturing an increasing share of the meme market and user attention due to their performance advantages; on the other side, public permissioned chains led by traditional financial institutions are gradually laying out in practical application scenarios such as payments and asset tokenization, likely to gain first-mover advantages in these key areas.

How to seek breakthroughs under this dual pressure, maintaining technological innovation while not losing market competitiveness, are key challenges that Ethereum must confront in its quest for a breakthrough.

The above views represent my personal perspective, and I hope to spark more constructive thinking and discussion within the industry. As industry participants, we should all contribute to pushing Web3 towards a healthier and more valuable direction.

Due to my personal cognitive limitations, I welcome everyone to engage in friendly discussions to explore the future development direction of the industry together. Additionally, I also trade cryptocurrencies and want to make money; please refrain from harsh criticism, as my viewpoint is simply that the industry should not only focus on speculative trading but also include some positive elements.

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