Author: YBB Capital Researcher Zeke

I. Bowing to Compliance

How did crypto move from niche to mainstream? Over the past decade, decentralized blockchain has provided a regulatory wilderness to the world. Satoshi Nakamoto's 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 existence that spans countless nodes on the internet.

Being outside of regulation is almost the only driving force behind the success of this industry. From the asset issuance that began with ICOs and the countless subsequent variants, to the DeFi ignited by UNI, and now the so-called super application stablecoins, all are built upon this factor. Eliminating the trivialities of TradFi has created what this industry is today.

Interestingly, after the failure to explore new continents during the Age of Exploration, people began to abandon sailing ships and return to the past. Perhaps it started from the moment the BTC ETF was approved, or from the moment Trump was elected; native crypto has entered an era of decline. The industry has begun to seek compliance, aiming to meet the demands of TradFi, with stablecoins, RWA, and payments becoming the mainstream of industry development. Beyond that, we are left with pure asset issuance—a picture, a story, a string of CA is the only topic of conversation in daily life. "Dogecoin" chains are no longer a derogatory term.

How did we get to this point? I have analyzed this in many articles over the past two years, but ultimately, the blockchain currently lacks effective means to restrain various entities behind the addresses from wrongdoing. We can only ensure that nodes are honest and that DeFi is intermediary-free. Beyond that, we cannot prevent anything that may happen in this dark forest; many things inevitably lead to desolation. NFT, GameFi, and SocialFi are all highly dependent on the entities behind the projects. Blockchain has excellent fundraising capabilities, but who will ensure that these project parties use the funds reasonably and turn a story into a real project?

The vision of non-financialization cannot be solved merely by improving infrastructure performance. If these things cannot be done well on a centralized server, how can we expect them to be done well on-chain? We cannot implement proof of work on project parties. Today, bowing to compliance may be the beginning of future non-financialization, which is indeed ironic yet helpless.

Crypto is indeed becoming a subset of the traditional. The discourse power of this ledger is beginning to be stripped away by the upper echelons. There are fewer and fewer bottom-up initiatives, and opportunities are being compressed; we are entering an era of on-chain hegemony.

II. Stablecoins

What is on-chain hegemony? I think it can be discussed from two aspects: first, stablecoins, and second, the story of traditional internet is repeating itself.

To start with the former, today's stablecoins are basically dominated by fiat stablecoins and YBS stablecoins. Recently, a significant event occurred regarding fiat stablecoins: the passage of the "Genius Act." Let me briefly summarize the content of the act:

Definition and Issuance Restrictions: Defines "payment stablecoins" as digital assets used for payments or settlements, which must be fully backed 1:1 by US dollars or highly liquid assets (such as short-term government bonds).

Only licensed issuers (who must register and accept regulation) can legally issue stablecoins, and unauthorized individuals or entities are prohibited from issuing them.

Reserve and Transparency Requirements: Issuers must hold reserve assets equal to the value of stablecoins 1:1 (such as US dollars or high-quality liquid assets) to ensure stability and solvency.

Issuers are required to publicly disclose reserve status regularly, and those with a market capitalization exceeding $50 billion must undergo annual financial audits and comply with anti-money laundering (AML) and counter-terrorism financing (CFT) regulations.

Regulation and Compliance: Establishes a clear regulatory framework; stablecoins are not considered securities and are subject to banking regulation rather than SEC regulation.

A licensing procedure will be established to 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 US through a clear legal framework, enhance financial inclusion, and maintain the dominance of the US dollar in the digital economy.

Restricting Large Tech Companies: Prohibits large tech companies from issuing stablecoins without regulatory approval to prevent market monopolization.

The long-standing industry concern over Tether's collapse has finally become a thing of the past, and it is only a matter of time before downstream payments are integrated into the mainstream. The large-scale adoption of blockchain is beginning to take shape. But what will happen to stablecoins once they are incorporated into the regulatory framework? How will other countries respond to this? The reasons for the success of stablecoins need not be reiterated.

The passage of this act also means that on-chain transaction mediums are officially taken over by the US. American private enterprises are benefiting from the dividends of US debt, and with control over currency, this country will have a high degree of control over on-chain activities. Without discussing the continuation of dollar hegemony, how should I imagine a scenario where all stablecoins in a DeFi project are suddenly frozen?

On the other hand, there are YBS stablecoins. The concept of Ethena is promising, offering UST-level yields in a bull market while boasting stability far exceeding that of traditional stablecoins. As I mentioned in my previous articles, native on-chain stablecoins may ultimately achieve Delta-neutral hedging, such as the more complex f(x) Protocol, which hedges on Hyperliquid through Resolv. However, it is strange that everyone is now starting to create YBS stablecoins, first with various traditional hedge funds entering the fray, then market makers like DWF getting involved, and finally exchanges wanting to take a slice of the pie. While they may not become Tether, they at least want a share of the ENA cake, and this ideal is spreading like a virus.

This pathological YBS stablecoin craze has clearly deviated from its original meaning. Using one's original accumulation and adopting more aggressive strategies to seize market share, truly innovative projects are being crazily suppressed, and the threshold for startups is getting higher and higher. Yes, technology and ingenuity are no longer important here; whether or not to decentralize is irrelevant. Innovative projects like f(x) Protocol are not receiving widespread attention. Now, the combination of Cex and high-end quantitative teams is seen as the right approach; in this war, APY and convenience are everything.

While YBS stablecoins may be a good choice compared to exchanging my ETH for small pictures or various bizarre narratives, the packaging of these Cex financial products becoming the only innovation in this round only indicates that most past paths were wrong.

III. Asset Issuance

Public chains are the largest asset issuance platforms, and ICOs were the beginning of this game. Everything that followed has been a variant, but at least it has promoted the birth of some narratives and pushed the industry forward. However, now everything is moving towards traditional internet development. The profit models of Base and Pump are actually infinitely close to Web2, with almost zero return to the community, and in this regard, they are even inferior to Cex. The original meaning of Web3 was to democratize everything; co-creation was meant to be about building and enriching together, but it has now become distorted. This is just the first point; now all oligarchs are studying how to create asset issuance platforms, wondering what constitutes innovative asset issuance.

Launchpads have now become the only paradise where native crypto users can get rich, but it is also pathological. Besides paying fees to platforms and tools like GMGN, one must also experience the feeling of shooting in the trenches. Asset issuance has also started to become nested, even capable of developing off-chain. Well, although NFTs and GameFi are not strictly decentralized, at least they have some on-chain components, have driven the construction of Infra, and have allowed this industry to break out.

Since the AI framework from last year, completely off-chain projects can now issue tokens, and it itself is an off-chain asset issuance platform. Extreme speculation is continuously lowering the industry's bottom line; what is the meaning of all this?

CZ and Vitalik are puzzled by memes, leading to the concept of DeSci, allowing speculators to speculate and researchers to innovate. It seems to find a common ground, but how can studying lab mice and classical mechanics be more interesting than the memes and bizarre AI on today's internet? This narrative has only been popular for a while; after AI and DeSci cooled down, it was time for celebrity coins to make their appearance, completely draining liquidity from Trump in North America to Milei in South America.

When the market begins to cool down and narratives fail to take over, asset issuance has to resort to Ponzi schemes. Virtuals combined the Binance Launchpool + Alpha model, staking for points to participate in new token offerings, and one could stake again after participating in new offerings, resulting in skyrocketing token prices. Emmm, such a naked and direct approach has failed to pique my interest. What comes next? Believe (the concept of internet capital markets)?

I cannot be sure, but in the last cycle, various flywheels, Ponzi schemes, and narratives left behind a treasure called DeFi, which indeed sparked a lot of fresh ideas in the industry. What can speculation at this stage create? I only see a continuous simplification of issuance thresholds, accompanied by many adverse events. Do we need a new set of rules?

IV. Attention

In the past, the rise of a project relied on narrative and technology, bursting forth after building consensus. Now we are buying attention, using points to purchase like Blur, or using real money to set up MCN companies for KOLs like exchanges. The combination of PDD and Douyin's marketing strategies permeates the circle; compared to various technical talks by founders at conferences, this method seems 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 really an innovation; it has been reflected in ancient SocialFi. Kaito's biggest innovation is AI-driven, claiming to recognize the "value" of information and measure sales capabilities using AI. However, this model clearly cannot truly capture long-term value; tokens are becoming a type of "fast-moving consumer goods."

The drawbacks of the points system are something everyone has likely experienced; I have also reviewed the impact that Blur has brought to this circle in previous articles. If future projects rely on purchasing attention, it is hard for me to evaluate whether this behavior is wrong. I can only say that there is no sin in projects striving for marketing, but there is a trend of everyone in the circle becoming pump-like. The old crypto era has indeed come to an end. Selling influence for profit has become a mature business, from the President of the United States to Binance and now to KOLs; no project has prospered because of this, as everyone is just taking what they need.

Conclusion

Stablecoins will move towards the world, and blockchain payments have become a certainty. But the natives living here may not need these; we need native on-chain stablecoins, we need non-financialization, we need the next wave, and we do not want to live in a Web3 that sells traffic.

Time is indeed proving that some BTC OGs were not wrong in what they said back then, but I still hope that in the future, they will be wrong.