New technology VS new applications, which one does the current market need more?

Original Title: 《GG》

Author: Matti

Compilation: Luccy, BlockBeats

Editor's Note:

Currently, the cryptocurrency industry is continuously emerging with new technologies and infrastructures, but many developers are more focused on attracting venture capital rather than directly solving problems for users. Matti points out, using Shopify as an example, that the cryptocurrency field should prioritize simplifying technical complexity and launching more practically useful application scenarios to attract more users.

Matti believes that the complexity of technology and immature infrastructure hinder mainstream user adoption. Despite significant funding, many projects lack actual consumer-oriented use cases. At the same time, the premature involvement of institutions and traditional finance may pose risks, further exacerbating market speculation. BlockBeats compiles the original text as follows:

In this article, I will explore whether more infrastructure is needed to attract more crypto users, with the ultimate conclusion being that we may actually need less technology. At the same time, the narrative around technology is essentially about capturing more value. In the pursuit of this accessible value, we have entered the era of crypto entertainment, where everyone, including institutions, wants to participate.

Are you tired of hearing about those emerging infrastructures that keep securing funding? Does the complexity of crypto technology really hinder its mainstream adoption? Or are we just delaying answering the truly tricky questions?

I saw a video where the founder of Shopify mentioned that venture capitalists who missed the opportunity to invest in his company claimed that the total addressable market (TAM) was too small. At that time, they counted about 50,000 online stores. Now, there are 1 million merchants on Shopify alone.

Shopify created a new market by solving the technical challenges of creating online stores. So, for the on-chain economy, do we need more use cases to attract users, or do we need better technology? Or is the speculation around technology itself a use case?

Are Developers the Product?

Currently, more developers are creating products for other developers rather than actual users. Optimizing for venture capital is easier; the more obscure your product, the stronger the reflexivity of the tokens. Right now, we have more technology than actual applications.

To reiterate the above, we must (at least) satisfy one of the following:

• We need better technology to eliminate user barriers.
• Technology doesn't matter; first develop products for users, then build infrastructure (see Amazon / AWS).
• Technology itself is the product, and venture capitalists are consumers and sponsors of the casino.

By analogizing Shopify's success story to today's on-chain usage, we can argue that the lack of useful applications is due to technological barriers. Shopify created a new market, and thus there was no actual total addressable market (TAM) before.

If this is correct, I believe we need to simplify the complexity of technology rather than increase infrastructure. In other words, the answer should be to reduce technology rather than increase it. At the same time, we need better use cases beyond speculation to attract more funding.

Reasons to Reduce Technology

Blockchain itself is designed to be complex. They are based on redundancy, liberating state retention from closed databases. Block space serves as a medium for updating states, and its production is not easy, accompanied by complexity and cost. After all, there is no such thing as a free lunch.

Developers and entrepreneurs have proposed various forms of chain abstraction solutions. These solutions aim to make it easier for people to interact with blockchains, such as conveniently bundling wallets, achieving cross-chain bridging, and deploying applications more quickly and cheaply. In a sense, they act as intermediaries between block space and users.

From a macro perspective, chain abstraction bundles block space with developer tools and composable infrastructure, then provides it to users. But is it possible that through these over-engineered solutions, we are heading back towards centralization? Does this mean that ultimately, we will have a complex multi-signature scheme as the "Amazon Web Services (AWS)" of Web3?

If you don't think abstraction is the solution, but you still support a technology-first approach, you might be looking for the next ZK or FHE miracle that can scale and verify proofs so that our ordinary neighbors can also use blockchains. Therefore, today's solutions to technical friction can be summarized as:

• Reduce technology: simplify complexity (compromise).
• Increase technology: scale and bridge (faster, cheaper, seamless transactions).

This means that to attract the next 500 million users, we need blockchains with scalability and interoperability, as well as simpler interaction methods for users and developers.

Developers continuously promote wallets and universal applications, claiming that a better user experience is the means to attract new users into the cryptocurrency space or capture market share from Metamask. For users, cryptocurrency does not need a better user experience—it needs new use cases. Give people more interesting or useful things to do.

Proposing new use cases is much more difficult than copying existing practices and making slight modifications to make them appear original. Many applications are built on "should"—"users should want to own their data or use governance" and "Twitter shouldn't have so much power," rather than based on actual needs.

Therefore, I don't think the problem lies in technology, but rather in a lack of imagination regarding use cases. What we currently need are new applications. Given that there is more funding in the crypto space than there are well-executed ideas, we ultimately find ourselves caught in the frenzy of the crypto cycle.

Specialization of Lollapalooza

When you don't know what to build, you develop more technology. When you don't know how to spend money, you engage in financial operations. When you feel bored, you browse memes online. Cryptocurrency encompasses all of these in a movement of escapism.

Cryptocurrency is currently in a macro cycle that I call "entropy reduction." This can be summarized as "speculation is the wedge." Speculation is consuming cryptocurrency, and cryptocurrency is consuming speculation. I believe the past and future can be divided into the following macro cycles:

• 2009-2014: Crypto Punk Movement (Origin)
• 2014-2020: Entrepreneurialization of Cryptocurrency (Entropy Increase)
• 2020-2025: Crypto Entertainment (Entropy Reduction)
• After 2025: Deployment Phase (Negative Entropy)???

Currently, the entire industry is caught between two extremes: a dystopian meme with no intrinsic value and a utopian technological promise that cannot solve current problems. No one is focused on answering the tough questions (use cases). This is the true reflection of entropy reduction:

Do you want to make money or do it right?

At the end of the cycle, midcurve investors may be right again, but this may also mean they will neither make money nor lose money. Cryptocurrency has become a reality of betting on the future; everyone is both a technology investor and a meme investor, and everyone can participate in this zeitgeist because there is no barrier to entry.

Left-wing and right-wing investors continue to play this pretend game because it can be profitable (midcurve investors will eventually get caught up as they become the liquidity at the exit). The rules of the game are simple. Sell tokens to anyone willing to buy. What's the problem? A lack of fundamentals?

This sounds like a "so what" attitude, but when the economy itself relies on a kind of alchemy, and few can justify its rationale without relying on performative economics, how do we anchor it to reality? One might say that the global $400 billion consulting market is also a joke, but because it has been established, it is hard for people to stop participating in this particular pretend game.

In fact, the market has largely turned into an entertainment industry, which is the impact of 24/7 streaming information on society. Cryptocurrency has found a good product-market fit in this peak era of performance, where we blur the lines between games and reality.

C'est la vie. This is not a normative analysis; I'm not saying this is bad. I'm just pointing out how financial games evolve. This evolution makes some seemingly worthless things potentially priceless in the future (and most will again become worthless).

In today's era, following the flow of funds means following the trend of Lollapalooza. If you can play this game—congratulations, you have skills that sell faster than KOLs. But in my view, the current cryptocurrency is primarily an entertainment industry, and we are engaged in the business of token sales.

I don't think this is the final form of cryptocurrency. I suspect a massive collapse—real disillusionment—is still ahead. The equivalent of the internet bubble in cryptocurrency has yet to occur. Why do I think so?

• Most funded projects are technology for technology's sake.
• Blockchains have not yet scaled to meet mainstream demand.
• Very few consumer-oriented use cases.
• The involvement of institutions and the adoption of traditional finance will be premature and ultimately become foolish funding.

No matter how you think about it, we are not yet prepared or worthy of meaningfully absorbing trillions in institutional funding, which is my final piece of the puzzle. If funding flows in through ETF approvals, we will let the ultimate degen big shots enter the last segment of the macro cycle that began in 2020.

From a high-level perspective, the success of cryptocurrency depends solely on bringing more funds into this game. In the short term, its success may become a self-fulfilling prophecy, igniting the financial decay that cryptocurrency attempts to replace. In the long term…