IOSG founder Xinwen: From Hong Kong to Denver, Ethereum is entering its "Dunkirk moment."

Author: Jocy@IOSGVC, Founder of IOSG Ventures

I believe everyone has seen many records from Consensus HK over the past two weeks, so I won't repeat them. Most can be summarized as **disappointment in the industry with no signs of a breakthrough, believing we have entered a **bear market. That week was also a feast for P players and KOLs. The impact of my trip to Hong Kong was the sense of reason; those young players and experts who work harder than funds and entrepreneurs deserve so much, and they are surrealist investors. They always manage to embellish every transaction with a perfect ending. Many P players' trading principles are 90% in BTC and 10% in active Solana positions, always maintaining PVP and sprinting, regardless of how much profit they make each time; they will execute such position configurations. Due to the meme wave and attention economy, this became the hottest discussion in HK.

Kaito's victory has ushered in a golden age for KOLs, where attention is priced and can be quickly monetized. In stark contrast is the entire Ethereum ecosystem, lifeless and hollow, with no one following the idealistic horn; this is a heavy blow to reality. So-called value investors are deeply trapped, and long-term holders are beginning to turn bearish on Ethereum, shifting towards Solana. **Many cannot see the hunger level of Ethereum's entrepreneurs (in contrast to Solana, when a *dev* seeks to establish a connection with L2/Ethereum, it typically takes an average of two weeks, while with the Solana Foundation, it usually takes less than two days to complete the connection and start communication).** This seems to be a deliberate act by the rulers of the crypto industry; **in this small cycle of the **bull market, they do not encourage long-term holders but rather provide better returns for short-term traders. However, in my view, this reflects the inaction or lack of crisis awareness among industry leaders like Ethereum, and the market is sounding the alarm.

The Prevalence of Short-Termism: The Collapse of Industry Values

At the same time, when everyone sheds their disguises, wanting to cash in during the end of the bull market, many begin to lack ideals and faith, becoming ruthless arbitrage tools. No one cares about the future of the industry; everyone just wants to make one last profit in this cycle. Exchanges, in order to support their project tokens and chains, may abandon listing standards to list some projects they have invested in; top-tier projects treat TGE as their last ATM, and market makers have become the consistent winners of this cycle, relying on BD and branding to obtain chips for free, averaging close to $40 million in net income despite the overall decline in VC tokens; it seems that everything is shifting from long-termism to short-term bubbles and speculation, and the actions of these individuals are profoundly affecting those who persist in building.

This moment is very similar to 2018/2022, extremely quiet. Practitioners leave the industry due to a lack of hope and recognition. **Everyone is trying every means to survive in the **bear market. For teams still starting and working, this will be painful for them; they need unwavering determination and values at all times. Trump influenced the core values of the entire United States, and after the Trump token, the crypto industry sparked a massive wave of nihilistic investment. Practitioners and speculators believe this is a fast and short-term game, and everyone aims to take as much cash as possible before the money game button is pressed.

Summarizing the trip to Hong Kong, it is a significant collapse of values in the industry and a formal written judgment on Ethereum. As the most successful entrepreneur in the industry, has he grasped the helm of the industry, or is he leading it towards nihilism?

Challenges and Transformation of the Ethereum Ecosystem

**TL;DR: The founder of Denver infra is very bearish, but the founders of applications and *AI* are very bullish.**

During the trip to Denver, I still saw many eye-catching scenes. Those founders and developers who have steadily built for many years were suddenly told that the dynasty was about to fall; they chose not to believe it. It seems that the Ethereum ecosystem has always had a culture of monopolization; they have been smoothly financing along the way and have seen many projects inferior to theirs perform well in the speculative token market. They may have never thought that one day they would be unable to raise funds and that their issued tokens would drop to zero like other air tokens. It was only when their runway was down to the last 6-9 months that they slowly realized the need to create a product with real revenue and a user base and began to seriously consider what the problems with Ethereum were.

Of course, it is never too late; it just requires drastic layoffs and a complete denial of their past, which poses a huge challenge for the founders, as they are betting on an uncertain direction but must risk everything for it. According to incomplete statistics, projects deeply rooted in and built on Ethereum and the EVM ecosystem have raised over hundreds of billions of dollars, with their total primary and secondary market valuations exceeding a trillion dollars. Therefore, the question facing these projects is whether to stay on Ethereum or leave. Even strong figures like Lido founder Konstantin, when he announced on Twitter that he would establish a second Ethereum Foundation, instantly received DMs from hundreds of founders in the Ethereum ecosystem (including Uniswap). This still poses significant challenges to consensus.

Additionally, I met a wave of Ethereum ecosystem entrepreneurs. In the past, they have always been the backbone of the industry's technical faction, and the technical products and solutions they developed have been widely adopted, whether TEE/zkTLS/rollup; they have been dominant. **However, these individuals have grown weary of providing the best solutions for technical protocols that lack end users and demand, which does not bring them true entrepreneurial joy. What excites them now are the inspiring new papers emerging in the field of *AI* research.** To be honest, there are quite a few founders like this, and they are among the few in the industry who can truly delve deep and produce viable solutions. If a large number of such founders choose to leave, I believe it will set back the entire Ethereum infrastructure by at least three to five years.

The Wonderful Energy of AI and Web3 Integration

At first, everyone said that Denver infra had no hotspots or vitality, but after we discussed 3-4 new AI*Web3 projects on average each day, we saw the Ethereum community's active embrace of emerging technologies like AI, as well as innovative attempts in areas like DeTraining/Inference/DePIN. Ethereum is actively adapting to new technological trends and exploring new application scenarios.

Capital and entrepreneurs have become the industry's early warning birds. Paradigm led a $1 billion investment in the Web3 LLM company Nous Research, Groq generated over $1 billion in revenue from Inference in the past year, Openmind collaborated with Yushu Technology to create RobotAI, and the open-source product DePAI was showcased in Denver. Hyperbolic has also become one of the most supported inference networks for Web3 developers, along with open-source intelligence platforms like Open Gradient and Pluralis. At the Denver Ethereum conference, smart developers and founders have begun to fully help Web3 embrace AI, brainstorming how to bring AI agents and more applications into Web3 scenarios. The industry has never had a definitive end or stopping point; research and curiosity will always drive builders further.

Openmind collaborated with Yushu Technology to create RobotAI, and the open-source product DePAI was showcased in Denver.

Macro Benefits Easing, Crypto Keeping Up with the Times

**However, after dealing with most American institutions, the scene is completely different from Asia. Everyone maintains a very optimistic confidence regarding the crypto policy's *bull market* and relaxed environment.** The U.S. banking policy on accepting crypto asset custody has been passed, and banks will soon gradually allow BTC/ETH to be used as collateral, even expanding to mining equipment. Here we can see a clear trend: **a crypto easing environment is about to form, with the previous industry borrowing rates of 10% potentially adjusting to around 3-4%, and even Japan could reach **negative interest rates, which will bring liquidity back to the industry.

In addition, we have recently seen a series of favorable crypto policies in the U.S. Uniswap and Coinbase are both considering designing tokenized securities models to allow traditional industry investors to better evaluate and purchase tokens. The regulatory release of good news in this cycle will far exceed our expectations, so I am very optimistic about the market in the next two years, expecting a good macro environment. Many people say this round of the bull market has ended, but I don't see it that way. Every bull market not only has the cooperation of the macro market but also the self-innovation and emergence of new applications within the crypto market. In this cycle, we have yet to see true innovation; if there continues to be none, it will be a false bull market. In the next two years, we can expect more traditional companies and even national governments to settle in L2 networks and issue their decentralized networks, with the prosperity of L2 business driving the growth and value capture of Ethereum L1 once again.

Restructuring Ethereum Governance: Moving Towards Mainstream and Commercialization

On the third day in Denver, I attended Pragma hosted by ETHGlobal and met several core EF developers. They revealed that Ethereum is about to undergo a new organizational restructuring. Interestingly, @dannyryan, who has had a well-known reputation and voice in the Ethereum core developer circle, and the newly established @Etherealize will shoulder the mission of leading Ethereum into the mainstream world and commercialization. Additionally, the two Co-EDs of the foundation, Hsiao-Wei @hwwonx, have been deeply involved in Ethereum for many years, following Vitalik on his journeys since 2016 (the person sitting next to Vitalik in the attached photo from the 2019 Ethereum hackathon selection day is him). Furthermore, Tomasz @tkstanczak, as the founder of Nethermind, is very familiar with the entire Ethereum ecosystem and, as a third-party dev shop, understands a more sustainable business logic, which can help Ethereum find a balance in its infrastructure and commercialization path.

Attached photo from the 2019 Ethereum hackathon selection day, the person sitting next to Vitalik is Co-EDs Hsiao-Wei @hwwonx.

In fact, the problems Vitalik faces are the same as those of all entrepreneurs; as the team grows, it becomes harder to manage. Friends who understand personality traits can try to analyze V's journey, from the Milady meme avatar on Twitter to his disappointment with crypto OGs, switching to a half-human, half-bird Druid image from World of Warcraft, which represents his reconciliation with the community's voice, announcing Ethereum's new team structure the next day. Ethereum may be the first truly decentralized organization and economy in history. We should be more tolerant of this man who has just turned thirty; he indeed has not shown particularly brilliant performance in organizational management and the commercialization of Ethereum applications, but who else could lead this organization to create more brilliance and results?

Perhaps Ethereum could also learn from Elon Musk to create a DOGE committee responsible for dismissing irresponsible devs and virtual positions. How to measure contribution value against KPIs is an important question before V. Additionally, providing clearer value propositions and development needs to internal core developers, and giving the management team more specific roadmaps and management timelines, will better allow Ethereum to return to community and democratically elected governance. As the cornerstone of Web3, Ethereum is also actively exploring Layer 2 solutions and technological upgrades to meet the growing application demands.

There Are No Saviors; V Needs to Encourage More Application Entrepreneurs

For Ethereum, is technical research so important right now? Perhaps it was important in 2017, 2020, and 2022, but now applications should be more important than technology. The next most important milestone for Ethereum, which will give the ecosystem builders the greatest confidence, will be whether Ethereum, as the world computer, can produce epoch-making super application products.

Many people regard Vitalik as the savior of Ethereum, and Ethereum as the savior of the industry, but there has never been a savior. Everyone should be a savior. I previously called for all organizations that have gained substantial capital accumulation and stable business income in this industry to contribute to the future of this industry, whether by donating to some open-source organizations of Ethereum or creating better opportunities for young people in the industry. Additionally, apart from supporting with grants, many entrepreneurs still need funding support. In this wave of bloodshed among industry altcoins, it has dealt a heavy blow to the already shaky Asian funds, with many funds beginning to shut down or transition to secondary markets. The entrepreneurial environment in Asia is difficult; if we lose the support of Asian institutional investment VCs, the industry will become even thinner. I still call for the early-stage venture capital support to be essential in Ethereum's ecosystem organizations, suggesting that all exchanges allocate 1-2% of their revenue each year to support the development and innovation of Ethereum's open-source ecosystem.

Will Ethereum perish in the next bull-bear cycle? I don't think so. It is the most successful decentralized organization in the Web3 industry, and we should not let it fail. Its failure would mean that the hundreds of billions to trillions of talents and project assets built on the Ethereum commercial empire would need to start over, plunging the entire industry into a 5-10 year regression, meaning many OGs would exit the stage.

Please cherish your Ethereum. If you look back at what happened from 2020 to 2030 in 2030 with a ten-year perspective, you may find that the doubts and noise of 2025 were actually trivial. How to judge value and innovation from a ten-year perspective is an even more worthy priority to consider.

Optimists are often correct; in the most difficult and tumultuous stages, we should maintain confidence and optimism.