Beyond Speculation and Stablecoins, What’s the Next Stage for Cryptocurrency?
In the past two years, the cryptocurrency industry has gone through what I call an “integration phase.” During this phase, the industry focused more on optimizing existing technologies rather than creating entirely new innovations from scratch.
This integration and optimization were mainly reflected in three key areas of the cryptocurrency industry:
Infrastructure: Improving and optimizing underlying technologies.
Application scenarios: Clearly defining and deepening existing core use cases.
Long-term winners: Emerging projects and technologies with sustained competitiveness.
Infrastructure Optimization: Moving towards 2024
The cryptocurrency industry’s infrastructure has matured and is no longer a major obstacle to industry development, thanks to continuous optimization of technology rather than radical architectural innovations. These optimizations have laid the foundation for the industry to embrace a possible next “bull market” phase, during which:
Blockchain transaction storage space (Blockspace) is sufficient to accommodate more transactions.
Development tools (Tooling) are more refined, providing convenient support for developers.
Transaction fees for users are close to zero or even completely free.
The complexity of wallet usage has been effectively simplified, reducing user barriers.
The user experience of on-chain applications can now rival traditional Web2 applications.
In fact, the infrastructure advancements in this phase, such as the maturity of Ethereum L2s (Ethereum Layer 2 scaling solutions), the reliability improvements of the Solana network, and wallet abstraction technology, have only taken 12-18 months to develop to a production-ready level.
Integration of Application Scenarios and Long-term Winners: Trends in 2024
Currently, two core application scenarios have entered a mature stage: speculation and stablecoins.
These two scenarios have existed since the inception of the cryptocurrency industry. Bitcoin has been the industry’s first speculative asset since its launch in 2009. Stablecoins, on the other hand, were among the earliest token applications (e.g., USDT launched in 2014). Now, the development in these two areas is entering a golden phase, closely related to the optimization of infrastructure.
For example, the creation and trading costs of memecoins, which directly embody speculative behavior, have become extremely low and simple. Similarly, the issuance and trading of stablecoins have become more convenient due to advancements in technological tools. Tools like Bridge have greatly simplified the process of stablecoin issuance and trading, making these operations easy and efficient.
In the extended areas of the core application scenarios of speculation and stablecoins, another integration trend is emerging: the “long-term winners” that have performed outstandingly in recent times are continuously expanding their advantages and achieving greater success. These projects include blockchains like Solana and Ethereum, wallets like Phantom, and decentralized exchanges (DEXs) like Uniswap and Raydium. They not only benefit from the rapid growth of stablecoins and the speculative market but also quickly adapt to popular speculative trends in the market, such as both memecoins and NFTs.
The Next Stage of the Cryptocurrency Industry: Breaking Bottlenecks and Embracing Transformation
With infrastructure bottlenecks gradually becoming a thing of the past, the industry faces two major bottlenecks that need to be overcome. These bottlenecks not only led to the integration-optimization phase but also hindered the industry’s transition from 0 to 1 in terms of new innovations.
The first bottleneck is the challenging and uncertain regulatory environment. However, this situation may be changing. The cryptocurrency industry may soon welcome a clear regulatory framework in the United States for the first time, providing a fertile ground for the development of excellent projects in the industry and clearing out bad actors.
High-performance infrastructure and a clear regulatory environment are the two key factors driving the industry’s transformation. However, the core of this transformation lies in solving the final and most important bottleneck: talent.
Since 2022, there has been a significant decrease in the number of new talents entering the cryptocurrency industry. This phenomenon is not difficult to understand, as the negative public opinion environment and the risks faced by founders under uncertain regulatory frameworks have discouraged many people. However, the lack of new talent directly limits the generation of new ideas within the industry.
I believe that with the improvement of the industry environment, this trend will reverse next year and unfold in two stages:
Long-term winners that have performed exceptionally well during the integration phase will continue to expand their advantages and achieve unexpected success. For example, Polymarket stood out during the recent election cycle, and similar cases will continue to emerge in the future. This trend will benefit from the mainstream application of on-chain technology, both at the consumer and institutional levels. New startups will have an IPO wave, and more projects will launch their own tokens. These developments will redefine people’s perception of the influence of the cryptocurrency industry and inspire a new generation of builders to join this field, injecting fresh vitality into the industry.
A completely new group of entrepreneurs will enter the cryptocurrency field. They will start from basic principles (i.e., first principles) and will no longer be bound by traditional infrastructure and existing concepts. Under clear regulatory rules, experiments centered around “user ownership” as the core of the new product experience will become feasible. This will bring a new wave of innovation to the industry.
Although the volatility of the cryptocurrency market will continue, with new rules, new talents, and new ideas emerging, we hope to see in the next five years whether the cryptocurrency industry can go beyond speculation and stablecoins and provide more profound value.
At the same time, we also expect “user ownership” to become the core of new products and networks, driving faster growth by aligning with users’ economic interests.
The success validation of breakthrough applications will be a key path to reducing long-term market volatility. Personally, I am very much looking forward to witnessing the development of this process, as I believe the next few years are a critical window period for the development of the cryptocurrency industry.
I shared these perspectives with Variant’s investors at the annual conference on Tuesday.
However, I need to add one point: what concerns me the most is that before the industry transitions from the integration-optimization mode to the 0 to 1 innovation mode, there may be another rapid cycle of price volatility.
If this situation occurs, it may slow down the pace of innovation in the industry. Nevertheless, I still believe that the next five years will be an important window period for the development of the cryptocurrency industry.
