What’s next for cryptocurrencies beyond speculation and stablecoins?
In the past two years, the cryptocurrency industry has gone through a phase that I call the “integration phase.” During this phase, the focus of the industry has been more on optimizing existing technologies rather than creating completely new innovations from scratch.
This integration and optimization can be seen in three key areas of the cryptocurrency industry:
Infrastructure: Improving and optimizing underlying technologies.
Use cases: Clearly defining and deepening existing core use cases.
Long-term winners: Emerging projects and technologies with sustained competitiveness.
Optimizing Infrastructure: Moving towards 2024
The infrastructure of the cryptocurrency industry has been continuously optimized and has now matured, no longer being the main obstacle to industry development. This maturity is due to continuous technological optimization rather than radical architectural innovations. These optimizations lay the foundation for the industry to embrace a potential next “bull market” phase. During this phase:
Blockchain transaction blockspace is sufficient to accommodate more transactions.
Development tools are more refined, providing convenient support for developers.
Transaction fees for users are close to zero or even entirely free.
The complexity of wallet usage has been effectively simplified, lowering user barriers.
User experience of on-chain applications can now rival traditional Web2 applications.
In fact, the infrastructure advancements during this phase, such as Ethereum L2s (Ethereum’s second-layer scaling solutions), the improved reliability of the Solana network, and wallet abstraction technologies, have only taken 12-18 months to develop to a production-level maturity.
Integration of Use Cases and Long-term Winners: Trends in 2024
Currently, two core use cases have matured: speculation and stablecoins.
Both of these use cases 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 implemented token applications (e.g., USDT launched in 2014). The development in these two areas is now entering a golden stage, closely related to the optimization of infrastructure.
For example, Memecoins, as a direct embodiment of speculation, now have significantly lower creation and transaction costs and simplified operations.
Similarly, the issuance and trading of stablecoins have become more convenient due to advancements in technical tools. Tools like Bridge have greatly simplified the process of issuing and trading stablecoins, making these operations easy and efficient.
In the extended areas of these two core use cases, another integration trend is gradually emerging: the “long-term winners” that have shown outstanding performance recently 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 speculative markets but also quickly adapt to popular speculative trends in the market (e.g., both Memecoins and NFTs).
The Next Phase of the Cryptocurrency Industry: Breaking Barriers, Embracing Transformation
As infrastructure bottlenecks gradually become a thing of the past, the industry faces two major bottlenecks that need to be overcome. These bottlenecks not only contributed to the integration-optimization phase but also hindered the industry’s transition from 0 to 1 in terms of completely new innovations.
The first bottleneck is the challenging and uncertain regulatory environment. However, this situation may be changing. The cryptocurrency industry may be about to witness a clear regulatory framework in the United States for the first time, which will provide a fertile ground for the development of excellent projects in the industry and eliminate the presence of bad actors.
High-performance infrastructure and a clear regulatory environment are the two key factors driving the industry’s transformation, with the core of this transformation being the resolution of 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 understandable, as negative public opinion and the risks faced by founders under uncertain regulatory frameworks have deterred 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 shown outstanding performance during the integration phase will continue to expand their advantages and achieve unexpected success. For example, Polymarket performed remarkably well during this election cycle, and similar cases will continue to emerge in the future. This trend will benefit from the mainstream application of on-chain technologies at both consumer and institutional levels. Startups will experience an upsurge in going public, 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 brand new group of entrepreneurs will enter the cryptocurrency field. They will start from fundamental principles (i.e., first principles) and will no longer be bound by traditional infrastructure and old ideas. Under clear regulatory rules, experiments centered around “user ownership” as the core of a new type of product experience will become feasible. This will bring a wave of new innovation to the industry.
Despite the ongoing price volatility in the cryptocurrency market, with new rules, new talents, and new ideas emerging continuously, we hope to see whether the cryptocurrency industry can go beyond speculation and stablecoins and provide profound value within the next five years.
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 the key path to reducing long-term market volatility. Personally, I am very excited to witness the development of this process, and I believe the next few years are a critical window for the cryptocurrency industry’s development.
I shared these views with Variant’s investors at the annual conference on Tuesday.
However, I need to add one point: I am most concerned that before the industry transitions from the integration-optimization mode to the 0 to 1 innovation mode, we may experience another rapid cycle of price surges and declines.
If this happens, 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 for the development of the cryptocurrency industry.
