Beyond Speculation and Stablecoins, What’s Next for Cryptocurrency?
In the past two years, the cryptocurrency industry has undergone what I call a “consolidation phase.” During this phase, the focus of the industry has been more on optimizing existing technologies rather than creating entirely new innovations from scratch.
This consolidation 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 sustainable competitiveness.
Infrastructure Optimization: Moving Towards 2024
The infrastructure of the cryptocurrency industry has matured and is no longer a major obstacle to its development. This maturity is due to continuous optimization of technologies rather than radical architectural reforms. These optimizations have laid the foundation for the industry to embrace a possible next “bull market” phase. During this stage:
Blockchain transaction blockspace has increased, allowing for more transactions.
Development tools have become more refined, providing convenient support for developers.
User transaction fees are close to zero or even completely free.
The complexity of using wallets has been effectively simplified, lowering user thresholds.
The user experience of on-chain applications is now comparable to traditional Web2 applications.
In fact, the infrastructure advancements achieved during this phase, such as Ethereum L2s (second-layer scaling solutions), reliability improvements in the Solana network, and wallet abstraction technologies, have only taken 12-18 months to develop to a production-ready level.
Integration of Use Cases and Long-term Winners: Trends in 2024
Currently, two core use cases have reached a mature stage: speculation and stablecoins. These two use cases have existed since the inception of the cryptocurrency industry. Bitcoin, since its launch in 2009, has always been the industry’s first speculative asset. Stablecoins, on the other hand, were one of the earliest token applications (e.g., USDT launched in 2014). Now, the development in these two areas is entering a golden stage, closely related to the optimization of infrastructure.
For example, the cost and complexity of creating and trading Memecoins, a direct embodiment of speculative behavior, have significantly decreased. 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, making these operations effortless and efficient.
In the extended domains of speculative and stablecoin use cases, another integration trend is emerging: the continuous expansion and greater success of the “long-term winners” who have performed exceptionally well recently. 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 speculative and stablecoin markets but also quickly adapt to popular speculative trends in the market, such as Memecoins and NFTs.
The Next Phase of the Cryptocurrency Industry: Breaking Through Bottlenecks and Embracing Transformation
With infrastructure bottlenecks gradually becoming a thing of the past, the industry faces two main obstacles that need to be overcome. These obstacles have not only been the reasons behind the consolidation-optimization phase but also hindered the industry from achieving entirely new innovations from 0 to 1.
The first bottleneck is the challenging and uncertain regulatory environment. However, this situation may be changing. The cryptocurrency industry may soon witness a clear regulatory framework in the United States for the first time. This change will provide a fertile ground for the development of excellent projects in the industry while eliminating 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 addressing the ultimate and most important bottleneck: talent.
Since 2022, there has been a significant decrease in the influx of new talent into the cryptocurrency industry. This phenomenon is understandable, as negative public opinion and the risks faced by founders in an uncertain regulatory framework have deterred many individuals. 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 in the coming year and unfold in two stages:
Long-term winners who have performed exceptionally well during the consolidation phase will continue to expand their advantages and achieve unexpected success. For example, Polymarket has performed remarkably well during the current election cycle, and similar cases will continue to emerge in the future. This trend will benefit from the mainstream adoption of on-chain technologies at both the consumer and institutional levels. New startups will go public, and more projects will launch their own tokens. These developments will redefine people’s perception of the industry’s influence and inspire a new generation of builders to join the field, injecting fresh vitality into the industry.
A new group of entrepreneurs will enter the cryptocurrency space. They will start from first principles, free from the constraints of traditional infrastructure and existing ideas. Under clear regulatory rules, experiments centered around “user ownership” as the core of new product experiences will become feasible. This will bring about a new wave of innovation to the industry.
While the cryptocurrency market will continue to experience price volatility, we hope to see clear evidence of breakthrough applications that can reduce long-term market fluctuations. I personally look forward to witnessing the development of this process, as I believe that the next few years are a crucial window for the development of the cryptocurrency industry.
I shared these perspectives with Variant’s investors during our annual conference on Tuesday.
However, I must add that I am most concerned about the possibility of another rapid price surge and decline cycle before the industry transitions from the consolidation-optimization mode to the 0 to 1 innovation mode.
If such a scenario 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 for the development of the cryptocurrency industry, with new regulations, talent, and ideas continuously emerging.