Bankless Co-founder The crypto market has entered the last cycle before maturity

Bankless Co-founder Crypto market in final cycle before maturity.

Source: Bankless

Author: David Hoffman, Co-founder of Bankless

Title: David’s Take: This is the Last Cycle

Translation: Yvonne, MarsBit

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Disclaimer: This article is based on a long-form post by David Hoffman, translated and compiled by MarsBit.

If you look closely, you will notice some signs indicating that cryptocurrencies are entering the last market cycle,

and after this phase, they will enter a mature, stable, and growth-oriented era.

One perspective in the crypto space is that “the next cycle will be the last cycle.” As I have mentioned before, I do not intend to make any definitive predictions about this. I am simply connecting some dots in the crypto space that point to a new phase for the crypto market after the bear market ends.

Now, let’s dive deeper!

About Regulation and Institutional Approval

The cryptocurrency market is going through the largest-scale regulatory struggle in history. In fact, this has always been inevitable. As an industry based on currency and finance, we cannot easily enter the mainstream without recognition from regulatory agencies.

“Becoming mainstream” means that cryptocurrencies can go through regulatory trials.

Don’t be afraid. Cryptocurrencies will prevail anyway. What we need to do is wait until the doubts are over.

Cryptocurrencies are an unstoppable force, and nation-states may change their minds. Gary Gensler will let us register. Elizabeth Warren (note: American politician and member of the Democratic Party) will stomp her feet. Banks will try to stifle us.

Ethereum will produce the next block.

Ultimately, history is defined by technological development. Every blow from anti-crypto regulatory agencies and legislators will eventually be offset by the power of the free market.

The current stage of crypto should not be seen as “nation-states attacking crypto,” but as “nation-states bullying disruptive technology.” Just like every college freshman or fraternity member, we just need to walk to the other side.

Ripple only achieved a temporary victory. BlackRock, Fidelity, and all other major TradFi participants have just sent a signal to the authorities to calm down. Mainstream brands are largely unconcerned about financial regulation and continue to explore the uses of cryptocurrencies.

Our court cases will be filed, bills will be drafted, voted on, rejected, and then voted on again. It will be frustrating and painful. But one day, it will come to an end. Regulatory agencies will eventually adapt to the situation. What we need to do is wait. Time is on our side.

Once the regulatory trial is over, the cautious curiosity about cryptocurrencies in the mainstream will turn into a frenzy of gold rush, as they realize that there is fertile land outside and the path to enter these new territories is clear and manageable.

Maturity of Protocols

As we begin to see the dawn of regulation, we can also see the endgame for many of the protocols that the crypto industry relies on.

Another key takeaway I got from the article by ETH CC is that many of the protocols required for Web3 are evolving into their final forms. We’re not there yet, but the end stage is within sight.

In the near future, in Web3, we will have more usable data.

EIP4844 will commoditize access to the world’s most secure block space.

Thanks to zk-rollup, transactions will be instantaneous. Shared ordering blurs the boundaries between chains. All these technologies pursue the same goal: to make blockchain invisible.

By the time the next bull market arrives, the cost of Web3 computation will reach its theoretical minimum. High gas costs and slow block times will not be bottlenecks for using decentralized protocols. The responsibility for innovation will shift to application developers, who will be responsible for leveraging the ample computing resources provided by protocol developers.

The next bull market will not be constrained by scale. No one will consider “high cost” and “protocol immaturity” as reasons not to integrate with Web3 systems. Ethereum’s “rollup-centric roadmap” will have enough expressiveness and customizability to easily build private chains to meet the use cases of any curious player.

This will open up the long tail of use cases for crypto. When Web3 is slow and expensive, the only available use cases are currency, finance, and high-value assets. If things cost tens or hundreds of dollars to do, the only rational activities that can be supported are things worth thousands of dollars or more.

When the cost of participating in Web3 is low enough, it starts to make sense for platforms to subsidize their own users. Once users receive subsidies from competing users’ platforms for their transactions, the full range of cryptocurrency use cases will eventually be open to everyone.

What can Web3 do when it can be accessed for free?

What new applications can be developed?

What new user groups can we join?

The answers are everything, all of them, and everyone.

Ethereum’s Development Path

In 2015, Ethereum set an ambitious roadmap for itself. Over time, the ambition of the roadmap only increased, while the speed of its completeness increased much faster. It turned out that Ethereum had far more complex expectations for itself than initially imagined.

At some point around 2019, things changed. Extensive research and some key technological breakthroughs opened up a new chapter for Ethereum. “Ethereum 2.0” or “Serenity” (now simply referred to as “Ethereum”) has a well-defined roadmap, with only testing and code writing remaining.

From 2019 to 2023, code was written and delivered. Ethereum has transformed from a single PoW chain to a modular and expressive PoS chain, spawning one network after another.

The Ethereum team made promises and fulfilled them.

What is most astonishing about Ethereum’s development is its commitment to the initial vision set in 2015. While the implementation details have changed and the path itself is unknown, Ethereum has never wavered in its goals.

Throughout history, betting on Ethereum’s development trajectory and Ethereum developers has never been successful. With the release of EIP4844 later this year (personal estimation), Ethereum will maintain a perfect track record of delivering on promises.

Keeping promises and sticking to the vision demonstrates to the outside world that Ethereum is building products with belief, intent, and purpose. We are not crazy – we have been striving towards the same vision for 8 years. You are just realizing it now.

Prior to this, the external world may have seen Ethereum as a group of confused monkeys running around in chaos. But now, as Ethereum finally evolves into the decentralized internet value computation layer that the world needs, people will see beauty in the chaos. The network of networks.

Alongside Ethereum’s vibrant development, there is also the story of ETH. In 2015, Ethereum could be considered a shitcoin, but it made progress alongside the protocol it runs on. In 2015, Ethereum had high inflation, with a block reward of 5 ETH, but now ETH is a native revenue asset with algorithmic monetary policies. It has real returns without human intervention, in stark contrast to the currency policies of the US dollar and the antics of the Federal Reserve.

In addition to further enhancing ETH’s monetary capabilities, there have been no further upgrades to ETH’s monetary policy.

If you ask large investors what they like, the answer is yield. ETH’s yield is far higher than other bonds. ETH investors earn returns while ETH itself is in a deflationary state. The nominal yield for bondholders is positive, but the actual yield is negative—”actual” being the more important descriptor here.

In contrast, it is widely believed that the real value of the US dollar and US government bonds must decline in order to maintain stability in the global financial system, so Ethereum’s future has a natural story.

The evolution of Ethereum towards a super-safe haven currency demonstrates to the outside world that the crypto industry has some unique new things. Through cryptography and networks, we can create unprecedented financial assets. No, the narrative power of crypto assets with strong value propositions does not stop at Bitcoin… We are not satisfied with “digital gold”. We are exploring new territory, and Ethereum-like assets can integrate well into existing mental models of asset value while being completely different from all previous assets.

The maturity of Ethereum and ETH can be summarized as “the growing Lindy” and “successfully navigating in unknown waters”. When society’s attention turns back to cryptocurrencies, they will see a protocol and its assets that have been consistently and directionally developed towards a vision that has never wavered since its inception.

This legitimacy earned by the Ethereum ecosystem will drive it to become a sufficiently “secure” cryptographic asset, where people can take on professional risks and begin advocating for “in-depth research” at a high level.

This will initiate the ETF, which is already in motion.

ETF Competition

The competition for ETFs has already begun. As mentioned earlier in the regulatory content, all we have to do is wait. The development line of history is defined by technology. Gary can only close the door to crypto ETFs for a long time – ultimately the power of the free market will come into play.

It seems that the sooner the better. Once Bitcoin opens the door to crypto asset ETFs, it will be difficult to stop other assets from having their own ETFs.

We can expect BTC ETF and ETH ETF in the near future. If these coincide with the upcoming bull market, the capital channels between cryptocurrencies and the outside world will be the largest ever. This will match the aforementioned regulatory dialogue. At the end of this cycle, the stock codes BTC- and ETH will be second only to APPL and AMZN, becoming commonplace in major brokerage firms worldwide.

In any case, the cycles are shortening

For years, Bitcoin returns have been suppressed. If you bought Bitcoin like crazy in 2010, congratulations because the increase in 2011 was the most drastic growth in Bitcoin’s history. Each subsequent cycle has taken more time to reduce returns.

One of the biggest topics surrounding cryptocurrencies is their high volatility. With each cycle, the volatility of crypto assets decreases, while at the same time, the volatility of traditional stocks and bond markets reaches the highest levels in over 30 years.

Trading markets are no strangers to volatility. The crypto market was born in it and shaped by it. Now, our market is heading towards stability, while traditional markets are in turmoil due to the actions of the Federal Reserve.

With the easing of regulatory pressure and the attractiveness of adopting cryptocurrencies sustainably and non-speculatively due to the maturity of network infrastructure, much of the volatility in cryptocurrencies can be suppressed through adoption. The bigger the ship, the harder it is to shake.

And, as I concluded in the infrastructure section above, our “crypto ship” is ready to expand to any scale society needs.

The ark is ready, it’s time to board!

The Development of Crypto Civilization

Cryptocurrencies will always have their wild west. There’s no putting the genie back in the bottle – once you offer society unlicensed financial services, the frontier facing the West will not be stopped. Thanks to ERC20, anyone can create meme coins, but now thanks to OP Stack, in the next market cycle, anyone can create a meme chain.

However, now, with the cyclical process, we will see the establishment of Eastern civilization. The security and guarantee of civilization. The East and the West are in opposition to each other. Those who seek freedom and adventure go to the West to escape the tyranny and oppression of civilization. But some people want the security and guarantee of civilization. Mainstream adoption requires methods, channels, laws, and police. The edge of cryptocurrency will move westward, but the mainstream of cryptocurrency will evolve into a predictable, reliable, and regulated environment, in which people who are less fond of taking risks will feel safe.

Some cryptocurrencies will begin to be considered safe enough that ordinary Web2 users will feel secure and willing to participate in their use. Smart contract wallets with account recovery functions, proven applications, high-traffic L2, Base… These will become the cryptocurrency civilization and will be the places where people who are not so fond of taking risks can still safely participate in the crypto world.

But for everyone reading this article, coming here will be a choice. We will know the secret path to the more hidden corners of cryptocurrency… where tokens and degens play a role. Whether good or bad, we will always have the wild west of cryptocurrency.

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