Two sides of the crypto economy: "useless speculation" and "practical innovation" coexist

Author: Techub Featured Translation

Written by: Ryan Watkins, co-founder of Syncracy Capital and former Messari analyst

Compiled by: Yangz, Techub News

Critics often argue that the economic system will eventually collapse under the weight of its overdevelopment, citing financial nihilism that is prevalent in crypto-economics. However, under the speculation that fuels this skepticism, we also see some emerging "winners" that are growing over time. In this article, we will explore the contradiction between the "uselessness" and "practicality" of the crypto economy and clarify that they are actually two sides of the same coin.

" It is the best time, it is the worst time; it is the wise year, it is the ignorant year, it is the surviving year, it is the surviving year, it is the surviving time, it is the surviving time, it is the surviving time, it is the surviving time, it is the surviving time, it is the surviving time, it is the surviving time, it is the surviving time, it is the surviving time, it is the surviving time, it is the surviving time, it is the surviving time, it is the surviving time, it is the surviving time, it is the surviving time, it is the surviving time, it is the surviving time, it is the surviving time, it is the surviving time, it is the surviving time, it is the surviving time, it is the surviving time, it is the surviving time, it It was the season shrouded in darkness; it was the spring full of hope, it was the winter that made people desperate; there was everything before us, there was nothing before us; we were all going to heaven, we were all going to hell. "— — "The Tale of the Two Cities" Charles Dickens

Critics often take the financial nihilism that is prevalent in the crypto economy as evidence of its futility. Although Bitcoin has been launched for 16 years and Ethereum has been launched for 9 years, there are still few mainstream use cases that can prove its undeniable practicality.

Whenever we hear stories of emerging market users protecting their savings from their own inflation through stablecoins, it seems that more users in developed markets will invest their savings into various Memecoins’ gambles.

Stablecoins are liberation and destruction; blockchain is a great equalizer and a giant destroyer; crypto economy is the future of the global financial system and the biggest collective illusion in human history.

These opposing views reveal the high risk that the technology has the potential to change the world and also has the potential to collapse itself due to its overly radicalization. For many, this contradiction has triggered skepticism, making people wonder "What does this mean?" and at the same time, it also makes people doubt that in addition to Bitcoin, there is a long-term fundamental for other assets in the crypto economy. Does the perspective still make sense?

However, this contradiction between "uselessness" and "practicality" is not a flaw, but a feature, which is showing the growth pain that blockchain's revolutionary potential is experiencing.

Wealth democratization in the digital age

In a world where inequality among countries is increasing, blockchain technology has the potential to democratize wealth to billions of people. To understand this, we first need to understand the concept of "blockchain is a new type of institution", which enables users to trade and execute contractual relationships without intermediaries. Blockchain achieves this through a supranational property rights system that is secured by encryption technology and allows anyone to verify. This is a subtle but powerful tool that can be used to level the economic playing field.

Blockchain operates on the cloud, and the only physical existence is thousands of computers distributed around the world, and the integrity of the network is maintained by these computers. Together, these computers have created an Internet native infrastructure for the market, and this is the best mechanism to date for the "perfect information" required to achieve effective resource allocation.

 Property Index; Data Source: The Global Economy, International Monetary Fund

Ronald Coase's pioneering paper, The Nature of the Firm, published in 1937, best illustrates the significance of this change . Coase believes that companies exist because the cost of finding information, negotiating agreements and executing contracts in the market exceeds the efficiency of outsourcing.

Blockchain fundamentally changed this situation. Through encryption technology, blockchain can make information universally available and reduce dependence on intermediaries, greatly reducing transaction costs, especially in the Internet era such as search engines and "gig economy" platforms, etc. When combined with technology. As transaction costs decrease, demand for large hierarchical companies also weakens, paving the way for the global market structure based on blockchain. This structure can maximize economic production, improve market efficiency, and lay the foundation for a completely new market.

 The largest on-chain \"business\" calculated by revenue and Gas consumption in 2024; data sources: DeFiLlama, Artemis, Top Ledger

The crypto economy has demonstrated these advantages. Stablecoins promote economic growth and financial inclusion by providing global users with cheap and reliable currencies; global exchanges and lending platforms create more efficient markets and democratize capital market access; DePIN creates a brand new one The marketplace enables users to coordinate and monetize different physical and digital resources. All of these use cases are extremely efficient in operation with software-like profit margins, while blockchain automatically handles most of the back-end infrastructure and settlement activities. Large financial institutions and businesses are slowly recognizing this potential, with many institutions either launching products directly on the blockchain or integrating blockchain-based projects into the back-end infrastructure of existing products.

So, why are there anyone skeptical about the crypto economy?

The superposition of practicality and uselessness

Creating a decentralized infrastructure for trading and executing contracts inevitably leads to unlimited experiments. Since the potential user base of blockchain covers billions of Internet users around the world, the kinetic energy of this experiment is also extremely powerful. Even leaders from all over the world are issuing their own currencies. The temptation of opportunity has allowed new assets and financial agreements to spread rapidly, including both transformative innovation and outright scams.

While these attempts may seem rash, they are not much different from what happened during the Internet bubble . At that time, many companies often had only one domain name when they went public. In contrast, the crypto economy has amplified this dynamic to the extreme, providing anyone with an internet-scale capital market. This provides an unprecedented stage for innovation and speculation, ultimately accelerating the pace of discovery and adoption. After all, before trillions of dollars of future value enter the blockchain space, speculation attracts new users and provides much-needed stress tests to the system.

\"Winners\" are emerging and consolidating market share; data sources: DeFiLlama, Artemis, Token Terminal

However, a handful of "winners" have begun to emerge in all speculation. Many projects are driving speculative activities in the capital market that have taken the top spots and achieved compound growth behind the scenes. These "winners" are rare "compounders" that are consolidating market share, expanding their capabilities, and increasingly serving non-speculative use cases over time. These projects will ultimately provide the pillar for the crypto economy to mature and scale globally.

Will parallel roads intersect?

For the foreseeable future, Syncracy believes that the best way to elaborate on the fundamental arguments of the crypto economy is to find assets that are both robust and capture the inherent speculative momentum of the Internet capital market. This is not a esoteric statement, because in practice it simply means embracing those fast-growing projects that people actually use. For now, this also means long trading volumes, such as monetizing on-chain speculation through asset issuers or market platforms (such as exchanges), or investing in its underlying infrastructure, such as L1. These L1s not only monetize speculative activities, but also provide a flexible valuation framework, as they are often priced as currency-like assets.

In fact, long speculation through infrastructure (fast-growth projects that people actually use) has always been a common thread among many of the biggest winners in this cycle. Solana provides first-class performance, making the on-chain trading experience similar to traditional retail trading platforms such as Robinhood; Phantom creates a user-friendly experience similar to Apple, with a special focus on mobile applications, allowing users to do it anytime, anywhere, in unprecedented ways. Speculation; Pump.fun compresses the cost, energy and resources required to launch new tokens; Hyperliquid gives on-chain traders a sense of using centralized exchanges, but with lower costs and fewer thresholds and restrictions; Virtuals and ai16z ( Eliza allows anyone to launch AI agents with related tokens and wallets; Telegram robots and token discovery tools such as Photon and DexScreener bring light to the on-chain economy and makes it easy to get from familiar Accessed in the application. There are countless examples of this.

 The crypto economy is growing in compound growth; data sources: DeFiLlama, Artemis

Ultimately, we will go beyond this model that relies on speculative projects to attract super high attention and traffic, especially after more institutional investors enter this asset class. Meanwhile, there are many less speculative but promising projects in DeFi and DePIN, which are following the fourth stage of the “Slope of Enlightenment” (i.e., the Gartner’s technological maturity curve: technological advantages begin to gradually emerge. and gain a broader understanding ) steadily rising. These projects have shown early signs of product-market fit and fundamental improvements. While these assets may take time to achieve valuation growth, they also urgently need a clear regulatory framework to push them to the mainstream. Although some tracks (such as stablecoins) have pointed out the way forward for the industry and have entered the deployment stage of their life cycle with confidence, given the current complexity of crypto-economic activities, bystanders can still find many counterexamples. Interpret according to your own prejudice.

Nevertheless, from an investment perspective, our current goal is to cultivate long-term players and make good use of the duality of the crypto economy, and to increasingly serve practical, non-speculative while leveraging speculative energy to drive financial change. Use cases. Such assets can achieve compound returns over time, rather than falling into the vortex of "rotating games" like other more narrative-driven assets in the crypto economy. These assets will eventually lead the world to the on-chain transition, as the speculation they drive will attract new users and provide much-needed stress tests before trillions of dollars of activity enter the blockchain space in the next few years.

In fact, uselessness and practicality are just like the two sides of a coin.