Written by: Zeus Translated by: Block unicorn
Foreword
In recent articles, I explored how cryptocurrency has deviated from its original vision, prioritizing infrastructure innovation while neglecting the monetary foundation needed to realize its promise of financial sovereignty. I traced how this deviation has led to a disconnect between technological achievements and sustainable value creation.
What I have not fully explored is how the industry has fundamentally misjudged which applications are truly worth developing. This misjudgment is at the core of cryptocurrency’s current predicament and also points to the direction where real value may eventually emerge.
The illusion of the application layer
The narrative of cryptocurrency has gone through several stages, but a consistent theme is the promise of revolutionary applications beyond finance. Smart contract platforms are positioned as the foundation of the new digital economy, and value flows back from the application layer to infrastructure. This narrative has accelerated with the “Fat Protocol Theory” — the idea that, unlike the Internet where TCP/IP captured very little value while Facebook and Google captured billions, blockchain protocols will accrue the majority of value.
This has led to a particular mental model: Layer 1 blockchains (L1) gain value by supporting a diverse ecosystem of applications, just as Apple’s App Store or Microsoft’s Windows create value through third-party software.
But there is a fundamental misjudgment here: cryptocurrencies attempt to impose financialization on areas where it is not naturally applicable and where there is little real value gain.
Unlike the Internet, which digitized activities that people already had (commerce, communications, entertainment), cryptocurrencies attempt to inject financial mechanisms into activities that are not needed or wanted. The assumption is that everything from social media to gaming to identity management will benefit from being financialized and “on-chained.”
The reality is quite different:
Social apps with tokens have mostly failed to gain mainstream adoption, with user engagement driven primarily by token incentives rather than underlying utility.
Gaming apps continue to face resistance from the traditional gaming community, who believe that financialization diminishes rather than enhances the gaming experience.
Identity and reputation systems struggle to demonstrate clear advantages over traditional approaches when token economics are involved.
This isn’t just a matter of “we’re still early days.” It reflects a deeper truth: the purpose of finance is to serve as a tool for resource allocation, not an end in itself. Financializing activities like social interaction or entertainment misunderstands the core role of finance in society.
The difference between game markets
It’s worth discussing some seemingly counter-examples, like the CS:GO skin market or microtransaction systems in popular games. These successful markets seem to contradict the argument for the financialization of games, but they highlight an important distinction:
These markets represent closed ecosystems of optional cosmetics or collectibles that exist alongside gameplay, rather than attempts to financialize the core gameplay itself. They are more like markets for commodities or memorabilia than fundamental changes to how games work.
When crypto games attempt to financialize actual game mechanics — making playing games explicitly for the purpose of making money — it fundamentally changes the player experience, often undermining the very essence of the game’s appeal. The key insight is not that games can’t have markets; it’s that turning gameplay itself into a financial activity changes its fundamental nature.
Blockchain Technology vs. Trustlessness
A key distinction that is often overlooked in crypto discussions is between blockchain technology itself and the property of trustlessness. The two are not synonymous:
Blockchain technology is a set of technical capabilities for creating a distributed, append-only ledger with consensus mechanisms.
Trustlessness is a specific property whereby transactions can be executed without relying on a trusted third party.
Trustlessness carries tangible costs—in terms of efficiency, complexity, and resource requirements. Such costs need to be clearly justified and only exist in specific use cases.
When entities such as Dubai use distributed ledger technology to manage property records, they are primarily leveraging the technology for efficiency and transparency, not trustlessness. The land department remains the trusted authority, and the blockchain simply serves as a more efficient database. This distinction is critical because it reveals where the value in these systems really lies.
The key insight is that trustlessness has real-world value in only a few areas. From property records to identity verification to supply chain management, most activities fundamentally require trusted entities for real-world enforcement or verification. Moving ledgers to a blockchain does not change this reality—it simply changes the technology used to manage records.
Cost-Benefit Analysis
This brings up a straightforward cost-benefit analysis for each platform:
Does the platform truly benefit from removing the trusted intermediary?
Does this benefit outweigh the cost of achieving trustless efficiencies?
For most non-financial applications, the answer to at least one of these questions is “no.” Either they don’t really benefit from trustlessness (because external enforcement is still necessary) or the benefits aren’t enough to offset the costs.
This explains why institutional adoption of blockchain technology is primarily focused on efficiency gains rather than trustlessness. When traditional financial institutions tokenize assets on Ethereum (as is increasingly the case), they leverage the network for operational advantages or to enter new markets while maintaining traditional trust models. Blockchains serve as improved infrastructure, not a mechanism to replace trust.
From an investment perspective, this creates a challenging dynamic: the most valuable part of blockchain (the technology itself) can be adopted without necessarily bringing value to a specific chain or token. Traditional institutions can implement private chains or use existing public chains as infrastructure while maintaining control over the most valuable layers - assets and monetary policy.
The Path to Adaptation
As this reality becomes clearer, we see a natural process of adaptation unfolding:
Technology Adoption without a Token Economy: Traditional institutions adopt blockchain technology while bypassing the speculative token economy as a better “plumbing” for existing financial activities.
Efficiency over Revolution: The focus shifts from replacing existing systems to making them incrementally more efficient.
Value Migration: Value flows primarily to specific applications with clear utility, rather than to underlying infrastructure tokens.
Narrative Evolution: Industries gradually realign their expressions of value creation to fit the technological reality.
This is actually a good thing: why would you let one activity enabler siphon all the value away from value creators? This rent-seeking behavior is actually quite far from the capitalist ideal that most people believe underpins the entire movement. If the primary means of capturing value was TCP/IP, rather than the applications built on top of it (as the “fat protocol theory” suggests), the Internet would look very different (almost certainly worse!). The industry is not dead—it’s finally facing reality. The technology itself is valuable, and it will likely continue to evolve and merge with existing systems. But the distribution of value within the ecosystem may be very different from the early narrative.
The root of the problem: abandoned original intentions
To understand how we got here, we have to go back to the origins of cryptocurrency. Bitcoin did not emerge as a general-purpose computing platform or a basis for the tokenization of everything. It emerged explicitly as a currency—a response to the 2008 financial crisis and the failure of centralized monetary policy.
The fundamental insight is not that “everything should be on-chain” but that “money should not rely on trusted intermediaries.”
As the industry has grown, this original intention has been diluted or even abandoned by more and more projects. Projects like Ethereum have expanded the technical capabilities of blockchain, but have also diluted its focus.
This has created a strange disconnect in the ecosystem:
Bitcoin retains its central currency position, but lacks programmability beyond basic transfer functions.
Smart contract platforms provide programmability, but abandon monetary innovation in favor of the idea of “everything on the blockchain.”
This divergence is perhaps the industry’s most serious misdirection. Instead of building more complex capabilities on top of Bitcoin’s monetary innovation, the industry has turned to financializing everything else—a backwards approach that misjudged both the problem and the solution.
The Path Forward: Back to Money
In my opinion, the path forward is to reconnect blockchain’s significantly improved technical capabilities with its original purpose of money. Not as a one-size-fits-all solution to all problems, but rather to focus on creating better money.
Money is a perfect fit for blockchain for the following reasons:
Trustlessness is critical: Unlike most other applications that require external enforcement, money can operate entirely in the digital realm, with rules enforced by code alone.
Natively digital operation: Money does not need to map digital records to physical reality; it can exist natively in a digital environment.
Clear value proposition: Removing intermediaries from the monetary system can bring real efficiency and sovereignty benefits.
Natural connection to existing financial applications: The most successful crypto applications (such as trading, lending, etc.) are naturally connected to monetary innovation.
Perhaps most importantly, money is essentially an infrastructure layer that everything else is built on top of without deep involvement. Cryptocurrency subverts this natural relationship. Instead of creating a currency that seamlessly integrates with existing economic activity, the industry is trying to rebuild all economic activity around the blockchain.
The power of traditional currency is reflected in this practical layer approach. Businesses don’t need to understand the Federal Reserve to accept dollars. Exporters don’t need to rebuild their entire business around monetary policy to manage currency risk. Individuals don’t need to become experts in monetary theory to store value. Money facilitates economic activity, not dominates it.
On-chain currencies should work the same way - through simple interfaces for off-chain businesses to use, just as digital dollars can be used without understanding banking infrastructure. Businesses, entities, and individuals can remain entirely off-chain while leveraging the specific benefits of blockchain-based currencies — just as they use traditional banking infrastructure today without being part of it.
Rather than trying to build “Web3” — a nebulous concept that seeks to financialize everything — the industry will find more sustainable value by focusing on building better money. Not just as a speculative asset or inflation hedge, but as a complete monetary system with mechanisms that allow it to operate reliably under different market conditions.
This focus becomes even more compelling when we consider the global monetary landscape. The evolution of the global monetary system faces unprecedented coordination challenges. The inherent instability of the current system, coupled with rising geopolitical tensions, creates a real need for a neutral alternative.
The tragedy of the current landscape is not just a misallocation of resources, but a missed opportunity. While incremental improvements to financial infrastructure do have value, they pale in comparison to the transformative potential of addressing the fundamental challenges of money itself.
The next stage of cryptocurrency’s evolution may not come by further expanding its scope, but by returning to its original purpose. Not as a universal solution to all problems, but as a reliable monetary infrastructure that provides a solid foundation for everything else — without having to think deeply about how it works.
Aaron
Catherine
Snake
Clement
Davin
Kikyo
Hui Xin
Jasper