New article by IOSG founder: From Hong Kong to Denver, Ethereum is entering the "Dunkirk moment"

I believe that everyone has seen many records of Consensus HK in the past two weeks. I will not repeat them. It can be summarized that most of them are disappointed with the industry and cannot see the prospect of breaking through, and think that it has reached a bear market. At the same time, that week was also a feast for P young players and KOL masters. The impact of the trip to Hong Kong on me was rationality. Those young players and masters who work harder than funds and entrepreneurs deserve so much, and they are surreal investors. They can always embellish every transaction with a perfect period. The trading principle of many P young players is 90% or BTC, and 10% active sol positions are always kept in PVP and sprint. No matter how much profit they make each time, they will execute such position configuration. Because of the meme wave and the attention economy, this has become the most lively discussion in HK.

Kaito's victory ushered in the golden age of KOLs, and attention was priced and could be quickly monetized. In sharp contrast, the entire Ethereum ecosystem is lifeless, and the hollow idealized horn has no one to follow. This is a heavy blow to reality. The so-called value investors are deeply trapped, and long-term holders are beginning to be bearish on Ethereum and are turning to Solana. Many people do not see how hungry Ethereum entrepreneurs are (on the contrary, when a dev goes to L2/Ethereum to establish a connection, it takes an average of two weeks, but with the Sol Foundation, it generally takes less than two days to complete the connection, pull a group and start communication). This seems to be deliberately done by the masters of the crypto industry. In this small cycle of the bull market, long-term holders are not encouraged but short-term traders are given better returns. But in my opinion, this is a warning to industry leaders such as Ethereum for their inaction or lack of crisis awareness.

Short-termism prevails: the collapse of industry values

At the same time, when everyone takes off their disguises and wants to make a fortune at the end of the bull market, many people begin to have no ideals/no beliefs and become ruthless arbitrage tools. No one cares about the future of the industry. Everyone wants to make the last money of this cycle. In order to support the price and chain of their own projects, exchanges can abandon the listing standards to list some of their own investment projects; the king-level projects regard TGE as the last cash machine, and market makers have become the ever-victorious generals of this cycle. Relying on BD and brand, they can always get chips for free and in the overall downward trend of VC coins, the average median size of mm can get a net income of nearly 40m; it seems that everything is moving from long-termism to short-term bubbles and speculation, and the practices of these people are having a more profound impact on some entrepreneurs who insist on building.

Such moments are very similar to 2018/2022. It is very deserted. Practitioners leave because they can't see hope and recognition in the industry. Everyone tries every possible way to survive in the bear market. For teams that are still starting businesses and doing things, this will be painful for them. They need firmness and values all the time. Trump has affected the core values of the entire United States. After Trump token, the crypto industry has inspired huge nihilistic investmentism. When practitioners and speculators think that this is a fast and short-term game, everyone also aims to take away as much cash as possible before the money game button is pressed.

To sum up the trip to Hong Kong, it was a big collapse of the industry and a formal written trial of Ethereum. As the most successful entrepreneur in the industry, did he grasp the bow of the industry? Did he lead the industry to nihilism?

Challenges and transformation of Ethereum ecology

Too long version: The founder of Denverinfra is very bearish, but the founders of applications and AI are very bullish.

The trip to Denver still saw many shocking scenes. Those founders and developers who have been steadily building for many years, some of them were suddenly told that the Qing Dynasty was going to fall, and they chose not to believe it. It seems that the Ethereum ecology has always had a culture of taking care of everything. They have been raising funds smoothly all the way, and have seen many projects that are not as good as them perform well in the speculative market of tokens. They may never have thought that one day, they will not be able to raise money and their own coins will return to zero like other air coins. When there were only 6 to 9 months left in the runway, they slowly realized that they needed to really make a product with revenue and user base, and they also began to seriously think about what the problem of Ethereum was.

Of course, it is never too late, but for them, they need to make drastic layoffs and completely deny their past selves. This is a huge challenge for the founder, because he is just betting on an uncertain direction, but he has to risk his entire fortune for this. According to incomplete statistics, the financing amount of projects that are deeply cultivated and built on the Ethereum and EVM ecosystem exceeds hundreds of billions of US dollars, and the total valuation of the primary and secondary markets exceeds one trillion US dollars. Therefore, the question facing these projects is whether to stay in Ethereum or leave? As strong as Konstantin, the founder of Lido, when he announced on Twitter that he would establish a second Ethereum Foundation, he instantly received DMs from hundreds of Ethereum ecosystem defi founders (including Uniswap). Of course, this is still very challenging for consensus.

In addition, I saw a wave of Ethereum ecosystem entrepreneurs. In the past, they have always been the backbone of the industry's technical faction. The technical products and solutions they have made have always been widely adopted. Whether it is TEE/zkTLS/rollup, they are the only one. But these people are also tired of providing good solutions for technical protocols without end users and needs, which cannot bring them real entrepreneurial fun. What excites them now is the exciting new papers in the field of AI research. To be honest, there are quite a few such founders, and they are the few founders who can really dig deep in the industry and make feasible solutions. If a large number of such founders choose to leave, I think the impact on the entire Ethereum infrastructure will at least regress three to five years.

The wonderful energy of the integration of AI and Web3

At the beginning, everyone said that Denver infra had no hot spots and no interest, but as we talked about 3 to 4 new AI*Web3 projects on average every day, we saw the Ethereum community's active embrace of emerging technologies such as AI, as well as innovative attempts in fields such as DeTraning/Inference/DePIN. Ethereum is actively adapting to new technological trends and exploring new application scenarios.

Capital and entrepreneurs have become the industry's prophets. Paradigm led the investment in Web3 LLM company Nous research with a valuation of $1 billion. Groq, as an inference, has generated more than $1 billion in revenue in the past year. Openmind and Yushu Technology have created RobotAI. DePAI's open source products were unveiled in Denver. Hyperbolic has also become one of the inference networks with the highest integration support among web3 developers. There are also open source intelligence platforms such as Open Gradient and Pluralis. At Ethereum conferences such as Denver, smart developers and founders have begun to fully help Web3 embrace AI. Everyone is brainstorming how to make AI agents and more applications appear in Web3 scenarios. The industry has never ended or stopped. Research and curiosity will always make those builders go further and further.

Macro-favorable conditions ease, Crypto keeps pace with the times

However, after dealing with most US institutions, the situation is completely different from that in Asia. Everyone is very optimistic about the loose environment of the crypto policy bull market. The US bank's policy on accepting crypto asset custody has been passed, and banks will soon gradually allow BTC/ETH to be mortgaged, and even expand to mining equipment. Here we can see a clear trend that the crypto interest rate reduction environment is about to take shape, from the original 10% lending rate in the industry to about 3-4%, and even Japan can reach negative interest rates, which will bring liquidity back to the industry.

In addition, we have recently seen favorable crypto policies in the United States. Uniswap and Coinbase are considering designing a tokenized securities model so that traditional industry investors can better evaluate and purchase tokens. The benefits of regulatory release will far exceed our imagination in this cycle, so I am very optimistic that the market will usher in a very good macro environment in the next two years. Many people say that this round of bull market is over, but I don’t think so. Each round of bull market is not only supported by the macro market, but also by the self-innovation and new applications of the crypto endogenous market. We have not seen real innovation in this cycle. If there is no innovation, it will be a false bull market. In the next two years, we can expect more traditional companies/even national regimes to enter the L2 network and issue their own decentralized networks. The prosperity of L2 business will once again drive the growth and value capture of Ethereum L1.

Reconstructing Ethereum Governance: Towards Mainstream and Commercialization

On the third day in Denver, I attended the Pragma held by ETHGlobal and met several core EF developers, who revealed the upcoming new organizational structure adjustment of Ethereum. The more interesting one here is @dannyryan, whose reputation and popularity in the Ethereum core developer circle are obvious to all. The newly established @Etherealize will also shoulder the mission of the new era Consensys to help Ethereum move towards the mainstream world and commercialization; the two Co-EDs of the foundation, Hsiao-Wei@hwwonx, have also been deeply involved in Ethereum for many years. Since 2016, they have followed Vitalik to fight north and south (see the picture of the Ethereum hackathon selection day in Beijing in 2019, the one sitting next to Vitalik is him), and Tomasz@tkstanczak, as the founder of Nethermind, is very familiar with the entire Ethereum ecosystem project, and as a third-party dev shop, they are well versed in the more sustainable survival business logic, which can help Ethereum find a balance between infra and commercialization paths.

In fact, the problem Vitalik encountered is the same as that of all entrepreneurs. The team is too big and it is difficult to lead. Friends who know how to study personal characteristics can try to analyze Vitalik's mental journey. From the Twitter avatar of Milady emoji to his disappointment with crypto OG, he changed to the half-man, half-bird image of Druid in World of Warcraft, which also represents his inner reconciliation with the community's voice. On the second day, he officially announced the new team structure of Ethereum. Ethereum may be the first truly decentralized organization and economy in history. We should be more tolerant of this man who has just turned 30. He does not have a particularly outstanding performance in organizational structure management and Ethereum application commercialization, but who can lead this organization to create more glory and results?

Perhaps Ethereum can also learn from Elon Musk to create a DOGE Discipline Inspection Commission, which is responsible for the elimination of some irresponsible devs and virtual positions. How to measure contribution value and KPI is an important issue facing Vitalik. In addition, give internal core developers clearer value propositions and development needs, and give the management team more specific roadmaps and management time limit requirements, so that Ethereum can better return to the community and democratic governance. As the cornerstone of Web3, Ethereum is also actively exploring Layer2 solutions and technology upgrades to meet the growing application needs.

There has never been a savior, V God needs to encourage more application entrepreneurs

Is technology research and development so important for Ethereum at present? Maybe it was important in 2017, 2020, and 2022, but now applications should be more important than technology. The next most important milestone for Ethereum and the greatest confidence for ecosystem builders will be whether Ethereum, as the world's computer, can produce cross-era super application products.

Many people regard Vitalik as the savior of Ethereum. Ethereum is the savior of the industry, but there has never been a savior. Everyone should be a savior. I called for all organizations that have obtained generous capital accumulation and stable business income in this industry to contribute to the future of this industry. They can donate to some open source organizations of Ethereum and create better opportunities for young people in the industry. In addition to Grants support, many entrepreneurs still need financing support. In this wave of bloodbath of industry altcoins, it also dealt a heavy blow to the already shaky Asian funds. Many funds began to stop operating or transform into secondary funds. The entrepreneurial environment in Asia is difficult. If Asian institutions lose investment in VC, the industry will be even thinner. Here I still call for the support of early venture capital in the Ethereum ecosystem. It is recommended that all exchanges can take out 1-2% of their income each year to support the development and innovation of the Ethereum open source ecosystem.

Will Ethereum die in the next bull-bear cycle? I don't think so. This is the most successful decentralized organization in the Web3 industry. We should not let it fail. Its failure means that hundreds of billions to trillions of talents and project assets built on the Ethereum business empire need to start over. The entire industry will fall into a major setback of 5-10 years, which means that many OGs will leave.

Please be reluctant to sell your Ethereum. If you look back on what happened from 2020 to 2030 in 2030 with a 10-year dimension, you may see that the doubts and noise in 2025 are actually insignificant. How to judge value and innovation in a 10-year dimension is even more a priority worth thinking about.

Optimists are often right. In the more difficult and ups and downs, we should maintain confidence and optimism.