Ethereum is shifting towards L1 scaling and privacy, while the U.S. stock market's backend engine DTCC, holding $100 trillion, begins migrating on-chain. It seems a beautiful new wave of crypto is about to arrive.
But the profit logic for institutions and retail investors is completely different.
Institutions possess extreme tolerance in time and space; a ten-year investment cycle and leveraged arbitrage with tiny spreads are far more reliable than a retail investor's fantasy of a thousandfold return in a year. In the upcoming cycle, it is highly likely we will witness the spectacle of on-chain prosperity, institutional influx, and retail pressure simultaneously.
Please don't be surprised. BTC's spot ETF and DAT, the disappearance of BTC's four-year cycle and the altcoin season, and Koreans "abandoning coins for stocks" have repeatedly validated this logic.
After the events of October 11th, CEXs, the last barrier for project teams, VCs, and market makers, have officially entered garbage time. The greater their influence on the market, the more it leads to a conservative approach, which subsequently erodes capital efficiency.
The worthlessness of altcoins and editors posting Memes are just episodes of a predetermined path collapsing under its own weight. Migrating on-chain is a move made out of helplessness, but it will be slightly different from the free and prosperous world we imagined.
We originally wanted to use the wealth effect to compensate for the numbness after the loss of belief in decentralization. Let's hope we don't lose both freedom and prosperity.
Today will be the last time I talk about concepts like decentralization and cypherpunk. The old stories about freedom and its betrayal can no longer keep up with the rolling wheels of the times.
Decentralization: The Birth of the Pocket Computer
DeFi is not built on the ideas and entity of Bitcoin. It never was.
Nick Szabo, creator of "smart contracts" (1994) and Bit Gold (first proposed in 1998, refined in 2005), and the inspiration behind core concepts like Bitcoin's PoW (Proof of Work) and timestamping.
He once affectionately called Bitcoin a pocket computer and Ethereum a general-purpose computer. However, after The DAO incident in 2016, where Ethereum decided to roll back transaction records, Nick Szabo became a critic of Ethereum.
During the ETH bull run from 2017-2021, Nick Szabo was seen as an outdated stubborn old man.
On one hand, Nick Szabo once genuinely believed Ethereum surpassed Bitcoin, achieving better disintermediation. Ethereum at that time fully implemented PoW and smart contracts.
On the other hand, Nick Szabo believed Ethereum reformed the governance system from the perspective of trustlessness. The DAO mechanism for the first time enabled efficient interaction and collaboration among strangers globally.
This outlines what decentralization actually refers to: Technical disintermediation -> Pricing cost + Transaction consensus, Governance trustlessness -> Minimized trust.
Image Caption: Composition of Decentralization
Image Source: @zuoyeweb3
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Disintermediation: No need to rely on gold or governments, but instead use computational work as proof of individual participation in Bitcoin production;
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Trustlessness: No need to rely on human social relationships, but operate under the principle of minimized trust to open outward and create network effects.
Although Satoshi Nakamoto was influenced by Bit Gold, he was noncommittal about smart contracts. Under the principle of simplicity, while retaining the possibility of opcode combinations for complex operations, the practice overall revolved around peer-to-peer payments.
This is why Nick Szabo saw hope in PoW ETH—complete smart contracts and "self-restraint." Of course, Ethereum encountered L1 scaling obstacles similar to Bitcoin. Vitalik ultimately chose L2 scaling to reduce harm to the L1本体 (mainnet).
This "harm" mainly refers to the full node size crisis. After losing Satoshi's optimizations, Bitcoin raced down the path of no return with mining rigs and hashrate competitions, effectively excluding individuals from the production process.
Image Caption: Blockchain Node Size
Image Source: @zuoyeweb3
Vitalik at least resisted. Before surrendering to the data center chain model in 2025, even while switching to PoS, he tried to ensure the existence of individual nodes as much as possible.
Although PoW is equated with hashrate and power consumption, determining its basic production cost, in the early days of the cypherpunk movement, Proof of Work combined with timestamp was meant to confirm transaction time, forming an overall consensus and enabling mutual recognition based on it.
Therefore, Ethereum's shift to PoS fundamentally removes individual nodes from the production system. Combined with the "costless" ETH accumulated from the ICO, and VCs investing nearly $10 billion in EVM+ZK/OP L2 ecosystems, an enormous amount of institutional cost has been无形中 (implicitly) accumulated. ETH DAT can be completely viewed as a form of institutional OTC exit.
After the failure of technical disintermediation, although node explosion was controlled, it moved towards mining pool clusters and hashrate competitions. Ethereum went through several iterations from L1 (sharding, sidechains) -> L2 (OP/ZK) -> L1, ultimately embracing large nodes in practice.
It must be objectively pointed out that Bitcoin lost smart contracts and the "individualization" of hashrate, while Ethereum lost node "individualization" but retained smart contracts and ETH's value capture ability.
A subjective evaluation must also be made: Bitcoin achieved minimized governance but highly relies on the "conscience" of a few developers to maintain consensus. Ethereum ultimately abandoned the DAO model and turned to a centralized governance model (Theoretically not, but practically Vitalik can control the Ethereum Foundation, and the Ethereum Foundation can guide the direction of the Ethereum ecosystem).
There is no intention here to贬低 (belittle) ETH and elevate BTC. From the wealth effect perspective of price, early investors were successful. But from the practice of decentralization, the possibility of either changing course is no longer visible.
Bitcoin will almost certainly not support smart contracts; the Lightning Network and BTCFi are still focused on payments. Ethereum retained smart contracts but abandoned the pricing benchmark of PoW and, beyond trustlessness/minimized trust, chose to build a centralized governance system—a historical regression.
The rights and wrongs, achievements and errors, will be left for future generations to judge.
The Middleman Economy: The Fall of the World Computer
Where there is organization, there is inevitably internal strife; where unity is emphasized, centralization is inevitable, followed by the spontaneous birth of bureaucracy.
In terms of token pricing mechanisms, there are two types: narrative and demand. For example, Bitcoin's narrative is application-oriented—peer-to-peer electronic cash—but people's demand for Bitcoin is digital gold. Ethereum's narrative is the "world computer," but people's demand for ETH is application-oriented—Gas Fee.
The wealth effect is more friendly to the PoS mechanism. Participating in Ethereum staking first requires ETH, using Ethereum's DeFi also requires ETH. ETH's value capture ability in turn enhances the rationality of PoS. Ethereum was correct in abandoning PoW, driven by real demand.
But on the narrative level, the model of transaction volume ✖️ Gas Fee is highly similar to SaaS and Fintech, unable to match the grand narrative of "computing everything." When users who don't use DeFi leave, ETH's value cannot be sustained.
Ultimately, no one uses Bitcoin for transactions, but there will always be those who want to use Ethereum to compute everything.
Image Caption: BTC and ETH Address Profitability
Image Source: @TheBlock__
Decentralization ≠ wealth effect. But after Ethereum turned to PoS, it默认 (defaulted) to accepting ETH's capital value as its sole pursuit. Price fluctuations will be excessively scrutinized by the market, further questioning the gap between its vision and reality.
In contrast, the price fluctuations of gold and Bitcoin are highly equated with the market's basic sentiment changes. People worry about the world situation when gold soars, but no one doubts Bitcoin's fundamental value when its price falls.
It's hard to say that Vitalik and the EF caused Ethereum's "de-" decentralization, but it must be admitted that the Ethereum system is increasingly becoming intermediary-oriented.
In 2023/24, it became fashionable for Ethereum Foundation members to serve as advisors for projects, like Dankrad Feist for EigenLayer. But few remember the unclear connections between The DAO and several core Ethereum members.
This situation only subsided after Vitalik officially announced he would no longer invest in any L2 projects. But the systemic "bureaucratization" of the entire Ethereum ecosystem was already inevitable.
In a sense, being a middleman doesn't necessarily carry negative connotations like a broker. It refers to efficiently matching and facilitating each other's needs. For example, the Solana Foundation, once considered an industry典范 (model), generally promotes project development from the perspective of the market and its own ecosystem's growth.
But for ETH and Ethereum, ETH should become an "intermediary" asset, but Ethereum should remain彻底 (thoroughly) open and autonomous, maintaining the technical architecture of a permissionless public chain.
Image Caption: Ethereum DEX Volume by Token
Image Source: @blockworksres
Within the Ethereum ecosystem, there are signs of stablecoins gradually replacing ETH. As liquidity migrates on-chain with Perp DEX, USDT/USDC is also profoundly changing the old格局 (landscape). The story of stablecoins replacing ETH/BTC as the benchmark asset within CEXs will replay on-chain.
And USDT/USDC are precisely centralized assets. If ETH cannot maintain a vast application场景 (scenario) and can only be used as an "asset," then under the背景 (background) of speed increase and fee reduction, Gas Fee consumption must be large enough to sustain ETH's price.
Moreover, if Ethereum is to be completely open, it should allow any asset to act as an intermediary asset. But this would severely harm ETH's value capture ability. Therefore, L1 needs to reclaim power from L2, L1 needs to scale again. Privacy in this context can be interpreted as a necessity for institutions or as a choice不忘初心 (not forgetting the original intention).
There are many stories here, each worth hearing, but you must choose a direction to pursue.
Complete decentralization cannot achieve minimal organization, leading to everyone acting on their own. Under the principle of efficiency, one can only continuously lean towards minimized trust. Minimized trust relies on the order derived from Vitalik, which is no different from the extreme freedom Brother Sun (Sun Yuchen/Justin Sun) gives to black and gray industries.
We either trust Vitalik, or we have to trust Sun Ge (Sun Cut). Simply put, decentralization cannot establish a self-existent, self-sustaining order. People's hearts desire extreme chaos, but their bodies极端厌恶 (extremely detest) environments without a sense of security.
Vitalik is a middleman, ETH is a middleman, and Ethereum will also be the middleman between the traditional world and the链上 (on-chain). Ethereum wants a product without a product, but any product inevitably carries elements of falsehood and deception. "Just use Aave" is fundamentally no different from UST.
Only by repeating the first failed action can the financial revolution succeed. USDT first failed on the Bitcoin network, UST failed by buying BTC, then came the success of TRC-20 USDT and USDe.
Or rather, people suffer from ETH's decline and sideways movement, and also suffer from the膨胀 (bloating) of the Ethereum system, making retail investors unable to separate from Wall Street. It should have been Wall Street buying ETH from retail, but people are now tasting the bitter fruit of buying ETFs and DATs.
Ethereum's limitation is the capital of ETH itself. Production for the sake of production, production for the sake of ETH, are two sides of the same coin, a self-evident truth. East and West do not buy from each other. Capital and project teams that prefer certain ecosystems, certain entrepreneurs, ultimately are not producing for the token of the invested project, but for ETH.
De—->"Centralization": The Future of the Financial Computer
From the Second International to LGBT, from the Black Panther Party to Black Panther, from Bitcoin to Ethereum.
After The DAO incident, Nick Szabo began to detest everything about Ethereum. After all, Satoshi Nakamoto has disappeared into obscurity, but Ethereum's performance cannot be said to be poor. I'm not schizophrenic, criticizing Ethereum and then turning around to speak well of V.
Compared to next-generation公链 (public chains) like Solana and HyperEVM, Ethereum is still the best player balancing decentralization and wealth effect. Even Bitcoin's天生 (innate) lack of smart contract support is its biggest flaw.
As a 10-year-old chain, ETH and Ethereum have transformed from the "opposition" to the "official opposition," needing to occasionally summon the spirits of decentralization and cypherpunk, then continue advancing towards the realistic future of the financial computer.
Minerva's owl can only take flight at night. The debates over wealth effect and decentralization must be buried in Königsberg. The真正残酷 (truly cruel) historical practice has long buried both these narratives together.
