The Web3 industry is entering a "New Era of Compliance". Are we heading in the wrong direction with our efforts for "mass adoption"?

Recently, there has been a heated discussion in the industry regarding Ethereum. Not long ago, several well-known figures in the field initiated a 3-hour online discussion titled "What is happening with Ethereum?", covering various angles such as the competition between Ethereum and Layer 2 networks, ideology, organizational structure, and more, delving deeply into the current dilemmas faced by Ethereum and the entire industry.

This discussion has sparked some thoughts in me. Although my views may differ from those of most Web3 practitioners, I have decided to share them in an attempt to provide a new perspective on the challenges currently facing Ethereum and the entire industry from an application standpoint. I believe that only through rational and honest discussions can we drive the industry towards a healthier direction.

Over the past year, as a founding member of a fintech startup in Singapore, I have been deeply involved in project collaborations with the central banks of three countries regarding tokenization and cross-border payments. This experience has broadened my perspective beyond the pure Web3 circle, directing my attention towards the strategic movements of global central banks and traditional financial institutions.

I started to extensively research blockchain and tokenization-related reports and papers published by traditional powers, understanding the projects they are working on, while also paying attention to the development trends in the Web3 industry. This dual perspective has increasingly made me feel the disconnection in the atmosphere and development paths of the two fields.

In the Web3 world, there is a common complaint: an increasing number of technical infrastructures are emerging, new concepts and terms are constantly appearing, deliberately creating complexity and raising the threshold for understanding. The ultimate goal of most projects is to issue tokens, and after the initial token issuance, they almost become "ghost towns." As for whether there is real use value, it seems not to be a key focus.

The recent focus of discussion has shifted to questioning the Ethereum founder and foundation. More and more voices believe that they are too obsessed with "technical discussions" and "ideal pursuits," investing a lot of energy in studying technical details, but showing insufficient interest in the actual needs of users and commercial exploration. This tendency has sparked widespread concern within the industry.

However, when we shift our focus outside the cryptocurrency space, we find a completely different landscape: the attitudes of traditional financial powers and governments towards Web3 technology are undergoing significant changes. They not only see blockchain and tokenization as important upgrade opportunities for the existing payment and financial systems but are also actively exploring paths for transformation.

In 2024, a milestone turning point emerged, as the Bank for International Settlements, known as the "central bank of central banks," officially proposed the concept of "financial internet." This move positions tokenization and blockchain technology as the next paradigm of the human financial currency system, causing a stir in the traditional financial world and becoming one of the most discussed topics.

Major financial institutions and central banks around the world are accelerating their pace, engaging in unprecedented active exploration in areas such as tokenization infrastructure construction, asset digitization, and the implementation of payment applications.

The Bank for International Settlements began systematically studying Web3 technology as early as 2018, publishing dozens of highly specialized research papers. In 2019, the institution established the BIS Innovation Hub, systematically conducting experimental projects related to blockchain and tokenization.

A flagship project of the Bank for International Settlements is mBridge - a public permissioned blockchain based on the Ethereum Virtual Machine, operated by central banks of participating countries as nodes, supporting direct cross-border settlement of central bank digital currencies on the chain.

Another significant initiative by the Bank for International Settlements is the launch of the largest public-private partnership project in blockchain history - Project Agora. This project brings together seven major central banks and over 40 global financial giants, including SWIFT, VISA, MasterCard, and HSBC. Its goal is to leverage blockchain technology and smart contracts to establish a globally unified ledger system while maintaining the existing financial order, thereby optimizing the current financial currency system.

In contrast, the Web3 industry often shouts the slogan of "mass adoption," yet it is actually keen on hyping meme coins and indulging in the short-term attention economy. This stark contrast makes one ponder: as traditional financial institutions are taking concrete actions to promote the large-scale application of blockchain technology, should the Web3 industry also reconsider its development direction?

Looking back at the so-called "hit projects" in the Web3 field over the past few years, a pattern emerges: those claiming to achieve "mass application" are essentially speculative games dressed in innovative attire. Whether it is the endless stream of meme coins, the "Play-to-Earn" model operating under the banner of game finance, or social finance that boasts social innovation, upon closer inspection, they are nothing more than carefully packaged "digital casinos."

If getting more and more people involved in speculative trading and driving up coin prices is what we call large-scale application, then this kind of "application" is merely a zero-sum game where wealth concentrates in the hands of a few, and its unsustainability is obvious.

Recent research by an on-chain data analyst shows that on a certain platform, only 3% of users have made profits exceeding $1,000. This cold figure reflects that trading cryptocurrencies is truly a game for a very small number of people.

What is even more concerning is that the entire industry has seemingly become a breeding ground for hackers, phishing, and scams. According to the latest report from the FBI, in 2023 alone, the American public suffered over $5.6 billion in fraud losses in the cryptocurrency sector, and astonishingly, victims aged 60 and over accounted for 50% of the total.

I do not want to completely deny the speculative nature of Web3. However, Web3 should not, and cannot, only be a global casino. It needs to develop truly sustainable and practically valuable application scenarios.

Payments and finance are undoubtedly the application areas with the most practical potential for Web3 technology. This has been recognized by traditional financial powers, national governments, and market levels: we see traditional financial forces exploring various innovative applications on a large scale, including innovations in payment systems, tokenization of real-world assets, the integration of decentralized finance with traditional finance, and emerging concepts in payment finance.

For Ethereum or the entire industry, the core issue may not lie in whether the technical direction is correct, but in whether we truly understand what valuable applications are. When we overly focus on technological innovation while neglecting market demand; when we are keen on creating concepts but drift away from real scenarios, is this development direction really correct?

In the face of this trend, I have the following thoughts on the path to truly healthy and sustainable large-scale applications in the industry:

The primary goal is to solve real problems: whether it is infrastructure or applications, we should base ourselves on real needs and focus on addressing genuine pain points. For example, many ordinary people and small and medium-sized enterprises around the world still struggle to access financial services; for instance, there are issues related to privacy when companies use blockchain, and so on. The value of technological innovation ultimately needs to be reflected in solving real problems.

Secondly, it is about lowering the barriers to entry: the ultimate goal of technology is to serve users, not to create obstacles. The endless stream of jargon and complex concepts in the current Web3 world has, to some extent, hindered genuine adoption. We need to make technology more accessible, for example, by using chain abstraction technology to address user experience issues.

The third is to create sustainable value: The good development of the industry must be built on sustainable business models and cannot overly rely on speculative hype. Only projects that truly create value can survive in the long term through the test of the market, such as Web3 payments, payment finance, and tokenization of real-world assets, etc.

The importance of technological innovation is indisputable, but we must also recognize that application is the primary productive force. Without practical application as a foundation, no matter how much infrastructure or advanced technology we have, it will ultimately be nothing more than a castle in the air.

Throughout history, attempts to integrate blockchain with the real world have never ceased, but have often failed to materialize due to multiple factors such as timing, regulatory restrictions, or technological bottlenecks. However, the current situation presents an unprecedented opportunity: technological infrastructure is becoming increasingly mature, traditional financial forces are beginning to actively embrace innovation and explore practical applications, and at the same time, regulatory frameworks in various countries around the world are gradually improving. These signs all suggest that the next few years are likely to become a critical turning point for the large-scale adoption of Web3 applications.

At this important juncture, regulatory Compliance is both the greatest challenge and the most promising opportunity. An increasing number of signals indicate that the Web3 industry is gradually transitioning from its initial "wild era" into a "new era of Compliance." This shift not only signifies a more regulated market environment but also heralds the beginning of true sustainable development.

There is no doubt that the future battlefield of blockchain technology will focus on several key areas: innovation in payment systems, tokenization of physical assets, emerging concepts in payment finance, and the deep integration of decentralized finance with traditional finance. This reality brings an unavoidable proposition: if the industry wants to achieve breakthrough development at the level of real applications, it must face the interaction with regulatory agencies and traditional financial institutions. This is not a matter of choice, but an inevitable path of development.

The reality is that regulation has always been at the top of the industry ecosystem. This is not only an objective fact but also an ironclad rule that has been repeatedly verified in the development of the cryptocurrency industry over the past decade. Almost every significant turning point in the industry is closely related to regulatory policies.

Therefore, we need to seriously consider several fundamental questions: Should we choose to embrace regulation and seek a symbiotic path with the existing financial system, or should we adhere to the concept of "decentralization" and continue to wander in the regulatory gray area? Should we pursue a purely "casino"-style large-scale application, repeating the old path driven by speculation over the past decade, or should we be committed to creating real, sustainable value and truly realize the innovative potential of blockchain technology?

Currently, the Ethereum ecosystem is facing a significant structural imbalance: on one hand, there is an ever-increasing stack of infrastructure and a plethora of technological innovations, while on the other hand, the development of the application ecosystem is relatively lagging. In this contrast, Ethereum is facing dual challenges: not only must it deal with the strong offensive from other emerging public chains in terms of performance and user experience, but it must also be cautious of the encroachment of compliance public permissioned chains being laid out by traditional financial forces in the actual application market.

How to seek breakthroughs under such a double squeeze, while maintaining technological innovation without losing market competitiveness, these are the key challenges that Ethereum must face head-on when seeking to break the impasse.

The above views only represent a personal perspective, serving as a starting point to inspire more constructive thinking and discussions within the industry. As participants in the industry, we should all contribute to promoting the development of Web3 towards a healthier and more valuable direction.