# A hopium & delusion malaise is crippling the crypto industry

By [polynya](https://paragraph.com/@polynya) · 2023-11-09

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The crypto industry has always been very detached from reality. It’s all about shilling and pumping tokens, with exuberant claims. These claims never come to pass, but the failures are quickly forgotten, and we move on to the next narrative to pump our bags. It’s easy to write off the entire industry as an embarrassing joke, and accept that degens are gonna degen.

Warning, rant alert… Also, I’ll deliberately use hyperbole, because quite frankly more nuanced discussions have failed.

But it’s almost 2024, the industry is almost 15 years old, and this is not true - the industry is not a joke, it is an integral part of the global financial system. Yet, most of the market’s participants continue to be completely delusional. The real danger is we keep wasting >90% of our time, capital, and resources on dead-end useless narratives, meanwhile the product-market fit we’ve currently established slowly erodes away.

The crypto industry has two significant product-market fits - 1) alternative reserve asset/SoV and 2) stablecoins. Let’s take 1) - this requires high security and high sustainability. For strong monetary properties and high economic security, we need low inflation, but without trading off long-term sustainability. Of course, we also need a strong fallback with a network of independent, unsubsidized nodes, with a robust social layer.

Today, BTC is the dominant product-market fit for the industry, but it has questionable long-term sustainability properties which too few want to discuss. Instead, we’re busy shilling even more worthless L1 tokens which have high inflation and aren’t even attempting to be sustainable. The danger is over time this dominant usecase erodes away and people go back to traditional assets and commodities - or perhaps something new and better than obsoletes crypto as we know it. I’ll note that ETH is at least making an effort, but we’ve scope for improvement.

The second strongest product-market fit is stablecoins. Today, $20B in stablecoins is settled on Ethereum & L2s, and $10B in USDT on Tron. Every single day. This is a very significant amount, and the very sign of a maturing industry. We see all sorts of useless L1s shilled, yet Tron has >10x higher economic activity **than all of them combined**. No one talks about Tron, and here’s the real danger - Tron is expensive and insecure. If Tron doesn’t improve, or we don’t migrate a lot of this very significant activity to more sustainable solutions like L2s with massive onboarding campaigns, there’s a real danger a lot of this will simply be absorbed by competing solutions like CBDCs, despite the network effects.

Many of the ancillary usecases - DeFi, DAOs, NFTs, identity - are bolstered by the requirements for 1) and 2) - security and sustainability.

Since 2013, and the advent of the first “Bitcoin killers”, we have had abundant blockspace. It’s only Bitcoin and Ethereum that are saturated, while most other chains have remained barely utilized. Today, nearly a decade later, we have countless L2s and L1s live in production, a new L2 being spun up every other week, yet all of them have negligible non-spam demand. The quality of this blockspace has improved too - we now have many Stage 1 rollups like Arbitrum One which are 2 or 3 upgrades away from the final Stage 2, and even some app-specific Stage 2 rollups like Fuel or DeGate which see negligible usage. (I’ll note that OP Stack chains is an outlier, only ones without proofs, so certainly those have low quality blockspace - but of course, OP Stack’s fraud proofs are currently in testing)

All of the product-market fit crypto has achieved today was discussed and talked about a decade ago, and almost all of them covered in the 2014 Ethereum whitepaper. Of course, there are divergences, but the broad theme was set back then. Indeed, before Ethereum existed, BitShares already had stablecoins (incl. algorithmic), memecoins, NFTs, DEX etc. We had app-specific chains like Namecoin targeting identity.

I have been writing about this very topic for 7 years now, and every time, I’m told I’m being too dramatic, or being too pessimistic. Yet, no one has ever offered me any evidence beyond vague and irrelevant analogies, and indeed, the blockspace has remained empty throughout the years. Where are the applications? Where are the onboarding efforts? Show me some concrete evidence. For example, in 2020, when GPT-3 released, it was fairly obvious this one’s going to see strong product-market fit in the near future. And indeed, a couple of years later, ChatGPT (4) scaled up to 100M+ users. If crypto is going to have this huge product-market fit moment that has never existed before - show me where crypto’s GPT-3 is today. You can even go back to the 2014 Ethereum whitepaper and see all the well-reasoned usecases listed out, most of which have played out. The best we have now is [Vitalik’s post about applications](https://vitalik.ca/general/2022/12/05/excited.html), note how this post is down-to-earth, looking at the reality of the situation, rather than hopium-charged VC/shills narratives.

Instead, the crypto world just latches on to hopium and delusion that “we’re soooo earllyyyyy”. No, we’re not so early, 15 years is an absolute eon in the digital age, a decade with stablecoins, and 8 years with smart contracts, and 5+ years with an overabundance of blockspace. It’s about time this industry grew up and built things with evidence and realism, rather than blind hopium.

I can go on and on, but the reality is very obvious here. All this hopium, delusion and chasing pumps and dumps has meant we’re heavily starved of application layer innovation, consolidating our PMFs, sustainability improvements, and user onboarding.

Finally, yes, it’s not impossible that even being so thoroughly neglected, the application layer can still come up with unprecedented innovations. But that’s totally besides the point. We have to make sure we increase the probability of that happening, and for that we must focus on applications, improve existing applications and UX, and kill every ghost L1 and L2 with fire.

I have talked about these topics for years, and at this point, I have given up. I don’t think anything will change, and we’ll go back to shilling ghost-L1-du-jour with hopium “we’re soooo earllyyyy… huge adoption imminent” over and over again ad nauseum. I don’t think crypto will ever acknowledge reality.

But at least I can give up knowing that I tried.

/end rant

All that said, I appreciate and am grateful for the few folks here who build products looking at the ground reality, with what people and organisations actually need and want.

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*Originally published on [polynya](https://paragraph.com/@polynya/a-hopium-delusion-malaise-is-crippling-the-crypto-industry)*
