IOSG Founder: From Hong Kong to Denver, Ethereum Is Entering a "Dunkirk Moment"

Original Article Title: "From Hong Kong to Denver, Ethereum is Entering its 'Dunkirk Moment'"

Original Article Author: Jocy, IOSG Ventures

I believe many of you have already seen the records from the Consensus HK event two weeks ago. I won't repeat them here, but most can be summarized as a disappointment in the industry's inability to see a breakthrough and a belief that we have entered a bear market. That same week was also a feast for junior players (P小将) and KOL gurus. The impact of my trip to Hong Kong was about rationality. Those junior players and gurus who work harder than funds and entrepreneurs should rightfully receive so much, and they are surrealistic investors. They always add a perfect period to every trade. Many junior players' trading principle is 90% in BTC, 10% in an active SOL position to always maintain PVP and be prepared to sprint. Regardless of how much profit they make each time, they will stick to this position. Because of the meme wave and attention economy, this became the liveliest discussion in HK.

Kaito's victory ushered in a golden age for KOLs, where attention is priced and can be quickly monetized. In stark contrast, the entire Ethereum ecosystem is lifeless, hollowed out, and idealistic horns that no one follows, which is a harsh reality. So-called value investors are deeply locked in, long-term holders are starting to turn bearish on Ethereum, shifting to Solana. Many fail to see the hunger of Ethereum's entrepreneurs (in contrast to Solana, when a dev goes to L2/Ethereum to request a connection, they usually have to wait an average of two weeks, whereas with Solana Foundation, it typically takes less than two days to complete the onboarding, join the Discord group, and start communicating). This seems to be a deliberate act by the rulers of the crypto industry. During this bull market's small cycle, rather than encouraging long-term holders, it rewards short-term traders more favorably. However, in my opinion, this is sounding an alarm for the industry leaders like Ethereum, who are inactive or lack crisis awareness, as the market is warning them.

Short-Termism Prevails: The Collapse of Industry Values

At the same time, as everyone sheds their disguises and tries to make a fortune as the bull market concludes, many have lost their ideals/beliefs and become heartless arbitrage tools. No one cares about the industry's future; everyone just wants to make a final profit in this cycle. Exchanges, to support their own project's price and chain, may abandon listing standards to list some projects they have invested in; top-tier projects treat their TGE as the last ATM, and market makers have become the undefeated generals of this cycle. Relying on BD and brand, they can always get free chips and, in the overall downward trend of VC coins, an average median volume MM can receive nearly 40m in net income. It seems that everything is moving from long-termism to short-term bubbles and speculation, and these actions are having a more profound impact on some entrepreneurs who persevere in building.

Times like this are very similar to 2018 and 2022, where the coldness is very cold, and practitioners leave the industry because they cannot see hope and recognition in the industry. Everyone is trying their best to survive in the bear market. For teams still working on startups and projects, this will be very painful for them, as they need unwavering values and principles at all times. Trump has influenced the core values of the entire United States, and the crypto industry, after the Trump token, has sparked a huge wave of nihilistic investment. Practitioners and speculators alike saw this as a fast and short-term game, and everyone had the goal of taking away as much cash as possible before the money game button was pressed.

To summarize the trip to Hong Kong, it was a big collapse of the industry, and also a formal trial for Ethereum. As one of the industry's most successful entrepreneurs, did he steer the industry towards nihilism?

The Challenges and Transformation of the Ethereum Ecosystem

TL;DR: The founder of Denver infra is very bearish, but the founder of the app and AI are very bullish.

The trip to Denver also saw many heart-stopping scenes, where founders and developers who had been steadily building for many years were suddenly told that the dynasty was about to perish. They chose not to believe it. It seems that the Ethereum ecosystem has always had a culture of control. Their funding journey has been smooth, and they have seen many projects less deserving than theirs perform well in the token speculation market. They perhaps never thought that one day, they would be unable to raise funds and their self-issued coins would go to zero like other meme coins. It was only when their runway was down to the last 6-9 months that they slowly realized the need to truly create a product with revenue and a user base, and began to seriously consider what the problem with Ethereum is.

Of course, there is never a point of no return. It's just that for them, it requires drastic layoffs and a complete denial of their past selves. This is a huge challenge for founders because they are just betting on an uncertain direction, yet they have to risk all they have for it. According to incomplete statistics, the current amount raised by projects deeply rooted and built on the Ethereum and EVM ecosystem exceeds tens of billions of dollars, with the total valuation of the primary and secondary markets adding up to over a trillion dollars. Therefore, the question facing these projects is whether to stay on Ethereum or leave? Even a strong founder like Lido's Konstantin, when he tweeted about building a second Ethereum Foundation, instantly received DMs from hundreds of Ethereum ecosystem DeFi founders, including Uniswap. However, this still poses a significant challenge to consensus.

Recently, there has been another wave of Ethereum ecosystem entrepreneurs. In the past, they have always been the backbone of the industry's techies, with their technical products and solutions being widely adopted. Whether it's TEE/zkTLS/rollup, they have always dominated the field. However, these individuals have become tired of providing excellent solutions for technical protocols without end-users and demand, which does not bring them true entrepreneurial joy. What excites them now is those exciting new papers emerging in the AI research field. To be honest, there are quite a few founders like this, and they are among the few who can truly dig deep into the industry and create viable solutions. If many of these founders choose to leave and exit, I believe the impact on the entire Ethereum infrastructure would set us back at least three to five years.

The Magical Fusion of AI and Web3

Initially, everyone was saying that there was no buzz in the Denver infrastructure. However, after discussing an average of 3-4 AI*Web3 new projects every day, we have seen the Ethereum community actively embracing emerging technologies like AI, along with innovative attempts in DeTraning/Inference/DePIN, among other areas. Ethereum is actively adapting to new technology trends and exploring new application scenarios.

Capital and entrepreneurs have become industry prophets. Paradigm, with a $10 billion valuation, led the investment in the Web3 LLM company, Nous Research. Groq, as an Inference, generated over $1 billion in revenue in the past year. Openmind, in collaboration with Tree Technology, created RobotAI. DePAI's open-source product made its appearance in Denver. Hyperbolic also became one of the highest-rated inference networks for Web3 developer integration. Additionally, platforms like Open Gradient and Pluralis, open-source intelligence platforms, have emerged. At events like Denver's Ethereum conference, smart developers and founders have started to assist Web3 comprehensively in embracing AI, brainstorming how to integrate AI agents and more applications into the Web3 scene. The industry never has a point of ending or stopping - research and curiosity will always drive those builders further.

Openmind, in collaboration with Tree Technology, created RobotAI, and DePAI's open-source product made its appearance in Denver.

Macro Optimism Mitigates, Crypto Keeps Pace

However, having dealt with the majority of American institutions, the scene is completely different from Asia. Everyone maintains a very optimistic outlook on the crypto policy bull market's relaxed environment, and the U.S. bank's policy regarding accepting crypto asset custody has been approved, and soon banks will gradually allow BTC/ETH to be used as collateral, and even expand to mining equipment. Here we can see a clear trend that a crypto interest rate reduction environment is about to form, where the industry's original 10% lending rate can be adjusted to around 3–4%, or even reach negative interest rates as seen in Japan, which will bring liquidity back to the industry.

Additionally, recently we have seen the U.S.'s crypto-friendly policies, Uniswap and Coinbase are both considering designing a tokenized securities model, allowing traditional industry investors to better assess and purchase tokens. The regulatory tailwinds in this cycle will far exceed our imagination, so I am very bullish on the market's favorable macro environment in the next two years.

Many say that this bull market cycle has already ended, but I don't see it that way. Each bull market cycle not only has the cooperation of the macro market but also sees self-innovation and new applications emerging in the crypto native market. In this cycle, we have not yet seen genuine innovation, so if it continues to be absent, it will be a false bull market. In the next two years, we can expect more traditional companies/even nation-states to join Layer 2 networks, launching their decentralized networks, with the prosperity of L2 businesses once again driving Ethereum L1's growth and value capture.

Refactoring Ethereum Governance: Towards Mainstream and Commercialization

On the third day in Denver, attending Pragma organized by ETHGlobal, I met several core EF developers who revealed the upcoming restructuring of Ethereum's organizational architecture. Here, what's interesting is @dannyryan, who has had a visible reputation and voice in the Ethereum core developer community in the past. Furthermore, the newly established @Etherealize will also take on Consensys' mission in the new era, helping Ethereum move towards the mainstream world and commercialization; in addition, Foundation's Co-EDs Hsiao-Wei

@hwwonx have also been deeply involved in Ethereum for many years. Since 2016, they have been following Vitalik's every move (the attached image shows the 2019 Ethereum hackathon selection day in Beijing, with the person sitting next to Vitalik being). In addition, Tomasz @tkstanczak, as the founder of Nethermind, is very familiar with and understands the entire Ethereum ecosystem project, and as a third-party dev shop, they deeply understand a more sustainable survival business logic that can help Ethereum find a balance in its infrastructural and commercialization path.

Photo attached shows the selection day of Ethereum Hackathon in Beijing in 2019. The person sitting next to Vitalik is Co-EDs Hsiao-Wei @hwwonx

In fact, the problem Vitalik encountered is the same as all entrepreneurs: as the team grows, it becomes harder to manage. Friends who understand how to study individual personality traits can try to analyze V God's journey, from using the Milady reaction image as his Twitter profile picture to his disappointment with crypto OGs, and finally changing to a World of Warcraft half-man-half-bird Druid image. This also represents his inner reconciliation with the community feedback, as he officially announced Ethereum's new team structure the next day. Ethereum may be the first truly decentralized organization and economy in history. We should be more tolerant of this man who has just reached thirty, indeed, he has not shown particularly remarkable performance in organizational management and commercializing Ethereum applications. But who else can lead this organization to create more brilliance and results?

Perhaps Ethereum can also learn from Elon Musk and establish a DOGE Ethics Committee dedicated to removing irresponsible developers and figurehead roles. How to measure contribution value and KPI is an important question facing V God. Additionally, provide clearer value propositions and development requirements to internal core developers, give the management team a more specific roadmap and time management requirements, and better allow Ethereum to return to community and elected governance. As the cornerstone of Web3, Ethereum is also actively exploring Layer2 solutions and technological upgrades to meet the growing demand for applications.

There Is Never a Messiah; V God Needs to Encourage More App Entrepreneurs

Is technical research and development so important for Ethereum now? Maybe it was important in 2017, 2020, and 2022, but now applications should be more important. The next most important milestone for Ethereum and the greatest confidence builder for ecosystem builders will be whether Ethereum, as the world computer, can produce a transcendent super app product.

Many people consider Vitalik to be Ethereum's savior, and Ethereum to be the savior of the industry, but there has never been a savior. Everyone should be a savior. In a previous tweet, I called on all organizations in this industry that have accumulated generous capital and stable business income to contribute to the future of this industry. They can donate to some Ethereum open source organizations, as well as create better opportunities for young people in the industry. Besides supporting with Grants, many entrepreneurs still need financing support. In this wave of industry altcoin massacres, Asian funds have also been severely hit, with many funds starting to shut down or transition to the secondary market. The Asian entrepreneurial environment is tough, and if Asian VC investment institutions are lost, the industry will become even more vulnerable. Here, I still call for support from early-stage venture capital in Ethereum's ecosystem organizations. I suggest that all exchanges set aside 1-2% of their annual revenue to support the development and innovation of the Ethereum open-source ecosystem.

Will Ethereum Die in the Next Bear Market Cycle? I don't think so. It is the most successful decentralized organization in the Web3 industry, and we should not let it fail. Its failure would mean that the tens to hundreds of billions of dollars worth of talent and project assets built on the Ethereum business empire would need to start over, leading to a 5-10 year setback for the entire industry, causing many OGs to exit.

Please hodl your Ethereum. If you take a 10-year perspective, looking back at what happened between 2020 and 2030 in 2030, you may see that the doubts and noise in 2025 were actually insignificant. How to assess value and innovation from a 10-year perspective is a more important priority to consider.

Optimists are often right. The more difficult and tumultuous the stage, the more important it is to maintain confidence and optimism.

Original Post Link