The entire Web3 is being paid for by two men, and the explosion of blockchain applications may just be an illusion.

The blockchain industry is not without progress, but rather its progress is mostly "vertically deepening" rather than "horizontally expanding."

Written by: Liu Honglin

The Web3 industry experiences a narrative of "application explosion" from time to time: NFTs are changing the art market, blockchain games are disrupting the game distribution model, DAOs are rewriting the logic of corporate governance, and AI+Crypto is set to usher in a new era of "on-chain artificial intelligence agents"... However, after each wave of enthusiasm, we still face an increasingly clear question: the boundaries of the industry do not seem to have truly expanded.

There is such a sentiment, as seen in a tweet by Wu today: "What is quite frustrating in the crypto world is that its boundaries seem to have changed little over the years. Bitcoin remains the largest and only consensus. Attempts to expand the scope, such as NFT mini-games, tokenization, and AI+crypto, have all temporarily failed. ICOs cannot replace IPOs, and no companies have opted for issuing tokens instead of going public. Casinos remain the core source of profit, entrepreneurs are reluctant to come, and the difference between the popular memes and the ICOs from 2017 is not that significant."

Indeed, from the market structure perspective, we have not welcomed a new "mainstream asset" to challenge BTC's position, nor has there emerged a new business model that allows Web3 to step outside the realm of "financial technology." NFTs, blockchain games, SocialFi, and AI narratives, although once very popular, have rarely seen projects that truly complete the transformation from "concept" to "sustainable application."

We seem to be experiencing a collective illusion—a technology field driven forward by narrative, each attempt to go further ultimately finds itself still unable to escape the original path.

The Boundaries of Blockchain Adaptation: Is It Really Suitable for "All Industries"?

The "omnipotent fantasy" of Web3 has been repeatedly mentioned in the past few years: we want to create "on-chain social networking", "on-chain e-commerce", "on-chain education", and "on-chain entertainment", as if there is room for "transformation" in any industry that has not yet integrated into Blockchain. However, looking at it calmly, the technical characteristics of Blockchain itself—immutability, verifiable rights, and contract logic that does not require intermediaries—are indeed very suitable for financial scenarios, but may not be appropriate for information flow-oriented or social-driven businesses.

The underlying logic of the internet is "zero-cost copying", while the logic of Blockchain is precisely "restricted copying + a fee for each write-in". Under this technological structure, attempting to recreate something like TikTok, Taobao, or Twitter using Blockchain is mismatched from the start. The costs are high, the experience is poor, and the performance is unstable, while users do not have an urgent need for "decentralized social" or "traceable live streaming platforms".

Moreover, even though some industries seem to have demands for "rights confirmation", "traceability", and "profit sharing", such as music copyrights, art transactions, or e-commerce supply chains, the integration of Blockchain has not genuinely reduced costs or improved efficiency; rather, it has increased the understanding threshold and operational complexity. Ultimately, "chain reform" has become a selling point for project financing rather than a tool for enhancing commercial efficiency.

The entire Web3 is paying for two men

To some extent, the entire Web3 industry is currently footing the bill for two men.

A proposal from Satoshi Nakamoto—the founder of Bitcoin, who suggested that "currency issuance can rely on no state machinery." The global currency experiments, from Bitcoin to stablecoins, from CBDC to anonymous coins, can all be seen as responses to this proposition left by Nakamoto. The rise of stablecoins is essentially an exploration of how private credit can replace state sovereign credit; while the regulatory suppression by various governments is a self-defense mechanism of the state machinery.

Another one from Vitalik Buterin, the co-founder of Ethereum. His proposition is: "Can we build a globally decentralized internet system that never goes down?" From smart contracts and decentralized identity systems to trustless governance (DAO), the entire Ethereum ecosystem is actually trying to construct a new system that does not rely on traditional trust mechanisms. However, the reality is that on-chain systems still face old problems like governance failure, high Gas fees, and performance bottlenecks. There remains a structural contradiction between "never going down" and "sustainable operation."

From this perspective, the development of Web3 is not meaningless, but its expansion path always revolves around the above two issues—reconstruction of the monetary system and internet infrastructure, rather than the illusion of "completely penetrating all industries."

Market Validation: Why Are the Most Successful Projects Still "Fintech"?

We can see the real situation from the most "robust" business forms currently existing in the industry: exchanges, stablecoin issuance, on-chain asset management, cross-border payments, custody services, and RWA (Real World Asset) asset tokenization, among others. These directions invariably possess financial attributes and address specific market demands and regulatory adaptation issues.

Circle's USDC is gradually implementing a "bank-like" model in multiple countries, directly integrating with local payment systems; licensed virtual asset exchanges in Hong Kong are attracting traditional financial institutions to explore new paths of "tokenized financial products + exchange listings"; Singapore is rapidly advancing RWA pilots through financial regulatory sandboxes, allowing traditional assets such as real estate and funds to circulate in the form of tokens. These are all clear attempts to "take a step forward" under the existing regulatory framework, though far from disruptive, they hold practical value for implementation.

On the contrary, we rarely see "on-chain social" platforms survive beyond one bull-bear cycle, and there are almost no blockchain games that can escape the lifecycle of "short-term token issuance + short-lived ecosystem." As for on-chain content platforms, DAO city governance, and other directions, most are still in the experimental stage, so it cannot be said that there has been an "explosion."

The Repetition of "Pseudo-Applications": Are We Wasting Resources?

There is a common risk in the industry: a large amount of capital, manpower, and resources are invested in certain unsustainable application narratives. These projects often have a strong "financing logic," but lack reusable product logic or technical paths, ultimately leading to an awkward situation of "completion of the demonstration means termination."

For example, some "AI+Crypto" projects are essentially just calling OpenAI interfaces on-chain and embedding token incentive mechanisms, with core functionalities no different from Web2 AI tools, and even worse experiences. Similarly, some NFT social projects completely rely on "secondary market expectations" for user retention; once prices drop, the social value collapses accordingly.

The common characteristics of such projects are: narrative first, fictional scenarios, lagging products, and a lack of stable user demand support. Investment institutions and entrepreneurial teams, driven by cycles, repeatedly tilt resources towards these directions, which not only inflates the industry bubble but also dilutes the continuous investment that could have been made in infrastructure, payment, compliance, and other areas.

Is it an illusion, or are we unwilling to accept the "boundaries of reality"?

So the question returns to the starting point: Is the explosion of Blockchain just an illusion?

Maybe. But a more precise expression is: it's not an illusion, but a misjudgment.

We misjudged the applicable boundaries of Blockchain, treating it as the next generation of Internet infrastructure, hoping it could "conquer all"; we misjudged the universality of user needs, believing that everyone needed "decentralization"; we also misjudged the compliance thresholds and technical costs, ignoring the inertia of systems and the considerations of efficiency in the real world.

But we must also see that within the boundaries of financial technology, Web3 still has very solid opportunities. The reconstruction of global payment networks, the improvement of transparency in asset digitization, the compliant issuance of tokens, and the gradual maturity of secondary market trading systems are forming the most solid foundation for Web3. It does not require excessive narratives or the need to overturn everything; as long as it continuously provides real value in this field, it is enough to support a sustainably developing industry.

Conclusion: Returning to the problem itself allows us to continue moving forward.

The blockchain industry is not without progress, but its progress is mostly "vertically deepening" rather than "horizontally spreading." The industry is not without value; it's just that this value does not mean that all industries must connect to Web3; it is not without a future; it's just that this future may be more focused and narrower than we imagine, but also more real.

When we look back at the slogan "Transform Everything with Blockchain" proposed in those years, we may realize that what is truly worth adhering to is not the grand dreams, but rather the technological adaptation and institutional innovation that can transcend cycles. And these, precisely, do not require too much imagination, but rather stronger execution and more rational industry understanding.

Where will Web3 ultimately go? We may not be able to predict all the answers, but at least we can be clear about one thing: letting go of fantasies allows us to see reality. And reality itself does not need embellishment.