If you haven't been at this long, it's hard to fully appreciate how quickly narratives can change in this industry, especially when it comes to playing catch-up. Fashions get old, memes get tired. It's fair to say that this year's seasonal craze is currently feeling the pressure of Bitcoin's fading momentum.
While it might be easy to dismiss it as a temporary setback caused by the usual bull market correction, there are strong underlying currents that are working against popular rally narratives. As this tide recedes, it has become a little difficult to ignore those who swim naked.
Is the airdrop meta over?
If it wasn’t already clear, the recent crop of projects proposing to “build on Bitcoin” has so far been more about opportunism than innovation. Yes, BitVM and Ordinals sparked genuine interest and creativity, but the follow-through leaves a lot to be desired. This has been caused, in large part, by lazy operators. Instead of doing any real engineering work, every other third-rate entrepreneur in the industry has simply taken the Ethereum playbook and applied it to Bitcoin.
Yo He made a case In my last article I explained why this modular cottage industry has left Ethereum worse off from a scalability standpoint, but recent events have highlighted just how misaligned the economic incentives are.
Of course, the impediment to this infrastructure arms race has been the ability of its promoters to print tokens like they are going out of style. Unfortunately for them, it seems the tide is starting to turn on those schemes. You might remember how everyone eventually moved away from ICOs after Dentacoin raised billions of dollars. Something similar is happening as we speak.
Just a couple of months ago, I explained How the notion of points had taken the token airdrop meta by storm. Alternative execution layers were popping up all over the place, advertising the opportunity to collect eventual rewards in exchange for liquidity on their networks. The premise was simple enough: users would be incentivized to use applications in a given rollup or contribute assets to their trading pools. Once the chain launched, tokens would be allocated to a semi-random set of qualified participants. The idea was that this would further align them with the protocol and its future.
It turns out that exactly the opposite is happening. Over the past week, a pair of highly anticipated token releases have shed light on the absurdity of the method.
How do you verify a user's identity in a pseudonymous system? You can't. The inability to do so creates an opportunity for any capable actor to impersonate any number of users. Unsurprisingly, well-capitalized actors he quickly got the hang of it and they have been busy exploiting it for their own profit. Instead of users, airdrops have attracted mercenaries who plunder every new layer they can get their hands on in their wallets.
You might be wondering why I am writing about tokens in an article about Bitcoin. Consider it just a reminder that any Bitcoin scaling proposal or layer involving a token should be avoided at all costs. Leaving aside the fraudulent nature of the assets, this playbook is a telltale sign of projects that are behind the curve, even by Ethereum standards. I don’t care what technology they claim to work on nor should you care about their execution environment or their zero-knowledge proof. The window is closing for them and we can expect them to scam their “users” at every turn to profit from whatever liquidity they have left in this business. Stay away.
Ethereum's Identity Crisis
He Bitcoin Layers The platform reported yesterday that more than half of the current scaling proposals for Bitcoin planned to use Ethereum's EVM as a technology platform. I don't know what to do with this number. It's probably generous to associate any of them with Bitcoin, but the market is clearly interested in exploring this idea.
This is especially telling when you consider the volatile state of Ethereum right now. Let's not call it a civil war just yet, but some battle lines are being drawn and the outcome will be telling for its accumulation-focused roadmap. I previously laid out The case of the fragmentation of the Ethereum network. Suffice it to say that things are rapidly deteriorating and the project is once again facing serious debate and introspection.
On the one hand, a group of developers advocates for the consecration of accumulated operations in the protocol to consolidate economic activity and improve user experience. Another group is raising questions on the initiative that claims it would be Further centralize MEV extraction and affect resistance to censorship. It's looking more and more like Vitalik might need to pull another rabbit out of his hat.
Combined with the commoditization fatigue of EVM runtimes, the previously held modular thesis is starting to look pretty dimAt the very least, the original manual no longer appears to hold up and the narratives are changing again.
The timing for this might be better for emerging Bitcoin layers that are starting to look pretty dated by industry standards, and they haven't even launched yet!
Memetic exhaustion
You would never see me as pessimistic about memes, but they move in cycles and the latest version has lost some of its luster. While I’m not ready to say that this new meme paradigm has peaked, it is another example of Bitcoin’s new layers being late to the show. Without tokens for cats and dogs, what market exists for all the infrastructure being built?
The ground is shifting under the feet of a new generation of Bitcoin developers. I suspect that those who decided to take the long route of putting in the work will have a better chance of making it to the other end of this bull market. This will require learning valuable lessons from the experiments being carried out on other sides of the pond. It seems that patience is warranted given the rapidly evolving situation.
