If you haven’t been around very long, it’s hard to fully understand how quickly the narrative can change in this industry, especially when you’re playing catch-up. Fashions get old, memes get tired. It’s fair to say that the annual seasonal craze is currently feeling the pressure of the fading Bitcoin momentum.
While it may be easy to write it off as a temporary setback caused by a general bull market correction, stronger undercurrents are working against popular valuation issues. As the tide goes out, it’s hard to ignore those who swim naked.
Is the airdrop meta over?
If it wasn’t already clear, the latest crop of projects proposing to “build on Bitcoin” have so far been more about opening up opportunities than innovation. Yes, BitVM and ordinals have sparked real interest and creativity but the follow-up leaves a lot to be desired. This has been caused, in large part, by lazy operators. Instead of doing real engineering work, every other third-party entrepreneur in the industry just took the Ethereum playbook and ran with it for Bitcoin.
I made a case in my last article for why this modular cottage industry has left Ethereum the worse for wear from a valuation perspective but recent developments have underscored just how wrong the economic incentives are.
Of course, one obstacle to this infrastructure arms race has been the ability of its promoters to print tokens like it’s going out of style. Unfortunately for them, it looks like the trend is starting to converge on those programs. You may remember how everyone eventually got out of ICOs after Dentacoin raised billions of dollars. The same is playing as we speak.
A few months ago, I explained how the points concept had dominated the token airdrop meta. Other exploit layers were popping up left and right, advertising the opportunity to collect rewards at the end by exchanging money on their networks. The premise was simple enough: users would be incentivized to use apps in a given rollup or donate assets to their trading pools. Once the series is launched, tokens will be distributed to a random set of qualified participants. The idea was that this would also be consistent with the protocol and its future.
It turned out to be the exact opposite of play. In the past week, a few highly anticipated tokens shed light on the folly of the approach.
How do you verify a user’s identity on an unknown system? You can’t. The inability to do so creates an opportunity for any skilled actor to impersonate any number of users. Unsurprisingly, money-savvy actors quickly caught on to this trick and have been busy using it to their advantage. Instead of users, the airdrops attracted contractors who looted all the new layers they could put their wallets into.
You may be wondering why I am writing about tokens in the Bitcoin topic. Just think of it as a reminder that any Bitcoin scaling proposal or layer involving the token should be avoided at all costs. Putting aside the speculative nature of the asset, this playbook is typical of behind-the-curve projects, even by Ethereum standards. I don’t care what technology they claim to be working on and you shouldn’t care about their place of execution or lack of knowledge. The window is closing and we can expect them to change their “users” every now and then to benefit from whatever money is left of this racket. Don’t stay.
Ethereum’s identity problem
The Bitcoinlayers platform reported yesterday that more than half of the current Bitcoin scaling proposals plan to use Ethereum’s EVM as a technology platform. I don’t know what to do with this number. It might be generous to associate any of those with Bitcoin but the market is clearly interested in testing the idea.
This is especially telling when you consider the volatile nature of Ethereum at the moment. Don’t call it a civil war yet but the battle lines are being drawn and the outcome will be showing its middle ground. I have previously laid out the case for Ethereum network fragmentation. Suffice it to say that things are moving quickly and the project is also facing serious debate and reflection.
On the other hand, the developer pool represents the inclusion of wrapper functions in the protocol to integrate the economic function and improve the user experience. Another group is raising questions about the plan, which it says will also include MEV emissions and affect test resistance. It’s increasingly looking like Vitalik may need to pull another rabbit out of his hat.
Coupled with fatigue over the sale of EVM facilities, the module’s previously celebrated thesis is beginning to look bleak. At least, the original playbook no longer holds and the narrative changes again.
The timing of this could be better for the emerging Bitcoin layers that are starting to look outdated by industry standards – and they haven’t even started yet!
Memetic fatigue
You’ll never catch me being bearish on memes but they go in cycles and the latest iteration has lost its luster. While I’m not ready to call the top of this new meme paradigm, it’s another example of Bitcoin’s new layers arriving late to the show. If not, what market is there for all the infrastructure being built?
The ground is changing under the feet of the new generation of Bitcoin developers. I suspect that those who have decided to take the long career road will have a better chance of making it to the other end of this bull market. Doing so will require learning important lessons from the trials played out on other sides of the pond. Patience may seem appropriate given the rapidly changing environment.
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