ETH Denver Conference Impressions: VC Indifference, Lackluster Narratives, and the Disillusionment of Idealism

Mar 04, 2025

By @kokii_eth

https://x.com/kokii_eth/status/1896017012083868040

1. Compared to last year — and even more so than the recently concluded Consensus — the overall atmosphere was much more subdued, with panel speakers noticeably outnumbering the audience.

2. In the short term, there is little evidence of any momentum that could reverse the trend in the secondary market. However, I remain optimistic about a policy turnaround in the United States and am generally positive about the price trend in the second half of the year.

3. It’s a case of some celebrating while others are dismayed. Projects that have already secured substantial funding or successfully launched are quietly taking advantage of the low prices to accumulate more, while star projects that have not yet launched are collectively postponing their TGE (Token Generation Event) by three months. Meanwhile, many mid- to lower-tier projects are now struggling with insufficient runway.

4. Returns for VCs have been less than ideal; many crypto VCs have not made a move in quite some time. Meanwhile, the crypto arms of well-funded traditional investment funds continue to invest — albeit increasingly on the institutional side. Their focus has shifted toward areas like B2B payments and banking, following a more fintech-oriented logic.

5. Traditional internet and entertainment companies such as Meta and Ubisoft have essentially disappeared from the scene. They have been replaced by payment and financial giants like PayPal and Franklin Templeton. The term “Web3” is no longer commonly mentioned, and the idealistic purists who were once swept up by grand narratives have now come to their senses.

6. There is a significant narrative void. Industry practitioners are beginning to doubt the once-prevalent business model of “telling stories, creating assets, and then offloading them to retail investors.” Yet, due to path dependency, many are at a loss as to what to do next.

Launching a blockchain remains the primary productive force. No matter what direction one takes, the ultimate goal is to launch a blockchain. However, the so-called “ecosystem building” still boils down to organizing hackathons, disbursing grants, and repackaging the familiar DeFi toolkit.

BTC Ecosystem: The BTC ecosystem has cooled considerably — it’s still just a handful of players attempting repeatedly to replicate the successful token-splitting model once seen on ETH and SOL. Their aim is to find yield opportunities for BTC through avenues like lending, staking, stablecoins, liquidity provision, etc. However, large holders are unwilling to compromise on security for such modest returns, so progress remains slow.

ETH Uncertainty: ETH seems to be at a crossroads. The main venue is now filled with advertising booths for various alternative Layer-1s, and after discussions around ZK, Rollup, and Restaking, there is no clear new direction in sight.

7. Emerging New Directions:

AI: Arguably the hottest topic at the event, with various niche AI agents and developer tools emerging en masse. Yet, few of these projects exhibit genuine technical barriers or have solid use cases. Most are viewed optimistically, but many participants are at a loss regarding implementation. This subject is so vast that it might merit a dedicated discussion later.

BTCFi: Following the withdrawal of SAB121, U.S. banks now have more freedom to custody cryptocurrencies. With banks able to hold BTC and then transfer it across different chains — capturing both on-chain and off-chain yield without the typical security concerns — a successful model here could inject significant liquidity into blockchain ecosystems.

RWA (Real-World Assets): With T-Bill tokenization already reaching a certain level of maturity, the key to bringing off-chain assets on-chain lies in standardization, mature custody solutions, a sizable market, and ideally a relatively inactive off-chain market. Some emerging asset classes are being explored — there are even experiments with unconventional categories such as uranium.

Preconfirmation: A new exploration on Ethereum that essentially creates a futures market for block space. Currently, on-chain transactions operate solely in the spot market, which comes with numerous issues like volatile gas fees and long wait times. Preconfirmation involves selling block space in advance, and it is a strategy that will be critical for future rollup-based solutions aimed at reducing costs and increasing throughput.

InfoFi/AttentionFi: A competitor to Kaito, this approach stems from the fact that the primary business model still revolves around issuing tokens to retail investors. In this context, sales are the most crucial element. The market channels for new tokens are still very rudimentary — effectively controlled by major institutions, tight-knit circles, and key opinion leaders (KOLs). This model can be seen as the productization of a marketing agency, where the challenge is to design a mechanism that motivates people to act as your sales force.

DeFi/Trading Tools: These projects are primarily focused on optimizing user experience, enabling rapid on-chain transactions, implementing anti-sandwich measures, providing trading signals, and offering chip analysis, among other enhancements.

Overall, although many remain disappointed by the lack of real-world use cases in crypto, I stay optimistic. Historically, those who have truly profited in this industry have been concentrated at the two ends of the asset lifecycle, as well as in various fee-extraction segments in between:

Asset Issuance: This includes miners, top-tier VC syndicates, leading project teams, token issuance groups, launchpads, market makers, secondary institutions, and stablecoin issuers — the core advantage being the ability to generate demand through capital, storytelling, or influence.

Asset Trading: Encompassing exchanges, public blockchains, DeFi platforms, and trading tools — with product strength and the ability to capture the latest market trends at its core.

Asset Circulation Fee Extraction: Involving KOLs, marketing agencies, and payment services — the critical element here being the ability to leverage information asymmetry and robust channel access.

The disillusionment among the idealistic purists isn’t so much a result of the gap between the vision of a “next-generation internet” and the current reality of gambling, lotteries, and money laundering. Rather, it is that the methods previously used to create assets are no longer as compelling in this new cycle. At the same price, why should retail investors choose an infrastructure token that barely anyone uses over something as widely recognized as, say, “Trump”? If the story and the target audience of a product remain centered around existing crypto users, even the most naive investors will eventually catch on.

Reflecting on the emerging new directions, it becomes evident that the fundamentals of this industry continue to improve:

Asset Issuance: Moving toward sexier narratives, a broader diversity of assets, and more impressive asset issuers (AI, BTCFi, RWA, Preconfirmation).

Asset Trading: Evolving toward better products, such as enhanced DeFi protocols and trading tools.

Asset Circulation Fee Extraction: Advancing with stronger channel access capabilities, including payment systems, banking, and InfoFi/AttentionFi.

Pandora’s box has been opened — nothing now can stand in the way of this frenzy.

Wu Blockchain

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