Read the different stages of the encryption cycle in one article: from vision reset to peak imitation

Note: The original text is from egirlcapital, authored by Matti @mattigags.

I ask the reader not to take everything literally, or to take it too seriously. There's nothing intellectual about what follows, but it will do you good if you can understand it. The following is a fictional story, some characters are not real.

There are two scenarios as to how the "end of history" came about. One is that everyone believes the same thing, and the other is that everyone believes something else. These small cycles of the end of history occur regularly and can be defined as Girardian cycles. There is a very thin line between the two.

Crypto cycles tend to end with nearly every participant in their respective tribes believing the same thing. When that single belief is broken - chaos ensues. When the scapegoat is sacrificed, people disperse and do their own thing, form their own new ideas, and a new cycle begins.

We can observe three distinct phases of the encryption cycle. It all begins (or ends) with a cleansing natural transition to Restoration, then into Intensification, and ends with Lollapaloza (the peak of imitation). Throughout the cycle, we can observe heightened imitation and a narrowing of the field of vision. Imitation is what creates the hype, and scapegoating is what resets the vision to start a new one.

1

From Vision Reset to Peak Imitation

Restoration is a time of growth, heterogeneity and dialogue. This is often a humbling time in which people are still able to reflect on their past. During this period, people do not have the pressure of heavy baggage, and the ego becomes lighter. This is when people are "poor" but happy, which allows them to really have a (own) mind.

Intensification occurs when people become aware of the success of others. At this stage, ideas that do a better job than most will get the lead.

During the Lollapaloza (peak of imitation) vision gets lost in the cacophony of imitation. Communities are based on the same ideas, focus on the same topics, and obsess over one or two people who end up turning against them.

Without compromise, there is a clear divide between the outsider and the insider, with the insider becoming one and the outsider becoming the other. You either believe the gospel, or you are the enemy. Once this parody peak is reached, the masses are willing to pay a huge meme premium to get inside. Becoming a member requires paying high dues.

2

religious belief

Even cryptocurrency outsiders have observed that Bitcoin is like a religion, and I believe all mass movements employ similar mechanisms to religion. Looking closely at cryptocurrencies, we may observe great schisms and religious wars, which all started with the Cypherpunks.

Those who still distinguish cryptocurrencies in terms of Bitcoin and altcoins have not paid attention to the continued development of the cryptocurrency narrative. In fact, Bitcoin is dominant in terms of market capitalization, but its challengers are not just its imitators.

Vitalik's reforms are a real challenger to Bitcoin's hegemony. Ethereum’s DeFi and NFT army is now another force for Bitcoin alternative users (believers) to enter the cryptocurrency space. Just one year after the flip talk of 2017 was dismissed as hallucination or sacrilege, 2018 ended with "Peace in Augsburg", both neighborhoods had to be rebuilt, and both couldn't waste resources in total war, which is Time to go back to the drawing board.

Bitcoin believers, content with the stigma surrounding Ethereum, remain wary but must focus on finding the strength to attract new believers. To get them through tough times, some have adopted the Stock-to-Flow (S2F) model to supplement their dogma.

In the end, when the narrative of “uncorrelated assets” and “inflation hedges” dissipates, all that remains is a wishful gamble of self-fulfilling prophecies. The vision of Bitcoin has changed, and this is the true source of its power - Adaptive Narrative.

But while Bitcoin is busy with...well, as Bitcoin, its rival community has built a 24/7 globally accessible casino. Bitcoin believers were jealous of Ethereum's DeFi, saying it was unlikely to succeed, they first denied this, but then began to imitate the idea of ​​​​BTC DeFi. Bitcoin mimicking the enemy is heresy, but the ends justify the means.

As the inflation debate heats up, bitcoin has emerged as an alternative for companies with lots of cash. Bitcoin was appreciating and then Elon Musk joined the Prophets, which was a huge boost for the Bitcoin community. Musk seemed to be the legend who dominated this cycle, but his influence has ended prematurely. And when all hope begins to fade, an unlikely hero comes to the rescue. Bitcoin becoming legal tender in El Salvador was a great plot twist and an unexpected victory that doesn't seem to be over yet.

Retinazer seems to be the main sign of an intensifying period, and Musk launched Lollapalooza, and since then we’ve seen bitcoin opinion leaders determined to hold on to the bull run until at least the magic number of $100,000 hits.

3

Ethereum: Purification, Resurrection, and Momentum

Ethereum has been mobilizing and building since 2018. Ethereum’s massive launch brings visionaries who can build products and achieve user traction. DeFi is gaining momentum, Ethereum's resurrection is complete. Suddenly, the topic of flipping came up again.

This time around, however, Ethereum has been on a steady rise, built on top of DeFi and productive assets. Peace in Augsburg no longer exists, and the "Thirty Years' War" has begun. The Reformation has become too powerful for Ethereum to stay in the shadow of old Bitcoin.

The vision of a world of decentralized computers brushed aside Vitalik in 2018. The community experienced a purge as the value growth of ETH was called into question. In 2019, the demise of utility tokens ushered in a new season for young Ethereumers.

In early 2019, an open finance narrative joined the DeFi meme. Vitalik's core was more interested in exploring radical markets and related Marxist theory, but the community didn't find that appealing, instead pursuing laissez-faire capitalist endeavors. The real change for ETH began in early 2019, and while still conservative and token minimalist at the core of ETH, attention was being paid to projects like Synthetix whose native tokens showed some signs of potential value accumulation.

Uniswap was the darling of the tokenless paradigm at the time, but its adoption and increase in transaction volume did not go unnoticed. On the other hand, Synthetix was an independent and undervalued team at the time, and the COMP token was the catalyst for the 2020 DeFi Summer.

YFI was the pinnacle of solidifying the DeFi narrative, Ethereum was once again a hot topic, after which any real horizon disappeared and imitation began to take hold. The discovery of AMMs catering to long-tail assets sparked a new token craze, but this time tokens fed tokens, creating a powerful self-reinforcing mechanism. The more tokens, the higher the income. The higher the income, the more tokens.

4

MEV and new frontiers

In the summer of 2020, insiders in the Ethereum ecosystem began to focus on miner extractable value (MEV). A year later, an industry of talented developers has emerged around MEV, which appears to be less of a bug than a feature.

There are two responses to Nathan's statement. Here's a less subtle one:

There is also a more subtle response:

MEV attracted many talented developers who could have developed other things, but chose to compete fiercely. Imagine Anatoly Yakovenko decides to compete on Ethereum instead of... competing with Ethereum?

So, in crypto, people seem to choose to compete on Ethereum, or compete with Ethereum. DeFi is already cross-chain, and so are the benefits. From Unicorn to Orca, we are seeing narrower visions and more horizontal innovation as DeFi starts to rely on new state machines (another term for blockchain).

At this stage, Ethereum’s competition is not Bitcoin. And many Ethereum people, who haven't fully realized this, are already the same as their biggest competitors before.

L2 seemed like an optimistic experiment, and with the rise of Solana, Avalanche, and Polkadot chains, it became a weapon against new adversaries. On the one hand, ETH maximalists have to battle new (and better equipped) competitors, while on the other hand, there are still old bitcoiners willing to throw stones at ETH. I'm not sure that a vegan diet provides enough nutrients to wage war on multiple fronts.

5

coldest before dawn

The narrative of ETH surpassing BTC hit Twitter in the spring of 2021, and while EIP-1559 is a powerful upgrade fueling the deflationary narrative, the meme of productive assets is slowly forming, and a new massive attack on BTC dominance is imminent.

General Su Zhu rides his supercycle and calls out his loyal degen army for this brave, foolish attempt. But he's right to ask: If not now, then when? The first attempt was rejected by the big crash in May. He will try again, or someone else will try.

The productive asset narrative will dominate cryptocurrencies outside of Bitcoin and will be the watchword for the rise of ETH along with the rest of L1 to follow. Mainstream media will talk about famous investors buying ETH because DeFi and NFTs make shoe shine boys richer than Paul Tudor Jones. BTC and ETH will soon have a showdown.

This article comes from Tao of Yuan Universe, reproduced with authorization.

This article comes from Tao of Yuan Universe, reproduced with authorization.