The choice between ideals in a permissionless era and the compliance moat
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The choice between ideals in a permissionless era and the compliance moat
Rules and regulations will determine who can sustainably endure, while the ideal of permissionlessness may face tougher tests.
Navigating Web3 tides with focused insightsAuthor: alexzuo, VP at Cobo
Recently, more and more people have been complaining about the high USDT transaction fees on the TRX network. This is indeed an interesting phenomenon.
Data as of August 31 shows that on Binance, withdrawing USDT via the Tron network incurs a fee of 2 USDT, while on OKX the cost reaches as high as 3 USDT. These fees are now approaching those of the Ethereum mainnet—where withdrawals require 4 USDT on Binance and 3.82 USDT on OKX, respectively.
Yet despite rising fees, Tron's network activity does not appear to have been significantly affected. According to Lookonchain monitoring, Tron’s gas fee revenue reached $61.43 million in August, a 46.54% increase month-on-month.
This suggests that even with higher fees, demand for the Tron network remains strong.
Looking across the industry, stablecoins represent one of the few genuinely practical application areas after Bitcoin, capable of maintaining stability through both bull and bear markets. After all, even under current geopolitical conditions, global capital flows and settlements will increasingly rely on offshore crypto dollars. As such, even during the most severe bear markets, the volume of stablecoin transfers has not noticeably declined.
TRON has long been the dominant player in stablecoin transfers. To rapidly capture market share, Sun Yuchen implemented early subsidies, securing a monopoly in exchange-to-exchange transfers before expanding into broader payment use cases. During the 2018 bull market, amid extreme congestion and high fees on Ethereum, TRON experienced significant traffic growth. While DeFi applications primarily run on Ethereum, users often turn to decentralized cross-chain platforms to save costs—especially during peak times, where using TRON could save $40–50 per transaction.
Although newer Layer-2 chains, as well as Solana and TON, offer cheaper transaction fees and comparable user experiences, many users seem to have grown accustomed to TRON’s reliability and have not migrated en masse to these newer networks. Wallet transfers between exchanges still largely depend on the TRON chain.
The recent rise in TRON transfer fees stems partly from technical issues—such as network congestion and rising base costs caused by the proliferation of meme tokens. But it also appears to be a form of compliance test by the market. Since everyone remains dependent on the TRON network, raising prices to expand profit margins seems like a natural next step. From an economic perspective, once a company achieves monopolistic market position, increasing service prices to boost profitability becomes inevitable. This mirrors how Didi and Meituan eventually raised prices after years of subsidizing ride-hailing and food delivery—a predictable outcome driven by capital and market dynamics.
Still, we should reflect: Is Sun Yuchen correct in assuming that TRON has achieved true monopoly status in the stablecoin space? Beyond USDT, there are competitors like USDC and AUSD. Moreover, USDT itself is issued across multiple blockchain networks. The coming months will reveal whether the price hike triggers shifts in stablecoin market share.
More importantly, when permissionless economic models enter maturity in competitive markets, can first movers sustain competitiveness and grow profits simply by raising prices?
Based on my experience in the digital asset custody industry, this sector has evolved over six to seven years—from dozens of competitors down to roughly ten major global players today. Even though Cobo leads in Asia, we remain in a phase of heavy R&D investment and intense, fine-grained competition. Our rivals continue launching price wars and introducing innovative products.
In the past year, we’ve seen some competitors begin building deep moats in niche segments through regulatory compliance. Regulatory oversight typically lags behind emerging industries, creating a window of policy arbitrage. Once regulations become clear, the scarcity of licenses causes rapid industry consolidation. Companies that haven’t participated in shaping policy face mounting challenges.
For example, while Asian custodians are still discussing how to engage regulators, overseas firms now list government relations (GR) expenses as a top budget item. One prominent UK-based custodian, after failing its first regulatory sandbox application, hired the Big Four accounting firms to deliver regular industry training sessions for regulators and brought a former UK finance minister onto its board. Take Coinbase: despite using a relatively conservative cold storage approach for custody, it now holds over 95% of the ETF custody market following approval of spot Bitcoin ETFs. This dominance stems directly from years of lobbying efforts by its founders and team in the U.S. This year, Coinbase is projected to earn nearly $100 million in ETF custody fees alone. Only Fireblocks comes close in revenue scale, yet Coinbase operates in a much simpler business context. In these niches and regions, no matter how advanced their technology, other companies will find entry increasingly difficult.
If an industry faces global competition and offers a large market opportunity, a more prudent strategy may be to establish entry barriers via licenses within specific niches—gradually transforming a permissionless industry into a permissioned one.
Meanwhile, permissionless economic models powered by strong communities and algorithmic incentives—once hailed as the future financial operating system, exemplified by Ethereum—are now facing a crisis of faith. While technological leadership and developer community strength remain important, in the eyes of capital and the market, a regulatory license now carries far greater weight. The legitimacy we speak of may no longer impose moral constraints on new entrants when larger players and institutional capital arrive.
From the evolution of the stablecoin market to the standardization of custody services, we’re witnessing a rapidly changing cryptocurrency landscape—one actively searching for balance, striving to find a viable path between decentralization ideals and real-world demands, between open access and sustainable development.
In the end, market choices may become more pragmatic: rules and regulation will determine who can endure, while the ideal of permissionless access may face tougher tests ahead.
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