Crossing the chasm and returning to square one: blockchain's challenges and opportunities
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Crossing the chasm and returning to square one: blockchain's challenges and opportunities
Stories are no longer sexy; applications are where the value lies.
Navigating Web3 tides with focused insightsAuthor: Liu Honglin
After watching Dr. Xiao Feng's speech "From the Origin" at Wanwu Island, my first reaction was: this is a sharing session with extremely high information density and broad content scope. It ranges from RWA to PayFi, from stablecoin settlement to AI-blockchain synergy, but instead of creating excitement through "predicting hotspots" or "piling up concepts" like some industry talks do, it attempts to use language close to real-world structures to clearly explain the current industry's challenges and opportunities.
Stories Are No Longer Sexy—Applications Have Value
A representative shift mentioned in the talk is that if you now attend a Web3 summit in Hong Kong, topics like Layer1, cross-chain bridges, and modular blockchains are noticeably less prominent on main stages. They've been replaced by application-layer themes such as RWA, USDT payments, and PayFi.
This doesn't mean technical roadmaps have become irrelevant; rather, the industry's narrative structure has indeed changed. Over the past decade, projects raised funds and valuations by building protocol frameworks. Now, investors focus more on whether a practical use case can run on that framework, and whether there’s consistent user behavior and a stable revenue model.
We’ve seen too many projects that “have nothing to do after building the protocol.” If you can’t offer a solution connecting to the real world, merely talking about “decentralization” is no longer enough to win market confidence. At this point, speaking about “returning to the origin” makes sense—because if you’ve already forgotten the mechanism your system originally aimed to replace, then you certainly can’t achieve replacement.
The industry has truly reached a stage where we need to look back and reconfirm our starting point—not in a slogan-like sense of “starting point,” but asking concretely: when you continue building blockchain products or businesses today, what problem are you actually solving? For whom are you creating certain value?
The Best Current Application of Blockchain Is Still Payments
When discussing real blockchain adoption, the most compelling example remains that Yiwu scenario: a T-shirt merchant displays a USDT payment QR code. Overseas customers scan it, payment arrives instantly, and shipping is arranged immediately. This scene may not seem advanced or supported by complex protocols, but it reflects a logic that has already worked—not “technology-driven,” but “business choice.”
It involves no cryptocurrency price volatility, no KYC barriers, and requires no education on how wallets work. For merchants, it simply means “fast settlement, fixed exchange rate, low fees”; for consumers, it means “I can buy, I can pay, and it won’t fail.” In other words, stablecoins here don’t play an innovative role but serve as minimal trust substitutes and highly efficient value delivery tools. They aren’t transforming the payment system—they’re filling structural gaps left uncovered by traditional systems.
In the past, when we talked about Web3, we loved phrases like “rebuild everything” and “break trust boundaries.” But the reality is, most on-chain transactions don’t need to reconstruct social institutions—they just aim to reduce friction and improve efficiency in specific processes. Small and fragmented commercial activities like cross-border retail, remote outsourcing, and content creator revenue sharing were previously expensive and slow under banking systems. Blockchain can now act as a “low-dependency, high-reliability” settlement base. This kind of “structural clearing gap” is where on-chain systems truly have opportunity.
Therefore, blockchain may not take over every scenario in the future, but it can “replace the part that no one else wants to handle anyway” within certain transaction structures. It might not overthrow SWIFT, but it could very well build a high-frequency, stable channel system within peripheral systems. And the existence of such channels doesn’t depend on public chain concepts or DAO organizations—it depends on one basic judgment: can your product or service actually solve real problems and meet actual needs?
This is the true meaning of “blockchain going live.”
Five Types of Tokens—Clear Classification Determines Compliance Paths
What I found most valuable in Dr. Xiao’s talk was his classification of mainstream tokens into five categories, each with distinct value logic, usage scenarios, and regulatory requirements—and none interchangeable.
Most Web3 project teams claim their token is a utility token when launching. To some extent, this mindset was shaped by Ethereum’s fundraising precedent. While Ethereum is indeed a utility token, its narrative and compliance logic may not apply to your project.
The first category is reserve tokens, represented by Bitcoin. These emphasize scarcity, immutability, and censorship resistance. They don’t rely on application ecosystems or transaction logic but exist as system-level value anchors. Their operation is permissionless, prices fully market-determined, and thus highly volatile. Some countries and institutions have started including them in asset allocations, though policy divergence remains. If you position as a reserve, you must acknowledge they're unsuitable for payments and cannot support cash flow narratives—better suited for “strategic positioning” than product design.
The second category is utility tokens, such as native tokens on chains like Ethereum or Solana. Their value comes from network usage—you need them to deploy contracts, stake validators, or pay gas fees. The issue is that the value premise relies on genuine, active ecosystem engagement. Without sustained development, users, and transactions, utility tokens’ prices are essentially “spinning idly.” Your job isn’t marketing the token, but building the system: the more people use it, the stronger the token’s value becomes.
The third category is payment tokens—stablecoins like USDT and USDC. Pegged to real-world currency units, issued by centralized entities, and maintained via custodian banks and audits to ensure market trust. Their core value isn’t technological but lies in “settling capability, low barrier, high efficiency,” making them the most direct infrastructure on-chain. In cross-border e-commerce, personal remittances, and small B2C settlements, these tokens already have de facto scale. But they aren’t free currencies or decentralized assets—they are financial instruments hosted within a credit system. Regulatory scrutiny is increasing, and stricter licensing and usage thresholds will inevitably follow.
The fourth category is security tokens—the hottest topic today being RWA (real-world asset tokenization). These are often misunderstood: they aren’t just “digitizing assets,” but digital securities fully embedded within financial regulatory frameworks. If you talk about RWA, you must clearly define the underlying asset, the custodian, the settlement mechanism, and who bears compliance disclosure responsibilities. Many projects love packaging ideas like “on-chain gold” or “tokenized real estate,” but without clear legal structures and compliance paths, these tokens are essentially risk certificates that cannot withstand regulatory scrutiny.
The fifth category is entertainment tokens, such as meme coins. They typically lack stable pegs or functional claims, relying entirely on community sentiment and viral热度. Once hype fades, value quickly collapses to zero. These tokens can exist and do have market foundations, but misclassification is key. A token driven by emotion shouldn’t be expected to fulfill financial instrument duties; if created for cultural storytelling, it shouldn’t promise appreciation. Confusing identities leads to problems.
Different token types entail completely different regulatory logics, expectation management, and product designs. You must respect the boundaries of whichever category you operate in. If you present a securities-style return model but label it a payment token, or market a meme coin as a reserve asset, it won’t hold up—and won’t last long. Regulations are changing, markets are evolving, and tolerance for tokens is shrinking. Clarifying who you are matters far more than inventing a “new model.”
RWA: Going On-Chain Isn’t the Point—Compliance Is
RWA has recently become one of the hottest topics, so Dr. Xiao devoted significant time to it. In one sentence: the RWA projects that succeed won’t be those with the strongest tech, but those that can clearly articulate legal structures, asset ownership, and settlement mechanisms.
The market doesn’t trust whether you can write logic on-chain—it cares whether you’ve successfully transplanted the “trust elements of real-world financial assets” onto the chain. Take gold tokenization: if a miner or refinery says, “I produce X amount of gold daily, so I’ll issue tokens,” you can certainly code that logic on-chain. But why should the market trust your token?
It’s not about doubting technical ability, but about three missing essentials:
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Ownership verification: Who proves your claimed gold is real and belongs to you? Are there title certificates? Third-party custody?
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Custody arrangements: Where is the gold stored? Who holds it? Is there a legal disposition process? Can it be seized?
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Legal structure: In cases of redemption, settlement, or default, can token holders assert rights? Under which jurisdiction? Based on what contract?
Many so-called “RWA projects” ultimately fail because they can’t pass ownership verification, lack settlement pathways, or fall short on compliance. Truly viable RWA projects must combine access points to traditional finance, legal closure, and on-chain efficiency optimization. All three are indispensable.
You’ll notice that the projects advancing furthest in RWA almost all have licensed financial institutions behind them. For example: BlackRock’s tokenized short-term bond fund comes with custodian banks, fund disclosures, and regulatory reporting; Hong Kong firms piloting RWA start from traditional financial products, not direct “on-chain asset conversion.” The entry point for RWA is actually traditional financial institutions. Either partner with them directly, or build legal structures even more rigorous than theirs.
The only viable opening for entrepreneurs is achieving higher structural efficiency than traditional models—not weaker trust outsourcing. Any project emphasizing only “asset on-chain” without resolving ownership, compliance, and liquidity isn’t RWA—it’s a “renamed crowdfunding platform.”
Ethereum “Lost China”—But the Problem Goes Deeper
Xiao Feng said in his talk: “Ethereum has fallen to this state because you lost China.” A strong statement, clearly reflecting his firsthand observations as an early participant. Yet from a more structural perspective, this may only be half true—yes, Ethereum lost China, but its issues go beyond that; and “China” itself is no longer a single variable.
Looking back, the earliest developers, node operators, and DApp experimenters on Ethereum did include large numbers of Chinese contributors. Starting in 2015, local institutions like the Wanxiang group continuously supported Ethereum’s technology advocacy, fundraising, and ecosystem building. At one point, the Ethereum China community was among the most active globally. But post-2017, tightening regulations, ICO restrictions, exchange cleanups, and shrinking developer activities rapidly compressed Ethereum’s public presence in China. This clearly had impact—but it would be wrong to blame Ethereum’s entire trajectory solely on this.
A more critical issue lies in Ethereum’s own system choices and evolutionary path. Over recent years, Ethereum underwent PoS transition, L2 ecosystem explosion, MEV competition, and governance decentralization. Yet simultaneously, the network’s usability and entry barriers increased. Gas costs, development complexity, and protocol fragmentation aren’t unique to China—they’re shared anxieties among developers worldwide.
As for “returning to China”: discussing this today requires moving beyond emotional or policy lenses. Having Vitalik visit China to give talks, host workshops, or invest in projects isn’t impossible—but only if the system can genuinely serve real needs of Chinese entrepreneurs. In other words, if Ethereum today offers only “Staking supremacy” and “narrative arbitrage,” rather than a low-cost, compliant, revenue-generating development platform, then talk of “Chinese developer return” remains symbolic. You could argue China once missed the window to co-evolve with Ethereum, but Ethereum also lost a crucial feedback loop it once had.
In the end, it’s not about “who left whom,” but whether your system still offers “practical value” and “commercial entry points.” Developers choose chains they can use, frameworks they can launch tokens on, and models that generate profit—that’s the reality. The vitality of a tech ecosystem isn’t sustained by sentiment or past glory, but by whether it can run businesses, connect use cases, and maintain expectations today.
ManKun Lawyer Summary
The reason this talk deserves to be written down isn’t because it reveals any “latest” tech trends, but because it helps organize the logical path of the industry.
When narratives fade and arbitrage windows narrow, what remains isn’t the loudest parts, but those closest to reality and certainty. What truly survives cycles isn’t abstract idealism, but projects that fit into institutional gaps, complete transaction loops, and consistently deliver system efficiency. In this sense, blockchain technology isn’t about creating a parallel world, but repairing, connecting, and replacing corners the original system failed to serve.
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