Lorenzo Founder: Is the Crypto-Native Economy Dead? Three Dilemmas Facing the Cryptocurrency Civilization
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Lorenzo Founder: Is the Crypto-Native Economy Dead? Three Dilemmas Facing the Cryptocurrency Civilization
The problem with encryption lies in the backwardness of civilization and the absence of excellent institutions.
Navigating Web3 tides with focused insightsAuthor: Matt Ye, Founder of Lorenzo
Editor’s Note:
As the industry collectively begins questioning itself—asset quality deteriorating, innovation stalling, fraudsters proliferating, and mainstream institutions remaining on the sidelines—are these phenomena truly just cyclical issues?
From a more foundational perspective, the founder of Lorenzo argues that the crypto industry’s problems are not rooted in projects, technology, or individuals—but in the nature of its civilizational form. Tracing crypto’s evolution from DeFi’s anarchic black market, to the feudal order dominated by centralized exchanges (CEXs), and finally to Wall Street’s capital colonization, he reconstructs three distinct civilizational stages—and poses a far more critical question:
What will be crypto’s next civilizational form?
Today, the general consensus within the industry is bleak: “The assets are subpar, and so are the people.” In summary, the core issues are as follows:
- Why is the quality of native crypto assets continuously declining, while the entire industry rapidly pivots toward securities trading?
- Why has innovation in cryptocurrency stalled? Why is there nothing left that genuinely excites people?
- Why do serious participants from finance, law, and the real economy refuse to recognize crypto technology as a legitimate tool?
- Why does crypto produce more fraudsters per capita than any other industry in history?
- And yet—why do many pure idealists persist? People who hold near-religious convictions and dedicate years of effort to the cause—such as researchers and developers pursuing absolute decentralization.
I believe all individuals and products are products of civilization. The form of civilization determines the kind of technology, goods, institutions, and people it produces. So when systemic problems emerge across these dimensions, the root cause lies not in surface-level symptoms but in the civilizational form and institutional framework itself—after all, as history reminds us, studying medicine could not save China, nor could importing foreign guns and cannons save the Qing Dynasty.
Does crypto have a civilizational form? Of course it does.
Stage One: DeFi’s Anarchic Black Market
Pure on-chain activity is essentially a black market—a dark forest with no rules and no institutions.
In this dark forest, the rational strategy is not construction, but rather extracting as much value as possible as quickly as possible—and then vanishing. That is the game-theoretic optimum.
If we assume everyone else is an unbound, ruleless hunter, the longer you stay, the greater your risk exposure. Even if you’ve already successfully “cashed out” as a big winner, continuing to play inevitably means encountering someone stronger—or simply less scrupulous—who will eventually take you down. Your optimal strategy, therefore, is to profit ruthlessly, then disappear before anyone else can act against you.
This is why rug pulls are crypto’s most native business model. Every rug pull, every anonymous team vanishing into thin air, every project handed over to “whoever the community deems worthy”—none of these are accidents. They are the inevitable outcomes of market incentives under this structure.
The same logic applies to crime. “Not your keys, not your coins” may serve as a tactical stance against financial hegemony—but it is clearly not sound security philosophy. When assets are stolen, the response becomes a technocratic version of victim-blaming: “Why didn’t you properly manage your private keys?” It sidesteps the very question a civilized society ought to ask: Who bears responsibility for building a system safe enough for ordinary people to use?
Stage Two: The Feudal Empire Under CEX Rule
When the high costs of black-market chaos become unbearable—even for the most radical participants—power begins consolidating around CEXs (including centrally managed DEXs). Within their self-governed empires, CEXs impose their own regulations and institutional frameworks, substantially lowering trust costs for participants. CEXs go to great lengths to secure custodied assets; most penalize clear criminal or illegal behavior; and although listed assets are not universally flawless, they at least undergo some level of vetting—making them vastly superior to the 99.9% of on-chain tokens that crash to zero within three days. When an asset performs poorly, most people’s first reaction is still, “How did this token even get listed on XXX exchange?”—a testament to trust in the CEX brand.
Yet feudal systems come with their own flaws. They give rise to a novel, crypto-enabled form of planned economy. The direction of industry resources and capital—the “core narratives”—are effectively “planned” according to exchanges’ listing aesthetics. But true innovation cannot be planned; thus, vast amounts of innovation are silently strangled. Data fabrication and rent-seeking for node resources—common in traditional planned economies—abound equally in crypto’s planned economy. Each cycle sees the entire industry unite behind a narrative only to see it collapse cyclically. Any project falling outside CEX listing criteria—or worse, threatening CEX dominance—receives zero liquidity support from exchanges.
Stage Three: Wall Street’s Colonization
When institutional capital enters the space, the industry erupts in celebration, believing it has gained mainstream legitimacy. What actually unfolds, however, is this: history’s most seasoned predators have discovered a frontier devoid of institutional guardrails—where retail investors cannot seek redress after being “rekt,” and where blame is reflexively placed on individuals for failing to “do their own research” (DYOR).
They aren’t here to build. They’re here to colonize and harvest. ETFs, tokenized U.S. Treasuries, securities platforms—this isn’t maturity. It’s annexation. Wall Street will certainly provide rules for crypto—but they are Wall Street’s rules, designed to protect Wall Street capital. And Wall Street’s elite neither care about crypto innovation nor about the fate of crypto participants—and certainly won’t use crypto to revolutionize their own entrenched systems.
Crypto technology is revolutionary—but a mature crypto civilization has never arrived
So let’s now answer those five questions:
- Poor native asset quality and the rush toward securities trading: Financial products, too, are civilizational artifacts. This demonstrates that products born of sovereign-state civilizations are superior in quality to those of crypto civilization. In traditional finance, a security must survive rigorous market competition and validation—and comply with legal financial regulation. None of this exists in crypto. Trading securities on-chain is not crypto’s evolution—it’s an implicit admission of native economic failure: good assets must be imported, because they cannot be generated internally.
- Innovation stagnation: Trust costs in the black market are too high to enable effective large-scale collaboration—and thus large-scale innovation is impossible. Meanwhile, the planned economy of the feudal system concentrates allocation of industry resources in the hands of a tiny committee—not through robust market competition—rendering the structure inherently hostile to widespread innovation. “Shandong-style” projects built explicitly for exchange listings are, in fact, a perfectly rational strategy emerging from this system.
- Why serious industries remain distant: They understand the technology—but they don’t trust the environment. There is no accountability mechanism. No consensus-based, enforceable institutional framework exists. When things go wrong, the default response is flight—not resolution. Staying away from crypto is not prejudice—it’s the rational response to an environment where accountability is structurally absent. As the ancient saying goes: “A gentleman does not stand beneath a crumbling wall.”
- Why fraudsters proliferate: Because in a black market, fraud is a rational strategy. There’s no lasting reputation to protect, no peer group empowered to expel you, and no legal authority capable of tracing your on-chain activity. The environment breeds fraudsters. Perhaps the better question is: Why do any still choose honest construction?
- Why idealists coexist: Because in the absence of institutional foundations, faith becomes the sole substitute. Amid constant ground-shifting, conviction is the only durable asset. Fraudsters and idealists are not moral opposites—they are two responses to the same void: one fills the vacuum through predation; the other, through belief.
Five Questions, One Answer: Crypto’s Problem Is Civilizational Immaturity and the Absence of Excellent Institutions
Which brings us to the sixth question: What will crypto’s next civilizational form be?
I have a perfect answer in mind—but due to space constraints, I can’t include it here. If you’re a practitioner concerned about crypto’s future—and if you resonate with the arguments above—we welcome your thoughts and discussion.
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