Lorenzo Founder: Is the Crypto Native Economy Dead? The Triple Dilemma of Cryptocurrency Civilization

Author: Matt Ye, Founder of Lorenzo

Introduction:

When the industry starts collectively questioning itself—asset quality deteriorating, innovation stalling, fraudsters running rampant, and mainstream institutions continuing to stand by—are these really just cyclical issues?

From Lorenzo’s founder’s perspective at a deeper, more foundational level, he points out that the root problems of the crypto industry are not issues with projects, technology, or individuals, but with the form of civilization itself. From the anarchic black market of DeFi, to the feudal order dominated by CEXs, and then to capital colonization by Wall Street, he tries to reconstruct the crypto world’s three civilizational evolutions, and raises a more critical question:

What will be the next civilizational form of crypto?

Nowadays, the common assessment in the space about the coin world is: “the assets aren’t good, and neither are the people.” Summarized, it comes down to the following issues:

Why is the quality of crypto’s native assets continuously getting worse, while the entire industry rapidly pours into securities trading?

Why has crypto innovation stalled? Why is there nothing left that truly excites people?

Why do serious participants in finance, law, and the real economy refuse to treat crypto technology as a legitimate tool?

Why does the coin world produce more fraudsters per capita than any other industry in history?

At the same time, why are there still many pure idealists—those who carry nearly religious beliefs and are willing to work toward them for years? For example, researchers and developers pursuing pure decentralization.

I believe that any person and any product are products of civilization. What kind of civilizational form will produce what kind of technology, goods, institutions, and people. So when we feel systemic problems have emerged in these dimensions, the issue must lie in the form of civilization and the institutions themselves—not in the specific surface manifestations, after all, as is well known, practicing medicine can’t save people in China, and importing Western rifles and cannons can’t save the Qing dynasty either.

Does the coin world have a civilizational form? Of course it does.

First form: DeFi’s anarchic black market

Pure on-chain is basically a black market: a dark forest with no rules and no institutions.

In the dark forest, a rational strategy is not to build, but to steal as much value as possible as quickly as possible, then disappear—this is the optimal solution under game theory.

If we assume everyone else is a hunter with no rules and no bottom line, the longer you stay, the bigger your risk exposure becomes. Even if you’ve already made a successful exit as a “big cut,” if you keep playing, one day a stronger or even less scrupulous person will ultimately take you down. So your optimal solution is: make a huge profit by any means, then vanish from this world before anyone else can move against you.

That’s why Rugpull is the most native business model in crypto. Every RugPull, every disappearing anonymous team, every project handed to “fate” recipients in the community—none of this is accidental. It’s the inevitable operation of the market under incentive structures.

The same is true when it comes to crime. Not your keys, not your coins may be a strategy in the face of financial hegemony, but clearly it isn’t a good security philosophy. Once assets are stolen, it turns into a technical version of victim-blaming: “Why didn’t you manage your private keys properly?” It avoids the question that a civilized society should address: who should be responsible for building a system that an ordinary person can use safely?

Second form: Feudal rule under CEXs

When the high costs caused by the chaos of the black market become too hard for even the most aggressive participants to bear, power begins to concentrate on CEXs (including the centrally managed DEXs). Under their own imperial rule, CEXs implement their own regulations and institutions, which greatly reduces the trust cost for participants. CEXs will do their best to ensure the security of custodial assets. Most CEXs will sanction clearly illegal and criminal behavior. The assets that can get listed may not be perfect, but at least they’ve gone through some degree of screening. Compared with the 99.9% of on-chain “launchers” that go to zero within three days, this is still much better. When an asset performs poorly, most people’s first reaction is still, “How did this coin get listed on that xxx exchange?”—which is also a reflection of trust in the CEX brand.

But feudal systems also have problems. They produce a new kind of planned economy based on crypto technology. The direction of industry resources and capital—what is commonly referred to as the “core narrative”—is “planned” according to the exchange’s listing aesthetics, but genuine innovation can’t be planned into existence. As a result, it unconsciously suffocates a large amount of innovation. Data falsification common in planned economies, resource rent-seeking by nodes—these are also rampant in crypto’s planned economy. Every cycle, the whole industry puts its effort into elevating narratives, only for them to periodically reset back to zero. Any project that doesn’t align with the CEX listing aesthetics—and even assets/businesses that might threaten the CEX’s position—will not receive any liquidity from the exchange.

Third form: Wall Street colonization

When institutional capital enters, the industry celebrates everywhere, believing it means mainstream world recognition. But what actually happens is this: history’s most seasoned predators discover a place with no institutional framework, where retail victims can’t seek redress and will only admit that they didn’t do DYOR in the first place—a perfect playground for being cut.

They didn’t come to build. They came to colonize and harvest. ETFs, tokenized U.S. Treasuries, securities platforms—this isn’t maturity; it’s annexation. Wall Street will, of course, provide rules for the crypto world, but they are Wall Street’s rules—rules designed to protect Wall Street capital. The “gentlemen” of Wall Street don’t care about crypto innovation, they don’t care whether people in crypto live or die, and they definitely won’t use crypto technology to revolutionize their own way of life.

Crypto technology is revolutionary, but a mature crypto civilization has never arrived.

So now we answer those five questions:

Poor quality of native assets and the pursuit of securities trading: Financial products are also products of civilization. This proves that the product quality of sovereign nation civilizations is better than that of crypto civilization products. In traditional finance, a security needs to go through sufficient market competition and validation, and must comply with legal requirements under financial regulation—none of this exists in the coin world. Trading securities on-chain is not an evolution of the crypto industry; it’s a disguised admission that crypto’s native economy has failed—good assets must be imported because they can’t be generated internally.

About innovation stagnating: The black market’s trust costs are too high to form effective large-scale cooperation, and thus it can’t produce large-scale innovation. In a feudal planned economy, the allocation of decision power for a large amount of industry resources is held by a tiny number of committees—not by sufficient market competition. This structure itself also doesn’t support a surge of innovation. “Shandong school” projects built for exchange listings are the rational strategies that emerge to operate within this system.

About why the serious industry stays at a distance: They understand the technology, but they don’t trust the environment. There is no accountability mechanism, no institutions that can form consensus and be executed. When something goes wrong, the response is to run, not to solve. Staying away from crypto isn’t bias—it’s the correct response to an environment in which “accountability does not exist structurally.” As the saying goes, a gentleman does not stand in danger behind a precarious wall.

Why fraudsters run rampant: Because in a black market, deceiving people is a rational strategy. There’s no durable reputation to protect, no groups with authority can expel your peers, and no laws exist to track your on-chain behavior. The environment creates a whole bunch of fraudsters. It’s better to ask: why do people still choose to build honestly?

About why idealists coexist: Because when there is no institutional foundation, faith is the only substitute. In a constantly shaking environment, belief is the only lasting asset. Fraudsters and idealists are not moral opposites; they are two reactions to the same missing layer—one fills the void with plunder, the other fills it with faith.

Five questions, one same answer: The problem with crypto is civilizational backwardness and the absence of excellent institutions

So there’s the sixth question: What exactly will be crypto’s next civilizational form?

In my mind, I have a perfect answer, but due to space limitations, I can’t write it here. If you’re also someone working in the space who cares about the fate of the coin world, and you agree with the viewpoints in the article, feel free to discuss.