What is 0-to-1 in this Crypto “Bull Market”?

Hi all, this is Gaurav here, the founder of The Tinkering Society.

Provocatively, I put bull market in quotes in the title. Surely, we’re in a bull. Or are we? I continue to be skeptical. Perhaps it’s because the gm Portfolio—not to mention my own personal account—is in cash, and I just want there to be no bull market. Fair.

But, let me lay out some arguments.

Where’s the Disruptive Innovation?

One observation from TradFi markets is that every new bull market comes with new disruptive technologies. Clayton Christensen was famous for explaining why big companies get outcompeted by little ones despite having more resources, brand name, market penetration, etc: they focus on sustaining innovations—those that make existing products more efficient—rather than disruptive innovations—those brand new 0-to-1 leaps that come out of left field, look like toys, but grow exponentially to take over the market. Various incentives cause big companies to ignore disruptive innovations, a topic for a different post.

It is my observation that both in TradFi and Crypto, each bull market is marked by disruptive innovation.

In the rally lasting until June 2011, Bitcoin was the new invention.

The following bull lasting until late 2013 was marked by an explosion of UTXO chains which did foster some disruption with the likes of Namecoin and Litecoin. This was also the era in which a project called Mastercoin was launched, which while proving to be a failure, inspired the much more elegant vision behind Ethereum.

The launch of Ethereum coincided with the birth of the new bull market noted by other disruptive L1s including Monero and ZCash. Yet, the app layer was just in its infancy in this era ending in late 2017.

The app layer finally found its wings with the birth of DeFi in the summer of 2020, followed quickly with retail gobbling up NFTs. Other L1s such as Solana and Avalanche were launched. Rollups like Optimism were birthed, and much early work was done in the zk-rollup space.

Which brings us to today.

If this is a new bull market, where’s the disruption? Sure Bitcoin is reaching new highs, but where’s the thing that’s come out of nowhere to take the crypto world by storm? Some candidates of which I’m skeptical:

• Eigenlayer - restaking just doesn’t seem very disruptive. Rehypothecation seems more like leverage: take existing economic security, use it twice over, or thrice, or more. (I’m open to having my mind changed.)
• Crypto AI - seems like a meme at this point.
• Blobspace, Celestia - love it, but more like sustaining innovation making rollup settlement cheaper, faster, etc.
• Maturation of rollups including zk tech - again, seems like sustaining innovation making last cycle’s new technology better.
• DeFi - I was hoping for a highly liquid options protocol by this point or maybe a long-tail perpetuals solution, but nothing quite fits the criteria, though I’m keeping a close eye on the launch of Panoptic and Infinity Pools before I get excited. They’re disruptive in design but it’s another thing to see proof that they work.
• Memes - get outta here.

At this point, memes are driving the rally. Why are so many crypto VCs, those people who day after day see pitches and take meetings with new projects so focused on finding the next memecoin? Perhaps it’s because there’s fundamentally very little disruptive tech to bet on.

Where are the New Apps?

Infrastructure is great, but a new bull market should be also be driven by new apps built on that infrastructure.

In DeFi land, we have Morpho Blue which is the closest thing to a new app that could disrupt the existing incumbents of AAVE and Compound. Aside from that, what is there?

• Pendle? Seems like a lot of TVL farming the Eigenlayer ecosystem airdrops rather than speculation on organic yield.
• Silo? Still appears to have heavy governance and low interest for depositors of long tail tokens.
• Panoptic and Infinity Pools? Let’s see them live.
• RWA protocols? Still immature and largely inaccessible for most.
• Ethena? Limited scalability and too dependent on centralized entities imo.

Outside of DeFi, Farcaster seems to have product-market-fit, but in what sense? It doesn’t seem like they’re really censorship resistant or scalable since all of their hubs have to share state. They’ve done a great job “unbundling” the web3 community from Twitter but aside from that, the tech doesn’t seem that special (though I’m not a tech guy so I could be wrong). By and large, Decentralized Social has been a bit of a dud.

Decentralized Science? Don’t see a lot there (yet).

AI? I would love to have an LLM that’s not lobotomized by Silicon Valley culture, but don’t see any projects working on this, and much of the space seems to be a grift to dump on retail.

(Note: This isn’t a criticism of any builders out there reading this.? The space needs sustaining innovations, disruptive innovations, lots of experiments, including failures from which to learn. I applaud your efforts.)

“Bull Market”

For these reasons, I continue to see this bull market in quotes—a mere sustaining eddy gasping for attention in the grand history of crypto disruption.

- Gaurav Patel, Tinkering Society Founder

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