Founders in the crypto world find themselves in a dilemma! You may not care about regulations, but regulations definitely care about you.

The foundation of public blockchain was laid by the Cypherpunks. Although the encryption industry was destined to embrace diverse ideas and practices from the beginning, decentralization, open source software, cryptographic security, privacy protection, and self-sovereignty have always been the cornerstone of its most disruptive achievements.

However, this industry also faces a core problem: without a regulatory framework that supports innovation and recognizes blockchain as an administrative infrastructure with unique functionality, encryption entrepreneurs have to face a difficult choice - whether to adhere to the purity of their ideology, thus making the structure and operation of the project more complex, or to compromise on their original ideals in exchange for regulatory recognition and a more traditional path to success. I call this dilemma the 'Cryptopreneur's Dilemma'.

Since the birth of blockchain, it has carried a grand vision: to achieve the separation of currency from the state, establish a globally uncensored payment and coordination network, develop software services without single point of failure, and create new forms of digital organizations and governance. To promote such revolutionary changes, a special historical background is required.

For the encryption industry, this background is shaped by the aftermath of the global financial crisis and the evolution of data and business models of big tech companies. At the same time, the global popularity of digital technology and the built-in token incentive mechanism have provided almost ideal conditions for the rapid development of the early ecology of the encryption industry. Since then, with the accumulation of individual blockchain networks and social capital and financial capital within the entire industry, the encryption industry has gradually become an undeniable force, which is particularly prominent in the 2024 US presidential election.

However, driving revolutionary change not only requires courage, but also a certain degree of 'sociological naivety'. The likelihood of failure in any attempt to subvert social structures, especially those based on law, is often much higher than the probability of success.

The encryption industry has indeed seized the public's dissatisfaction with the traditional system by challenging existing institutions, but this confrontational posture is difficult to reconcile with the goal of building a digital platform that serves global users. Similarly, blockchain transactions attempt to bypass regulatory requirements in the jurisdiction (whether it is the operator of the underlying infrastructure or the transaction party), and this argument always faces the risk of intervention by local law enforcement agencies.

To achieve true growth and influence, the encryption industry must accept the formalization of its regulatory status and the consequences that come with it. As the saying goes, 'You may not be interested in the state, but the state is definitely interested in you.'

Although many aspects are still constantly changing, this is exactly what we see in practice. From taxing encryption-related activities, classifying tokenized assets, to enforcing anti-money laundering and counter-terrorism financing (AML/CTF) rules, and clarifying legal responsibilities in DAO governance, the encryption industry is gradually integrating into the existing regulatory system with national judicial jurisdiction as its core.

However, more importantly, this process has also given rise to new case law and customized regulatory frameworks - these frameworks have become the key battlegrounds for defending the original values of the encryption industry, preventing them from being neglected or destroyed in ideological and political games (whether intentional or unintentional). The existence of this dilemma for encryption entrepreneurs is because, like any innovation activity with far-reaching impact, the process of legitimization is slow and controversial. This process is particularly difficult for the encryption industry because the behavior of some malicious opportunists has led to misunderstandings and unnecessary collateral damage to the industry's image.

Another notable trend is the increasing integration of blockchain with the traditional business and financial system. For those who see the encryption industry as a parallel system designed to replace traditional institutions, this convergence blurs the lines between the two and can lead to cognitive contradictions and internal conflicts. For others, this convergence is precisely a sign of success and the only sustainable path for blockchain to become systemically critical infrastructure. As the industry matures and reduces risks, its practitioners, operators and user groups will continue to expand and diversify. This trend, while attracting the attention of traditional companies, could also further exacerbate the ambiguity of the encryption industry narrative, especially as traditional institutions seek to control ostensibly neutral infrastructure. The risk of this "institutional capture" will increase proportionally with the popularity of the encryption industry.

So, as the public blockchain enters the next phase of its adoption curve, how should the dilemma of 'encryption entrepreneurs' be repositioned?

On the one hand, the mainstream success of the encryption industry seems to depend more on deep integration with existing systems than on some idealized, fully decentralized vision. It's not unacceptable to accept the fact that most "encryption projects" may end up being no different from traditional enterprise or Open Source software initiatives, or that most blockchain users are unlikely to fully embrace the idea of cypherpunk or even use it as the primary basis for consumption decisions. As long as these systems remain open and verifiable and more resilient than existing alternatives, "decentralization shows" make little practical sense, and centralized enterprises utilizing and operating public blockchains are understandable. So once the regulatory status of the encryption industry is clarified, this dilemma may no longer matter to most entrepreneurs.

However, it is incorrect to think that this signifies the end of the original vision of the encryption industry. Technologies such as autonomous robots and artificial intelligence (AI) are injecting new and profound transformative power into the digital revolution, and the demand for powerful computing and information management services is more urgent than ever before.

As an innovative platform, blockchain can provide alternative solutions for traditional systems that are susceptible to corruption, mass surveillance, and single point of failure. Only when enough entrepreneurs and supporters insist on embarking on the difficult path of building true decentralization, privacy protection, and resistance to control systems, can blockchain continue to exist. Although the commercial success of the encryption industry may no longer depend on these principles, its long-term social impact undoubtedly still depends on them.

This article is authorized for reprinting from: 'TechFlow'.

Originally written by Placeholder

『Cryptocurrency entrepreneurs are in a dilemma! You may not care about regulation, but regulation must care about you' This article was first published in 'Encryption City'