Major Event Analysis: Application Scenario Expansion

Introduction

The ultimate value of blockchain lies in its ability to solve real-world problems. The following events mark key breakthroughs as blockchain technology transitions from theory to practical application.

1. Digital Collectibles and NFTs (Non-Fungible Tokens)

• Event Background: After Ethereum emerged, the ERC-20 fungible token standard was widely used for ICOs. However, how to represent unique, indivisible on-chain assets became a new challenge. The 2017 CryptoKitties project first explored making each token unique through the ERC-721 standard, but failed to sustain lasting momentum.
• Event Details: In 2021, the NFT market exploded. "PFP" (Profile Picture) projects represented by CryptoPunks and Bored Ape Yacht Club (BAYC) suddenly became popular. CryptoPunks, created in 2017 and regarded as the ancestor of NFTs, was "rediscovered" in 2021 with values soaring. BAYC launched in April 2021, not only as avatars but pioneering the "NFT as community" paradigm by granting holders commercial development rights and community membership. That same year, artist Beeple's NFT artwork sold for $69.3 million at Christie's auction house, completely igniting mainstream attention.
• Direct Impact:
  • Market Frenzy: NFTs became the biggest engine of the 2021 bull market, with trading volumes and user numbers growing exponentially.
  • Cultural Breakthrough: NFTs successfully combined crypto culture with mainstream culture including art, fashion brands, sports, and music, attracting numerous non-technical users into the Web3 world.
• Long-term Significance:
  • Validated Digital Ownership: NFTs first allowed ordinary users to intuitively experience what it means to "truly own" a digital item. They provided a powerful solution for scarcity, ownership, and identity authentication in the digital world.
  • Pioneered "Community Economy": Particularly BAYC's success demonstrated a completely new, community-driven brand and IP creation model. Holding NFTs means not just owning an image, but joining a community with shared culture and economic interests.
  • Expanded Application Boundaries: NFT applications rapidly expanded from collectibles to game items, tickets, membership credentials, domain names, digital identities, and other fields, greatly expanding blockchain's application boundaries.
• Lessons Learned: Market frenzy also spawned enormous bubbles and extensive fraudulent activities. Many NFT projects quickly went to zero after hype subsided. Additionally, debates about NFTs' true value, environmental impact (early PoW-based chains), and copyright issues continued.
• Subsequent Development: After experiencing the 2022 bear market cooling, the NFT market is developing toward emphasizing more "utility," meaning NFTs need to provide actual value beyond speculation for holders (such as game functions, event participation rights, etc.). Combining NFTs with Real World Assets (RWA) has also become a new exploration direction.

2. Decentralized Finance (DeFi)

• Event Background: After the ICO bubble burst, the industry began seeking applications with genuine "value creation" capabilities. Some early financial applications existed on Ethereum but lacked liquidity and users.
• Event Details: Represented by protocols like Uniswap, Compound, and MakerDAO, DeFi gradually built an open, permissionless, composable on-chain financial system during 2019-2020.
  • MakerDAO: Through over-collateralization of ETH and other assets, generated the decentralized stablecoin DAI, providing the DeFi world with a native, censorship-resistant unit of value.
  • Compound: Pioneered decentralized lending models. Users could deposit assets to earn interest or collateralize assets to borrow others. Its "liquidity mining" launch in summer 2020 ignited "DeFi Summer."
  • Uniswap: Invented the Automated Market Maker (AMM) model, replacing traditional order book systems. Users could trade directly with on-chain "liquidity pools" without professional market makers, greatly lowering trading barriers and improving long-tail asset liquidity.
• Direct Impact:
  • Financial Revolution: DeFi replicated and even innovated almost all core traditional financial functions (trading, lending, derivatives, asset management, etc.) on-chain without needing banks, brokers, or any intermediary institutions.
  • Capital Efficiency: Through smart contract automation and composability, DeFi created extremely high capital efficiency and completely new financial products (like flash loans).
• Long-term Significance:
  • Blockchain's Core Application Scenario: DeFi is by far blockchain technology's largest and most successful application scenario. It validated the feasibility of building an open, transparent, efficient, globally accessible financial system through smart contracts.
  • Driving Technical Development: DeFi's enormous demand for transaction throughput and cost reduction became the most direct and powerful driver for Ethereum Layer 2 scaling solution development.
• Lessons Learned: DeFi's high yields come with high risks.
  • Smart Contract Risks: Code vulnerabilities are DeFi protocols' biggest threat, with countless protocols hacked, resulting in billions in losses.
  • Economic Model Risks: Improper protocol token economic model design or insufficient consideration of extreme market conditions can also lead to systemic collapse (like Terra/Luna).
  • Regulatory Risks: Due to its disintermediated nature, DeFi conflicts with existing financial regulatory frameworks, and effective regulation remains a global challenge.
• Subsequent Development: DeFi is developing toward greater security, compliance, and usability. Introducing Real World Assets (RWA) into DeFi is considered key to its next growth phase. Combining DeFi with Traditional Finance (TradFi) to create more complex structured products is also an important exploration direction.

3. Ordinals and BRC-20 — Assets Return to Bitcoin (2023)

• Event Background: For most of its history, Bitcoin resisted becoming an application platform. Its scripting language was deliberately limited, and the community view was that anything beyond payments belonged on other chains. Two earlier upgrades quietly changed what was technically possible: SegWit (2017) introduced a discount on witness data, and Taproot (2021) removed the size cap on witness data within a single input.
• Event Details: On January 21, 2023, former Bitcoin Core contributor Casey Rodarmor released the Ordinals protocol. It assigns a sequential number to every satoshi based on mining order, making individual satoshis identifiable, and lets users "inscribe" arbitrary data onto them via Taproot witness fields. Unlike most NFTs, which store a link to an image hosted elsewhere, an inscription places the data itself on the Bitcoin blockchain. In March 2023, a pseudonymous developer known as Domo used the same mechanism to create BRC-20, a fungible token standard built from JSON text inscriptions. Because Bitcoin has no smart contracts, BRC-20 balances are tracked entirely by off-chain indexers reading inscription data.
• Direct Impact:
  • Block Space Competition: Inscriptions consumed substantial block space, driving transaction fees to multi-year highs and, for the first time in years, giving miners significant fee revenue beyond the block subsidy.
  • Community Conflict: Bitcoin developers split sharply. Critics called inscriptions spam and chain bloat that harmed Bitcoin's payment use case; supporters argued that anyone paying the fee has an equal claim on block space, and that filtering transactions by content would violate Bitcoin's neutrality.
• Long-term Significance:
  • A Fee Market Preview: Bitcoin's block subsidy halves roughly every four years and will eventually approach zero, at which point transaction fees must fund network security. Inscriptions provided the first sustained demonstration of what a fee-driven security budget could look like.
  • Bitcoin as an Asset Layer: Ordinals reopened a question the community considered settled and seeded a wider Bitcoin-native asset ecosystem, including the Runes protocol as a more efficient successor to BRC-20.
• Lessons Learned: Protocol upgrades produce uses their designers never intended. Neither SegWit nor Taproot was built to enable on-chain media, and neither could be un-built once the consequence appeared.
• Subsequent Development: Inscription activity has moved through several cycles of enthusiasm and decline, with tens of millions of inscriptions created and BRC-20 market values falling far below their late-2023 peak. The lasting effect was less the specific assets than the demonstration that Bitcoin's block space is a general-purpose commodity.

4. Restaking and Shared Security (2023 - 2024)

• Event Background: After The Merge, Ethereum's security rested on tens of billions of dollars of staked ETH. Meanwhile, every new bridge, oracle, data availability layer, and sidechain had to bootstrap its own validator set and its own token incentives, an expensive and often insecure process. The staked ETH securing Ethereum sat idle from the perspective of these other systems.
• Event Details: EigenLayer, founded by Sreeram Kannan, proposed letting stakers opt in to additional slashing conditions so that the same staked ETH could also secure other services, called Actively Validated Services (AVSs). Stage 1 of its mainnet launched on June 14, 2023 with deposit caps, and the full AVS marketplace opened on April 9, 2024. Deposits grew extremely quickly, exceeding $10 billion before the protocol's core functionality was complete, driven substantially by point programs that anticipated a future token.
• Direct Impact:
  • A New Category: Restaking became one of the fastest-growing sectors in DeFi, spawning liquid restaking tokens and a layer of protocols built on top of EigenLayer itself.
  • Function Lagging Capital: At mainnet launch the protocol still lacked slashing and in-protocol payments, the two mechanisms that make restaking economically meaningful. Slashing arrived later, in 2025.
• Long-term Significance:
  • Security as a Rentable Resource: Restaking reframed cryptoeconomic security as something that can be pooled and rented rather than rebuilt per project. This substantially lowers the cost of launching infrastructure that needs a trust guarantee.
  • Correlated Risk: Critics, including Ethereum researchers, warned that stacking many slashing conditions on the same collateral could create correlated failures that damage Ethereum's base layer. Whether pooled security concentrates risk or distributes it remains genuinely unsettled.
• Lessons Learned: Capital will flow toward speculative reward programs well ahead of the functionality those rewards are meant to reflect. Deposits are not evidence that a mechanism works.
• Subsequent Development: Restaking's growth slowed as points-driven speculation faded and the market contracted through 2025 and 2026. The underlying idea, that staked capital can secure multiple systems, has been absorbed into how new infrastructure projects plan their security, whether or not they use EigenLayer specifically.