The cypherpunk spirit is at all-time lows. Narratives are overwhelmingly depressing, with CT excited about 'regulatory clarity,' outright institutional capture of Bitcoin, and the usurping of stablecoins by traditional finance.

All the while, society faces existential risks of the type crypto is supposed to prevent – in its own name.

The original spirit of crypto feels nearly gone.

So let me ask a blunt question:

Will the cypherpunk ethos die?

I believe the answer is no – with certain conditions. There is a way forward, but it requires the cypherpunks to embrace their unique positioning while embracing reality as it is.

While blockchains will be used by traditional finance in ways they were not intended, they will also continue to be used by crypto-natives, and the other groups of users for whom they are essential.

My belief stems from the following premises.

Censorship-resistance has established PMF

Censorship resistance is the only 10x value proposition of blockchains and their applications. All other use cases offer marginal improvements over existing solutions.

The 'unbanked' and 'underbanked' make for nice narratives in TradFi and more PC circles of crypto, but it's the de-banked who need crypto the most. This is a massive total addressable market, including political activists in various countries, crypto-natives, and citizens of countries such as Russia and Iran who – through no fault of their own – have been excluded from mainstream financial rails by US sanctions.

Speculation is insufficient for sustainable price growth

To date, crypto has been driven almost entirely by speculation. This will not persist in a mature market. Prices must be supported by strong demand – that which is essential – resulting in price floors.

Price floors are based on the essential demand for a token based on its use in a protocol, or arbitrageable value (e.g. future cash flows in equity-like tokens).

DeFi is a new financial system

It is unique, and thus cannot borrow outdated practices from traditional finance – such as mark-to-market valuation. These practices leave crypto protocols vulnerable to price manipulation attacks and many other types of economic vulnerabilities, both emergent and acutely exploited.

Crypto must build from first principles; it cannot simply borrow from traditional finance. The additional design constraints required to build in a way truly fitting its value propositions demand more creative thinking, but also make these protocols more defensible – less easily copied by TradFi.

DeFi will split in two

@narodism has called these DarkFi and RegFi. I like "RegFi" as a pejorative term, and think it underscores the nature of this bifurcation to continue calling censorship-resistant financial primitives DeFi.

After all, DeFi is unique because it will always exist.

This bifurcation is all but ensured by recent regulations, namely the CLARITY Act in the US and MiCA in Europe. Both of these have regulatory exemptions for decentralized projects.

While regulation is not good for crypto – which thrives on natural selection – the combination of strict compliance requirements for centralized projects and exceptions for decentralized ones will force those "decentralized in name only" to out themselves.

This leaves the remaining, truly decentralized and censorship-resistant protocols to grow, relatively unhampered by competition – so long as they get two things right: token value accrual and economic security.

Value Accrual

Protocols must accrue value to their tokens, first and foremost, to pay for operations.

This is perhaps my most contentious point, but development costs money, and that capital has to come from somewhere.

The best way to do this is alternately:

  • Source capital from existing successful ventures, i.e. bootstrap (see Hyperliquid), or
  • Raise from a community and use demand-side tokenomics to accrue massive value to a token and provide outsized returns

In any case, the revolution will not be VC-funded.

Economic Security

Centralized applications can fall back on trusted third-parties to resolve disputes. By contrast, censorship-resistant applications require another method of arbitration – or in the best cases, prevention.

In blockchains, this is economic security: code is law and interpretation, incentives are its enforcement. Economic security requires the alignment of incentives in these systems.

Censorship-resistance

Censorship-resistance is the one use case that consistently proves product-market fit across crypto's history.

From Bitcoin's origin story to Ethereum's permissionless settlement layer, even to memetic experiments like pump.fun, the throughline is clear: the closer you are to censorship-resistance, the more likely you are to matter.

The further protocols drift from that core, the more they resemble solutions with no demand in search of a problem:

  • Increasingly fragile
  • Increasingly dependent on hype cycles
  • Increasingly irrelevant when the tides shift

This is the nature of all innovation cycles. The first wave is driven by necessity and conviction. The copycats, by contrast, chase the meta and fade fast.

Like the viral "cartwheel of interest" graph: each derivative stepping away from the core idea of censorship-resistance brings diminishing returns.

Conclusion

So no, the cypherpunk ethos isn't dead. But its survival hinges on whether builders and communities can resist the gravitational pulls of compliance and speculation to return to crypto's only enduring truth:

Censorship resistance is the utility. Everything else is noise.

At Token Dynamics, we specialize in token launches, mechanism design, and financial models for censorship-resistant protocols – those with the highest impact and most complex design constraints.

If you're building for censorship-resistance, we want to support you. Reach out to us to schedule an intro and tell us what challenges you're facing.