It's already happening. The CEX scams are falling one after another. Long live self custody.

What does it mean for a protocol to fail?

There's multiple layers to the bigger picture: the protocol itself, and the systems that use the protocol to provide value to users.

Customers don't actually care about the protocol, they care about receiving value. A protocol is only as valuable as the systems that use it to add value to consumers.

I remain unconvinced that any currently existing decentralized crypto system has a net-positive long-term value proposition, regardless of the underlying protocol.