Blockchain Value Creation and Scaling, Part I: Financing and Monetization
If you want to understand the era we live in, you only need to know the stories of three people — Masayoshi Son, Elizabeth Anne Holmes, and Sam Bankman-Fried. These three, who can be considered as iconoclast to investing, iconic for Silicon Valley entrepreneurship, and representative for a rising star: the blockchain industry, are accurate representations of our society nowadays.
I. A story of three people: Masayoshi Son, Elizabeth Anne Holmes, Sam Bankman-Fried
1. Masayoshi Son
On Friday the 18th of November, a news notification titled “Tech stocks plunge, bringing Masayoshi Son’s debt to SoftBank to $4.7 billion” caught my attention. Two days later, at SoftBank’s latest fiscal quarter meeting, Masayoshi Son made a solemn announcement that he would withdraw from the company’s day-to-day operations.
Son is well known for his aggressive and daring style of betting on new technology companies. The two most well-known investments of Masayoshi Son, are substantial long positions in Yahoo and Alibaba. This high risk investment style has brought Sun impressive returns. Especially during major financial transition periods. Due to the global technology stock valuation collapse in 2022, SoftBank Vision Fund I (SVF1) has unrealized losses of $2.3 billion in its unlisted shares. Vision Fund II (SVF2) has unrealized losses of $6.6 billion in unlisted shares, which directly led to 2022 Q2 SoftBank (SoftBank ) recording a $23.4 billion quarterly loss, causing this “mad investor” to commit to an hour of public self-criticism.
If we look at Masayoshi Son as an avid lover and supporter of technology, we can see that some people are using their belief that “technology is reshaping the world” to deceive the world with lies for their personal gain.
2. Elizabeth Anne Holmes
In November, Elizabeth Anne Holmes, the founder of the blood testing company Theranos, was sentenced to 11 years and three months in prison for fraud. She was once given the title of female version of Steve Jobs, who liked to wear black shirts and jeans like Jobs, and shared the same dream of changing the world.
In 2015, she had the highlight of her life, being named one of the most influential people of 2015 by Time Magazine, receiving the Under 30 Doers award by Capitalist Magazine, being listed in the 2015 “Most Powerful Women” list, and being named Glamour Magazine’s Woman of the Year by Glamour magazine. She received the 2015 Horatio Alger Award, the youngest recipient of the award. She was also named Fortune Magazine’s Business Person of the Year and was listed in the 40 Under 40 list. But at the end of 2015, as the Wall Street Journal delved deeper into their investigation, a shocking scam unfolded which proved all her achievements were built on lies.
It also makes us wonder if the prevailing Silicon Valley culture of “narratives and stories are more important than truth” needs to be corrected. In such an investment culture, as long as entrepreneurs can draw up a blueprint that investors like, there will be a good chance that they’ll get backed by investors, regardless of whether the path to achievement is feasible. In a forgiving, mistake-permitting investment climate, we may cultivate true world-changing companies like Airbnb and Tesla, but we may also propagate scam artists like Theranos. Especially when the Federal Reserve opens the monetary floodgates, the market is lush with money, and investors can get a lot of cheap loans, the probability of investors encountering startups like Theranos becomes even greater.
3. Sam Bankman-Fried
In the afternoon of March 11, 2020, the WHO declared the outbreak of the COVID-19 virus a global pandemic.; Four hours later, President Donald Trump in Washington, D.C., announced through a nationally televised address the suspension of travel to and from all European regions except the United Kingdom, plunging the world into panic. After the U.S. stock market opened on March 12, the S&P index fell by 7%, triggering the circuit breaker.Three major stock indexes consequently suspended trading for 15 minutes. By the close of trading, the S&P 500 was down 9.51%, the largest drop since Black Monday in 1987. On the same day, Bitcoin fell 39.5%. Against this backdrop, the Federal Reserve started quantitative easing on a scale we’ve never seen before. The two assets that benefited the most from this big release were Nasdaq tech stocks and crypto assets.
Professional investors are increasingly interested in cryptocurrencies as a long-term investable asset in 2020. One of the most immediate manifestations of this was in November 2020, when data from Chainalysis showed that while the number of Bitcoins available for trading was generally similar to three years ago, the regular turn-over rate (volume/market cap) was much less than before, suggesting that investors are shifting to long-term holdings. The turnover rate is also my favorite underlying screening criteria to use. If the tokens change hands a lot at the bottom, it’s a good sign that assets are starting to be handed back to investors who are more willing to hold for the long term.
Also, the exponential climb in the Grayscale Bitcoin Trust suggests that institutional investors who see Bitcoin as a long-term investment, are playing a bigger role in this rally. Voyager Digital, BlockFi and other institutions are becoming increasingly influential, and people are calling the bull market that kicked off in late 2020 an institutional bull, with investors generally seeing it as the beginning of a move towards formalization and compliance in the crypto market. However, in 2021, anti-inflation became the primary focus of the Fed as the CPI reached uncomfortable levels and continued to grow, which ended the zero interest rate cycle. With higher cost of funds and tighter liquidity, both tech stocks and Bitcoin entered the downward track, and people soon realized that these so-called professional institutions in the crypto market turned out to be “swimming naked”. 2 days later, Terra’s market capitalization fell from 40B to 3B, and 92% of the current market capitalization evaporated. The price of UST, a stable coin based on Terra’s issuance, has now also fallen from $1 to $0.02. With the domino effect, 3AC, Celsius, and BlockFi crashed one after another. Just as the market rally started in November and everyone thought the market had bottomed out, the FTX balance sheet was circulating in the market, showing that $15 billion of FTX’s total assets of $24 billion were FTT, SOL and SRM. Given FTX’s liquidity risk, CZ said on Twitter that it was ready to sell its FTT holdings.
Market panic caused FTT prices to plummet, and the total market value of FTT, SOL, SRM assets held by FTX fell from $15 billion to $5 billion. FTX’s balance sheet deteriorated rapidly, causing FTX to become insolvent and forcing it to stop withdrawing coins from its users. People only now began to find out that the “crypto hero”, who had been claiming to push for cryptocurrency compliance and bailed out struggling blockchain firm, had misappropriated a large amount of user assets to an affiliate, Alameda, and caused a deficit of up to $8 billion. But the story is far from over, rumors of the bankruptcy of its parent company DCG and DCG’s subsidiary Grayscale began to circulate in the market as Gemini’s lending arm Genesis was caught up in the bankruptcy fiasco.
The crypto industry’s “institutional year” of 2020–2022 has come to an abrupt end with the departure of scammers and gamblers. If there is a takeaway, perhaps every crypto believer needs to look again at Satoshi Nakamoto’s quote in the Genesis block at this point.
“The Times 03/Jan/2009 Chancellor on brink of second bailout for banks”
This quote may have only applied to Wall Street yesterday, but today it applies to our cryptocurrency industry as well.
II. How to define cryptocurrency: Answer from Satoshi & Vitalik
1. The Jobs of Cryptocurrencies: Satoshi Nakamoto
Bitcoin originated in a 2008 paper by Satoshi Nakamoto entitled “Bitcoin: A Peer-to-Peer Electronic Cash System”, which first demonstrated the theoretical feasibility of a “decentralized currency”. This revolutionary innovation means that the issuance of money can be shifted from national credit to open source code, completely reversing the role of central banks in the fiat system. Central banks intervene in the economy by regulating the circulation of money. Once the central bank loses its power to mint money, it also loses its ability to intervene in the economy. This is what the liberal economists would like to see. I believe that Satoshi Nakamoto must have been influenced by Hayek and Milton Friedman in his monetary philosophy. Both of them have proposed the idea of monetary policy that is independent and free from government interference. Friedman believed that since inflation is essentially an undeniable character of a monetary system, money is the most important factor in macroeconomics. Thus, policymakers should develop a system with controlled inflation. This is the famous “Friedman rule”: the optimal policy is to keep the nominal interest rate at or very near to zero, and the government should abandon the fine-tuning of the economy and replace it with this fixed rule, thus avoiding intervention in the free market.
The idea of money issuance advocated by the liberal economics school was brought to life by Satoshi Nakamoto in code. I was particularly fond of reading Hayek and Friedman when I was a student, and when I first read Satoshi Nakamoto’s white paper, I was fascinated by the independent monetarism he advocated. In fact, it is not hard to find that practitioners in the blockchain industry are also more receptive to the Austrian School and libertarian economic ideas.
Satoshi Nakamoto first appeared in the limelight on November 1, 2008, when a new post appeared in the secret discussion group “Cryptography Mail Group”.
“I am developing a new electronic money system that is completely peer-to-peer and does not require a third party trust.” The post was signed by Satoshi Nakamoto.
Two months later, Satoshi Nakamoto announced the birth of Bitcoin by releasing the first version of the open source Bitcoin client. He also obtained 50 Bitcoins by “mining” them. Nine days later, Satoshi Nakamoto transferred a single Bitcoin to cryptographer Hal Finney, the first peer-to-peer transaction in human history to be completed without a third-party financial trust. As the first person to receive a Bitcoin transfer, Finney is known to the community as “Satoshi Nakamoto’s Watson,” just as Mr. Bell’s assistant Watson was the first person to hear Bell’s voice over the phone when the telephone was invented.
In 2011, Satoshi Nakamoto began to fade out of the community. No one has heard anything from Satoshi Nakamoto since then.
Can Bitcoin be used as a currency? There is still debate about this, and due to its supply ceiling, more people think it might be better thought of as “digital gold”. Although the high volatility of its value has prevented its widespread adoption, Satoshi Nakamoto’s vision of a network for transmitting value independent of third parties has clearly come to fruition. And even more unexpectedly, the blockchain technology he built has had an even greater impact on the world.
As the most successful blockchain entrepreneur, what can we learn from Satoshi Nakamoto?
1) To think very deeply about fiat currency.
2) To understand cryptography.
3) to believe that a system like Bitcoin is theoretically feasible.
4) Be motivated enough to develop the idea into a practical product.
5) have excellent programming skills and be able to build a secured product.
6) have enough social skills to build a successful community around this product.
In addition to the above, the two guidelines that Satoshi Nakamoto adhered to have become the most central to the crypto industry.
“Code is law.”
“Not Your Keys, Not Your Coins.”
2. ICO: Vitalik Buterin
Ethereum was proposed by Vitalik Buterin (V-God) in 2013. Vitalik was originally a programmer involved in the Bitcoin community. He argued that the Bitcoin platform should have a better programming language for people to develop programs, but did not have the approval of core Bitcoin developers, so he decided to develop a new platform for this purpose. Believing that many programs could be further developed using principles similar to those of Bitcoin, Vitalik wrote the Ethereum White Paper in 2013, stating the goal of building decentralized programs. The development was then funded through an initial public offering in 2014, with investors using Bitcoin to buy Ether from the foundation.
Ethereum opened up two new paradigms: a new way of financing ICOs, which gave the token an “equity-like” quality; and the invention of public chains that enables other applications built on smart contracts. These two became the main development foundations of blockchain technology.
Next, I will first discuss the series of chain reactions generated by the introduction of ICO into the crypto economy.
3. Token Fundraising
ICO is essentially crowdfunding.
ICOs provide a new financing channel for innovative blockchain projects: entrepreneurs simply disclose information about their projects to the public, and if the public is interested, they have the option to invest. Unlike the past, the capital comes from the private sector (often time retail investors) rather than traditional venture capital institutions.
With the herding effect and the influx of funds, blockchain entrepreneurs are having a great time raising funds. In the second half of 2017, the market became so preposterous that investors often fought for startup investment’s allocations as if it was BestBuy’s Black Friday sale. Sometimes, projects got funded with 15 pages of powerpoint slides before white papers had the chance to be written. This is clearly an irrational market. We anticipate there will be a similar phenomenon in the next bull market, the difference is that the FOMO comes from professional institutional investors. While innovation energizes an industry, risk surely comes with it, and the cryptocurrency industry is no exception. At this point, the role played by regulators becomes increasingly important. But regulators have the same dilemma when facing financial innovation, and it is difficult balancing between effective regulation of industry risks without destroying the dynamism of innovation in the industry. The success of regulation is based on historical experience; the regulation of new scenarios and new businesses is lagging. The industry and regulators are always playing the game of cat and mouse. Unfortunately, the industry always runs ahead of regulation, as one is to make money, one is to watch others make money. Financial regulation has a relatively large decision power. But until now, it is still a problem for regulators to effectively build a framework for the cryptocurrency industry.
Entrepreneurs, investors, speculators, ordinary users and scammers have flocked to the industry, all hoping to get a piece of the action. Rendered by the windfall effect, everyone in the market was snapping up lines of credit, financing became exceptionally easy, and project valuations were exceptionally exaggerated. The most impressive thing is that I once met an entrepreneur who wanted to do a DEX in early 18. The first time we met (when he just started to raise funds), he was selling his DEX project, utilizing “off-chain aggregation, on-chain settlement”. Which was the industry’s accepted way of DEX improvement at the time. This will transaction efficiency while also reducing gas costs. We met again a month or two later and asked him how the project was progressing. He said, “he is spending more time on his own investment firm as it will be more profitable than the project he built.” In 2018, there are too many stories of investors chasing over-valuing projects, resulting in the project losing motivation to push the project forward after raising the money.
The bubble was not meant to last forever, and the market began to step into a long bear market in the second half of 2018, with the market reaching a freezing point at the end of the year. A large number of projects died, and crypto miners began to shut down. The whole industry was paying for its reckless behavior at the beginning of the year, and everyone was reveling in the crowdfunding model brought about by ICOs, but failed to prevent the problems of crowdfunding itself from the mechanism of
- Project fraud. Financiers falsify project’s data, funds are not used for development purposes, etc.
- Lack of regulation. Traditional market financing requires strict auditing and a rigorous process to protect investors.
- Investor education. Investment opportunities are imbalanced, most investors are inexperienced, and a few professional investors can easily pick the best projects.
Before the introduction of ICOs on Ethereum, tokens were mainly used for incentivizing miners and paying gas fees; ICO gives tokens a new “equity-like” function. If the price of Ether rises, its investors will be benefited, but the cost of daily transactions for users will rise. Therefore, in order to reduce the harm caused by excessive gas cost to Ethereum users, the Foundation was designing new methods to move the transaction process to layer2. Arbitrum and Optimism take up more and more transactions of Ethereum’s chain. For example, in terms of protocol usage penetration rate, Optimism has exceeded 20% on Uniswap. Optimism will become the most powerful competitor of the existing EVM public chain. Layer 2 solutions’ success can somewhat alleviate the contradictory interests of both types of users of the network and investors.
III. Era of the Gold Rush: CoinList, Gitcoin, IXO
The unsustainable ICO boom was followed by a lot of unpleasant activities and its flaws were then realized. But those that did well, still survived and became accepted by the public. The more typical ones are CoinList, Gitcoin and the IXO model.
1. CoinList
CoinList was founded in 2017. They work with high quality projects that follow compliances.
The formation started when AngelList and Protocol Labs provided token sales for Filecoin and found a high market demand for this type of service and productized the service. Due to their strong team background, and boutique token sale approach, the firm received over 3,000 requests from projects to partner with since its inception, and 29 projects have ended up partnering with them. So, if a project can be on CoinList ICO, it means the project is considered successful. The high quality projects and strict selection mechanism have welcomed investors. For CoinList to pursue compliance, it has stricter requirements for investors and needs to pass a strict KYC/AM, leading to a large number of tutorials online that teach investors how to pass CoinList’s KYC/AML. CoinList, as the most successful ICO platform, has the following reasons for its success.
Strict selection process: the ICOs of CoinList are also very strict, with a pass rate of less than 1%.
Exclusive offering, strong wealth creation effect: CoinList high quality project resources, its ICO projects are mostly market star projects, and CoinList is the only offering channel.
Professional compliance, high user trust: AngelList and Protocol Labs endorsement, no risk of runaway.
Using their own methods, CoinList avoids the problems of project fraud, lack of regulation, and lack of investor knowledge that usually exist in the crowdfunding economy. Finding industry pain points and coming up with solutions has made it one of the most successful businesses in the cryptocurrency space.
2. Gitcoin
As mentioned above, ICO is essentially a type of crowdfunding. There are several types of crowdfunding models: (1) Donation model, in which investors receive nothing in return for their donations; (2) Payback model, in which investors are rewarded with non-share returns. (3) Pre-purchase model, in which investors receive products or services from the fundraiser in return. (4) Equity crowdfunding, in which investors are promised expected dividends or shares in the company.
Gitcoin’s business model is completely different from CoinList’s. CoinList is much more centralized and filters projects internally before release; Gitcoin is a public donation model, which does not promise any return on investment, and it mainly provides services for public goods in the cryptocurrency industry, which is more of a public good. The online application method is relatively lenient, serving 1600+ projects with a funding amount of about 11.8M, and users can participate with small donations.
One of the main features of the donation method is the introduction of “quadratic fundraising”, originally proposed by Vitalik. This approach amplifies the influence and support of the average participating user. Projects that are more supported (not just funded) by users will receive more support on Gitcoin.
The first component is funding from direct individual backers, i.e. users donating directly to the project owner.
The second part is a matching pool of institutional and individual-backed funding, which is allocated to individual project parties based on the number and amount of user funding received by the first part of the project party, calculated in a secondary funding manner.
Notable projects that have received funding through Gitcoin include Tornado.cash, Uniswap, 1inch.exchange, Dune Analytics, and other projects. Currently, Gitcoin has become the most important window for Ethereum infrastructure builders to seek community support.
3. IXO
After the bubble busted, ICOs are no longer welcomed by investors, and there are even negative sentiments towards it. Faced with the depleting trading volume, in 2019, the exchange represented by Coinan opened the IEO model, i.e. “fundraising + listing” model. Under the wealth creation effect, users were reactivated. The exchanges have finally found a new traffic secret and have followed suit, opening various IXOs, but the performance of IXOs varies from platform to platform, mainly because of the platform’s traffic and project screening capabilities. The exchange turned fundraising into a traffic magnet, which seems to have changed the flavor, but it is also considered to be the warm fire for cold winter.
In 2020, a DeFisummer dawned upon us, liquidity migrated from CEXs to DEXs. the original IEO, dominated by CEXs, began to hand over the baton to DEXs, through what we called IDOs. One of the best performers were Balancer and PancakeSwap. Ethereum and BSC were also two of the most successful public chains during this DeFi summer.
4. Hypothesis
Each bull market we will see breakthroughs in new technologies and models, bringing new attention and traffic to the cryptocurrency market. The most direct impact of new traffic is the rise to new financing methods. Whether it is the startup-led ICO in ’17, the CEX-led IXO in ’19, or the DEX-led IDO in ’21, the new entrants will build new financing models based on their own understanding of the market.
As mentioned above, financing is essentially a form of crowdfunding, and the crowdfunding models represented by CoinList and IXO, rely on selection mechanisms to ensure project quality. This type of financing is similar to the “lead + follow” investment model. Interestingly, CoinList and IXO invest in reputation whereas users invest in money capital. The advantage of this model is the high certainty of investment returns and the obvious effect of wealth creation; the disadvantage is the low scalability and the high threshold of participation for financiers and investors.
Therefore, it becomes important to increase the scalability of financing in terms of participation. There are typically three types of economic coordination mechanisms among organizational participants.
- Hierarchical: top-down decision-making mechanisms with centralized power.
- Market: mechanisms by which prices regulate supply and demand.
- Collaborative mechanisms: social relationships, shared norms, and values-driven cooperation.
ICO financing is essentially a social public screening of innovative projects. In contrast, CoinList, ecological support (Grant), IXO, etc. are difficult to directly and effectively respond to user needs and innovation directions. Take Polkadot ecological Grant as an example, although there is a strict vetting mechanism, the projects that get grants are not recognized by the community users. On the contrary, it will affect the direction of technological innovation to some extent. Therefore, “community participation mechanism”, where the decision is made based on meritocracy and openness is the most likely breakthrough scenario in the future.
The two most important points of startup financing are information transparency and credibility. Therefore, a financing platform firstly needs the ability to disclose as much information about the project and the return plan as possible to establish transparency. Secondly, it needs to establish an information exchange mechanism among investors to give separate evaluations of the project’s innovativeness and market prospects. As more individuals talk about the project’s potential and risks from different perspectives, it will create a market reputation. In this way, the financing platform will be able to change the way of financing from a one-way, agenda-setting communication between investors and entrepreneurs to a multi-way, high-frequency, more party-like approach. The benefits for investors and financiers are plenty:
1) Establish a showcase platform, entrepreneurs have the opportunity to reach more potential investors.
2) Retail investors can have access to more early stage projects.
3) Create an information exchange platform between investors, they can obtain more project information and potential evaluation, and make informed investment decisions.
IV. The Story of Cryptocurrency Continues: Surviving The Bear Market
1. Are investors ready for a bear market?
Since I joined the industry, I have witnessed numerous bull markets; it is a blessing for individuals to not only achieve financial gains, but also to experience very interesting stories. The excitement in the world of cryptocurrency is not imaginable for people in other industries. Same for evangelists and builders in this industry, if we want to survive, we should stay curious.
Every bear market is the best opportunity for the newcomers to make their mark, but only if they are solid in the fundamentals. In the bull-bear transition, the most important thing is to do a good job of crossing the bull and bear with firm confidence, constantly seeking for innovative technology directions and business tracks.
And in different market cycles, there are completely different requirements for investors. When a bull market opens, it is often accompanied by the emergence of new technologies and new tracks like the DeFi Summer in 2020, the NFT Summer of 2021 and the recent public chain wave. In a bull market, investors only need to catch one leader in a popular track, even if most of the projects fail to get high returns. GCSN is a very effective strategy in the pre-bull market, where an aggressive investment style is more likely to yield high returns than those institutions that operate in a refined manner. The requirement for investment managers is to grab more projects.
By the second half of the bull market, most typically 2021Q4–2022Q1, Web2 investment institutions entered a marketfull of funds, while the secondary market had been declining. But all the while, the primary market valuation was constantly reaching higher points. The market is obviously in a bubble. Primary and secondary market valuation inverted; star projects had poor performance once listed on the exchange. In turn, the performance of the primary market was also affected. The combination of both factors made many investors tend to adopt a more conservative strategy. They are writing checks less often and are making more rational decisions. Valuation has become the most important thing for investors to focus on.
As the market officially enters a bear market, the era of unchecked growth comes to an end. For entrepreneurs, returns are no longer explosive. Now they need to know how to navigate the bear market. For investors, the investment cycle will also become longer and uncertainty will increase significantly. Investors are looking for certainty inside uncertainty. But in terms of methodology, there are only two: 1) find inevitable trends in the industry; 2) lowering uncertain investment. For investors, the second one is perhaps easier to do than the first one. In a bear market, the investment cycle becomes longer and the startups may not only need support financially, but also need help from market operation and ecological resources.
2. Rise from the ashes
In the face of the bear market, it seems that there is not much we can do except reflect on the experience and look ahead. Of course, it is the right time to bury our heads in the sand, ignoring what’s going on at markets and just “BUIDL”.
The history of internet development is the history of online information transmission expansion, under Moore’s law, the chip performance doubles every 18 months, in other words, the cost of the same unit of information transmission is half of the original every 18 months. Therefore, the cost of internet information transmission is getting lower and lower, thus making information transmission a business, which is the first principle of internet development. Currently, in contrast to the traditional internet Web1\Web2, the cryptocurrency industry has proposed the concept of Web3. Web3.0 is originally an imported product, a broader theory mentioned in an article criticizing Web 2.0 in Jeffrey Zeldman’s blog in early 2006. Obviously there is a fundamental difference between the Web 3.0 he proposed and our cryptocurrency industry today.
In contrast to the traditional internet that enables online information augmentation, blockchain enables the augmentation of information on-chain valorization. There are predictions that the limit of Moore’s Law will come around 2025, and the first-nature principle that drives the traditional internet will fail. Blockchain, which does not depend on Moore’s Law to drive it, will be the most likely successor to the internet. Blockchain will open a new era beyond the internet.
The development of the cryptocurrency industry is a process of on-chain value-based expansion. Therefore, the arrival of a new bull market is bound to be a broader value on-chain, which is definitely the main narrative of blockchain development. Looking at the blockchain industry development from the perspective of on-chain value expansion, Bitcoin has realized the tokenization of currency, and Ethereum has realized the on-chain tokenization of financial transactions. However, the above changes are still limited to a small group, which is the current stage of blockchain tech. The project has been successful as long as it can break the circle, just like NBA TOP SHOT, Axie infinity and Stepn. NBA TOP SHOT started a new trend of NFT Collectibles; although Axie infinity and Stepn have been accused of being Ponzi frauds, their strong but out of the ordinary mechanisms still makes them stand out from the gameFi craze and become the biggest beneficiaries.
It is evident whether it is greed for money and profit, or to reach for the stars. For digital nomads, their treasure will lie in the mass market. Openness is the most important guideline to ensure its development, no matter for individuals, industries and even countries.
Practitioners are trying to realize the value expansion of blockchain from different directions, from the new public chain and L2, to Socialfi, Creator Economy, DAO, etc. in the application layer. Among them, I think the directions that are most likely to help cryptocurrencies achieve value expansion are as follows.
- L2: From the perspective of penetration, Optimism, Arbitrum has the potential to replace public chains.
- Creator Economy: Music, Sport’s fan effect, has a huge out-of-the-loop effect.
- DAO (Socialfi, Gamefi): Valorization of on-chain behavior, self-organization to achieve on-chain governance.
Disclaimer: This is the first part of a paper produced by LBanks Labs, the investment arm of global crypto exchange LBank. The fund holds 100 million dollars in USDT to support blockchain and Web3 start-ups and companies.
