The completion of the prologue and the opening of a new chapter: a review of the encryption industry and future vision

Source: 4 Pillars; Compilation: Techub News

Article Summary

• The description of the development of the cryptocurrency industry is beginning to change the rules of the narrative game, and market participants are forming a metacognition of the narrative game itself.
• The cryptocurrency industry urgently needs applications that can bring demand for block space.
• The greatest advantage of cryptocurrency is that its value will undermine any imagined ability to give to the economy and provide a trading platform. Recently, new experimental forms utilizing the focal economy and speculative characteristics have emerged in the market, such as memecoin, social trading, and prediction markets. There may be more flexible on-chain applications and business models.
• For on-chain applications, speculation is the most powerful feature. The social demand for speculation is constantly increasing, which can attract "degens".
• In the long run, the industry's goal should be to provide value beyond speculation. It is necessary to convert the users attracted by speculative demand into the core value of users who truly appreciate the service, establish a sustainable token economy, and ultimately provide social graphs and product value beyond speculation.

Source: Dawn Delivery | 4844 Movies

As Matt Wong, co-founder of Paradigm, said, we are like a casino built on Mars. From the redefinition of money to the underlying interaction with applications, the systems and mechanisms built by society are being rebuilt to fit the new paradigm known as "cryptocurrency". It transcends the globalization of technological innovation and embodies different cultural and social significance. For liberals, cryptocurrencies offer a path to free markets and autonomy. For cryptopunks, it provides a censorship-resistant, permissionless network of value exchange. For entrepreneurs, cryptocurrencies are the foundation on which the next generation of the internet will be built. For traders, it is an endless source of dopamine and potential profits. Depending on the individual's point of view, the casinos built by cryptocurrencies will be very different. What do you think about the future of crypto drills?

By the time 2024 is more than half over, looking back, this year is full of vitality, highlighting the diversity of the cryptocurrency industry. Bitcoin has gained institutional recognition through ETFs. Ethereum successfully implemented the Dencun upgrade, including EIP-4844 bills. Rollup has been deployed in blockchain projects and has become the mainstream solution for launching new chains. After a difficult period, Solana has embarked on an amazing revival, and the bull market that started last year has also sparked public enthusiasm for memecoins and celebrity coins.

In terms of applications, we have seen significant developments in the cryptocurrency space. DeFi protocols have matured over time and are expected to grow. At the same time, scenarios such as SocialFi, as well as the emergence of narratives such as restaking and artificial intelligence, have attracted attention and speculation.

Compared to the previous bear market, the market has clearly rebounded. However, along with the recovery, the industry has also seen polarized valuations. As for memecoin, on the one hand, opponents argue that it is a meaningless speculative behavior, while others believe that the innovation it represents is 'going to market,' a derivative of the focus economic emerging model. In addition, in terms of narrative, the industry is also divided into two factions, one praising the new narrative style and the evolution of infrastructure, while the other belongs to the domain of elitism.

Since the birth of Bitcoin in 2008, the cryptocurrency industry has taken a more turbulent path than any other industry, going through multiple growth and funding cycles to usher in the recovery it is now. When public interest fades, the industry makes a dramatic comeback, triggering new narratives and hype. Similarly, the future of the cryptocurrency industry encompasses a myriad of scenarios and possibilities. This article reflects on the narrative game that is driving the development of the cryptocurrency industry tonight, explores the latest trends in the changing industry landscape, and considers the direction of the cultural industry.

Editing the game

Source: Fractal Life

It all started with Bitcoin. Since its birth, the cryptocurrency industry has experienced countless developments and changes, but Bitcoin remains the benchmark for the entire industry. As of the time of writing, Bitcoin's market value has reached $1.2 trillion, ranking tenth among all asset classes. With the approval of spot ETFs, Bitcoin has further consolidated its position as "digital gold." The reason Bitcoin can achieve a market value of $1.2 trillion is not based on a profit-driven business, but it is considered as a scarce and legitimate asset. Even the world's most widely used payment networks Visa and Mastercard have a market value of less than half of Bitcoin's.

Source: Bitcoin Vision

Bitcoin was not initially seen as "digital gold." In the early days, most people thought of Bitcoin as a new form of electronic currency or a low-cost payment network. In the early 2010s, it was also widely regarded as a dark However, over time, Bitcoin gradually gained legitimacy, and its narrative shifted from transactional value to value storage. The latter part of the chart, in 2018, clearly indicates a shift in public opinion towards categorizing Bitcoin as an asset rather than a payment network. Although the chart does not show data after 2018, the argument about Bitcoin being "digital gold" not only persists but continues to strengthen.

Satoshi Nakamoto's view on Bitcoin is that the essence of currency comes from social consensus. Blockchain is just the encrypted implementation of social consensus among participants. The value of this network is determined by how participants evaluate the network. If Bitcoin is perceived as a payment network or dark web currency rather than a narrative of value storage, then achieving value at present will be very difficult.

Bitcoin's success set the standard for the protocols and tokens that came after. Like Bitcoin, most of the tokens in the cryptocurrency have both business and asset characteristics. In addition, the blockchain's censorship-resistant and consumable permissions provide the basis for anyone to issue tokens and allow others to trade tokens. In order to increase the value of the token, each protocol needs to get more people to buy into its vision and feel that its token has value.

Source: X(@alphanonceStaff)

As a result, a unique culture of "narrative games" began to prevail throughout the cryptocurrency industry. Emerging industries often focus more on future potential than on the immediate benefits of users. However, in the cryptocurrency space, this narrative-driven approach has become dominant. Marketing strategies based on compelling stories have worked since the rise of the ICO craze, when people rushed to release white papers, even today. In the cryptocurrency space, the most influential figures have always been idols, researchers, and thought leaders. The trend of idolizing these figures has become one of the most striking features of the industry.

In addition, the narrative game is particularly effective because most participants in the cryptocurrency market are investors and traders. The success of cryptocurrency narrative games exceeds that of effective marketing campaigns. Its greatest advantage lies in replacing licensed features and models, allowing anyone to tokenize any idea and give it economic value. The narrative that a project can carry is convincing and more attractive, becoming a key factor directly linked to the market. As token prices rise and trading volume increases, traders will constantly look for the next captivating story, while projects create an endless cycle to provide these narratives. The cryptocurrency industry is constantly maintaining growth in a cycle of accepting and fading new narratives.

Source: X(@intuitio_)

The meme coin craze since the beginning of this year has exposed the essence of the narrative game in the cryptocurrency industry. The phenomenon of tokens that hardly provide any practical utility or vision being sought after in the market fully illustrates that narrative games are still the dominant force driving the development of the cryptocurrency market.

The rise of Memecoin is not just because of speculation. It also reflects the criticism of elitism in the pursuit of complexity in cryptocurrencies, as well as the imbalance between retail investors and VCs in the market. As the industry matures, the narrative of true innovation tends to be more rigorous and fewer. More and more projects claim themselves as the next 'blockchain revolution' with the differences they possess, leading to overcrowded platforms, excessive block space, and fatigue from repetitive narratives. In addition, mainstream projects can even obtain exaggerated valuations from VCs before their release and attempt to control prices through limited circulation supply. This situation makes it difficult for many retail investors to participate in the narrative game.

Source: X(@gainzy222)

The meaning of the cryptocurrency narrative and the ways in which practitioners consume the narrative are changing. It remains to be seen how long the old routine of justifying high market capitalizations and creating new stories can continue. But we also can't expect new technological innovations or business models to emerge every week.

All along, the cryptocurrency industry has been described in terms of technological breakthroughs and capital efficiency. Now, investors and users seem to have developed a meta-consciousness about the narrative game itself. The narrative game of cryptocurrencies seems to be developing in two extreme narrative ways. On one hand, there are complaints about the lack of innovation and narrative compared to the past, while on the other hand, there is continuous hype about the emergence of meme coins and hot projects, only to watch them burst like bubbles. In the near future, we may see this change become even more apparent.

Where am I now?

Since its inception, the narrative game of cryptocurrencies has undoubtedly played a vital role in building the foundation of the industry. More than just maintaining the token price, the cryptocurrency industry needs goals and visions to prove its existence and potential, especially after tricking many people into embracing the vision of blockchain and Web3, who are committed to driving the industry forward and playing an important role in shaping the current shape of the industry.

However, the technical limitations of blockchain and Web3 are clear. Networks with sufficient security and censorship resistance are too slow and expensive for everyday applications. During the DeFi and NFT summers, the cost of a single transaction on Ethereum can easily exceed $100.

Source: Rollup.wtf

Thanks to the efforts of engineers and researchers, blockchain technology has advanced. Now, a secure and scalable blockchain space has become a reality. The transaction fees for most L2 or high-performance chains are less than $0.01, and the speed is comparable to traditional applications.

Source: The myth of the infrastructure phase

Looking back, Bitcoin has been around for 16 years, and Ethereum has been around for 9 years. Over these years, the cryptocurrency industry has gone through several cycles of infrastructure and application development, experiencing both technological advancements and declines due to greed. In the initial stages, industry development was relatively slow due to insufficient demand and the need to procure necessary resources. By the summer of 2020, the demand for applications began to explode with DeFi and NFT, but the systems supporting this demand were insufficient. Subsequently, we deeply met the need for stability and scalable infrastructure.

The crypto winter after 2022 heralds a rapid development period for blockchain infrastructure. Rollups, data availability layers, and ZK technology have transitioned from the research phase to the commercialization phase. The market is actively adopting these innovative technologies. Integrated chains like Solana have made progress in low-latency, high-speed transactions, attracting new users. Performance chains such as Sui and Monad have also piqued people's interest and are expected to launch more applications in the foreseeable future.

The development of infrastructure and applications is complementary. Neither is more important than the other, nor is there a need to prioritize one over the other. Applications stimulate the demand for infrastructure. In turn, advanced infrastructure lays the foundation for new applications. YouTube was able to emerge in 2005 instead of 1995 due to the widespread use of broadband infrastructure. The popularity of broadband, in turn, benefited from the success of early network companies such as Amazon and eBay.

Source: X(@Imrankhan)

There is great potential for improvement in blockchain technology. We look forward to a wider adoption of networks that provide better user experience and security. However, it is undeniable that the narrative of the cryptocurrency industry is entirely focused on technological improvements and previous concepts. Now is the time for applications in the crypto industry to stimulate the development of infrastructure. Most importantly, we need applications that can bring about the demand for block space.

As mentioned earlier, there has always been a market demand for new narratives in the cryptocurrency industry, and this tendency is extremely strong in a Web3 environment where value accumulation is concentrated at the protocol layer. As a result, almost out of inertia, the industry continues to show a preference for platforms and foundations, with the emergence of applications lagging behind and the impact on users being underestimated.

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Source: Vitalik Buterin (EthCC 2022)

Following the Ethereum Dencun upgrade earlier this year, Vitalik Buterin gave his thoughts on the future direction of the cryptocurrency industry.

Today, I would like to think that we are clearly on the right side of an S-shaped curve, the terminating period. Towards the end of the day, two of Ethereum's biggest changes, the switch to proof-of-stake and the re-architecture blob, have become a thing of the past, and further improvements are still important, but will not have the same direct impact as proof-of-stake and sharding.

The first decade of Ethereum was largely a "trainee" stage, with the goal of landing Ethereum L1 and the application mainly being used by some interests. Until a few years ago, we still set a low standard for ourselves, that is, to build applications that are obviously not widely used, as long as they can run as prototypes and be reasonably decentralized.

By now, we already have most of the tools we need to build apps with a cryptopunk style and user interface. We let it go, and the developers have no excuses.

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Source: X(@QwQiao)

If analyzed by analysts, tokens as stores of value (such as Bitcoin) and stablecoins as payment methods have entered the mature stage. Stablecoins have become on-chain reserve currencies, and the DeFi field in countries with unstable currencies such as Latin America or Africa has also come out of the disillusionment stage, and the business of mainstream projects has also stabilized. Token Terminal data shows that MakerDAO generated $3 million in revenue in the first quarter of 2024, with an annualized rate of about $12 million. The token has a market cap of about $20 billion and a price-to-earnings ratio of about 16. Even when compared to traditional fintech companies, this doesn't seem like a high valuation.

On the other hand, for a wider user base, there are still limited applications in some areas. NFTs seem to be experiencing a "disillusionment". After the bull market in 2021, most NFT projects have failed to gain the favor of society, except for a few core IPs. In addition, even though the market has high hopes for the game, the results of this achievement are not optimistic, and users are greatly neglected. As for other scenarios, such as artificial intelligence, DePIN, and social, they either haven't reached the peak of hype yet, or are just the beginning of innovation.

The cryptocurrency industry has passed a critical framework. Despite facing various challenges related to events such as Terra and Luna, the collapse of FTX, increasingly severe macroeconomic environment, and regulatory pressure, cryptocurrency will continue to move forward. Even in the extreme scenario, imagining the collapse of the entire industry becomes extremely unreasonable. However, it is undeniable that the application of blockchain still dominates the financial and trading fields, catering to a limited user base and lacking mainstream appeal.

The current cryptocurrency industry is at a crossroads and is likely to remain where it is now, with only incremental improvements in mature areas such as tokens as a store of value or DeFi. This doesn't mean that there is no point in continuing to play the role of the currency market, only that as a result, the cryptocurrency industry is ultimately a participant-driven market, just like the stupid or cannabis industries. Cryptocurrencies have great potential as an application layer. Ideally, leveraging this would give us every chance of driving mainstream adoption and the emergence of new business models.

Target everything

Source: Insights from the Almanac of Nawal Ravicante

Traditionally, only individuals or businesses with capital and labor had leverage. However, the proliferation of software and media has broken this situation. Software enables individuals with very little capital to develop applications and services, bringing about innovation and giving rise to mass platforms and SaaS products. The widespread use of platforms such as YouTube and Instagram can expand personal influence, leading to the 'Cambrian explosion' of influencer market and small media.

The maximum value offered by cryptocurrencies is able to give economic value to any idea and provides a trading platform. In the traditional system, the formation of the market requires internal intervention and permission, maintaining economic value and mutual trust. However, blockchain technology provides the basis for tokenization, allowing users to exchange economic value and form a market with others through the Internet on the premise of gaining the trust or permission of others.

First coined by Richard Dawkins in his book "The Selfish Gene", "meme" is the concept of similar genes, and genes transmit genetic information through physical means. In society, the meme is a cultural unit that can represent later, memes adapted to internet culture and are widely used in their current meaning. Memes, like genes, are transmitted through social interactions and evolve in the process of replication, modification, and reproduction.

Recently, Michael Rinko of Delphi Digital highlighted in his article "Attention is all you need" that cryptocurrencies give economic value to people's ideas and interests, allowing users to own their interests and earn profits.

On Instagram, we follow brands and influencers. But the most I can do is retweet and share these with friends. 100% of the value of our attention is taken by others.

Cryptocurrencies are different, cryptocurrencies democratize attention, allowing us to have it. If you find yourself spending a lot of time on certain topics, you can truly own your topics and estimate returns. This principle seems simple but represents a significant shift in internet economics.

Memecoins takes the "attention is value" framework to the extreme. They offer the purest way to buy tokens because you think it's going to attract attention in the future.

Source: X(@jessewldn)

It must be clearly acknowledged that memecoins themselves are not the most important. They are essentially just a meme, and once they become uninteresting, they will quickly disappear from people's sight. Memecoins represent the original potential for tokenization, implying the possibility of emerging new applications. From identity and data to the creator economy, the ability to give economic value to the focus paves the way for cutting-edge markets and applications.

This is especially evident in the breakthrough in 2024. The cryptocurrency market is re-energizing, and applications that turn attention into speculative demand are rapidly gaining momentum.

• Solana's Pump.fun became the main platform for memecoin, generating the highest fees of any protocol.
• Friend.tech and Fantasy.top have integrated social trading features related to Twitter, generating strong speculative demand, achieving $65 million and over $36 million in transaction volume, respectively.
• Farcaster-based Scenecoin DEGEN has contributed to the success of the Farcaster ecosystem by attracting a large number of users and events through innovative airdrops and community incentives.
• During the U.S. presidential election, Polymarket's activity and trading volume grew significantly, recording $100 million in trading volume in June alone.
• Hamster Kombat in the TON ecosystem has achieved a user base of 100 million with its simple functionality and seamless integration with Telegram.

While this list isn't spectacular, the launch and experimentation of scale apps continues. Although the industry has been around for more than 10 years, the work of developing applications with cryptocurrency's emphasis on features has only just begun. An on-chain application may provide a unique set of user experience decisions. We should pay more attention to these initiatives, as they provide meaningful experimental results on how cryptocurrency applications can meet user needs and adapt to the market. We look forward to more experimentation being carried out in the underexplored areas of crypto social, gaming, NFT, and prediction markets.

Investing in machinery is a feature, not a flaw

Blockchain is a leading technology. In addition to application-specific chains, most networks provide a common execution environment and database for applications to run. In principle, most of the applications we use every day can be on the blockchain, and just as software no longer has the ability to run it on mobile devices or uses cloud marketing keywords, encryption should not be the ultimate standard for describing the functionality of an application. The terms "blockchain" or "cryptocurrency" will no longer be used to describe the application, and users should be able to use the application without knowing the underlying chain or wallet.

When someone wants to launch a product or service, no one will ask why it should be released online. Because the deployment cost is relatively high, the speed is faster, and except for special circumstances, customers can enjoy greater convenience and accessibility than offline. Similarly, it can be foreseen that applications running on the chain will eventually be seen as a matter of course. As the use of permissionless markets and interconnected application ecosystem wallets becomes more common, we will no longer question why applications need to run on the blockchain.

However, in the current limited blockchain environment, such an assumption is nothing more than a hope. The current blockchain development environment is still challenging, with users not only unfamiliar with wallets, but also tending to shy away from wallets. Except for some enthusiasts, most users need a strong motivation to use the on-chain app. It's not just a matter of increasing adoption by 10% or 20%, what we need is a user experience and functionality that can only be achieved in an on-chain environment.

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Source: Sound.xyz

Most users in the industry are airdrops "hunters" and traders, whose main purpose is to meet speculative demand. Those who pursue the ideal of cryptocurrency believe that this speculation disrupts the essence of cryptocurrency and try to keep up with these behaviors. However, we need to reevaluate the role of these "degens" in the industry. It is no exaggeration to say that the cryptocurrency industry is built on the basis of capital injection through speculation. Most on-chain trading volume is based on speculative demand, arbitrage, or MEV profits, and this fact cannot be ignored. Without the infrastructure of users, there is no value, and without vulgar investment, degens are important drivers of the cryptocurrency industry.

During the NFT summer of 2021, many companies and brands joked about entering the cryptocurrency industry, which excited everyone. However, the ultimate success was not Disney, but Pudgy Penguins. Cryptocurrencies have reached a level where they can sustain growth on their own. Rather than external entities entering the cryptocurrency industry, expanding outward through successful products within the industry may be a more feasible way to achieve mainstream adoption. Ultimately, Degens are early adopters and core user base of all on-chain applications, and meeting their needs should be the first step in validating product-market fit.

Source: eToro

The preference for speculation is not limited to cryptocurrencies, it is a social phenomenon. The deepening economic inequality and the shortened attention span under the influence of social media have prompted people to continuously increase their risk tolerance for investment assets. In the 1970s, the average holding time for Americans was 5 years, but by 2020, this number had dropped to 10 months.

Because the high risk preference of Generation Z is worried that they will not pay enough attention or gamble, they will lose their bias. In most of the major countries today, it has become increasingly difficult for the younger generation to live better lives than their parents. They realize that labor income cannot exceed capital, and many investors invest with the idea of "nothing to lose." They have few chips, but if they do not actively bet, the chances of survival in the casino will become more and more slim.

While the current situation is undoubtedly dystopian, the coin's high volatility is also seen by many as an opportunity for dynamic adjustment. It turns out that easily accessible speculative assets like memecoins are attracting new users to the cryptocurrency industry. Driven by the Memecoin boom in the Solana ecosystem, Phantom Wallet ranked third in the App Store's utility rankings in the U.S., with 7 million monthly users. Speculative demand attracts users to use apps without consciously learning about digital wallets, wallets and marketplaces, so Finnish culture has the potential to translate into traffic.

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Source: X(@0xJim)

While most on-chain applications attract a lot of attention in the short term with their unique user experience and speculative needs, they tend to have short lifecycles due to their rough design and extremely speculative nature. However, from this point of view, the conclusion that on-chain applications cannot achieve structural retention does not rule out residual sloppiness.

The reasons for the start of the lifecycle of on-chain applications include: the majority of the user group consists of consumers and traders, and their loyalty to the product is very low; compared to infrastructure development, very little time and resources are allocated to product development; the vast majority of products excessively focus on short-term speculation rather than long-term effectiveness.

In the end, I think that if speculation was the only use of cryptocurrency, then I would not contribute to this industry. However, for cryptocurrencies to realize the vision of Web3 and make universal applications such as games and social platforms connected at our fingertips, we need to think not only about the goal, but also about the solution to achieve it. Given the current industry and social environment, speculative demand appears to be the most powerful tool that cryptocurrencies can utilize.

However, in the long run, it is necessary to convert the users attracted by speculative needs into users who truly enjoy the core value of the service, so as to build a meaningful funnel and promote interaction beyond speculation. In addition, there is a need to develop a framework for token issuance and distribution at an affordable price and demand in the short term, ultimately providing a social graph and product value that goes beyond investment opportunities.

The End of the Prelude

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Source: 'Bitcoin is Dead'

People's mood swings are even more emotional than the price fluctuations of a token. When the price falls, everyone gives the market a verdict on Bitcoin. Since its inception, Bitcoin has caused "death" every year. In my opinion, the cryptocurrency industry has grown to the point of attrition, however, and the next two or three years will be a critical period that will determine whether the industry can realize the Web3 vision and become mainstream. If the fit of an important product with the market cannot be verified within this cycle, then there is no excuse.

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The first general-purpose blockchain Ethereum has been launched for 10 years. Although Ethereum has undergone extensive research and development over the years, and the entire industry has experienced ups and downs, it is not until recently that it has evolved into a technology that can be reliably used by actual users. While token prices and narrative games have been driving industry development, now more than ever, attention should be paid to the impact of its products on actual users.