From the new public chain war to WEB3, where are the opportunities?

Source: FTX discord

Editor’s Note: This article is a compilation of the speeches from the first community event of FTX-Chinese Discord, where several deep divers in Web3 discussed hot topics such as the Curve War, competition among new public chains, debates on L2, the rise of Eastern NFTs, and the paradigm shift in VC.

Host: Sino Global Capital---Sally

Guests: GBV---Johnson; HashKey Capital---Rui; FTX's community partner in Taiwan---Benson; Deep Tide TechFlow founder---Min; Nothing Research---0xTodd; Smrti Labs---Bowen

Sally: The recent Curve Wars have sparked the Curve ecosystem, including the CVX battle. How will the future landscape of DeFi "change"? Some even say they look forward to the birth of ve (NFT). What does everyone think?

0xTodd: I have always held the view that there is a "god" for various projects on Curve. Without the "divine assistance" of Curve, these pegged assets actually have almost no scenarios or uses for generating yield, while the continuous $CRV rewards seem to have become the most important use for these stablecoins.

For example, a stablecoin starting with M, looking at on-chain data, is either in Curve or in cross-chain bridges, then crossing to other chains to exist in other chains' Curve. People quickly realized------the speed at which this divine milkmaid produces milk is limited. Since that’s the case, there must be a way to allocate these scarce resources, which led to Convex and the bribery ecosystem built on Convex, including Votium. Bribery has maintained for a long time, with a leverage ratio of about 1:3, meaning that nowadays, a $1 bribe can leverage $3 worth of CRV rewards.

But this has also started to enter a more competitive state. Some vested interests began to consider how to further pocket these milk rewards. Therefore, AC proposed ve(3,3), and from the words in his article, it can be seen that he hopes the rules for distributing milk become biased, for example, using a Locker to allocate all $CRV rewards to the pools with the highest fees. But if you look at Curve, you’ll see that the pool with the highest fees is the $MIM he personally promotes…

Thus, the evolution of the Curve ecosystem is a "milk distribution" problem, and this topic will definitely be a long-term one; only by continuing over the long term can it evolve into the most perfect form. Currently, in terms of milk distribution, the DeFi ecosystem is still quite primitive, with many being a communal dining system.

Therefore, the debate over Curve's evolution is a good thing. In the long run, everyone will have to emulate Curve's DAO model, for which we must thank him. We previously invested in a project called Izumi, which absorbed some milk distribution techniques from $CRV, and I think that’s quite meaningful.

I look forward to the future, where Curve also becomes a "god" in governance and milk distribution.

Rui: I understand that the core reason for the governance struggle in Curve is that stablecoin swaps can bring stable, low-risk mining yields. The competition is for the liquidity of the mining funds pool, meaning that low-risk preference funds bear some potential losses to obtain stable returns. Governance rights are important, but in the market, apart from Curve and a few other DeFi protocols, very few have evolved to the stage where governance rights are fiercely contested. Regarding future directions, I believe that projects based on Aave and Uni, which have accumulated the majority of underlying assets, have the potential to redevelop the efficiency of locked funds.

There have been many attempts at interest rate derivatives for Aave, but these attempts have not been very successful because no one uses them, no matter how sophisticated the protocol is, as they are too complex. I am optimistic about projects that redistribute deposit and loan interest rates and new lending projects based on long-tail assets.

Then there’s Uni. UniV3 is a cash cow for capable market makers, but the scale of market-making strategies is limited, and there’s no need to develop them for everyone to use. Another path is to hedge through options derivatives, perhaps turning LP assets into risk-neutral mining products through crypto-native derivatives.

I think the possibility of DeFi's underlying assets increasing tenfold based on current BTC and ETH prices is low, and the status of leading protocols is also difficult to shake in the short term. However, redistributing the value generated by existing underlying assets presents a significant opportunity.

Johnson: DeFi is moving too fast, and there are too many variables. I will approach this from the direction of "change," and there are a few directions that are roughly determined.

1. Curve's veCRV model/ecosystem, such as Redacted and other bribing protocols based on or not based on OHM.

2. Permissionless lending protocols for long-tail assets, such as Silo Finance and Euler Finance, which then attempt to incorporate veCRV lending.

3. Crypto-native Game DeFi, such as MAGIC and Genesis Adventures in the Loot ecosystem. For example, the MAGIC ecosystem may adopt the ve model.

4. Exploration of on-chain derivatives. I believe that most designs of existing on-chain derivatives (options, futures, IRS) are not tailored for DeFi. What DeFi needs are on-chain derivatives primitives designed specifically for DeFi, rather than just moving a centralized set onto the chain.

5. DeFi's attempts on L2s and the ecosystems established to solve issues like high gas fees on L1.

Overall, DeFi emphasizes composability. Early protocols need to first solve their liquidity issues and acquire enough early users before discussing whether the protocol design is optimal and whether asset efficiency can be improved. Although innovation in DeFi will be relatively difficult at this stage, the gameplay will not stagnate.

Min: The war of Curve has never stopped since its inception. First, it’s a war of yield platforms: Yearn.finance, Stake DAO, Convex, Frax, and Wonderland, all trying to attract liquidity from competitors by controlling CRV. Secondly, there’s the offensive and defensive battle over stablecoin trading volumes between Curve and Uniswap.

As non-stablecoin projects enter Curve, such as the addition of Tokemak, the liquidity war will continue, reaching a new level of unimaginable intensity, with more new and old projects wanting to integrate into this ecosystem and join the battle.

As for the future of DeFi, it still needs to bring about incremental innovation, or it will have to crazily increase capital utilization and leverage.

Some observed directions mainly include: one is "RdeFi" (Regulated DeFi), such as Aave Arc and Compound Treasury, providing DeFi services for institutions.

Secondly, real-world assets on-chain: Aave has partnered with Centrifuge to launch a new market called Real World Assets (RWA), allowing users to use their real-world assets as collateral to borrow cash.

Thirdly, unsecured lending, such as the recently launched Goldfinch by Coinbase and TrueFi (which seems to be changing some models). However, fundamentally, it still relies on B-end credit limits, and the long-tail market is not large because the crypto space lacks a credit system and risk control measures. Therefore, I am quite optimistic about future Web3 credit ratings based on wallet addresses, which can be considered a form of credit.

Overall, my enthusiasm for DeFi is not that high, mainly because my IQ is not enough. Watching fixed rates is like doing calculus for me; I fall asleep halfway through.

Benson: Currently, DeFi protocols generally face the issue of liquidity loyalty. Besides liquidity mining, is there a better, more sustainable way to retain liquidity? This is a problem that DeFi 2.0 needs to solve. Personally, I think Tokemak's model may shine this year. Tokemak is thinking about the interaction between DAOs rather than being limited to individual perspectives. For example, to establish a new reactor in Tokemak, one needs to obtain corresponding tokens to deposit into the reserve pool.

This process requires DAO-to-DAO communication, exchanging tokens for corresponding tokens. This process is full of possibilities: it could be done under the guise of lending, introducing new protocols specifically for DAO-to-DAO lending, or adding a new PCV protocol, etc. Additionally, algorithmic stablecoins are also a holy grail that DeFi has yet to conquer. From early AMPL, mid-term Basis, to the latest Fei, OHM, UST, etc., they all rely on relatively narrow game theory mechanisms, making it impossible to achieve true anchoring.

I personally think UXD is a very interesting stablecoin, using delta-neutral positions as collateral to mint UXD. Mechanically, it is very close to holding spot + short hedging, while also retaining usable liquidity and potential funding income.

The simplest path may be that true stablecoins do not need to rely on overly complex game mechanisms. Currently, the equilibria of stablecoin games on the market are overly optimistic; they tend to collapse in corner situations. For example, when Luna spiraled up, everyone was happy, but if it spiraled down, it could lead to disaster. The UXD model is worth paying attention to.

Bowen: 1. As the uncrowned king of DeFi in 2020, Curve achieved a TVL of $24 billion in stablecoins and homogeneous tokens [WBTC/SBTC, ETH/Lido ETH], surpassing the FX market depth of most centralized exchanges. Now, many OTC desks' stablecoin trades also go through CRV.

2. The iterative layers of algorithmic stablecoins are like the Federal Reserve printing money. Every new project wants to replace USDC, USDT, and DAI in the ecosystem from different angles, such as FXS, MIM, UST, FEI, etc., with multi-chain 85% asset-backed algo stablecoins with DeFi yield attributes. However, these new algo stablecoins, in order to increase circulating supply and utility, must increase market credibility by entering the 3CRV/algo stablecoin pools. So if there will be more stablecoin projects in the future, the competition for CRV governance tokens will continue.

3. The composability of DeFi is core; no single entity can do everything well. How to recombine the ecosystem can open up many expansion opportunities.

4. The Crypto Degen community has many strange cultural trends, forming their own factions, such as Magic on Arbitrum, Hdao on Tezos, Crypto Raiders on Polygon, and AAVEgotchi. Although they are quirky, they also have a strong sense of community.

Sally: L1 vs L2, is the L1 landscape gradually settling? Do established public chains (like Cosmos) still have a chance? Will future opportunities emerge in layer two or layer one?

Johnson: WAGMI, I think there are opportunities, but most opportunities will be short-lived unless there is a very strong community and ecosystem.

Capital will consider undervaluation and overvaluation. If ecosystem A has already risen 10x while ecosystem B has not, capital will view ecosystem B as relatively undervalued. Once capital enters, an explosion will occur.

The opportunities in layer two networks differ slightly from those in public chains, although the ecological strategies of layer twos will also resemble those of public chains, such as the emergence of ecological funds and native major protocols.

In the short to medium term, the opportunities in layer two mainly lie in Boba, Optimism, Arbitrum, Metis, etc., which are based on Optimistic Rollup technology. Currently, only Boba and Metis have issued native tokens to incentivize their ecosystems, while Optimism and Arbitrum have not yet issued tokens. I believe that layer two networks can only begin to incentivize their ecosystems once they issue tokens. Without token incentives, it will be difficult for the first batch of users to migrate.

Whether it’s layer two or public chains, the first batch of users will always be Degen---the second batch will be DeFi's power users,---and the third batch will be the larger number of ordinary users.

Sally: That’s quite interesting; the presence or absence of tokens in layer two will have very different impacts on user incentives.

Min: The biggest investment theme from last year to this year is the scaling war, new public chains vs L2, and this war continues this year… I believe the future is multi-chain, and each chain will have its own path, but this will only be revealed in a bear market. I am more optimistic about public chains that have their own characteristics in certain aspects, such as gaming, NFTs… Regarding new public chains, there are currently two MEMEs: in 2021, it was SoLunAvax, and now FOAN is starting to rise (Fantom, One, Atom, Near). I am more focused on the latter; there are still many opportunities on new public chains, especially for some native projects, not just forks of Ethereum, such as DEFIKINGDOM.

From another perspective, large VCs have a demand to promote L1 narratives, as the ceiling of the track is high enough to accommodate a lot of liquidity. The first and a half financing of large public chains is particularly active; for example, a certain large public chain recently sold at a discount of $1B.

For L2, the focus is still on zkEVM. After all, Vitalik has stated that in the medium to long term, with the improvement of ZK-SNARK technology, ZK Rollups will prevail in all scenarios, and several solutions are being monitored.

A core point in the competition for users between new public chains and L2 is the entry point. At least currently, the interaction costs and experience of L2 are not as good as new public chains. Therefore, securing bridging support from large exchanges becomes particularly important to reduce users' interaction costs.

0xTodd: How should an L1 public chain develop?

Financing → Subsidies + Data Manipulation → Using Data to Re-Finance → More Subsidies + Data Manipulation → Using Data to Re-Finance Again (including selling to retail) → More Subsidies + Data Manipulation → …

It’s an infinite loop; the more times you loop, the stronger you become. The richest L1 can also invite Curve, AAVE, and UNI to assist, with increasing difficulty in invitations. Successful invitations can accelerate the loop.

L2 is relatively more difficult; for example, Arb and OP have not issued tokens yet. Without subsidies, their speed will definitely be slower than L1, but we need to give them opportunities. Without subsidies, there will be fewer fork-type projects because these forks only make quick money. Fortunately, their legitimacy is decent, so some projects born out of passion still have the genes of ETH entrepreneurs. I know quite a few innovative teams that, despite being limited by ETH's high gas fees, still prioritize Arb, such as the Divergence we led the investment in. For example, Magic, a marketplace, has emerged on Arb, and interesting projects like Metis and Boba, which have tokens, may develop faster.

In summary, both L1 and L2 have opportunities, but we really need to give L2 more patience.

Sally: In summary, be patient and give L2 a bit more time.

Bowen: The competition for LAYER1 has just begun. There are a total of 4 million DEX user addresses, while the active addresses on Opensea are 300,000. Polygon's Sunflower gas, with 300,000 addresses participating, reached 600 gwei. Arbitrum and Sol have both experienced outages, and Dfinity was congested due to NFT issuance.

Although every L1 has ample resources, not every one can withstand the test of the battlefield.

Star teams like Zksync, Starnet, Aleo, and Aztec have not yet launched. I am looking forward to architectures that separate computation and storage.

For L2 ecosystems, I particularly like Arbit, GMX, DOPEX, MAGIC, and HND - derivatives, NFT trading, and lending all have native developers, making the ecosystem quite healthy.

Recently, I have also been re-examining the developers in the Dfinity ecosystem. Many Social Fi projects, such as decentralized Reddit, Twitter, and psychedelicDAO, have developers reminiscent of the ETH community in 2016, all developing tools and infrastructure. They are very creative but lack a killer app.

I agree with 0xTodd's statement; we need to give them more patience. It’s not yet time to discuss results.

Benson: As Johnson mentioned, this wave of FOAN (FTM, One, Atom, Near) has suddenly performed much better than the market, possibly due to capital rotating to public chains that haven't risen much yet. With a low base, they are more easily favored by speculative capital. In the short term, from an EV perspective, the opportunities on FOAN are definitely greater than on SoLunAvax.

I personally believe that the opportunity for Layer1 lies in the development speed of zk-rollups. L1 public chains must seize the opportunity to capture territory before zk is fully developed. Since zk has higher computational resource requirements, it is more complex in practice and will generally be slower than OP-based L2s by about six months. The seven-day exit period for op-rollups is too long and severely disrupts user experience.

However, in the long run, I still believe that L2 will not be the ultimate answer; everything still depends on the development of ETH2.0 because Layer2 will disrupt the composability of DeFi. For example, Aave is only available on Polygon, while Uniswap is only available on Optimism. We cannot conduct a transaction that simultaneously calls Aave and Uniswap smart contracts. Protocol fragmentation leads to limited composability, which will reduce the attractiveness of DeFi.

In addition to protocol fragmentation, liquidity is also fragmented. Although some top protocols have already moved to L2, the overall trading volume and TVL still lag significantly behind their main chain versions, mainly due to severe liquidity fragmentation.

Rui: I am quite optimistic about Cosmos. The Tendermint framework is currently the most stable and user-friendly one-click chain deployment tool outside of the EVM framework, and it is very flexible. It can connect to the IBC ecosystem or not, and the IBC bridging function is well done, being fast, accurate, and stable across chains. Previously, Cosmos did not charge for the Tendermint framework, allowing everyone to develop freely, but as more chains join the IBC ecosystem, the value capture of ATOM will become clearer. Another interesting point is that there is no requirement in the Cosmos network for which chain must be a Hub; it is determined by the market, which means Cosmos will be more open.

Apart from the established public chains of Cosmos, there are Polkadot and Dfinity. Both have good technical directions but have not found suitable ecosystems for themselves and have already overdrawn the appreciation of their native tokens before developing ecosystems. It is very challenging to rely on the appreciation of native tokens to drive strong profitability for infrastructure, but we can expect some unique ecosystems to emerge.

In my understanding, AVAX, MATIC, BNB, and many new public chains started by forking the Ethereum ecosystem, gradually finding their own ecological directions. BNB has found a suitable development direction, moving towards gaming and attracting traffic from outside the circle. AVAX and MATIC are more polarized; on one hand, they are low-gas alternatives to some leading Ethereum DeFi protocols, and on the other hand, they have some native projects with strong profitability. However, both of these growth paths have limits, and new chains will compete for users and attention from older ones. Therefore, finding a development direction is crucial for these L1s.

For general L2s, I personally understand that the early development direction is also polarized. On one hand, they share security with Ethereum, migrating some quality protocols and developers. On the other hand, they attract users with strong demand for profitability through the appreciation of native tokens. However, to achieve the issuance of native tokens, they need to support some native protocols after acquiring a certain user base. These L2s have legitimacy, inheriting Ethereum's large developer community, and I believe a batch of interesting native protocols will emerge.

But to be honest, the applications and fundamentals of L1 are too similar. Compared to the competition among L1 giants, I am more optimistic about functional chains like AR and MINA that can serve other L1s.

Sally: In the past two weeks, the Chinese-speaking NFT space, including Zhou's Pantabear, the previously rising Heliren, and the soon-to-launch classic IP Cold Rabbit X Rabbits, has received widespread attention. Some say that Chinese-speaking NFTs are about to make a comeback. How far are we from the birth of a domestic light in Chinese-speaking NFTs? In your view, what stage are we currently in the historical march forward?

Min: Let me throw out a question: am I supportive of domestic NFTs? Of course, I am supportive; Chinese culture is the coolest.

To expand, I believe that Tokens and NFTs will gradually become two different development paths. Among them, I have always been optimistic about the narrative of crypto streetwear (even though I wear Adidas). I even think that the future "Supreme" will first appear in the digital world and then reflect in the physical world.

First of all, in my view, whether in traditional finance, crypto, or even religion, it is all a Ponzi scheme. Without incremental growth or collective runs, everything will collapse. The question is how to maintain the Ponzi. Social security and pensions are forcibly locked by state power, but a more advanced means is culture (the ability to tell stories allows humans to become the bosses of the Earth), making you willingly lock your assets.

For example, diamonds are just a bunch of carbon, one of the best marketing strategies in human history, but by telling the story "A diamond is forever" and binding it to love, it becomes a physical NFT (3,3), bought, held, and staked (worn daily)…

Thus, a powerful NFT must carry cultural attributes, whether it comes from the atomic world (like Jay Chou's bear) or from the crypto-native world (like PUNK), because there will always be someone who treats it as a "consumer product," permanently (3,3).

0xTodd: Agreed, I’ll take the baton. Today, in the Chinese channel, discussing this is indeed very timely. Chinese culture is the coolest +1.

I feel that Chinese people should play with their own NFTs, as this cultural clash is right here. To be honest, I really can’t get some of the works from Western artists.

Additionally, I think the atmosphere for NFTs in Taiwan seems to be better right now. Later, we can hear @Benson elaborate on this, haha. Mainland China currently has regulatory requirements, such as digital collectibles needing T+180 before they can be sold, limiting secondary market trading, etc. These factors will somewhat affect the development of NFT assets in mainland China. In contrast, NFTs from Hong Kong, Taiwan, Malaysia, or Chinese people living abroad in Europe and America may produce some very interesting things. In short, I am very much looking forward to it.

Johnson: I think it’s important to understand the playbook of NFTs. Web 3 is a global movement without borders. Only by finding your own product-market fit and unique gameplay can you naturally attract widespread attention. I believe that every region and culture will develop its own unique NFT culture, bringing new understanding to the world.

Sally: It’s interesting that many of our guests today are seasoned crypto collectors. Personally, I’m curious about how everyone views this from the perspective of users/industry practitioners.

@Benson, I know that in Taiwan, people like Woody should have insights on NFTs. Many in the community are also early supporters of blue-chip NFTs like BAYC/MAYC. What do you think, Benson?

Benson: Pantabear's trading volume has reached the top of OS, a height that even Justin Bieber's little bear has not achieved. This shows the immense potential of Chinese NFTs. However, I didn’t buy in; it’s hard to see you all making money while I’m feeling down.

Benson: Following Todd's point, Taiwan is indeed quite crazy about NFTs. There’s a community similar to the Western CyberKonz called Fomo Dog, a cultural Demi community, and even a fried chicken (Taiwanese fried chicken?) shop has issued NFTs.

I attended a BAYC community gathering and found that many participants were unfamiliar to me; many were people outside the native crypto circle. It can be said that the narrative and cultural inclusivity of NFTs may surpass that of the traditional crypto circle, which can also be seen from the different cycles of NFT bull markets and crypto bull markets.

Recently, a Taiwanese artist named Chen Lingjiu launched a project called yolocat, giving 9% of his personal income to NFT holders. This is a very unique gameplay, where fans transition from content consumers to artist investors. I personally think this gameplay is very Web3.

Because I love you, I buy NFTs; because I am your investor, I promote your work; because I promote your work, more people love you. This positive feedback loop is also a kind of fan flywheel.

Rui: I don’t think Chinese people are really lagging behind in the NFT space. Many people own APEs, and many popular anonymous projects are led by Chinese people. It’s just that, on one hand, everyone communicates in English (which is the most universal language), and on the other hand, after experiencing DeFi, there’s always a feeling that the moon is rounder abroad.

Whether it’s Chinese-speaking NFTs or NFTs in any language, finding the core narrative and target buyers is crucial, and continuously building expectations is necessary. Users need to see that the team is doing something. The liquidity of NFTs is generally low; as long as everyone is 33, at most, they won’t sell, but they won’t crash either. APE is a great example; the community has strong cohesion, becoming a totem-like belief, with new expectations constantly emerging. The result is that it doesn’t drop in a bear market and keeps rising in a bull market. So far, I haven’t seen any Chinese NFT teams with this operational capability and understanding of crypto-native concepts.

Cultural NFTs will be more interesting. Most of these NFTs have some endorsement from external resources, naturally creating expectations of fundamental value. The regional differences determine the different player groups, and people from other regions or those unfamiliar with this culture may experience FOMO due to the rapid price increase, leading to a quick pump in NFT prices. However, once the FOMO sentiment fades, there needs to be enough community education and intrinsic value to support the price. For example, Jay Chou's NFTs, which have clear price expectations due to the endorsement of a celebrity IP.

Buying at 0.4E, the expectation is that if it doesn’t work out, there are so many fans of Zhou Dong, and good seats at concerts are about this price. Someone will always buy it. If it doesn’t work out, the project party can empower the NFTs with some physical benefits, and fans will support it. But the purchasing power of die-hard fans also has an upper limit. As prices rise, this expectation gap gradually gets leveled, and the project party needs to provide a new practical roadmap and utility expectations to prepare for the next pump.

Bowen: Domestic NFTs are similar to streetwear/luxury goods; they have regional characteristics. For example, diamonds are a global Ponzi, but jade is a Southeast Asian Ponzi. Everyone needs to show off, demonstrating that they are trendy, cool, and have taste. Therefore, there will be batches of new brands emerging, representing new types of people.

Celebrity endorsements are definitely an effective way, just like Edison Chen's Clot. I believe that in the future, every popular star will have their own record NFTs, streetwear NFTs, and profile NFTs. When I met Chainsmoker in New York, he said he invested in an NFT record company, allowing the top bidder to collaborate with him on a mix. This fan economy is very cool and provides great utility.

Sally: The narrative of Web3 seems to have returned to the public eye. Whether it’s the early VC-driven narrative or the recent battle between tech giants and top VCs in the Web3 war, can you all share your views on Web3 and the projects you are optimistic about?

Min: Since I have always been involved in the tough content (everyone, please support us), I have been paying attention to the creator economy.

The logic here is that the WEB2 internet was not built to facilitate the flow of capital but rather information. Therefore, its profit model is based on the attention economy of free products, where attention and traffic are essentially deposited in the platform rather than with the creators. As a result, platforms often become very large, and creators are more often "exploited."

WEB3 can transform the attention economy into an ownership economy, allowing authors to truly own their content as an asset, directly connecting with users, and enabling traditional support for creators (tips & subscriptions) to become an investment behavior, growing stronger and sharing the fruits of content.

For example, this is a case study. Thanks to Benson, the leading platform for creator economy is OPENSEA, but this is considered WEB2.5. There will definitely be more attractive platforms emerging; this is a very large track. As for specific projects, I am still learning and researching, and I welcome everyone to recommend more to me.

Johnson: Let me briefly summarize. Web 3.0 can encompass too much.

1. Social tokens and social fi, such as how to organically integrate personal tokens into DeFi gameplay, how to make NFT PFP sustainable, and how mobile wallets can better connect some crypto-native elements.

2. The development and gameplay of the metaverse, and how to combine it with some middleware of Web 3.0, such as real estate leasing and advertising services, and metaverse decorations.

3. Web 3.0 native applications and tools of unique culture, such as the emergence of (3,3), ape, rekt, meme culture, and how to apply them in various ecosystems.

0xTodd: It’s the hardest topic to discuss what tracks and directions to be optimistic about. I have a few viewpoints. What is revolution? Revolution is a bloody conflict. Since Web3 is called a revolution, its competition must be at a life-and-death level to be considered a true revolution.

Many current Web3 applications claim to be Web3 just because they support MetaMask wallet connections or display NFTs. This feels a bit like "why not eat meat porridge." These minor innovations don’t seem particularly revolutionary.

Last month, I wrote an article where my core viewpoint is that I hope Web3 can genuinely focus on the general public. I had a great time chatting with everyone today, mainly because everyone’s knowledge is very broad. However, this does not mean that ordinary people or those in other industries can have such knowledge accumulation to use current Web3 so smoothly.

People from all walks of life are busy; unlike us who are deeply immersed, they need Web3 to solve problems that Web2 cannot provide to be considered adequate. We can’t just play with highbrow things as selling points.

I’ll mention a metric------40% of the population in China's rural areas. I think at least 1/3 of them should be able to smoothly use these Web3 tools before I believe they can change the world and fulfill their mission.

Rui: First of all, I don’t think Web3 is suitable for everyone. The definition of data belonging to oneself sounds easy to say, but it is very difficult to implement. Without search and recommendation algorithms, many people's lives would be very difficult. For example, if Chain News were gone, many quality crypto contents would be lost, and users would need to discover their own information streams. Living within the WeChat traffic matrix, although it incurs some extra costs, is at least comfortable. Therefore, Web3 will definitely be niche for a long time, requiring a lot of quality content accumulation and profitability to stimulate more people to enter.

Secondly, I believe that all projects aiming to create Twitter or Facebook in the Web3 space are unlikely to succeed. On one hand, the user experience of Web3 is definitely not as good as Web2. The role of chains is to allocate the interests of various participants under low trust conditions, and interests only target valuable things; not everything needs to be on-chain. For example, what value does daily GMGN on-chain generate? On the other hand, the traffic matrix of Web2 is based on data. Web3 returns data to individuals, which inherently cannot establish a traffic matrix. For instance, if users migrate from WeChat to Telegram, they lose a lot of chat content, which incurs significant migration costs. However, if this data migrates on-chain, migration costs are almost negligible. Therefore, Web3 should be modular, targeting valuable data, with product forms being modular products stitched together through composability.

Thus, investing in Web3 should focus on core modules, such as identity, storage, and on-chain data reading and parsing. These are infrastructure investments, and regardless of the direction Web3 takes, they will have their place.

Bowen: Web 1 is what you see is what you get (everything that can be read, played, or checked).

Web 2 is what you recommend is what you get (everything you can buy, play, or eat is based on big companies or influential friends/KOLs, presented on "shelves" or in some form, recommended to you for selection).

Web 3 is what you build is what you get (those who participate in building have the right to own the community and follow new rules).

The most obvious aspect of Web3 is connecting wallets like MetaMask. All transactions are recorded on the Smart Contract layer, and everyone can see your on-chain operation records. The current state of Web3 may be akin to the year 2000, where everyone can only create display pages for NFT profiles. However, I am very optimistic about the applications and composability of Creator Economy, DID, Social Graph, and On-chain Credential.

For example, our good friends are working on Project Galaxy and CyberConnect.

Benson: The logic of Web3 itself is very politically correct; it’s a concept of returning power to the people, allowing users to become part owners of the network/organization. This can break many relational boundaries. As I mentioned earlier, Chen Lingjiu's yolocat allows holders to transition from fans to investors.

Traditional content producers, whether artists, writers, or comic creators, have their income heavily extracted by intermediaries or platforms. This is unavoidable, as traffic is concentrated in these intermediaries. Besides the unfair profit-sharing mechanisms, some intermediaries earn not from the product itself but from advertising attention. This makes many talented content producers extremely frustrated, as they can only create sensational works to attract attention. For example, journalists continuously report on sensational topics not because they genuinely want to, but because platforms only care about traffic, and only with traffic can they sell ads.

However, Web3 can disrupt this model. A creator does not need 100,000 ordinary fans; they only need 1,000 true fans willing to spend money to survive. If a creator is willing to create in the digital world and shares part of the profits with fans through DAO fundraising or NFTs, binding cash flow tools like Superfluid through smart contracts for regular profit-sharing, this is a great Web3 application. These fans, who transition from content consumers to investors, have stronger loyalty and missionary attributes than ordinary fans.

I personally believe that Web3 projects derived from this creator economy could represent a massive track.