Special Report on Pizza Day: The Major Changes in the Crypto Industry Over 12 Years

Author: Fiona, Let's Go Metaverse

In May 2022, the crypto industry welcomed the 12th Pizza Day.

This is a little story that many people love to talk about. On May 18, 2010, a programmer with the username Laszlo posted on the Bitcoin Forum offering 10,000 bitcoins for two pizzas. On May 22, Laszlo posted to brag: "I successfully traded!"

Twelve years later, those 10,000 bitcoins have changed dramatically; if calculated at $30,000, they are worth $3 billion.

Dust to dust, earth to earth. With the further development of blockchain technology, the entire ecosystem of the crypto industry has undergone tremendous changes. The number of participants, blockchain companies, and public chains has significantly increased, with new concepts, new gameplay, new hotspots, and new tracks emerging endlessly.

A Hundred Flowers Blooming in Public Chains

As the infrastructure of the blockchain industry, the development of public chains has always been one of the most eye-catching topics in the crypto industry.

On October 31, 2008, Satoshi Nakamoto published the Bitcoin white paper "Bitcoin: A Peer-to-Peer Electronic Cash System" on the P2P foundation website. On January 3, 2009, the Bitcoin network was born, becoming the world's first public chain.

In simple terms, a public chain is the most original infrastructure of blockchain. It is decentralized, created, owned, governed, and used collectively by everyone.

However, due to the persistent congestion issues of the Bitcoin network, the functionality of public chains seems to have weakened in recent years, with Bitcoin increasingly leaning towards the role of "digital gold" representing value storage.

To address the issues within the Bitcoin network, programmer Vitalik Buterin (V God) developed the Ethereum network. Ethereum is a programmable blockchain that allows users to create complex operations according to their wishes, serving as a platform for various types of decentralized blockchain applications.

As the most popular public chain today, Ethereum carries most of the ecological applications in the crypto industry and has long dominated the decentralized finance (DeFi) sector.

According to DeFiLlama data, in April of this year, the total value locked (TVL) on the Ethereum chain approached $120 billion. Due to a decline in investor interest in the overall crypto market, Ethereum's TVL sharply dropped in the second week of May, falling to around $71.7 billion by May 20, 2022.

In the past two years, the rapid development of DeFi, NFT, GameFi, and the metaverse has further congested the already "burdened" Ethereum network, leading to higher gas fees, making Ethereum an unaffordable "noble chain" for many.

Despite the London upgrade deploying EIP-1559, gas fees have not decreased to an acceptable range for users. Meanwhile, various Layer 2 solutions differ greatly in their implementation mechanisms, and without resolving compatibility issues, a permanent solution is difficult to achieve.

Against this backdrop, several competing public chains such as Solana, Near, Avalanche, Polkadot, WAX, and CUN have seized the opportunity to develop rapidly. According to DeFiLlama statistics, over a hundred public chains have been recorded, increasing nearly tenfold since the beginning of 2021, showing a trend of flourishing diversity.

Solana, as one of the brightest stars in the public chain arena, has not only seen a hundredfold increase in its token price but also a massive ecosystem. While other public chains claim to be compatible with EVM and seek to be friends with Ethereum, Solana stubbornly declares: "I don't want to be your friend!"

Solana's goal is to become a high-performance public chain: its main feature is the PoH (Proof of History) mechanism used by its mainnet, which allows each node to generate local timestamps without waiting for the entire blockchain network to synchronize data and data states, thus improving overall efficiency.

Near has long been known in the community as "ETH 2.0." The reason is that Near has implemented the ultimate scaling solution of ETH 2.0—sharding—earlier. Sharding is not a panacea; it is the most "balanced" and cost-effective solution among all scaling solutions, sacrificing the least in terms of decentralization and security while maximizing performance improvements.

In the EVM public chain arena, Avalanche has also performed impressively. Compared to other single-chain structures, Avalanche's structure is much more complex, with the recent Consensus 3.0 being a platform with X, P, and C three-chain structures. Although Avalanche's ecosystem size is not yet dominant among emerging public chains, its strong fundamental performance shows a trend of "leading the track."

Polkadot mainly addresses cross-chain issues, where different blockchains cannot communicate data with each other. To break this data isolation, Polkadot aims to create a network protocol that allows all blockchains connected to this architecture to better complete information exchange among themselves.

In addition to star players, some relatively niche new public chains cannot be ignored. For example, WAX has taken a unique path, focusing on NFTs, dApps, and video games, with its homepage boldly declaring itself the "King of NFT."

CUN is one of the few followers of the Ethereum technology route that has proposed upgrades at the main chain consensus layer. As a new Layer 1 network, CUN has established improvement plans tracking the Ethereum network in areas such as community incentive mechanisms, privacy protection, identity authentication, and multi-chain cross-chain. In the future, the CUN network ecosystem will connect more with the offline economy, promoting the development of the real economy. This fundamentally distinguishes it from blockchain networks like Ethereum.

Like all entrepreneurial projects, the development of public chains cannot be smooth sailing. Recently, a highly watched public chain project is Terra. Terra, centered around the stablecoin UST, creatively designed a "dual-token elastic supply mechanism," deeply binding LUNA and UST to form a cycle of ecological development and token rise.

In April, Terra's TVL once approached $20 billion, with a market cap exceeding $30 billion. A report released by Messari in March identified Terra as the best-performing public chain ecosystem of 2022.

However, as Terra continued to develop, users began to worry that LUNA might fall into a "death spiral." Unfortunately, this concern was validated. Within 48 hours from May 11 to 12, LUNA experienced a cliff-like plunge, with prices on Binance dropping to as low as $0.00000112, approaching zero, while just a month earlier, its price was around $120.

Of course, the dazzling stars or potential projects in the public chain arena may not be limited to these. Overall, each public chain project is unique and has its own strengths. It is foreseeable that the future public chain ecosystem will inevitably form a "multi-chain coexistence" situation.

Web 3.0 is Coming Strong

The rise of public chains has laid a solid foundation for the development of Web 3.0.

Web is short for the World Wide Web (WWW), a collection of a vast number of documents stored on Internet computers, based on client/server information discovery technology and hypertext technology as the internet application layer service. After years of development, the Web has gone through three stages: Web 1.0, Web 2.0, and Web 3.0.

Currently, there is no standard definition for Web 3.0, but it generally refers to a new type of decentralized architecture for the Web, where the existence of public chain technology has gradually made people aware of privacy, data, rights, censorship, identity, etc., which aligns closely with the concept of Web 3.0. The crypto industry has high expectations for Web 3.0.

Web 3.0 is not just a technological innovation; it will be a crucial step in the internet's development from technological innovation to user concept innovation.

DeFi (Decentralized Finance) can help circulate the user value generated in Web 3.0, providing liquidity for digital assets, and is therefore considered a core feature of Web 3.0.

In simple terms, DeFi refers to platforms and products based on blockchain smart contracts that provide users with financial services such as trading, insurance, remittances, lending, and derivatives without going through centralized financial platforms or third parties.

2021 is regarded as the year of DeFi. The total TVL of DeFi projects grew from $19 billion at the beginning of the year to about $260 billion, an increase of over 13.6 times. Entering 2022, after experiencing a market crash in May, the total amount of global assets locked in major DeFi protocols approached $111 billion, a decline of over 50% from its peak.

Many research institutions believe that DeFi will enter a slow development phase, and regulatory policies will have a significant impact on DeFi projects. In sectors like DEX and lending, leading projects have already formed, and there is limited room for innovation in the mechanism design of newly launched DeFi projects. However, there are still opportunities in areas such as on-chain credit, capital utilization, and decentralized derivatives.

Like DeFi, the rise of NFTs has brought new changes to Web 3.0. NFTs are non-replicable, immutable, and indivisible proof of digital rights built on blockchain technology, which can be understood as a decentralized "digital ownership certificate for virtual or physical assets."

As an important carrier of user value in Web 3.0, NFTs can perfectly embody the value of user-created content. The international NFT market is developing rapidly, with a rich variety of applications. Representative applications for game items include Gods Unchained and Axie Infinity; for collectibles, there are CryptoPunks and CryptoKitties; for virtual worlds, Decentraland and Cryptovoxels; for crypto artworks, Async Art and SuperRare; and major NFT trading markets include Opensea and DADA, among others.

Currently, GameFi is expected to be the first sector in the Web 3.0 ecosystem to resemble the real economy, and it is also the most exciting track in the industry. GameFi is a fusion of DeFi, NFTs, and gaming, opening a new Play-To-Earn model in the gaming industry, allowing blockchain to extend beyond mainstream digital assets.

In terms of token mechanism design, most current blockchain game projects adopt a dual-token model, consisting of an in-game token and a platform governance token. The governance token can be used to incentivize players to earn tokens through tasks such as PvP battles, granting them governance rights over the community, which not only strengthens user engagement but also allows for self-adjustment through resource integration to reduce the impact of the secondary market on the game and increase the stability of the in-game economic system.

Taking Axie Infinity, the number one player in GameFi, as an example, Axie's main selling point is that it allows players to earn real money simply by playing the game. Axies and SLP can be sold in cryptocurrency form, and players can earn SLP by playing the game or by participating in scholarship programs to lend their Axies to other players and receive a percentage of those players' rewards.

The success of Axie Infinity has attracted a large number of similar games to follow suit. According to Footprint Analytics data, as of April 30, there were 38 blockchains participating in the GameFi sector, with 1,479 game projects, a month-on-month increase of 5.2%.

From October to November last year, GameFi trading volume soared, exceeding $510 million daily. However, since January of this year, due to macroeconomic trends, GameFi trading volume has remained sluggish, with the trading volume per wallet gradually declining from $105 to $20.

Despite the increase in the number of games, the number of new users and active users has also shown a downward trend. As of April 30, the total number of active users was 9.22 million, with 780,000 new users. Compared to March, the number of active users decreased by 24.9%.

Additionally, the Axie Infinity hacking incident in mid-February severely impacted active users and trading volume, resulting in users losing ETH and USDC worth over $615 million.

Currently, projects on BSC and Polygon have become the most popular games in today's crypto market, attracting over 60% of GameFi players. In contrast, projects on Ethereum are gradually losing users to other blockchains due to high gas fees and low throughput.

With the popularity of the Play-to-Earn model, the variety of Web 3.0 play-to-earn projects is increasing, now covering Move-to-Earn, Learn-to-Earn, Write-to-Earn, Contribute-to-Earn, Curate-to-Earn, Paint-to-Earn, Create-to-Earn, and more.

STEPN is the first successful Move-to-Earn game, where users purchase NFT sneakers and earn game tokens for walking, jogging, or running. It further gamifies exercise by creating a sneaker upgrade system. As of April 30, STEPN had been online for less than six months, with a market cap exceeding $2 billion.

NFT's Chinese Characteristics

Since the outbreak of the pandemic, the world has witnessed a significant shift from the real economy to the digital economy, with both accelerating integration. In 2021, NFTs welcomed a breakout year.

In March, crypto artist Beeple's massive collage NFT work "Everydays: The First 5000 Days," created over 5,000 days, landed at the top auction house Christie's, selling for a staggering $69 million, becoming the third highest-priced artwork by a living artist; in December, crypto artist Pak's work "Merge" attracted attention, with total trading volume reaching $92 million, breaking Beeple's record.

Driven by international trends, domestic NFT projects are also emerging rapidly. Not only have major internet companies like Tencent, Alibaba, and NetEase begun to explore related projects, but it has also become common for celebrities like Wilber Pan and Edison Chen to enter the NFT space, bringing a greater out-of-the-box effect to NFTs due to their fan base.

In the past year of development, profile picture NFTs (PFP) have begun to dominate the market, with their success rooted in: organizational system design based on blockchain programs, cultural consensus based on IP images, and a community of interest based on the unique identity of NFTs.

Globally, the Bored Ape Yacht Club (BAYC) is undoubtedly the most eye-catching. Launched in April 2021, BAYC NFTs consist of 10,000 unique ape NFTs, each with distinct backgrounds, clothing, earrings, eyes, fur, hats, and mouths. Each attribute has various appearances and styles. Depending on the rarity of each feature, the prices of the ape avatars vary significantly.

In October last year, Bored Ape #8585 was sold for a record-breaking 696.969 ETH ($2.7 million), setting the highest transaction price for Bored Apes ever.

Today, BAYC is not only sought after by many celebrities but has also collaborated with major companies like Adidas, becoming one of the most successful NFT series. On January 29, 2022, BAYC's floor price surpassed 100 ETH, setting a historical high.

In China, other similar projects are continuously making new attempts and innovations. The Little Stone digital collectible platform, created by the NVWA platform, provides a very good case.

Little Stone transcends the logical system of value inherent in digital collectibles; it is not only a pure digital collectible but also a tool for building and participating in communities. In terms of identity recognition, players use Little Stone as their avatar, helping holders gain additional social capital and resonate with other players who also have Little Stone. In terms of development philosophy, Little Stone builds the Little Stone Real DAO, maintaining open communication and voting through the empowerment of Little Stone to adapt to the ever-changing environment. The total issuance of Little Stone is 10 million, with the initial sale price of 1 yuan now rising to 4.5 yuan.

Web 3.0 is getting closer to us; it is an era where everyone talks about property rights, and Little Stone may bring us more surprises.

It is worth noting that foreign NFTs mainly rely on public chains for issuance and trade through cryptocurrencies, which carry strong financial attributes and pose various risks during development.

In contrast, domestic companies have borrowed from foreign NFT models, fully utilizing blockchain technology for asset digitization and ownership, but have stripped NFTs of their asset attributes to explore the development path of digital collectibles within regulatory compliance.

Overall, NFTs have just begun to innovate ownership and exchange of digital assets, and there have not yet been widespread NFT use cases in the real economy.

What is exciting is that as the level of informationization increases, the mapping value of NFTs may have tremendous development potential. In the future, NFTs will enter various industries, from identity documents to biological genes, from real estate and automobiles to bills and contracts. NFTs will mark the beginning of a larger-scale migration of humanity into the digital world, generating new types of rights and social values that we cannot imagine.