The trigger point for the next bull market: a new way to drive traffic from Web2

Author: W Labs Guatian Laboratory

I. The Wealth Code Revealed by the Mini Bull Market at the Beginning of 2023

On January 1, 2023, the price of BTC was still at 16,500 USD. As of February 6, when this article was written, the price of BTC was around 23,000 USD, a rise of over 40% in just a little over a month.

The mini bull market has spurred a long-awaited rotation of sectors. The new public chain Aptos, which emerged during last year's bear market, was aggressively pushed by the Korean speculative trading team, skyrocketing from a bottom of 3 USD to nearly 7 times that, peaking at 20.4 USD. Friends familiar with the Aptos ecosystem know that it is still a super inactive chain, but that doesn't matter; when the wind blows, don't say pigs can fly, even a sluggish elephant like Aptos can soar freely. However, it is said that it is tied to a thin line that is constantly being pulled upwards, with the other end held by a Zhao-named master in the cloud (this is gossip, details omitted).

Looking at the rotating sectors, the one with the highest increase is the AI sector, with the leader AGIX directly soaring tenfold. We consulted seasoned scientists, and AGIX has not yet been practically applied; it is still in the PPT stage and is not on the same level as ChatGPT. However, this does not prevent AI from flying to the moon as a new sector.

Have you noticed? This mini bull market has once again validated a principle: the crypto world favors new over old. Aptos is a new public chain, and AI is a new sector that did not launch in the previous two bull markets. This should be the key focus for everyone in 2023: what kind of projects have logically new concepts?

II. How to Discover Logically New Projects

It should be clarified that not every novel idea or concept should be pursued blindly. For example, if a project's white paper states that they are developing a method to use brain waves for quantum entanglement to display information instantaneously, then store it in a nanochip that can connect to a decentralized network and be implanted in the brain, it is indeed very novel, but would you believe it?

New concepts must align with the rhythm and logic of the times. So how do we discover them? Grabbing at everything without a methodology will leave you exhausted. In the crypto world, a day feels like a year; there's always a sense of not having enough time, and missing out on a project while watching others make a fortune can be very frustrating. A good article I read a few days ago suggested using the "point + line + area" model to capture projects, starting with one or two areas for analysis.

I personally agree with this. After all, most investors do not have enough capital to cover the entire WEB3 landscape or create a complete portfolio. Focus on one area, analyze it to the line, and finally drill down to the point. If you can make a decent profit at this point, that's good enough. For example, in the bull market of 2021, the area analysis indicated that new public chains were emerging; the line analysis showed fresh models, large funds, and CX communities; the point analysis focused on Solana: innovative model POH, large funds supported by FTX, and then it was time to go all in, while other altcoins could be held in smaller amounts, resulting in hundredfold returns. Of course, this is hindsight, but this analytical method should be effective.

Returning to the topic everyone is most concerned about, where should we focus in the next bull market? As mentioned earlier, finding logically new concepts is the best. This does not mean that old sectors like public chains, DEFI, NFT, Gamefi, and the metaverse have no opportunities, but rather that the probability of new concepts producing hundredfold projects is greater.

I have been closely following the "drain from WEB2 to WEB3" sector, and I boldly say: the narrative of the next bull market will likely revolve around how to build the ecological modules of WEB2.5, establishing accessible paths to attract more new players (new retail investors) from WEB2. An article I read yesterday analyzed that this mini bull market was still driven by existing funds, with no large new capital entering the market, which cannot constitute a true bull market.

Alright, if we analyze from the area perspective, focusing on the "drain from WEB2 to WEB3" sector, how do we further analyze it from the line perspective? The current challenges in transitioning from WEB2 to WEB3 lie in two aspects: 1. Infrastructure is not up to standard; the entry barrier for WEB2 users is too high; 2. Apart from getting rich quickly, WEB2 users lack the motivation to enter WEB3. Therefore, our line analysis will unfold from these two aspects.

First, infrastructure is an eternal challenge that requires massive funding or a top-tier team. The most likely project to succeed in becoming WEB2.5 is Twitter. The acquisition by Elon Musk, a top figure in the crypto world, has created a gathering place for WEB3 enthusiasts, with unparalleled dissemination power in the WEB2 world. If Twitter were to launch its own token and wallet, along with a subsequent information storage network, a large number of WEB2 players could seamlessly connect to WEB3. While I haven't seen any related new projects, some older projects like Mask have been fluctuating wildly, often with 4-5 times the amplitude.

Second, why would WEB2 players want to enter WEB3? "Everything that can be played and used is already available in WEB2. Don't talk about those decentralized concepts; smooth experiences and quality services rank as the top two on users' voting boards. Until WEB3 products reach the same level in experience and service, I will consider decentralization and other bonus items." This should be the real thought of the vast majority of users. In the past two years, most WEB3 projects have attempted to attract users through "get rich quick" methods, but it has been proven that the Treasury's method of continuously printing money for the public to spend is not sustainable, as even Satoshi Nakamoto opposed it. The death spiral is waving at you at the intersection ahead.

In fact, there is another method that has been successfully validated, which is to rely on the idol effect and real IP for drainage, and this is what we will analyze in this article.

Let’s not forget that the ignition point of the last bull market, which started in early 2021, was NFTs. At that time, NFTs did not have as many gimmicks as they do now; there were no PFPs or utility NFTs in blockchain games, just a new model that helped artists and celebrities earn more money transparently. Recall this piece of news:

On March 11, 2021, at a Christie's auction, renowned digital artist Mike Winklemann set a record when his single artwork "Everydays – The First 5000 Days" sold for 69.3 million USD. This was the most expensive NFT auction in history for a Beeple work.

Also, remember how "NBA Top Shot" skyrocketed at that time, attracting countless WEB2 NBA fans.

This drainage method is healthy and sustainable:

Step 1: Artists, celebrities, and creators inherently have the impulse to turn their works into NFTs, as the hype and circulation can be quickly monetized, which aligns with the fundamental interests of this group. Therefore, they are natural allies with NFTs and transparent blockchain contracts.

Step 2: They drive fans into WEB3: "Support your brother by collecting an NFT, or join the DAO community to vote for him." Fans' enthusiasm for their idols is so strong that they would go to great lengths, and they have no motivation to install a wallet like MetaMask?

In fact, this model is not new in WEB2; it is just private domain traffic.

III. Three Development Stages of the IP Drainage Model

Stage One: The Image Stage. The speed at which users accept different domain IPs is related to human anatomy. Why did image-based NFTs first become popular in WEB3? Because visual contact through the eyes is the fastest; the eyes are the windows to the soul, and the information captured by the eyes is relayed to the brain the quickest. This is how the "eyeball economy" came about. Thus, Beeple's paintings, Punks, and Bored Apes led the NFT market in the last bull market.

Stage Two: The Music Stage. After the eyes comes the ears; listening to beautiful music can also provide pleasure and enjoyment, and this type of work has a good foundation for IP dissemination. A16Z's Audio has been making attempts in this area for a while, but it is primarily social-driven. In the past two years, some traditional record companies have turned new songs into music NFTs, but they still operate using traditional methods, which have not been effective. Last year, two music-related WEB3 projects, Melody and MMMM, emerged during the bear market. Melody quickly disappeared, while MMMM is still building, hoping to persist until the bull market arrives. If they can create a product model centered on song IP and social interaction, it’s not just about going to the moon; they could even fly to the Centaurus constellation. We look forward to such products breaking out soon.

Stage Three: The Text Stage. Next comes text works, which take the longest to transmit to brain neurons because they require analysis through both the eyes and the brain to find the beauty or content that brings pleasure. Since the stimulation to the brain is not as direct as in the previous two stages, the development of WEB3 in this stage has only just begun, but the potential is the greatest.

Text is the best storage method for the essence of human civilization over thousands of years, and it has the widest dissemination, with the longest tail effect. A good book's IP can be passed down for decades and become increasingly popular. For example, "The Three-Body Problem," written by Liu Cixin in 2006, has gained immense popularity over the past decade, and now even CCTV is airing a TV series based on it. Can you name a picture from over a decade ago that still brings you joy (other than certain explicit images)?

The potential of text works has already been validated in WEB2. The former billionaire Chen Tianqiao founded Shanda Literature in 2008, buying up various platforms like Qidian Chinese Network, Rongshuxia, and Jinjiang Literature City, at one point holding 70% of the market share for Chinese original works, becoming a classic case of an "internet gene" private publishing company that transformed the traditional publishing industry.

By 2015, the financially robust Tencent acquired Shanda Literature, merging it with its existing literary sector to form the current giant "Yuewen Group," which went public in Hong Kong two years later. Just look at the IPs it owns: "Douluo Dalu," "Ghost Blows Out the Light," "Tomb Raider Notes," "Nirvana in Fire," "Full-Time Master," "Qing Yu Nian," etc. Its annual revenue for 2021 and 2022 was around 8.5 billion.

Unfortunately, a crisis has emerged. The once-dreaming dragon-slaying youth, who aspired to overthrow the monopoly of traditional publishers, has transformed into a larger, more formidable dragon. WEB2 entertainment companies like Yuewen Group have monopolized most of the market resources, squeezing original authors with one hand while continuously charging high fees from readers and fans with the other.

Currently, apart from a few top authors like Tang Jia San Shao, Tomato, and Catnip, the vast majority of creators are struggling to survive, having no bargaining power against Yuewen Group: "Don't accept our commercial terms? Fine, even if your work is excellent, we will promote someone else's novel instead." Even more frightening is the temptation to exploit power for personal gain.

Fortunately, the wave of WEB3 has begun. Since WEB2 publishers were able to disrupt traditional publishers over a decade ago, why can't WEB3 text IP projects overthrow WEB2 publishers? A spark can start a prairie fire!

IV. How to Build WEB3 Products for Text IP?

Yuewen Group claims to have disrupted traditional publishing, but in reality, it has done three things: 1. Turned physical books into internet text; 2. Based on transparent internet data, it can engage in performance betting with authors (sharing profits based on votes and clicks); 3. Embedded works into the larger entertainment sector, potentially transforming them into films and games.

WEB3 text IP products can evolve even further:

1. Position as a platform, avoiding the opportunity to "transform from a dragon-slaying youth into a dragon." Yuewen Group is a company with the power to select and promote works, a centralized institution. WEB3 can introduce a DAO model, where the quality of works and promotion decisions are made by DAO community members, prioritizing fans. Daily staff work for the DAO community. In short, WEB3 text IP products should merely be a platform connecting creators and fans, without middlemen like Yuewen Group profiting from the difference. The platform's revenue should come from two sources: a revenue-sharing agreement with creators and investment income from the appreciation of the works themselves.
2. For creators, each work uploaded to the WEB3 platform can be seen as a stock listing. The platform issues corresponding NFTs and tokens, injecting copyright into the NFTs and tokens. The simplest model is: originally planning to issue 100,000 physical books, now issue 100,000 NFTs, and only fans holding NFTs can read; subsequent updates require token payments to access new chapters; after reading, they can sell the NFTs, allowing new fans to enter. All of the creator's income (sales and royalties) is locked in the blockchain code, with contracts executed automatically, eliminating concerns about data tampering.
3. For fans, in addition to being readers, their identity gains an extra layer: investors. Previously, when reading physical books or web literature, the only identity was that of a reader, requiring spending money. Even if you found a book particularly good, you had no way to reap financial rewards for your foresight. However, in WEB3, if you find a work on an IP platform appealing, you can buy its NFT or corresponding token. As more people want to read it, the price will surely rise. Thus, years ago, after being shocked by "The Three-Body Problem," you wouldn't just recommend it to classmates or colleagues; you'd buy its NFT! Growing and making money together is enticing, isn't it?

V. WEB3 Case Study of Text IP: Read2N

I noticed the Read2N project last year. As a seasoned reader, I initially scoffed: another StepN clone? Do I really need to grind to read? This is simply an insult to literature! This was a misunderstanding caused by the project's name "Read to Earn."

During the Spring Festival, out of boredom, I began researching the project and found it was not what I thought. The essence of Read2N is: establishing a trading platform for investing in excellent text IP! Simply put: a decentralized incubator for outstanding text works + an OpenSea for trading text work NFTs.

The core logic of Read2N is fundamentally similar to the ideas I discussed earlier, but it excels in the following points:

1. Each book has a DAO established, and the creator assigns the copyright of the work to this DAO, which then issues NFTs as tokens for copyright securitization. Only those with NFTs can read the book, and the issuance is limited; currently, the NFTs are Freemint. NFT holders can also enjoy a portion of the project's revenue, representing a share of copyright income.
2. The project team collects 6% of the total transaction volume from the marketplace as the first part of the project's income, while extracting 30% of the book rental income as the second part. Simply put, it generates revenue through a fee structure. Compared to most projects that rely on selling NFTs and tokens, this revenue source is healthy.
3. After creators assign their work's copyright to the DAO, they receive 30% of the two parts of the project's income. This means that the more transactions related to this copyright occur and the more people rent to read, the higher the creator's income. From the community and AMA, I learned that after 15 days of a work being online, creators can earn an average of 2-3 BNB, which is about 600-1000 USD, and this income is increasing daily.
4. The remaining 70% of the income is further divided: a portion is shared with NFT holders and loyal community users; a portion covers the project team's costs and expenses; the remainder is distributed to governance token WCM holders.
5. As a fan, there are several channels to access a book: 1. Win an NFT to read through a whitelist lottery; 2. Directly buy the book's NFT from the marketplace; 3. Pay daily rent to read the book.

Currently, reading is rewarded with the sub-token RCM, which launched on December 15, 2022, rising from an initial 0.4 USD to 3 USD, causing the prices of NFTs and whitelist WL to soar to around 4 BNB. Thus, fans are also investors; if they believe in a book, they can buy its NFT, grinding while waiting for the NFT's price to rise.

What if the initial hype fades, and everyone starts mining and selling RCM, causing its price to drop, which in turn lowers the NFT price? This is an inevitable process: initially relying on CX to build hype, and when the FOMO tide recedes, it reveals who was swimming naked. If a book is genuinely excellent and has real readers wanting to read it, then the NFT will have underlying value support and will not go to zero.

The NFTs of Read2N represent a part of the book's IP, which is different from StepN's shoe NFTs. After the overall market returns to rationality, some book NFTs will have high value while others will have low value, just like stocks on a stock exchange, with blue chips and ST stocks; the value will be left for investors to judge.

Moreover, the beauty of value is that it is subject to individual judgment, with no fixed standard, leading to transactions. As transactions increase, the project team and creators can profit. Additionally, it's worth mentioning that the judgment of a book is based solely on its content, while the judgment of a stock can be swayed by various false information and malicious operations. It can be said that literary works align more closely with the transparent characteristics of WEB3.

6. Among the more than twenty authors of the books currently online, there are well-known web authors like "Fog Full of River" and "Luosen." Fog Full of River is one of the earliest web authors in China, while Luosen is known for romantic novels like "The Story of Elegance." The project team seems to have some resources and capabilities.

To summarize the essence of the Read2N project:

It can generate revenue, but that is just a superficial phenomenon. It more importantly combines revenue generation with the value judgment of text IP, encouraging users on the platform to bet on and trade good works, similar to buying stocks, hence it is the OpenSea for literary copyright IP.

It can be inferred that the user profile on the Read2N platform leans more towards investors rather than readers. Through the mutual competition and trading among investors, they can identify genuine blue-chip works, and then… approach WEB2 publishing groups like Yuewen Group: "Look, we have a work here, the data is like this, and it will definitely be popular after launch. Shall we collaborate?" In this way, Read2N becomes an incubator for outstanding literary works.

Now, let's discuss some issues currently faced by Read2N:

1. Among the more than twenty books listed, some are older works with expired authorization, meaning users can find the same content on other online reading platforms. This implies that if readers truly want to read the content, there is no need to spend so much money on NFTs. Therefore, the conclusion is that the currently active users are primarily investors, which is not a problem; which WEB3 project doesn't initially rely on CX and price to create hype? The key is when the project can evolve to the second stage, attracting users who want to read the book and invest simultaneously, while also ensuring that enough excellent new books join the project, ensuring that IP-rich Read2N can offer unique content compared to other platforms. Once the second stage is done well, it can then entice large WEB2 publishing platforms to collaborate, which is the third stage.
2. In the long term, the behavior of investors buying and selling NFTs based on works is not a Ponzi economic model; it is a good long-term model of value competition. However, currently, the price of the sub-token is influencing the prices of NFTs and whitelist, which still reflects a Ponzi model. The challenge is how to evolve from the initial Ponzi model to a competitive model at the right time, which requires ongoing observation.
3. Another common issue with IP products transitioning from WEB2 to WEB3 is: if creators act maliciously, transferring the IP to the DAO (currently using the CC0 network protocol), and then after gaining popularity, they sell the IP to WEB2's Yuewen Group, it will be very difficult for the DAO to sue the creators in real courts with the CC0 protocol. However, due to the public nature of IP, buyers will not venture into murky waters if they see that the IP has already been transferred to the DAO. The key here is for the platform to establish its reputation.

For strategies regarding the Read2N case, you can check out the project's DC community; I won't elaborate further here.

VI. Conclusion

New narrative sectors have always been the explosive points leading the charge in each bull market. This article focuses on how to drain WEB2 users into WEB3, with infrastructure potentially emerging from giants like Twitter, while the driving force for drainage can utilize the IP drainage method, complementing the gold-grinding drainage method.

WEB3 projects' IP drainage includes artistic IP, musical IP, and text IP, and artists and creators are willing to promote from a profit-sharing perspective. Artistic IP has already begun to take off in the last bull market, while music and text are still in their early stages.

The biggest feature of the WEB3 model for text IP is that it first transforms some fan readers into investors, with works becoming securitized products similar to stocks, helping creators to monetize in advance. The Read2N case is essentially a decentralized incubator for outstanding text works + an OpenSea for trading text work NFTs, not just a simple reading and gold-grinding chain game.