From "Looking Up" to "Looking Straight Ahead": How I Demystified Web3

Author: @LiamWang88 Web3 Independent Researcher

I first heard about and got involved with blockchain around the end of 2017 and the beginning of 2018. At that time, I was working at a large internet company, and thanks to the inherent advantages of large internet companies in trying new technologies and the relatively strong programmer atmosphere, I had the opportunity to come into contact with blockchain relatively early. Back then, I often hung out with a group of programmer friends, and the topics they discussed the most were "Bitcoin," "mining," "ICO," "air coins," and so on.

I do not come from a technical background, so what they talked about was completely baffling to me. However, since I have a background in content creation, my intuition told me that blockchain was a very different kind of technology.

So, I started to read the Bitcoin white paper and the Ethereum white paper. I remember very clearly that one night I read the English version of the Bitcoin white paper ten times and still didn't understand it. The only thing I remembered was one title: "Bitcoin: A Peer-to-Peer Electronic Cash System." This title was deeply etched in my mind, and my intuitive feeling was just three words: so awesome!

This was the beginning of everything. Or to use a phrase that is popular online now: the wheels of fate began to turn.

Interestingly, even though I started to learn about blockchain from Bitcoin, I actually took my friends' advice and started with air coins, and the result was predictable—I couldn't escape the fate of being a "retail investor."

So at that time, my attitude towards blockchain was very contradictory. On one hand, like many others, I thought it was a new scam to exploit retail investors—indeed, at that time, such situations did exist; on the other hand, I felt that at least the concept of Bitcoin was very new, indicating some possibilities for the future.

In the following years of 2019-2020, I didn't participate much in the industry; I was just a learner and observer trying to understand the development of this industry. Even now, I still feel that "learner" and "observer" are the most suitable labels for myself.

2021: Immersed in the Beauty of Web3

If the years 2017-2018 were a "superficial" experience with blockchain, then 2021 can be described as a year of "deep experience."

That year, I worked at a dollar fund, and thanks to the platform advantages of VC work, I had more opportunities to learn about the development of cutting-edge technologies and emerging fields. Coincidentally, it was also that year that, with the crypto market entering a bull market, "Web3" began to replace blockchain as a new narrative.

When I recall that bull market, what immediately comes to mind? There are several things that left a deep impression on me:

• In early 2021, Bitcoin first reached a market capitalization of $1 trillion.
• Large companies like Tesla disclosed their holdings of Bitcoin.
• Artist Beeple sold an NFT artwork titled "Everydays: The First 5000 Days" for $69 million.
• Basketball superstar Stephen Curry spent $180,000 on a BAYC NFT. Yes, you read that right, $180,000.
• El Salvador passed a bill to make Bitcoin legal tender.
• DAOs—a new type of social organization model in Web3—began to emerge.

Looking back, the overall sentiment in the Web3 industry in 2021 was very high. This enthusiasm was reflected in:

1. Hot Investment and Entrepreneurship

Since I was in the VC industry, I had many opportunities to communicate with investors and entrepreneurial friends, and throughout the process, Web3 was always a topic that could not be absent. At that time, I saw many investors starting to leave traditional investment fields to transition into Web3.

Not only investors but entrepreneurs were the same. In traditional VC investments, senior talents from large companies were often the preferred targets for investment. But that year, I also saw many outstanding talents leaving large companies to venture into Web3.

When I asked those investors and entrepreneurial friends who immersed themselves in Web3 about their reasons for choosing it, a common answer was: The Web3 industry is like the internet in the 1990s; it is a blue ocean, and the earlier you occupy an ecological niche, the more industry dividends you can gain.

2. Speculation was Hot

In Web3, speculation is a common verb. Especially in a bull market, speculation was even more prevalent.

1. Speculating on coins, especially contracts. If we look purely at the K-line, the entire crypto market saw a sharp increase in 2021. So at that time, social media was filled with people showcasing their huge profits and sharing experiences on how to easily make money in the crypto market. Such information was almost daily, and seeing so much of it could give people the illusion that making money in this industry was particularly easy—regardless of your professional background or education, in a bull market, with enough courage, anyone could easily make money.
2. Speculating on NFTs. In 2021, the most talked-about topic was undoubtedly NFTs. Especially BAYC's popularity converted a large wave of Web2 users. At that time, the greatest value of NFTs, aside from speculation, was as profile pictures. If your social media avatar was a bored ape or a CryptoPunk, congratulations, many people would regard you as an OG or a particularly impressive figure because typically, those who own such NFTs either have considerable wealth or significant status. It can be said that NFTs very specifically satisfied the human desire for flaunting. So many people around me were speculating on NFTs, especially some younger friends. Since many NFTs were not minted according to UTC+8 time, if you wanted to mint an NFT you liked that was highly speculated, you had to stay up late. At that time, the industry jokingly referred to NFTs as "little pictures," and as for the act of speculating on NFTs, an industry slang would be: "Did you grind today?"

3. DAO Practices Were Hot.

Even now, I still feel that the emergence of the term DAO in 2021 was a very valuable thing. Because DAO stands for Decentralized Autonomous Organization, compared to the speculation of coins and NFTs, the tokenization speculation of DAOs was relatively less, focusing more on exploring a completely different organizational form compared to traditional models. This kind of organizational form has three important characteristics: ① Decentralized, with no distinction between leaders and subordinates; ② Collaboratively working based on consensus and democratic deliberation rules; ③ Remote work, with tasks completed through online collaboration.

Of course, like many things that rise, DAOs first became popular abroad. Some well-known DAOs at that time included: Bankless DAO (aiming to promote the large-scale application and social consensus of a truly de-banked financial system), Pleasr DAO (composed of digital artists and collectors aiming to acquire culturally significant works), and ConstitutionDAO (raising funds to bid for a copy of the U.S. Constitution). Later, DAO organizations also took root domestically, giving rise to some experimental DAO projects.

Like the speculation on NFTs, young people were the main group participating in DAO organizations. They were more open to new things, and many young people at that time referred to themselves as "digital nomads," making organizational forms like DAOs more suitable for their lifestyles.

Looking back at 2021, I certainly could not avoid being influenced by the Web3 bull market. My feelings about Web3 in 2021 can be summed up in one phrase: immersive admiration. This immersive admiration came from the high-end technology represented by this industry—Web3 integrates cryptography, distributed ledgers, smart contracts, and other new technologies—and from the perception that this industry seemed to offer easier ways to make money than other industries, as well as the emergence of new organizational forms like DAOs, exploring new forms of social organization and collaboration for the future of humanity.

In summary, it can be said: in a bull market, everything is beautiful.

2022: From Admiration to Calm, Change Comes Swiftly

If in the bull market of 2021 everything was beautiful, then 2022 was a year of shattered beauty for the crypto market.

That year saw too many historic events that could be remembered in the crypto industry:

• In May 2022, the public chain Terra collapsed, and the Luna token went to zero overnight.
• In July 2022, leading crypto investment fund Three Arrows Capital filed for bankruptcy protection.
• In November 2022, the leading exchange FTX was exposed for misappropriating user funds, and the entire process from discovering the problem to declaring bankruptcy took only a few days.

Although there were still some positive events that could bring comfort, such as Ethereum completing its transition from PoW to PoS consensus mechanism, the aforementioned events marked one of the darkest moments in the history of the crypto industry and directly set the tone of "recession" for the Web3 industry in 2022.

I no longer heard those inspiring and high-spirited messages; instead, I heard more disappointment and terrible news: XXX suffered heavy losses from speculating on coins, XXX exited the market, XXX project stopped operations due to lack of funding, XXX crypto fund stopped investing. No one was discussing which coins were worth speculating on, no one was discussing whether NFTs would rise again (on the contrary, everyone was selling, but due to the poor liquidity of NFTs, many NFTs basically went to zero in hand), no one was discussing what DAOs should do next, nor was anyone discussing how this industry could achieve mass adoption. The entire industry quieted down, or as I said earlier, the entire industry fell into recession.

Like many others, after witnessing and experiencing so many thrilling and tumultuous industry events, I began to detach from the admiration I had for Web3 in 2021 and gradually became calm:

On one hand, the huge fluctuations in the crypto market made me see that those who stepped into this field experienced not only the ecstasy of getting rich overnight but also the regret of suffering huge losses overnight. Especially for those who speculated on contracts with high leverage, they viewed Web3 as a "gamble to turn a bicycle into a motorcycle."

On the other hand, the issues exposed by this industry, such as the lack of transparency in fund usage and the absence of effective regulation, indeed dampened people's confidence in this industry. Although for something that is meant to develop in the long term, it is better for such problems to arise sooner, it did pour cold water on an overly excited sentiment, prompting everyone to start viewing Web3 more objectively and calmly.

Finally, for those attempts that I believe have more social value, such as further exploration and discussion of the DAO model, or promoting charity and environmental protection through tokenization, there was no significant development that year; instead, they fell silent along with the trends of the crypto market.

For a while, I kept pondering one question: why did so many newcomers enter the market in 2021? I felt that mediums like NFTs played a significant role because they expanded the application scenarios of Web3 (even if just as profile pictures), allowing more Web2 people to intuitively feel the connection between NFTs and Web3. The problem is that once everyone encountered NFTs, they would quickly realize that this was an investment/speculative product. So overall, the connection between Web3 and real-life scenarios was weak; the core still lay in asset attributes or financial attributes—creating more tokenized financial derivatives to attract and enhance capital liquidity, generating more investment and speculation possibilities. So at that time, I believed that if Web3 were to truly become a long-term developing industry, it must balance financial speculation with application scenarios.

2023: The Market is Recovering, but Can't Go Back to the Past

After experiencing the bear market of 2022, 2023 can be described as a year of self-healing for the crypto circle. That year, the price of Bitcoin slowly climbed from $16,000 per coin at the end of 2022, and mainstream exchanges, including Binance, began to increase their investments to promote compliant operations. However, when I talked to some friends who invested in primary projects, they chose to allocate to secondary markets or continue to observe. As one friend said to me at that time, "Now that the prices of mainstream coins in the secondary market are so low, why invest in uncertain primary projects?"

At the same time, I originally thought that as the market slowly recovered, discussions about Web3 on social media would become lively again. I remember during the 2021 bull market, a niche social platform gathered a large number of people interested in Web3. In the Web3 research circle, if you posted an update, you would receive many likes. But when I opened this social software again in 2023, I found that some people or project parties who used to be active were no longer posting updates, and new posts received almost no likes or comments. Everything seemed unable to return to the past.

So in that year, I began to consciously communicate with many people, including those outside the circle, newcomers to the circle, and players who were very knowledgeable about DeFi and MEME. When I asked them about their views on Web3, I received a unanimous answer: Web3 is a casino for exploiting retail investors, and the key is who is the retail investor.

Based on the feedback I received from these conversations, I began to develop the idea of writing a book, hoping to provide a more objective introduction to the development status of Web3 at that time, allowing myself and those who want to understand and enter this field to view Web3 from a level perspective, rather than imposing subjective biases of good or bad on this field. Thus, I collaborated with more than a dozen friends in the circle—each with a solid professional background and knowledge accumulation in their respective fields—to publish a popular science book on Web3 titled "From Technology to Application: A Learning Manual for Ordinary People in Web3," which was officially published at the end of 2023 and received many positive reviews. Looking back now, although only half a year has passed, the chapter structure and framework in the book are already far from sufficient to cover the current state of Web3 development. I admit that my mindset towards this industry has changed significantly, but what remains unchanged is that this industry continues to develop rapidly at its own unique pace.

2024: The Bull Market Returns, but is Mass Adoption Far?

Currently, it is certain that a bull market will return in 2024. This year, two major events became catalysts for the continuous rise in crypto asset prices: first, the U.S. SEC approved the issuance of Bitcoin spot ETFs, which means that more and more Wall Street funds will flow into Bitcoin, directly pushing up the prices of Bitcoin and even other crypto assets; second, Bitcoin will experience another halving cycle, and based on historical experience, every halving of Bitcoin has driven a bull market, and this year is likely no exception.

Based on my own observations, I also compared this round of the bull market with the one in 2021 to see what has remained unchanged and what has changed.

What remains unchanged is:

1. Bull Markets Amplify Speculative Power. In 2021, NFTs were speculative products; in 2024, MEME coins became unique speculative products. In my view, there is no right or wrong in speculation related to assets; after all, the traditional stock market also has shorting and going long. However, the crypto market is highly volatile and lacks effective regulation, so in a bull market, when the speculative games of each participant are aggregated into K-lines, they will be infinitely amplified.
2. Tokens Still Need Better Liquidity and Wealth Generation Ability. In the 2021 bull market, besides NFTs, GameFi and SocialFi were also prominent sectors. The unique tokenization attributes of Web3 need to rely on specific sectors or businesses to better realize token liquidity and create more assets. The same applies in 2024. On one hand, the Bitcoin ecosystem is being continuously speculated, from inscriptions to runes to Bitcoin Layer 2, Bitcoin staking protocols, etc., almost experiencing the same journey that Ethereum went through; on the other hand, re-staking projects based on Ethereum have become hot topics. Since Ethereum transitioned from PoW to PoS in 2022, what people want today is far beyond staking rewards; they want to enhance capital utilization efficiency on the basis of staking to achieve higher returns.

What has changed is:

1. The Path to Mass Adoption Has Become Diverse. In 2021, everyone placed the mission of Web3's mass adoption on games, social projects, etc., but the results did not meet expectations. In 2024, Web3 is increasingly integrating with AI and also beginning to combine with offline physical infrastructure to shape another narrative, DePin, hoping that "curved rescue" can achieve the goal of mass adoption. From this perspective, Web3 needs AI or the Internet of Things more than AI and the Internet of Things need Web3. Additionally, in my view, the approval of Bitcoin spot ETFs and the acceptance of crypto asset donations in the U.S. presidential election indicate that crypto assets have become mainstream, but this is a mass adoption that everyone can own, not one that everyone must have.
2. The importance of MEME culture in Web3 has further highlighted. In this decentralized world of Web3, believing in and maintaining what you believe in is, I think, a spiritual core, and MEME is a direct expression of the native spiritual core of Web3. This also explains why, in this round of the bull market, MEME coins have outperformed other altcoins.

After experiencing two rounds of bull markets from 2021 to 2024, as I mentioned earlier, my perspective on Web3 has shifted from an initial admiration to a level gaze. In my view, Web3 is about a person or a group of people "selling" an idea or vision and raising funds from the public, with those who identify with and participate receiving token incentives, in order to make the tokens effective or liquid, thus endowing them with financial attributes. Simply put, it is a consensus of a group of people dressed in financial clothing, constantly seeking utility scenarios for token empowerment.

Conclusion: How to Better Establish Oneself in Web3

This is my understanding of Web3. As I mentioned at the beginning, I see myself as a learner and observer in this field, so during these two years of deep participation and experience, I have had many opportunities to communicate with friends and practitioners in the circle. I found that many people face a common question: when we choose Web3 as a field for future development, how can we better establish ourselves in this field?

This question varies from person to person, as everyone will arrive at different answers based on their experiences and feelings. I cannot call myself crypto native because most of my professional experience is in Web2, and I also do not have long-term experience in well-known Web3 projects or investment institutions, so it is hard to say I have any standout achievements (although my personal investment returns are decent). However, I am fortunate to have met many practitioners in the industry over the past two years and learned a lot of experience. Combining my experiences with those of my friends, I would like to share some comprehensive views:

• Do not enter this circle with a mindset of speculating on coins. This industry seems to have many opportunities to make money, but in reality, there aren't that many. I have heard a saying that making money in this field follows a pyramid model: the first is to gather a group to do projects or create hype; the second is to do VC investments; the third is to be a trader doing arbitrage and quantitative strategies; the fourth is to conduct investment through research; and the fifth is to hoard coins. My own experience is that those who frequently speculate on coins may not have high returns; instead, traders who do arbitrage and quantitative strategies, as well as those who simply hoard mainstream coins, tend to have stable returns. The former has professional capabilities, while the latter believes that mainstream coins like Bitcoin have long-term value that can withstand bull and bear cycles. Therefore, in Web3, for most people, having a continuous and stable return is far superior to frequently speculating on coins for high-risk, high-reward opportunities.
• Approach people with the greatest goodwill. Web3 is a relatively mixed field, and since everyone's purpose for entering is different, and much of the communication and collaboration is based on virtual means, the trust cost for people or projects is relatively high. If you have already found a long-term team to work with, congratulations, you are very lucky. If you haven't found one yet, that's okay; in the process of communicating and trying with different people, you may encounter some disappointments, but through such experiences, you will find like-minded partners to work with. The more fluid and high-trust-cost the field, the more you should approach people with the greatest goodwill.
• Do Your Own Research. This is the most widely circulated phrase in Web3 and is universally recognized as very valuable advice. Because this field has all kinds of people, opinions, viewpoints, and information, when we approach people with the greatest goodwill, we also need to form our independent thoughts and judgments in the dazzling environment, thus creating our own thinking patterns and professional investment methodologies. Remember, do not be emotionally manipulated, do not be swayed by others' CX; everything requires DYOR.

I wrote this article as a way to summarize my transformation in understanding Web3 over a period of time. Because this field has provided me with better investment returns compared to other traditional investment varieties, it has also allowed me to meet many different people—true industry builders, impressive traders, and some speculative opportunists looking to make a quick profit. This is a very interesting thing. More importantly, through experiencing this field, I have also realized my ecological niche in this field and how to adhere to some of my principles.

Of course, all of this is based on my personal experiences and feelings and does not have universal applicability. I believe that everyone in this field will have their own understanding, interpretation, and feelings about Web3, and I wish everyone can make money while also finding their suitable ecological niche.