What are you buying in the public chain market or blockchain industry? Or where is the way out for the blockchain business model?
The lack of expectations of the copycat market has caused many people to have doubts about the industry. In different development stages of the industry in a complex environment, it is inevitable that investment will be more difficult, but the fundamental problem is that you have to find a business model for the long-term sustainable development of the project.
Ten years later, I find that many people, even those who have been in the industry for a long time, still don’t quite understand why public chains have been dominating so many TOP 100 lists, and why the top public chains have tens of billions and hundreds of billions of dollars, and they are flocking to them. , and your coins are only tens of millions, but there is nothing left. I personally like complex things to be simplified. I try to analyze them by peeling off the cocoons.
Starting from the first principle, "P = E x PE", that is, stock price = profit
First, valuation PE. This is more complicated and has many influencing factors, such as growth, interest rates, penetration rates, industrial space, the amount of water released by the central bank, monopoly, etc., which are all influencing factors that determine people to give different valuations to different stocks in a certain period of time. The idol Buffett I say not to buy Bitcoin because Bitcoin has no cash flow (just think of cash flow as profit). In the long run, I feel that most of what you said is right. However, in the above stock price formula, only profit E is taken into account, not profit. Valuation PE, so from another perspective, memes and Bitcoin are both in the same category and can be included in the PE factor. As long as your memes keep attracting people and people continue to buy them, your memes do not need to create cash flow on their own. It can rise to a certain stage, but there is a very important prerequisite: within a certain market value. The larger the market value, the more people you need to attract. Without continuous cash flow support, it is very difficult to last.
Second, profit E, we mainly discuss this. Profit comes from revenue, so if the stock price needs to rise, revenue must increase, so where does the revenue come from? It is a business model, which by definition is a business activity that makes money by providing goods or services to others. To put it simply, it is how your company makes money.
In 2006, Duan Yongping spent $620,000 to take a photo of Buffett's lunch. He asked a question that has been bothering him for a long time: What is the most important thing in investing? Buffett's answer is the business model. If a company does not know how to make money, it cannot develop sustainably in the long term. The core factor that drives the continuous rise of the Seven Sisters of the US stock market is profit, not other short-term factors.
The question is what is the business model of the currency circle?
Personally, it seems to be nothing more than: block space fee; SWAP fee, which is the exchange, including DEX and CEX; lending, interest spread; stable currency, pumping; MEV, parasitic on the block space. Everything else is easy to understand, except for the block space fee.
In fact, what is very hidden is that the currency circle has created a new business model: selling block space, that is, the public chain is priced in gas fees and charges block space fees. Global consumers purchase access to global computing, bandwidth resources and storage rights on a per-transaction basis.
I didn’t understand a few words before. What is the “value” of the Internet? We know that most of the information on the Internet is free, such as pictures, text, videos, etc., and a piece of information can be copied infinitely. Therefore, in the early days of the development of the Internet, people were I didn’t know how to make a profit, so I slowly discovered the business model of the Internet through subsequent explorations, including making money from SaaS subscription services, advertising, making money from transactions (e-commerce), etc.
So what is the business model of blockchain? I later figured out the value network in the currency circle, which is a paid network. Every time you click, you need to pay Gas. The original intention of the blockchain is to solve the problem of currency attributes, which is very different from the free Internet. You cannot use a piece of money to copy it infinitely and pay it to other people repeatedly. The free Internet cannot solve the currency problem.
Therefore, in the process of extending from currency to public chain, its uniqueness is that it allows consumers to bear the cost of accessing block space. For decades on the Internet, companies have rented their own machine computing resources and paid AWS bills to provide products and services to customers, thereby charging fees and making profits.
This is great for applications on the blockchain: users pay for the running costs of the project. Every year, consumers around the world pay billions to tens of billions of dollars for Gas, which is the revenue of the public chain. If the annual income is 10 billion and the government bond yield is 5%, and 20 times PE is given, it is a market of 200 billion, 10 times PE is a market of $100 billion, and 50 times PE is a market of $500 billion, so this is the basis for the huge public chain market.
For example, the current issuance of $USDT on TRON has reached 60 billion, accounting for half of the entire $USDT market. I looked at TRON's annual revenue in 2023, which is about $400-500 million, of which 75% is $USDT transfer revenue. That is a profit of 400 million US dollars. If we give 20 times PE, the valuation of $TRX of 8 billion is reasonable. Of course, this is not the point. The point is, can this figure expand ten times in the next ten years or is it far more than ten times? How much future incremental market share can $SOL’s efforts in payment and open finance seize? We are going too far, and we will not further expand on the topic of expansion here.
You have to understand that I am just trying to explain why the public chain market is huge, that is, I just elaborate on the existing phenomenon that you are willing to pay for gas fees. I have not gone further into why you have to pay gas and why there will be more in the future. More people come to pay gas. Need to transfer payment? The need to get rich suddenly (tun Gas)? Need for entertainment (paying for a DApp)? Need to trade coins, commodities, stocks, SWAP everything? You must know that if no one pays for gas fees in the future, the public chain market will not exist.
So now we often see some fancy terms. I don’t know if the currency circle is in its early stages of development or because it is not easy to implement and not concrete. What they promote are some abstract terms that are difficult for ordinary people to understand: expandable Functionality, ZK technology, Layer2, UTXO, chain abstraction, modularization, homomorphic encryption, parallel EVM, etc. Because I did not participate in network development early, I did not know the terms modularization and monolithic chain until later. Huidu originated from Internet technology, but it is rarely mentioned in the Internet industry. Instead, it is repeatedly promoted as a key point in the currency circle. Now I am very resistant to the vocabulary of narrative. Basically, I am familiar with the basic concepts. Then he directly asked: How much revenue can this technology bring me? How much profit can I generate to repurchase? Otherwise, where is the market fit of your technology? I can support the long-term development of basic technologies and basic disciplines, but tell me how long it will take to obtain a clear business model? Two years, ten years or twenty years? More complex issues such as how to increase revenue Gas and who can occupy the top market share in the future are the focus of your consideration, although I have already selected $SOL.
Therefore, since the public chain is a product with revenue, cash flow and profit, it is certain that its business model is clear and there is a way out. What remains is for you to decide how to expand revenue, increase market share and reduce market share. costs and other actions that are in line with the business development path.
Many projects in the currency circle have no business model. Even he himself does not know how to make money. The survival rate of the world's top 500 companies is only 3%. Investment is about finding these 3% projects and holding them for a long time. Many investment concepts are very simple. , but it is very difficult to put it into practice. There are tens of thousands of projects in the currency circle in the future, and if you can’t see the value, how can you invest? Be serious about investing.
When the river is clear, how long will one live? Be less pretentious and unrealistic, and be more down-to-earth, otherwise you won’t have much time left.
[Disclaimer] There are risks in the market, so investment needs to be cautious. This article does not constitute investment advice, and users should consider whether any opinions, views or conclusions contained in this article are appropriate for their particular circumstances. Invest accordingly and do so at your own risk.
This article is reproduced with permission from: "Deep Wave TechFlow"
Original author: Pima
