Editor | Wu Talks about Blockchain

This issue is Space organized by OKX. The guests conducted an in-depth discussion on key events and trends in the Web3 field in 2024. The questions included why there was a big explosion of memecoin on Solana; why the mini-game craze on TON suddenly broke out and then temporarily died down; Solana and TON’s strategic planning for 2025; how to deal with the community’s aversion to VC coins; HyperLiquid’s thoughts on the industry; Dragonfly’s investment in the three main lines of exchanges, public chains, and stablecoins; OKX’s investment philosophy, etc.

Please note: The views of the guests do not represent the views of Wu Shuo. Wu Shuo does not endorse any products or tokens. Readers are requested to strictly abide by local laws and regulations.

The audio transcript is generated by GPT, so there may be some errors. Please listen to the full podcast:

Microcosm:

https://www.xiaoyuzhoufm.com/episodes/6775715c1e823e72d380ce25

YouTube：

https://youtu.be/qWYhO5F_2dk

Solana: From infrastructure dominance to the rise of the Memecoin craze

Colin: First, let's welcome Adam, because Adam is the OG of Solana and also a former employee of FTX. First, I want to talk about a topic that everyone may be more concerned about. In fact, many people have summarized the trend of this year in the past two days. Solana is a gathering place for memecoin this year. But I actually saw some of your sharing before, saying that you did not mainly promote memecoin. In fact, this is a very natural phenomenon. You actually focus on PayFi or some infrastructure construction, etc. So from your perspective, why do you think memecoin will explode in Solana this year?

Adam: Yes, thank you for Mr. Wu's question. I think there are both accidental and inevitable factors in this. At the beginning, everyone knows that memecoins like Dogecoin and Pepe all started from a big cycle. And at the beginning of this cycle, if I remember correctly, it should be after FTX exploded. On December 24, 2022, the BONK project started an airdrop activity, airdropping to user wallets that had interacted. Due to its price performance, this triggered a big wave of enthusiasm. Later, everyone found that as long as they participated, they could get similar airdrops, which attracted more people to participate. This was the starting point of this round of memecoin craze, and later it developed into the first wave of various memecoins with dogs or other animals as the theme.

I think Solana can become the focus in this wave mainly because of its infrastructure advantages. Solana has fast speed and low transaction fees, which means that users can hardly feel any friction and loss when impacting memecoin or making large transfer transactions. This good user experience lays the foundation for the growth of the memecoin community.

In addition, I think the cohesion of the Solana community is also a key factor. The Solana ecosystem has experienced many twists and turns, but the project owners, teams, and users in the community have demonstrated strong solidarity and activity, which has largely promoted the trend of combining inevitability and contingency in its development.

Colin: Let me ask you a follow-up question. PumpFun is one of the core participants in the Solana memecoin ecosystem and has also made amazing profits. Do you think the Solana Foundation has given it a lot of support? Or has it grown naturally through wild growth? The core value of PumpFun is to provide standardized support for the issuance and initial liquidity of memecoin. What do you think of its success and why it has achieved such a monopoly position?

Adam: Actually, PumpFun’s UI design is not particularly user-friendly, and it feels a bit messy when you enter it. Despite this, its timing is very accurate. The initial memecoin issuance usually posted addresses on Twitter, and everyone transferred money like crazy. PumpFun seized this key node of traffic conversion and provided users with a way to issue tokens independently. In addition, that time point happened to coincide with the strengthening of political events and cultural attributes, which gave it an advantage in terms of timing.

As for the Solana Foundation, I think they spent almost no resources or energy on memecoin, more for compliance reasons. But from the perspective of the overall ecological development, the Foundation has indeed done a lot to improve user experience, such as promoting the application of mobile ecology, improving network security, a better development environment, and exploring cutting-edge technologies.

Colin: Got it. Will there be any progress on the Solana ETF next year? Can you share some thoughts?

Adam: I think ETF is a very long-term thing. BTC and Ethereum ETFs are currently seen as a bridge between Crypto and traditional finance, and this may also happen on Solana.

Colin: Indeed, Solana has experienced many twists and turns in the past year or even two years. After the FTX incident, Solana's price was very low. But with the active developer community and the support of some large institutions, it has come out of the trough. Do you think the main reason for Solana's success is institutional support or the power of the developer community?

Adam: I think the core is still the power of the ecosystem. The end of 2022 to the beginning of 2023 is the darkest time in the market, but teams like BONK are like lights in the dark night, driving the entire ecosystem project forward. Developers still focus on innovation and development when the market is down, and this resilience and focus have gradually restored the ecosystem. Capital is profit-seeking, but its pursuit of profit is still based on actual development and change. The innovation brought about by this ecological development is an important reason for Solana's resurgence.

Colin: I see. I think both aspects play a role. Thank you Adam for sharing.

Dragonfly’s investment strategy and response to community criticism

Colin: Okay, how about you briefly introduce some of Dragonfly's investment focuses in this cycle? In my impression, Dragonfly may be more inclined to the East in the early stage, and invested in many Asian projects. In the medium term, you paid special attention to DeFi and achieved great success in the last wave of DeFi craze. Of course, in the later period, you may also be involved in some centralized institutional investments, such as some familiar cases. So what is your main investment strategy in this cycle?

GM: Okay, thank you for Mr. Wu's question. Dragonfly was founded in 2018 and is an institution focused on crypto investment. Our first fund was from 2018 to 2021, the second fund was from 2021 to mid-2022, and we recently entered the third fund, which is behind the investments you have seen recently.

In the past two and a half to three years, our strategy has become more focused. For example, in this fund, we have focused on projects such as Ethena, ZKSync, Monad, MegaETH, Kaito, and Polymarket. Compared with previous funds, we continue to increase our investment in the most advanced projects in the industry, usually from the seed round, A round, and B round. This is the biggest difference between our strategy and the previous two funds.

Colin: Got it. I remember that some of the projects you invested heavily in include Ethena, MegaETH, Monad and a few others. I may not remember them all. Can you give us a detailed introduction to these projects and your investment logic?

GM: Okay. I think in this past cycle, from everyone's perspective, the projects with the highest exposure should be Ethena, Monad, ZKSync, and Kaito and Polymarket, which have been very popular on social media recently. These projects have a great influence in the industry and have received widespread attention.

Our overall approach is to invest around the three largest and most mature business models: the first is exchanges, the second is public chains (including Layer 1 and Layer 2), and the third is stablecoins. Our investment strategy has always focused on these three tracks and their combinations, or new players emerging in these tracks. From a business model perspective, these three are currently the most mature and successful models in the Crypto field, and are also the core focus of our investment.

Colin: Your partner is also a well-known KOL on Twitter with many followers. As a VC, what do you think of the recent anti-VC sentiment in the community? Especially before Q4 last year, this opposition was very intense, especially when the market was sluggish. Although the market has recovered since Q4, the voices of doubt still exist. Is this phenomenon unique to the Chinese community?

GM: I think this phenomenon is real and very important. The root cause is that in the cycle from the end of 2021 to the beginning of 2022, the primary market raised too much funds, and the size of the market itself did not match these funds. This led to several problems: first, there were not enough high-quality primary projects in the market to absorb these funds; second, these funds were forced to invest in the market, pushing up project valuations; finally, this high valuation made value discovery in the secondary market very difficult.

Now we have entered a period of adjustment, with primary market funds decreasing significantly, while secondary market funds are increasing. Especially from Q4 to the recent period, I feel that there are more opportunities for market participation.

Colin: What projects do you think have performed best during this period?

GM: I think the most outstanding projects in 2024 include Ethena and Hyperliquid. The common characteristics of these projects are that, first, they create huge value for investors, ecosystems and developers; second, they release this value to the market in some way, such as Hyperliquid opening up the market trading mechanism to more people to participate. This is the most interesting and valuable part of the Crypto market, and I think it is an important trend in the future.

GM: Then the second step is to release these values ​​to the market through some means. For example, the Ethena project opens the basis trade mechanism to users, or Hyperliquid opens the market making bot to allow more people to participate. This kind of value release is the most interesting, valuable and influential part of the Crypto market. I think this model will become an important trend in the industry in the next year or even longer.

Colin: Has your team ever thought about a model like Hyperliquid? It is very special, with no VC support, no centralized exchange, and it is completely controlled by itself. Will this model become a model for other projects to emulate in the future?

GM: I personally like Hyperliquid's approach very much. I think in the field of Crypto, the most valuable thing is to first create a valuable product, and then release this value to everyone through the community. To achieve value creation, you don't necessarily need to go the VC financing route.

Even in traditional industries, there are a few examples like Jeff Yan, the founder of Hyperliquid, or the Deep Seek team in the AI ​​field — they have enough funds, resources and experience (know-how) to complete product development completely independently in the early stages of entrepreneurship without external financing. More extreme, such as Elon Musk's projects, many times do not rely on external funds. As long as the product itself is valuable, this is a very good thing for the development of the industry.

Of course, after communicating with many outstanding entrepreneurs, I found that most founders do not have the initial capital reserves like Hyperliquid. This is why the VC financing model and the community financing model will continue to exist for a long time.

Colin: You just mentioned AI. Based on your observations and research, is the current combination of AI and Crypto really valuable, or is it more of a hype?

GM: At present, the combination of AI and Crypto has indeed attracted great attention from the market and attracted many developers to explore the possibilities in this field. We have seen many initial attempts, but currently, apart from the business model of issuing tokens, there is no model that can operate in the long term. Most projects spread through tokens and try to increase their appeal with the characteristics of AI, but this approach has limited sustainability.

However, I have confidence in the innovation ability of developers. In the past year, AI in the field of Crypto has accounted for more than 40% of the discussion in the Crypto circle, becoming one of the areas that developers pay the most attention to. I believe that with the increase of resources and attention, more interesting and innovative models will definitely appear in the future.

Colin: Although everyone’s innovative ability is exciting, we cannot rule out the possibility that this trend may just be a flash in the pan.

GM: Yes, that is possible.

Colin: Like many new models in the past, despite the high popularity, whether it can really stay depends on the core value of the model itself. Okay, let's talk about this here. Thank you for sharing.

Challenges of Telegram Ecosystem and Future Plans of TON Foundation

Colin: OK. This year, the TON ecosystem was once very popular. For example, Binance launched four or five TON mini-games in a row, which once caused great enthusiasm. But then the popularity seemed to decline rapidly, and even second-tier exchanges rarely launched TON mini-games. What do you think of this phenomenon? Why did it suddenly explode and then cool down quickly?

John: Thank you for Mr. Wu's question. First of all, let me correct your statement. In fact, second-tier exchanges still launched TON-related projects later, and there were still seven or eight projects launched by the end of December. Of course, the definition of "second-tier" may be controversial, but I mean the top ten exchanges in the world. Binance did suspend new actions after launching four or five small games.

As for why the popularity has dropped, I think the reason is very clear. Most of the small games launched on Binance were very simple to play, and they can't even be called "games". Except for Catizen, the others are basically "clicker" type applets. To put it bluntly, the main purpose of these projects is to help exchanges attract users. After Binance launched multiple similar projects in a short period of time, it is reasonable to suspend them due to user fatigue and strategy adjustments.

Another reason is that many mini-programs in Telegram are not connected to the TON chain, but to other public chains such as Solana, Aptos, and Sui. A large part of the transaction volume of these public chains also comes from Telegram mini-programs. However, next year we plan to take some restrictive measures, such as forcing mini-programs to only connect to TON-related wallets through TON Connect, similar to the logic of WeChat prohibiting Alipay links.

This year is the first year that the TON ecosystem has truly entered the public eye. We have experienced both peaks and valleys. The current valley is not a bad thing, because we have discovered the problem. When the ecosystem is not yet fully mature, appropriate macroeconomic regulation is necessary. This is just like the need for capital control in the early days of China's reform and opening up. The TON ecosystem has a large number of users, but the per capita capital is low, making it a relatively "poor" chain. In the future, we will focus on increasing the amount of capital and laying a solid foundation for ecological construction.

Colin: You mentioned that TON currently has some problems in the Memecoin stage. Can you talk about it in detail?

John: In the second half of the year, Memecoin took a lot of limelight on Solana, while TON performed poorly during this period. The main reasons are that TON's gas fee is high, the development language is complex, the learning cost is high, and the number of developers is relatively small. These problems make TON unsuitable for the initial stage of Memecoin development.

In order to improve this situation, we plan to improve the infrastructure of Memecoin, such as reducing gas fees, optimizing development tools, and launching better LaunchPad tools. The success of Memecoin depends largely on the promotion of social scenarios, and TON has a natural advantage in social networks (Telegram), so we are full of confidence in the future.

Colin: So you plan to impose restrictions on mini-apps in the Telegram ecosystem next year?

John: Yes. We will force mini-apps on Telegram to only connect to TON-related wallets through TON Connect. This decision has been agreed upon internally but has not yet been officially announced. More detailed information will be announced by our founder in a blog post.

Colin: From my perspective, Telegram is the only Web2 giant that actively supports Web3, which is the core advantage of the TON ecosystem. Compared with other platforms such as Facebook or WeChat, Telegram's attention and support for Web3 is unique. But TON's performance has indeed experienced ups and downs. For example, did the explosion and rapid closure of mini-games surprise you?

John: Indeed. April to June this year was the hottest period for TON. Our strategy at that time was very successful, but the rapid popularity also brought some problems. During the subsequent adjustments, we realized that we needed longer-term planning instead of relying solely on the temporary craze. This also prompted us to focus more on optimizing infrastructure and lay the foundation for long-term development in the future.

Colin: Was no one surprised by your own outburst?

John: It can be said that the outbreak in April this year is actually the result of the accumulated efforts of the past 12 months. We have made solid preparations in many aspects, and then concentrated on the outbreak in April. Let me give you a few examples: First, the issuance of USDT, which is a very critical point. At the end of April, our founder announced the news on the stage in Dubai. Previously, the TON ecosystem had no stablecoins, and DeFi was almost impossible to carry out. The issuance of USDT filled this gap, and Tether was very satisfied with TON's performance. This year, TON is the fastest growing blockchain for stablecoins in Tether's history, and the current liquidity has exceeded US$1 billion. This number is expected to grow significantly next year, because the potential of social payments is far from being fully tapped.

Another important event was the launch of the mini-game project Catizen. I met their team in March 2023 and invited them to join the TON ecosystem. Before launching Catizen, they tested a number of mini-games and eventually chose Catizen, which had the highest retention rate, for development and launched it at the end of March. This has also become a key driving force behind the TON mini-game craze.

In addition, the Hong Kong conference in April this year was also a highlight. We booked the main stage on the third day of the conference to showcase TON's ecosystem and projects. In April next year, we plan to book the main stage of the Hong Kong Web3 event again and plan to add more activities. If TON ecosystem projects are interested in participating in the sponsorship, you can contact us directly.

Finally, the high frequency of exposure of the founder of TON in April also played a big role. He participated in the Token 2049 event in Dubai and was interviewed by the Financial Times and other media. These were his first media appearances in seven or eight years, and the popularity of TON was very obvious.

Colin: This is indeed a highlight moment. What are the plans for TON ecosystem in the DeFi field?

John: DeFi is an area where we need to make breakthroughs. The main obstacle at present is the difficulty of developing languages. We are developing a new language similar to JavaScript, TOLK, which was announced at the Dubai Conference in November. This language will greatly reduce the difficulty of development and is expected to attract more developers to join.

In addition, we plan to strengthen the layout of BTCFi. In February, we will jointly hold a BTCFi hackathon with ecological project parties, focusing on promoting the construction of a cross-chain bridge from BTC to TON. The test network of the cross-chain bridge is now online, and the official version is expected to be launched in April. This will attract Bitcoin holders to enter the TON ecosystem and increase TON's DeFi TVL and liquidity. At the same time, we also plan to explore innovative application scenarios through the combination of mini-games and mini-programs with DeFi protocols, such as product forms similar to Yu'ebao.

Colin: You mentioned that the TON ecosystem also plans to promote the development of Memecoin. What is the strategy in this regard?

John: Yes, we are holding the official Memecoin competition "Meme LANDING" to provide incentive support for unreleased teams and launched projects. We also realize that the TON ecosystem needs to further improve its infrastructure in the Memecoin field, such as reducing gas fees and optimizing development tools. We hope that through these adjustments, the TON ecosystem can better support the issuance and development of Memecoin.

Colin: The TON ecosystem also has great development potential in the field of mini-programs. What plans do you have in this regard?

John: Mini Programs are an important strategic direction for the TON ecosystem. At present, we have seen AI projects being commercialized in Telegram Mini Programs. For example, an AI character generator project has become profitable and has begun to try to combine Tokenomics with AI gameplay. In the future, we hope to attract more similar applications to join.

At the same time, we expect that some large domestic Internet companies will launch mini-programs and public account channels for the TON ecosystem next year. This will further expand the application of TON in real-world scenarios, from small games to e-commerce, short videos and tool applications. We are full of confidence in the future of the TON ecosystem, and we also know where further improvement and expansion are needed.

Colin: The development language you mentioned is indeed a challenge. Lowering the development threshold will greatly promote the development of the TON ecosystem. I look forward to your performance next year!

OKX Venture’s investment philosophy

Colin: Can you briefly introduce whether there are any tracks or interesting projects that OKX Ventures is paying special attention to this year?

Kiwi: Okay, first of all, I would like to thank several guests. We have deep connections with Dragonfly, Solana and TON, and have co-invested in many projects. The past year has indeed been an impressive year, with many shocks and stories. Recently, I saw a year-end summary report that listed OKX Ventures as one of the most active institutions in the industry last year, mentioning that we invested in 50 projects. In fact, the actual number is higher, but it also reflects that we have been actively supporting the development of the industry. OKX Ventures not only pursues financial returns, but also hopes to create some interesting and useful products for the industry.

Colin: So OKX Ventures is not just pursuing financial returns, but also serving the overall strategy of the group, right?

Kiwi: Yes, this can be viewed from two perspectives. First, of course we hope that the investment will generate returns, which may be financial returns, or it may bring cooperation opportunities and traffic to the OKX exchange to promote overall growth. On the other hand, as a senior institution in the industry, OKX often deeply supports some early projects when the narrative is not yet mature and has not yet formed a scale. For example, at the beginning of last year, we began to invest in the Bitcoin ecosystem, when the adoption rate of Bitcoin Taproot clients was still very low, only 1% to 3%. Although the narrative is not mature enough, we still choose to support the development of these early projects. This has always been our strategy.

Colin: Indeed, OKX has done a good job in this regard, such as opening APIs and other industry feedback measures. So what are your criteria when choosing to support startups?

Kiwi: To be honest, investment is a "craft". Although AI has done a lot of complicated things in investment analysis and forecasting, investment essentially still requires one-on-one judgment of projects. This is not a formulaic process, and you can't simply use a few scoring dimensions to decide whether to invest or not.

Of course, we pay attention to whether the product has innovative ideas, whether the technology is unique, whether the operating data is excellent, and whether the economic model is reasonable. These are all important considerations for investment, but in my opinion, what is more important is the original intention of the founder and his team, and whether they really want to do things well. The human factor is indispensable in investment.

Colin: So looking ahead to next year, which tracks will you focus on?

Kiwi: That's a good question. I'm impressed by the point GM just made. I think AI is one of the most important narratives at the moment, and is gradually replacing the development direction of many industries, including DeFi, games, and other fields. AI's influence in all aspects is increasing, but the current investment pace is relatively slow. In fact, there are very few investment institutions that can catch up with the AI ​​trend now, and I think this is a manifestation of VC lagging behind the market narrative and progress in this cycle.

In the future, we hope to stay closer to the market and pay attention to the latest technologies and trends. OKX Ventures just released an annual investment review, summarizing the 60 projects invested in the past year and predicting 14 future trends. If you are interested, you can read that article. Most of it was written by me and it can better represent my views.

Colin: Thank you very much for sharing. OKX Ventures has indeed contributed a lot of excellent content, and I look forward to your future performance!