Article Summary
The rules of the narrative game that drive the cryptocurrency industry are beginning to shift, and market participants are developing a meta-awareness of the narrative game itself.
The cryptocurrency industry is in dire need of applications that can generate demand for block space.
The biggest advantage of cryptocurrency is that it gives economic value to any idea and provides a platform for trading. Recently, new experimental forms have emerged in the market that exploit the attention economy and speculative properties, such as meme coins, social trading, and prediction markets. More diverse on-chain applications and business models are likely to emerge in the future.
For on-chain applications, speculation is one of the most powerful features. The increasing social demand for speculation can attract "degens".
In the long term, the industry's goal should be to provide value beyond speculation. It is necessary to convert users attracted by speculative needs into users who truly appreciate the core value of the service, establish a sustainable token economy, and ultimately provide a social graph and product value that transcends speculation.
Source: Delievery at Dawn | a 4844 film
As Paradigm co-founder Matt Huang said, it’s like building a casino on Mars. From redefining currency to reshaping interactions with applications, the systems and mechanisms established by society are being reimagined to adapt to the new paradigm called "Crypto." It transcends the scope of technological innovation and embodies different cultural and social significance. For libertarians, cryptocurrencies offer a path to free markets and autonomy. For cypherpunks, it provides a censorship-resistant, permissionless network for value exchange. For entrepreneurs, cryptocurrencies are the foundation upon which the next generation of networks will be built. For traders, it is an endless source of dopamine and potential profits. Cryptocurrency-based casinos will vary greatly depending on one's perspective. What do you think about the future shaped by cryptocurrencies?
Source: foresightnews
We are already halfway through 2024, and looking back, it has been a dynamic year that highlighted the multi-faceted nature of the cryptocurrency industry. Bitcoin gained institutional recognition through ETFs. Ethereum successfully implemented Dencun upgrades including EIP-4844. Rollup is deployed in numerous projects and has become a mainstream solution for launching new chains. Solana has embarked on a stunning comeback after a rough patch, and the bull run that began last year has sparked a frenzy among investors for memecoins and celebrity coins.
In terms of applications, we are seeing significant developments in the cryptocurrency industry. Over time, mainstream DeFi protocols have matured and grown steadily. At the same time, tracks such as SocialFi and the emergence of narratives such as restaking and artificial intelligence have attracted attention and speculation.
The market has recovered significantly compared to previous bear markets. However, while recovering, there has also been unprecedented polarization within the industry. As far as meme coins are concerned, on the one hand, opponents call it a meaningless speculation, while supporters believe that it represents innovation going to the market (Go-To-Market) and an emerging model of the attention economy. model. Furthermore, when it comes to narrative, the industry is also divided between those who celebrate new narratives and the evolution of infrastructure and those who are tired of the elitism of the industry.
Since the birth of Bitcoin in 2008, the cryptocurrency industry has traveled a more tumultuous path than any other industry, going through multiple cycles of growth and decline to get to where it is now. When public interest shows signs of fading, industries can make a dramatic comeback, sparking new narratives and hype. Similarly, the future development of the cryptocurrency industry also contains countless scenarios and possibilities. This article reflects on the narrative games that have driven the cryptocurrency industry to date, explores the latest trends in the changing industry landscape, and considers where the industry is headed.
narrative game
Source: Fractal Lives
It all started with Bitcoin. The cryptocurrency industry has gone through countless developments and changes since its inception, but Bitcoin remains the benchmark for the entire industry. As of writing, Bitcoin has a market capitalization of $1.2 trillion, ranking 10th among all asset classes. With the approval of spot ETFs, Bitcoin has further consolidated its status as "digital gold." The reason why Bitcoin has achieved a market capitalization of $1.2 trillion is not that it is a business based on operating profits, but that it is regarded as an asset with scarcity and legitimacy. Even Visa and Mastercard, the world’s most widely used payment networks, have less than half the market capitalization of Bitcoin.
Source: Visions of Bitcoin
Bitcoin was not regarded as "digital gold" from the beginning. In its early days, most people thought of Bitcoin as a new electronic currency or a low-cost payment network. In the early 2010s, it was widely believed that Bitcoin was a darknet currency. Over time, however, Bitcoin gained legitimacy and its narrative shifted from a medium of exchange to a store of value. The second half of the chart above, around 2018, clearly shows that public opinion favors Bitcoin as an asset class rather than a payments network. Although the above chart does not show data after 2018, the argument about Bitcoin’s “digital gold” has not only persisted, but has also continued to strengthen.
Satoshi Nakamoto’s view of Bitcoin is that the essence of currency stems from social consensus. Blockchain is simply a cryptographic implementation of social consensus among participants. The value of such a network depends on the participants' evaluation of the network. If Bitcoin were viewed solely as a payment network or darknet currency rather than a store of value narrative, it would be very difficult to achieve its current value.
Bitcoin’s success set the standard for protocols and tokens that followed. Like Bitcoin, most tokens in cryptocurrencies have both commercial and asset properties. Additionally, the censorship-resistant and permissionless nature of blockchain provides the basis for anyone to issue tokens and allow others to trade them. In order to increase the value of its tokens, each protocol needs more people to buy into its vision and think its tokens have value.
Image source: X(@alphanonceStaff)
As a result, a unique "narrative game" culture began to prevail throughout the cryptocurrency industry. Emerging industries usually value future potential more than immediate actual benefits to users. In the cryptocurrency industry, however, this narrative-driven approach has taken hold. Marketing strategies based on compelling stories have been effective since the dawn of the ICO craze, when people rushed to publish white papers, and even today. In the cryptocurrency industry, the most influential figures have always been philosophers, researchers, and thought leaders. The tendency to idolize these figures has become one of the industry's most defining characteristics.
Furthermore, narrative games are particularly effective because the majority of participants in the cryptocurrency market are investors and traders. The success of crypto narrative games isn’t just about an effective marketing campaign. Its biggest advantage is its permissionless nature and ownership model, which allows anyone to tokenize any idea and give it economic value. How convincing and engaging the narrative a project can present will become a key factor directly linked to its market value. As token prices rise and trading volume increases, traders are constantly looking for the next compelling story, and projects create an endless cycle to feed these narratives. The cryptocurrency industry continues to grow in a cycle of new narratives emerging and disappearing.
Image source: X(@intuitio_)
The meme coin craze since the beginning of this year has exposed the nature of the cryptocurrency industry’s narrative game. The popularity of these tokens, which offer little real utility or vision, is a strong indication that narrative gaming remains the dominant force driving the cryptocurrency market.
The rise of meme coins isn’t just due to speculation. It also reflects a critique of complexity-seeking elitism in cryptocurrencies and market imbalances between retail investors and VCs. As the industry matures, narratives of true innovation become fewer and fewer. More and more projects are using nuances to market themselves as the next "blockchain revolution." This has led to over-saturation of the platform, excess block space, and fatigue with repetitive narratives. Additionally, mainstream projects are able to obtain inflated valuations from VCs even before launch and attempt to control prices with limited circulating supply. This situation makes it difficult for many retail investors to participate in the narrative game.
Image source: X(@gainzy222)
The meaning of cryptocurrency narratives and the way practitioners consume them is changing. It's unclear how long the old routine of creating new stories to justify high market capitalizations can continue. But we can’t expect new technological innovations or business models to emerge every week.
For a long time, the cryptocurrency industry has mostly based its narrative on technological breakthroughs and capital efficiency. Now, investors and users seem to have developed a meta-awareness of narrative games themselves. Cryptocurrency’s narrative play seems to be evolving in a polarizing way. One side complains that new innovations and narratives are not what they used to be, while the other side keeps hyping up new meme coins and hot projects, then watching them burst like bubbles. In the near future, we may see this change become more pronounced.
Where are we now?
Cryptocurrency narrative play has undoubtedly played a vital role in building the foundation of the industry since its inception. More than just maintaining token prices, the cryptocurrency industry needs purpose and vision to prove its existence and potential, especially in the face of fraud, speculation, and regulatory pressure. Many people have embraced the vision of blockchain and Web3, are committed to advancing the industry, and have played an important role in shaping the industry's current form.
However, the technical limitations of blockchain and Web3 are obvious. For everyday use, a network with adequate security and anti-censorship capabilities is too slow and expensive. During DeFi and NFT Summer, a single transaction fee on Ethereum frequently exceeded $100.
Image source: Rollup.wtf
Fortunately, thanks to the efforts of engineers and researchers, blockchain technology has steadily moved forward. Now, the secure and scalable blockchain space is a reality. Most Layer2 or high-performance chains have transaction fees of less than $0.01 and are as fast as traditional applications.
圖源：The Myth of The Infrastructure Phase
Looking back, Bitcoin has been around for 16 years and Ethereum has been around for 9 years. Over the years, the cryptocurrency industry has gone through several cycles of infrastructure and application development, with both technological advancement and greed-driven decline. In the initial stage, industry development was relatively slow due to a lack of demand and resources required for research and development. By the DeFi and NFT Summer of 2020, the demand for applications began to explode, but the systems to support this demand were insufficient. At that time, we felt the need for a stable and scalable functional infrastructure.
The crypto winter after 2022 symbolizes a period of rapid development of blockchain infrastructure. Rollup, data availability layer, and ZK technologies move from research to commercialization. The market is actively adopting these innovative technologies. Integrated chains such as Solana attract new users with their low prices and fast transactions. High-performance chains such as Sui and Monad are also generating interest and are expected to launch more applications in the foreseeable future.
The development of infrastructure and applications are complementary to each other. No one is more important than the other and no one needs to be developed first. Applications stimulate the need for infrastructure. In turn, advanced infrastructure lays the foundation for new types of applications. YouTube was born in 2005 instead of 1995 because of the widespread availability of broadband infrastructure. The popularity of broadband was due to the success of early Internet companies such as Amazon and eBay.
Image source: X(@Imrankhan)
Blockchain technology still has a lot of room for improvement. We look forward to seeing wider adoption of networks that provide a better user experience and security. However, it is undeniable that the cryptocurrency industry narrative is too focused on technological improvements and ideological concepts. Now, it’s time for crypto industry applications to inspire infrastructure development. Most importantly, we need applications that bring block space requirements.
As mentioned before, there has always been a market demand for new narratives in the cryptocurrency industry, and this tendency is particularly strong in the Web3 environment where value accumulation is concentrated at the protocol layer. Therefore, almost out of inertia, the industry continues to show a preference for platforms and infrastructure, the emergence of applications is relatively lagging, and the impact on users is also underestimated.
Image source: Vitalik Buterin (EthCC 2022)
Following the Ethereum Dencun upgrade earlier this year, Vitalik Buterin expressed his thoughts on the future direction of the cryptocurrency industry.
Today, I would say that we are clearly on the right side of this S-curve, the deceleration period. As of two weeks ago, two of Ethereum’s biggest changes, the switch to proof-of-stake and the re-architecting of blobs, were a thing of the past. Further improvements are still important, but won’t have as drastic an impact as proof-of-stake and sharding.
The first ten years of Ethereum were largely in the "trainee" stage. The goal was to implement Layer 1 of Ethereum, and the application was mainly used by a small number of enthusiasts. Until a few years ago, we set a low bar for ourselves by building applications that were clearly unusable at scale, as long as they worked as prototypes and were reasonably decentralized.
At this point, we have most of the tools we need to build user-friendly applications in a cypherpunk style. We should just go ahead and do it, developers have no excuses anymore.
Image source: X(@QwQiao)
If broken down by track, tokens as a store of value (such as Bitcoin) and stablecoins as a payment method have entered a mature stage. Stablecoins have become on-chain reserve currencies and are actively adopted by countries with unstable currencies, such as Latin America or Africa. The DeFi industry has also emerged from the disillusionment stage, and the business of mainstream projects has also stabilized. Token Terminal data shows that MakerDAO generated $3 million in revenue in the first quarter of 2024, which is approximately $12 million annualized. However, the token has a market cap of just $20 billion and a price-to-earnings ratio of about 16. Even compared to traditional fintech companies, this doesn't seem overvalued.
On the other hand, for a wider user group, the application in some industries is still very limited. NFT seems to be experiencing a "disillusionment." After experiencing the bull market in 2021, except for a few core IPs, most NFT projects have failed to gain the favor of society. In addition, even though the market has high hopes for the game, the results of this track are not optimistic and it is largely ignored by users. As for other tracks, such as artificial intelligence, DePIN and social, they have either not yet reached the peak of hype or are just in the beginning stages of innovation.
Source: foresightnews
The cryptocurrency industry has passed a critical threshold. Despite challenges including the Terra and Luna incidents, the collapse of FTX, a tough general economic environment, and regulatory pressure, cryptocurrencies continue to move forward. Even under extreme hypothetical scenarios, it becomes extremely unreasonable to imagine an entire industry collapsing. However, it is undeniable that the application of blockchain is still mainly limited to the financial and trading industries, catering to a limited user group and lacking mainstream appeal.
The current cryptocurrency industry is at a crossroads and will likely continue in its current state with only incremental improvements in mature industries such as tokens as a store of value or DeFi. This doesn’t mean there’s no point in continuing to play the role of a currency market, it’s just that if this continues, the cryptocurrency industry will just be a market driven by enthusiasts, just like the poker or cannabis industries. Cryptocurrency has huge potential as an application layer. Ideally, by taking advantage of this, we are likely to see mainstream application adoption and the emergence of new business models.
Tokenize everything
圖源：Insights from “The Almanack of Naval Ravikant”
Traditionally, only those individuals or businesses with capital and labor had leverage. However, the popularity of software and media has broken this situation. Software enabled anyone with minimal capital to develop applications and services, leading to innovation and the birth of numerous platforms and SaaS products. The widespread use of platforms such as YouTube and Instagram can expand personal influence, triggering the "Cambrian Explosion" of the KOL market and small media.
The greatest value that cryptocurrencies provide is the ability to give an economic value to any idea and provide a platform for trading. In traditional systems, the formation of markets requires the intervention and permission of intermediaries to maintain economic value and mutual trust. However, blockchain technology provides the basis for tokenization, and users can exchange economic value with others through the network and form a market without trusting others or obtaining permission from others.
Source: foresightnews
The term "meme" was first proposed by Richard Dawkins in his book "The Selfish Gene". It is a concept similar to genes, which transmit genetic information through physical means. In society, memes are cultural units that can represent certain ideas, trends, fashion tastes, etc. Later, memes adapted to internet culture and became widely used in their current meaning. Memes, like genes, spread through social interactions, evolving as they are copied, modified, and reproduced.
Recently, Michael Rinko of Delphi Digital emphasized in his article "Attention is all you need" that cryptocurrencies give economic value to people's ideas and interests, allowing users to own and profit from their interests.
On Instagram, we follow brands and influencers. But the best I can do is retweet and share them with friends. The value of our attention is 100% captured by others.
Cryptocurrencies are different. Cryptocurrencies democratize attention and let us own it. If you find yourself spending a lot of time on a few topics, you can truly own your attention and profit from it. This truth is obvious and may seem silly, but it represents a major shift in Internet economics.
Meme coins take the "attention is value" structure to the extreme. They offer one of the purest ways to purchase a token because you think it will gain attention in the future.
Image source: X(@jessewldn)
One thing that must be clearly recognized is that the meme coins themselves are not the most important thing. They are just a meme after all, and as soon as they become uninteresting, they quickly fade from view. What meme coins demonstrate is the raw potential of tokenization, hinting at the possibility of new applications. From identity to data to the maker economy, the ability to put economic value on attention paves the way for unprecedented markets and applications.
This is particularly true in the first half of 2024. The cryptocurrency market is revitalized, and applications that turn people's attention into speculative demand are rapidly growing.
Solana’s pump.fun became the main platform for launching meme coins, and the fees generated were at one point the highest among all protocols.
Friend.tech and Fantasy.top integrated social trading features associated with X, generating strong speculative demand and achieving $65 million in fees and over $36 million in trading volume respectively.
ScenecoinDEGEN based on Farcaster has attracted a large number of users and activities through innovative airdrops and community incentives, contributing to the success of the Farcaster ecosystem.
Polymarket saw significant growth in activity and trading volume during the US presidential election, recording $100 million in trading volume in June alone.
The TON ecosystem’s Hamster Kombat leverages its simple functionality and seamless integration with Telegram to reach 100 million users.
While this list is by no means exhaustive, releases and experimentation with apps large and small continue. Although the industry has been around for more than 10 years, the development of applications that take advantage of the unique properties of cryptocurrencies is only just beginning. The range of unique user experiences that on-chain applications can provide are yet to be determined. We should take these initiatives more seriously because they provide meaningful experimental results on how cryptocurrency applications can meet user needs and adapt to the market. We look forward to more experiments in the underexplored cryptocurrency social, gaming, NFT, and prediction market industries.
Speculation is a feature, not a bug
Blockchain is a back-end technology. In addition to application-specific chains, most networks provide a common execution environment and database for applications to run. In principle, most of the applications we use every day can run on the blockchain. Just as software no longer uses its ability to run on mobile devices or use the cloud as marketing keywords, encryption technology should no longer be a term used to describe an app's capabilities. Eventually, "blockchain" or "cryptocurrency" will no longer be used to describe applications, and users should be able to use applications without knowing the underlying chain or wallet.
When someone wants to launch a product or service, no one asks why they want to launch it online. Because deployment is cheaper and faster, and except for special circumstances, customers can enjoy greater convenience and accessibility than offline. Likewise, it is foreseeable that running applications on the chain will eventually be seen as a natural thing. As the use of wallets in permissionless markets and connected application ecosystems becomes common, we will no longer question why applications need to run on the blockchain.
However, in the current limited blockchain environment, such an assumption is nothing more than a hope. The current blockchain development environment is still full of challenges, and users are not only unfamiliar with wallets, but also tend to avoid wallets. Except for a small group of enthusiasts, most users need strong motivation to use on-chain applications. It’s not just a matter of increasing adoption by 10% or 20%, we need user experience and functionality that can only be achieved in an on-chain environment.
Source: Sound.xyz
Most users in the industry are airdrop "hunters" and traders, and their main purpose is to satisfy speculative needs. Those who pursue cryptocurrency ideals believe that such speculation defeats the essential purpose of cryptocurrencies and seek to distance themselves from these practices. However, we need to reevaluate the role these “Degens” play in the industry. It is no exaggeration to say that the cryptocurrency industry is built on the injection of capital through speculation. The fact that most on-chain trading volume is based on speculative demand, arbitrage, or MEV profits cannot be ignored. Infrastructure without users is worthless, and there is no doubt that Degens is an important pillar of the cryptocurrency industry.
During NFT Summer 2021, many companies and brands teased their entry into the cryptocurrency industry, and everyone was excited. However, it was not Disney that succeeded in the end, but Pudgy Penguins. Cryptocurrencies have reached a level where they can sustain growth on their own. Rather than outside entities entering the cryptocurrency industry, outward expansion of successful products within the industry may be a more likely way to achieve mainstream adoption. Ultimately, Degens is the early adopter and base user base for all on-chain applications, and meeting their needs should be the first step in validating product-market fit.
Source: eToro
The preference for speculation is not limited to cryptocurrencies, it is a social phenomenon. Rising economic inequality and shortened attention spans due to the influence of social media have led to increasing risk tolerance for investment assets. In the 1970s, the average American held shares for five years; by 2020, that number had dropped to 10 months.
It would be biased to accuse Gen Z of being unfocused or a gambler simply because of their high risk appetite. In most major countries today, it has become more difficult for younger generations to live a better life than their parents. Since they clearly realize that labor income cannot exceed capital income, many investors invest with the concept of "nothing to lose". They don’t have many chips, but if they don’t bet aggressively, their chances of surviving at the table become slimmer and slimmer.
While the current situation is undoubtedly dystopian, the coin’s high volatility is also seen by many as an opportunity to turn its fortunes around. Easily accessible speculative assets like memecoins have proven to be a major means of attracting new users to the cryptocurrency industry. Driven by the craze for the Solana eco-meme coin, Phantom Wallet ranks third in the U.S. App Store’s utility rankings, with 7 million monthly users. Users attracted by speculative needs will unconsciously learn about digital ownership, wallets, and markets while using the app, thereby integrating into the culture and potentially converting into organic traffic.
Image source: X(@0xJim)
Although most on-chain applications leverage their unique user experience and speculative needs to attract a lot of attention in the short term, their life cycles are often short due to their rough designs and strong speculative nature. However, based on this point, it would be too hasty to conclude that on-chain applications cannot achieve structural retention.
The reasons for the short life cycle of on-chain applications include: most of the user base is composed of Degens and traders, who have very low loyalty to the product; compared with infrastructure development, very little time and resources are allocated to product development; Most products focus too much on short-term speculation rather than long-term utility.
Finally, I would like to say that if speculation was the only use of cryptocurrencies, then I would not be contributing to the industry. However, for cryptocurrencies to realize the vision of Web3 and make general applications such as games and social platforms accessible, we must not only consider the goals, but also the feasible paths to achieve them. Given the current industrial and social environment, speculative demand appears to be the most powerful tool that cryptocurrencies can leverage.
However, in the long run, users attracted by speculative needs must be transformed into users who truly appreciate the core value of the service, thereby establishing a meaningful funnel and promoting interactions beyond speculation. Additionally, a token issuance and distribution structure needs to be developed that can withstand short-term fluctuations in price and demand, ultimately providing social graph and product value beyond speculation.
The end of the prologue
Image source: “Bitcoin Is Dead”
Sentiment swings are even more dramatic than token price swings. When prices fall, everyone gives the market a death sentence. Bitcoin has passively "died" every year since its birth. I believe that the cryptocurrency industry has evolved to the point where it can operate and grow without outside intervention. However, the next two to three years will be a critical period that determines whether the industry can realize the vision of Web3 and become mainstream. If important product-market fit cannot be proven during this cycle, there are no excuses.
Source: foresightnews
It’s been 10 years since the launch of Ethereum, the first general-purpose blockchain. Although Ethereum has undergone extensive research and development over the years, and the industry has experienced its ups and downs, it is only recently that it has evolved into a technology that can be reliably used by actual users. While token prices and narrative play have always driven the industry, now more than ever the focus is on the product and its impact on actual users.
[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 reprinted with permission from: "Foresight News"
Original author: pillarbear, Four Pillars
Compiled by: Yangz, Techub News
