Author: Jam

Editor: Vincero, YL, CloudY

Reviewer: Yasmine

The NFT market, as a nascent digital marketplace, is currently witnessing exponential expansion and advancement. NFTs serve as distinctive digital assets capable of representing digital artworks, avatars, virtual land, and various other digital commodities.

Overview

The uniqueness of digital assets enables them to function as evidence of ownership and scarcity for digital artifacts, thereby creating fresh avenues of income for digital artists and creators.

Blur has surpassed Opensea by incorporating a range of mechanisms, such as airdrop and ordering incentives, self-established trading markets, and aggregators. Although Opensea was previously considered the most liquid NFT marketplace, Blur's comprehensive strategy has gained significant market attention. Blur offers the most optimal liquidity solution by integrating its market and aggregator, thereby granting users a broader selection. This aspect holds paramount importance, as liquidity plays a pivotal role in the NFT market, and Blur's liquidity solution has demonstrated remarkable reliability.

In response to the challenge, Opensea has eliminated transaction fees to 0%, demonstrating its competitiveness. However, this strategy may jeopardize Opensea's long-term sustainability. Optional royalties provide Blur with another strategic advantage, offering a wider array of choices and attracting a larger user base, causing Subdivision trackunlikely to thrive in this environment.

While the NFT market still holds numerous opportunity, niche segments like X2Y2, LooksRare, and Uni V3 (Genie) have reached a saturation point with limited growth prospects. This is attributed to the dominance of established corporations and formidable rivals, creating significant hurdles for new entrants to prosper.

Blur's comprehensive strategy in the NFT market has demonstrated remarkable success. Its consistently outstanding performance serves as evidence of the viability and effectiveness of its strategy in the competitive market.

We will investigate prospective paradigms by integrating the historical trajectory of NFT marketplaces.

Crypto Kitties Market: the most rudimentary NFT trading platform.

Crypto Kitties Market enables players to acquire, breed, and trade digital cats, which originates as an extension of the Crypto Kitties Game and serves as the pioneering NFT trading platform. It employs NFTs to guarantee the distinctiveness and transferability of each digital feline.

The Crypto Kitties Market ecosystem encompasses platforms, users, digital cats, and a trading marketplace. The platform offers comprehensive services for creating, purchasing, breeding, and selling digital cats, alongside features like showcasing, social interaction, and trading for these feline assets. Users actively buy, breed, and sell digital cats, as well as engage in social interactions and promotional activities. The platform's appeal and interactivity are further enriched by the diversity of cat breeds, breeding seasons, and competitive events. The trading marketplace facilitates the buying and selling of digital cats, providing transaction histories and price trend analysis.

Consequently, the establishment of Crypto Kitties Market aimed to augment the monetary and asset properties of digital cats.

The swift expansion of Crypto Kitties Market has garnered a growing user and collector community, catalyzing the progress of the NFT trading market. Alongside Crypto Kitties, the platform has broadened its scope to encompass diverse digital assets, such as digital artworks and gaming items.

Despite Crypto Kitties Market's slow transaction speed resulting from its Ethereum foundation with limited transaction speed and processing capacity, it has played a significant role in advancing and promoting the NFT market. Its emergence marked a pioneering milestone and inspired the creation of more advanced and user-friendly alternatives.

（ Crypto Kitties Market UI ）

NFT Summer：Reflecting the Exponential Growth and Ubiquitous Adoption of the NFT Market

In the summer of 2021, the NFT market experienced rapid growth and widespread adoption, with record-high transaction volume and prices. OpenSea, one of the largest NFT trading platforms, saw substantial increases in transaction volume, user count, and historic NFT prices, consolidating its position in the market.

In 2021, the NFT market achieved a remarkable milestone with a total trading volume of around $20 billion, indicating a tenfold surge compared to 2020. Prominent platforms in the NFT market included OpenSea, Nifty Gateway, Super Rare, and Foundation. Notably, during the NFT Summer period, specific projects garnered significant attention, including CryptoPunks, Bored Ape Yacht Club, and Art Blocks.

During the NFT Summer, numerous Profile Picture (PFP) initiatives swiftly arose, captivating a significant user and investor base. PFP denotes digitally rendered avatar images adaptable for social media, gaming, and online platforms. Nevertheless, these projects transcend mere pictures, embodying symbols of identity and community establishment, akin to fashionable accessories in offline domains.

A buying frenzy unfolded in the NFT market, as investors and collectors lavishly spent millions of dollars to obtain diverse PFP artworks, aiming to express their identity and social standing. Surprisingly, even seemingly unconventional designs commanded substantial prices in the NFT market. Certain individuals were willing to incur exorbitant transaction fees, amounting to thousands of dollars, in their pursuit of acquiring their desired PFP.

However, the NFT Summer proved to be a tumultuous period. As speculative fervor escalated, prices of select PFP projects sharply declined, leading investors and collectors to liquidate their holdings and inducing market volatility. Some PFP projects succumbed to insustainability due to inadequate community backing, akin to small boats overwhelmed by ocean waves. Subsequent to the NFT Summer, contemplation ensued regarding this digital art frenzy, with divergent perspectives arising: some regarded it as transient speculation, while others saw it as the emergence of a new era in the digital art market.

Regardless, the NFT Summer was a period filled with opportunities and risks, showcasing the potential and allure of the NFT market.

( Monthly Transaction Volume on Ethereum )

PFP ignites NFT trading

The cumulative trading volume of NFT assets reached around $40 billion, with PFP transactions exceeding $25 billion, representing over 62.5% of the total. This data highlights the substantial share of trading volume and value held by PFP transactions in the NFT market, reflecting the significance and demand for personal identity and digital representation. This signifies that PFPs have emerged as highly popular and dynamic assets, playing a pivotal role in driving the growth of the NFT market.

From an economic standpoint, the popularity of PFPs stems primarily from the interplay of supply and demand. Firstly, the rapid growth of the NFT market has increased awareness among individual investors, resulting in a willingness to pay premium prices for them. Secondly, the availability of PFPs is relatively scarce, as they are created and released in limited quantities. Consequently, the persistently high demand with constrained supply leads to ongoing price escalation. However, an influx of designers and teams introduces more options and competition, further propelling its development.

From a sociological standpoint, the popularity of PFPs is shaped by social dynamics. PFPs serve not only as vehicles for personal style and identity expression but also as a form of social capital. Individuals often select designs that align with their identity or interests, aiming to gain recognition within their social networks. Furthermore, limited PFPs contribute to the elevated desirability, establishing ownership of these coveted PFPs as a form of social resources. The more people recognize PFPs as social prestige, the more the market's appeal is propelled forward.

This offers valuable insights into the prospects of NFTs. Firstly, the progressing digitization fosters a rising appetite for digital identities and assets, thereby unleashing the market potential for NFTs. Secondly, continuous technological advancements enable broader participation in this market, fostering its expansion. Lastly, the prominence of PFPs as key assets within the NFT market reflects distinct preferences and trends, providing valuable guidance for NFT investments and operations.

( Cumulative trading volume segmented by category: as of March 20, 2023 )

OpenSea: The Leading Marketplace During the NFT Summer

First-mover advantage: OpenSea, founded in 2017, quickly emerged as an early player in the NFT market, gaining support from renowned investors and reaching a valuation of $13 billion in early 2022. This strategic positioning enabled OpenSea to establish a sizable user base ahead of the NFT boom. It offers the widest range of NFT categories, including collectibles, PFPs, virtual real estate, gaming items, music, movies, etc. This diverse selection caters to users with various preferences, facilitating seamless transactions on a unified platform.

The bridge of Web2 and Web3: OpenSea's intuitive user interface enables transactions, with individuals unfamiliar with blockchain technology. This contributes to lowering the entry barrier for both the NFT market and the broader crypto industry, thereby attracting additional funding. Furthermore, OpenSea provides a range of trading tools and resources to aid users in optimizing the potential of NFTs.

Strategic Multichain Positioning: Despite Ethereum NFTs reigning supreme in the ecosystem, OpenSea strategically expands its reach across multiple public blockchains such as Polygon, Arbitrum, and Fantom to enhance its competitive edges. It empowers users to choose the blockchain that aligns with their transactional requirements and cost advantages.

Opensea provides an early solution for NFT marketplaces but operates within the confines of traditional models. It explicitly chose not to issue its own tokens, opting instead for conventional equity financing and exit strategies, whose capital operations align with traditional finance practices. Moreover, Opensea primarily generates revenue through transaction fees, which have decreased from 2.5% to 0% as a result of the emergence of Blur. Opensea resembles a proponent applying Web2 operational models in the Web3 world; however, its development status currently faces some challenges in adapting to the new landscape.

( User Interface of OpenSea )

Market Share Seizure Through Vampire Attacks: LooksRare and X2Y2 Dominate the Competition

LooksRare and X2Y2 sequentially launched their platforms, airdropping to Opensea users to garner initial traffic. Subsequently, they introduced their own mining rewards in an endeavor to seize market share. Nevertheless, the persistent reduction in reward mechanisms ultimately led to a sustained decrease in actual trading volume.

Nonetheless, LooksRare and X2Y2 assert themselves as formidable rivals to Opensea through their provision of an enhanced user experience. Additionally, they have incorporated value-added functionalities, including bulk listing and purchasing, as well as integrated tools for exploring the rarity of NFTs. In contrast to Opensea, these platforms boast lower transaction fees, fostering a more favorable environment for legitimate transactions and transfers. However, it also carries the potential for wash trading.

In summary, LooksRare and X2Y2 have embraced a design philosophy of an "online shopping mall," with the objective of offering heightened convenience, comprehensive services, and reduced transaction fees.

In the context of low-value NFT transactions, batch trading proves to be a preferable approach. By reducing time and labor costs, batch trading effectively minimizes transaction fees. Furthermore, batch trading enhances transaction efficiency and expediency, resulting in swifter and more streamlined transactions.

However, it is vital to levy suitable fees during batch trading to maintain the platform's developmental integrity. The fee structure should be reasonable, ensuring the platform's sustainability while remaining affordable for traders. It is imperative to tackle the issue of volume manipulation in batch trading. Wash trading can lead to a prolonged decrease in legitimate trading volume, thereby disrupting the market's normal operation. Consequently, preventive measures must be implemented to combat malicious manipulation and preserve the stable growth of the trading market.

In general, LooksRare and X2Y2 embraced a token economy approach instead of focusing on functional differentiation, capitalizing on Opensea's notable vulnerability of lacking a platform token. They implemented a more Crypto Native strategy, but the declining marginal rewards made their business model unsustainable, providing an opportunity for the success of Blur.

( UI interface of LooksRare ）

Unveiling the Narrative of Aggregator

Gem, the leading NFT aggregator prior to the launch of Blur, offers a platform that enables users to explore NFTs from diverse markets. Similar to Blur, Gem consolidates traffic from multiple mainstream NFT markets, facilitating cost-effective bulk purchases. This empowers users to secure optimal deals while driving traffic and revenue to Gem. Serving as a conduit, Gem redirects users from various NFT markets and platforms to its own platform, potentially establishing itself as a central hub for aggregating substantial NFT traffic. In April 2022, Opensea acquired Gem, allowing it to operate independently within the Opensea ecosystem. This integration provides Gem with access to Opensea's resources while preserving its distinctive features and services tailored to diverse users. As a part of Opensea, Gem is strategically positioned to serve Opensea's user base, expand its influence, and increase its market share.

Genie, the pioneering NFT aggregation project, shares similar functionality with Gem, providing a convenient aggregator with a smaller number of NFT platforms compared to Gem. In June 2022, Uniswap, a DEX built on the Ethereum blockchain facilitating asset swapping and liquidity provision through smart contracts, acquired Genie. Utilizing Genie as a tool, Uniswap enhances the NFT browsing and purchasing experience. Moreover, collaborating with emerging NFT markets enables Uniswap to broaden its user base and diversify its revenue streams.

Overall, Gem and Genie exhibit limited functionality and high substitutability because the absence of platform tokens impedes their potential for sustained business growth through tokenization. Nevertheless, both of them can capitalize on the support of their parent companies to broaden their service portfolios and offer users enhanced functionalities after the acquisition. This strategic approach enables them to preserve competitiveness and attain long-term development in the highly competitive NFT aggregator market.

（ UI interface of Gem ）

The Emergence of Blur

The target audience of Blur includes NFT professionals, whale players, and general users (albeit in smaller numbers). This distinctive targeting strategy sets Blur apart from others. Operating as a Marketplace+Aggregator, Blur aims to integrate various markets and provide users with enhanced convenience. Within this framework, NFT market makers and liquidity providers can reap specific advantages.

In addition, the noteworthy aspect of Blur is its economic model, which includes incentives such as airdrops, royalty fees, and order placement, all aimed at minimizing order gaps and ensuring consistent liquidity for NFT transactions. However, the most impactful strategy implemented by Blur is the management of expectations. For instance, the initial season's airdrop incentivizes intelligent ordering, followed by a focus on incentivizing the Bid pool in the second season, and market-making incentives in the third season. The core principle underlying this sequence of actions is the existence of ambiguous rules and perpetual expectations.

Moreover, Blur distinguishes itself with a zero-fee rate and cost-effective Gas fees. Users can easily uncover profitable opportunities while utilizing a variety of trading tools, including data analysis panels. Additionally, Blur offers faster transaction speeds compared to other platforms, guaranteeing a seamless trading experience. The platform's functional differentiation caters specifically to professional traders, providing them with advanced trading depth charts, liquidity monitoring, and floor price tools for enhanced benefits.

Through its distinctive product positioning, design, and airdrop distribution method, Blur has successfully carved out a unique niche distinct from Opensea, effectively addressing the issue of insufficient differentiation and gaining prominence within the vast landscape of NFT trading markets. However, Blur's true achievement lies in resolving the challenge of liquidity scarcity.

In summary, Blur has achieved both differentiated functional enhancements and token-based incentives, which have addressed the issue of inadequate NFT liquidity to some extent.

(Average daily trading volume and market share of NFT Marketplaces in the last 3 months.)

When considering Amazon within the context of Web 2.0, one is reminded of its extensive product range, efficient logistics, and customer-centric service. NFTs as commodities, bear similarities to e-commerce platforms as they offer a marketplace for NFT transactions. Consequently, NFT markets can be likened to the Amazon of Web3.

Firstly, E-commerce has critical business features that empower companies to conduct online sales. These features include online categorization and product information, shopping cart and checkout systems, secure payment processing, order management and fulfillment, customer relationship management, analytics, and reporting, as well as personalization and customization options. By harnessing these functionalities, businesses can establish robust online marketplaces, streamline product/service sales, effectively handle orders and inventory, cultivate customer relationships, and optimize marketing and sales strategies.

Furthermore, NFTs can be classified as commodities, which include raw materials or primary agricultural products that are exchangeable, such as gold, oil, or wheat. Conversely, NFTs are distinct digital assets that signify ownership or provide proof of authenticity for specific digital items like artworks, music, or even tweets. Similar to other commodities, they can be traded, with their value influenced by market dynamics of supply and demand.

Similar to conventional commodities, the value of NFTs experiences fluctuations influenced by diverse factors, including the popularity of the underlying digital assets, the reputation of the artist or creator, and the rarity of the NFTs. Moreover, NFTs can be utilized as instruments for diversifying investment portfolios or as speculative assets with the potential for economic returns.

In summary, although NFTs are a distinct form of digital asset, they can be viewed as commodities in terms of their significance in the market for buying and selling, with their value being determined by market forces. Thus, NFTs can primarily be seen as commodities and secondarily as assets with investment attributes.

Two key factors crucial to the success of an NFT marketplace are liquidity and user engagement. Liquidity necessitates a significant presence of buyers and sellers, enabling smooth and substantial transactions. User engagement, predominantly influenced by the token economic model, does not always guarantee strong user loyalty. Nevertheless, as the platform's liquidity improves and is enhanced by the token economic model, a self-reinforcing cycle is established, persisting until marginal arbitrage opportunities diminish.

Hence, we firmly assert that Blur represents a paradigm-shifting undertaking. As this domain continues to progress, it is reasonable to anticipate the emergence of a Marketplace exhibiting enhanced performance, expeditious order transactions, and diminished aggregate expenses.

OpenSea succumbs to market forces

The pace of updates and iterations lags behind the dynamic shifts in market demand.

The stagnation of OpenSea's platform and feature updates to meet dynamic market demands suggests slow progress. Initially, OpenSea attained market dominance through superior liquidity depth and a diverse range of NFT assets. Nonetheless, the volatile and rapidly fluctuating nature of the NFT market renders platforms vulnerable to sudden shifts in demand, potentially leading to customer attrition in favor of competitors. Fundamentally, OpenSea struggles to surpass other projects in terms of transaction performance, as market conditions continuously offer opportunities for rival forked products.

Absence of a Token Economy.

The Token Economy, characterized by the utilization of tokens for exchange and incentives, is currently lacking within OpenSea. This deficiency may impede OpenSea's capacity to attract and retain users. The direct evidence of this limitation can be observed through the vampire attacks carried out by LooksRare and X2Y2, which successfully attracted a user base.

Fragility in User Retention.

User stickiness denotes the level of loyalty exhibited by users towards a particular platform or brand. OpenSea exhibits a precarious user stickiness, implying that users may not exhibit strong loyalty to the platform and instead demonstrate greater interest in speculative investments (purchasing NFTs with the intention of later profiting from their resale). Essentially, the primary focus of most OpenSea users lies in the opportunity for arbitrage across various platforms, overshadowing their pursuit of superior platform performance. In response to this user segment, Blur has implemented airdrop plans accompanied by robust expectation management.

Overall, these factors imply that OpenSea may encounter difficulties in competing within a rapidly evolving market, imparting valuable insights for nascent projects. To uphold its competitiveness, OpenSea ought to prioritize the enhancement of platform functionalities and user experience. Establishing a token economy as a means to incentivize user participation should be considered. (Acknowledging that while the likelihood of OpenSea issuing its own token is low, there exists a noteworthy possibility of token issuance through its subsidiary, Gem.) Furthermore, fostering robust customer relationships is essential for augmenting user loyalty.

How far can Blur go?

Valuing NFTs presents a fundamental challenge within the market. Diverging from traditional assets, NFTs possess unique attributes and lack intrinsic value foundations, making the determination of a minimum price or fair value a laborious task. This opacity impedes the facilitation of derivative and secondary market transactions, as participants often struggle to reach a consensus on asset valuation. Platforms like OpenSea and Blur aim to alleviate this predicament by providing a transparent and dependable marketplace for NFT transactions.

OpenSea stands as one of the pioneering NFT marketplaces, renowned for its facilitation of NFT creation and cultivation of a communal atmosphere. OpenSea's triumph has served as a guiding model for subsequent marketplaces, including LooksRare and X2Y2, which have embraced similar frameworks while integrating token economies to bolster the promotion of their respective offerings.

Blur emerges as an alternative NFT marketplace that prioritizes speculation over collecting. Users on Blur are primarily motivated by monetary gains, exhibiting minimal interest in the specific nature of the held NFTs as long as they meet a minimum price threshold. Regarded as a speculative platform, Blur attracts individuals primarily seeking value exploration and profitable trading opportunities, with less emphasis on curating personal collections.

Hence, our assessment suggests that the NFT marketplace has a relatively shallow moat.

Where will the next groundbreaking project emerge?

Currently, NFT marketplaces can be categorized into specialized platforms involving market makers, LPs, and traders, with Blur serving as a representative project. Conversely, retail-oriented platforms that offer fundamental functionalities like Mint, Collect, Buy, and Sell can be exemplified by Opensea. The competition in the NFT marketplace primarily revolves around these two categories. Specialized marketplaces should prioritize providing traders with stable trading depth and professional tools. Meanwhile, retail-oriented marketplaces must focus on platform empowerment and sustaining a steady flow of traffic, as initial traction plays a pivotal role in the success of an NFT marketplace.

Based on the aforementioned analysis, we derive the following conclusive predictions:

A prominent trajectory in the future progression of the NFT market is the proliferation of vertically specialized platforms. These platforms will center their operations on distinct asset categories or market domains, encompassing domains like gaming NFTs, sports NFTs, or music NFTs. By directing their focus towards specific market segments, these platforms can furnish customized services and allure user communities that align with their respective domains.

Another notable trend is the emergence of novel trading assets within the NFT market. Going beyond the realm of PFP (Profile Picture NFTs), as the market undergoes ongoing evolution and advancement, new categories of assets will emerge, captivating the attention of speculators.

Technological advancements in the NFT market call for more efficient and comprehensive marketplaces. Presently, the majority of NFT platforms utilize similar AMM/Bonding Curve Protocols that are susceptible to manipulation and inefficiencies. The emergence of new protocols offering enhanced transparency and efficiency in trading mechanisms is expected.

Finally, the network effects and established user community of the Ethereum blockchain present challenges for multi-chain NFTs and L2 NFTs in competing with ETH NFTs. However, as other blockchains progress and emerging technology, possibilities for cross-chain transactions and interoperability may arise.

Reference

[1] Kunal Goel, "Meessari: How will OpenSea's Acquisition of Genie 'Break the Mold'?" WeChat Public Account, 2022, 05(7): https://mp.weixin.qq.com/s/ph8vNngMgU8344xNYsxxOQ

[2] Karen, "Understanding Genie and Gem: Pioneers of NFT Marketplace Aggregation," Foresight News, 2022, 12(2): https://www.defidaonews.com/article/6729148

[3] Alastair, "The Rise of NFT Finance (NFTfi) and Over-the-Counter Trading," OFR, 2022, 13(6): https://mirror.xyz/0xe70628e0E8e15F222AAdb406ce93fea713d6c30e/1LT5liPLgVCoWx8fVxudYVQYg-L-E7wKJWYVkdV-tUI

[4] Devin Finzer, "Opensea Acquires Gem to Invest in 'Pro' Experience," Opensea Blog, 2022, 25(4): https://opensea.io/blog/announcements/opensea-acquires-gem-to-invest-in-pro-experience/

[5] Alex Atallah, "Creating NFTs for Free on OpenSea," Opensea Blog, 2020, 29(12): https://opensea.io/blog/announcements/introducing-the-collection-manager/



Author: CloudY, Jam

Editor: Vincero, YL

Reviewer: Yasmine

In late November 2022, OpenAI launched ChatGPT, an intelligent conversational system, garnering global attention and stimulating extensive discourse.

Equities within the AI sector experienced a notable surge across the A-share market, the U.S. stock market, and the realm of cryptocurrencies. As ChatGPT gained widespread adoption, its profound impact on the global landscape became apparent, leading to the emergence of novel application scenarios and iterative products of similar nature.

Even Microsoft's acquisition of OpenAI and the subsequent integration of ChatGPT into the Bing and Office ecosystem generated soaring investor expectations, reflected in a significant increase in stock price. However, the introduction of ChatGPT4, showcasing superhuman artificial intelligence capabilities, tempered initial excitement and prompted individuals to contemplate the transformative effects of AI on their respective industries and the potential risks associated with further AI advancement.

Against this backdrop, this article aims to explore and address these inquiries by undertaking comprehensive research of both the AI and Blockchain industries, seeking to provide insights and solutions.

Current Development Status of the AI Industry

Productivity Tools

AI can be regarded as a transformative productivity tool, akin to the impact of historical technological advancements such as stone tools, steam engines, internal combustion engines, electric motors, computers, and the internet on human society. By minimizing the barriers to human-computer interaction and augmenting the efficiency of repetitive production tasks, AI can induce substantial shifts in productivity and production relationships. Consequently, AI's influence extends to improving the overall quality of human existence and mitigating impediments to human progress.

AI technology has significantly influenced diverse sectors, including intelligent manufacturing, healthcare, finance, transportation, education, etc. By enabling machines to acquire knowledge and autonomously execute non-creative tasks, AI contributes to enhanced productivity and cost reduction in specific industries. Notably, in pharmaceutical research, AI finds application in protein structure prediction. The ESMFold model was developed by the Meta AI team, which effectively predicted protein structures from a vast dataset comprising over 600 million macro genomes. This remarkable achievement unveils the extensive scope and variety of natural proteins, surpassing previous bounds of the imagination.

In practical terms, AI technology enables the processing complex programs through natural language. It obviates the necessity of comprehending intricate programming or possessing coding proficiency. Instead, users can express their desired outcome to the AI system, which autonomously executes the requisite intermediate steps to attain the intended result. This augmented productivity stems from AI's capability to bridge the divergence between human intentions and task execution, negating the requirement for extensive programming expertise or comprehension of intricate algorithms.

(From Goldman Sachs Global Investment Research)

The AIGC technology holds vast potential for applications in various domains, including intelligent customer service, virtual agents, and gaming. By leveraging existing language datasets, ChatGPT enables a seamless and natural conversational experience in virtual agent systems and gaming platforms, enhancing user satisfaction and product competitiveness. Additionally, ChatGPT effectively replaces humans in repetitive content generation tasks, such as generating reports, gathering and summarizing information, translating, and producing conditional illustrations. This AI augmentation liberates human productivity, allowing individuals to focus on providing essential instructions and engaging in creative pursuits, relieving them from mundane task execution.

Technology Trends Guide

The prevailing core applications of AI encompass general Artificial Intelligence, Knowledge Graphs, Data Analysis and Synthesis, Autonomous Driving, and AI-Generated Content (AIGC).

Knowledge graphs: Graphical representations of diverse entities, relationships, and attributes in knowledge graphs support intelligent search, recommendation, and question-answering applications.

Synthetic data: Generated through machine learning and other AI techniques, synthetic data is used to train and evaluate AI models, overcoming challenges related to privacy and security when obtaining or sharing real data.

AIGC: AIGC technology, utilizing deep learning and generative models, is widely discussed and applied in domains such as text generation, audio generation, image generation, video generation, and more.

(From Guohai Securities Research Institute)

In 2022, AIGC experienced a significant breakthrough in market financing and media attention. However, it is essential to note that AIGC is still a nascent technology and is in the early stages of exploration and development.

Specifically, the development stages of AIGC can be categorized as follows:

Research stage: This phase primarily focuses on elucidating the fundamental principles and algorithms of AIGC, investigating methodologies for model training and optimization, and establishing comprehensive databases.

Application stage: AIGC initiates its deployment in diverse real-world scenarios, exploring effective integration of AIGC technology into specific domains.

Industrialization stage: AIGC undergoes widespread adoption across multiple industries and fields, giving rise to its distinct industry chain and complementary ecosystem.

In summary, we have recently transitioned from the research stage to the application stage, indicating that the development of AIGC is still in its nascent phase.

(From Guohai Securities Research Institute)

Key Components

Data, algorithms, and computing power are the three pivotal factors propelling the advancement of AI.

In the data domain, the increasing significance of data quality and diversity accompanies the ongoing evolution of AI technology. Besides abundant domain-specific data, effective data cleaning, preprocessing, and labeling are imperative for improving algorithm training accuracy. Furthermore, cross-modal and cross-domain data fusion is critical in extracting enhanced value and intelligence.

Concerning algorithms, the current state of AI technology exhibits iterative advancements and continuous refinement. Future trends center around deep learning algorithms encompassing multi-modal and large-scale models alongside innovations in autonomous learning, knowledge transfer, and incremental learning. These developments will elevate the intelligence level and expand the application scope of AI algorithms, facilitating the widespread adoption of AI technology.

Regarding computing power, the acceleration and optimization of AI computations drive ongoing hardware upgrades and enhancements. Specialized chips like GPUs and TPUs have emerged as crucial contributors, significantly amplifying the efficiency and speed of AI computations. Additionally, cloud and edge computing advancements offer more flexible and diverse computational environments for AI processing.

(From Goldman Sachs Global Investment Research)

The Current Stage of Blockchain Industry

Distributed Ledger

Blockchain is a decentralized distributed ledger.

Blockchain is a decentralized and distributed ledger with the crucial immutability property derived from its underlying consensus mechanism. On-chain data is recorded in blocks and validated by miners/validators, forming a continuous chain. Once data is recorded in a block, whether generated by smart contracts or accounts, it becomes unalterable.

The difficulty and cost of disrupting consensus increase with the number of nodes, geographic distribution, computational power, or the value of staked tokens. As a result, altering the recorded content becomes a formidable task for centralized entities.

Moreover, in an unalterable setting, smart contracts, constructed through code, empower users to engage with them without relying on any third party for trust. These intelligent contracts execute predetermined code paths to facilitate relevant operations, ultimately enabling the realization of trustless transactions on the blockchain.

Furthermore, assets within the smart contract can only be accessed by the associated account, preventing other accounts from transferring assets from the original account through the smart contract. Each operation of the original account requires a signature to confirm identity, and even the initial transfer interaction requires prior Approve for the smart contract to access the account's assets. This design positions the user's wallet account as the ideal vehicle for their identity (DID) and assets.

Within the framework of consensus mechanisms and smart contracts, all on-chain assets and actions can be recorded and attributed accurately, facilitating the automatic aggregation of related benefits into the rightful owner's account. This effectively resolves the problems of counterfeit assets and impersonation, as it prevents unauthorized individuals from copying and pasting to steal assets or usurp the interests of the rightful owner.

Specifically, digital assets can be uniquely defined using tokenized smart contract addresses. For example, non-fungible tokens (NFTs) can represent digital artworks. Additionally, individuals' actions can be authenticated using non-transferable tokens (SBTs), providing proof of their work or presence in a specific time and space (Proof of Work/Proof of Attendance).

Technology Trends Guide

The layered structure of the Blockchain technology architecture is characterized by Layer 0-2, with consortium chains and private chains representing distinct types of Blockchain application scenarios.

Layer 0 refers to the physical infrastructure and network architecture of the Blockchain, encompassing hardware devices, network protocols, and transmission media. It serves as a foundational component enabling cross-chain communication and addressing asset-related issues. Notably, leading technologies such as Cosmos, Polkadot, and LayerZero are prominent representatives within this domain.

Layer 1, also known as the base layer or public chain, plays a fundamental role in the Blockchain ecosystem. Prominent examples of Layer 1 include widely recognized platforms like Bitcoin and Ethereum. The protocols' design and technological implementation at Layer 1 have a significant influence on the core performance and functionalities of the Blockchain system. Furthermore, Layer 1 can be further categorized into distinct types, such as EVM (Ethereum Virtual Machine) and non-EVM-based systems, based on their specific characteristics.

Layer 2 refers to the protocols and solutions built on top of Layer 1, aiming to enhance the performance and expand the application scenarios of the Blockchain. There are currently six types of Layer 2 protocols, with ZK Rollup and Optimistic Rollup being the mainstream ones. These protocols enable the Blockchain to process a greater number of transactions, improve TPS, and reduce Gas fees.

A Consortium Chain is a collaborative blockchain network governed by multiple organizations or institutions with shared interests, such as banks, insurance companies, and supply chain companies. It differs from public chains as it has a restricted number of participants and nodes, leading to enhanced transaction speed and security.

A Private Chain is a permissioned blockchain network belonging to a single organization or institution, usually allowing only internal personnel to participate.



Key Components

Distributed nodes, cryptography, consensus algorithms, smart contracts, and cryptocurrencies constitute the foundational elements propelling the advancement of Blockchain technology.

Distributed nodes constitute the foundational essence of Blockchain technology, facilitating decentralized storage and transmission of data. Cryptography serves as an essential theoretical instrument, ensuring the security and privacy of the Blockchain. Furthermore, consensus algorithms play a pivotal role in establishing distributed consensus within the Blockchain network. Smart contracts, being self-executing computer programs, enable the execution of diverse logical instructions on the Blockchain. Lastly, cryptocurrencies, empowered by encryption techniques, ensure the security and anonymity of transactions.

Through the utilization of distributed nodes, all participants are able to maintain a comprehensive replica of the data, thereby ensuring both transparency and security. The essential technologies within Blockchain, including hash functions, digital signatures, and asymmetric encryption, are cryptographic applications. These technologies play a crucial role in safeguarding data integrity and verifying identities, all while upholding user privacy.

Through the implementation of consensus algorithms including Proof of Work (PoW) and Proof of Stake (PoS), all nodes can achieve unanimous agreement, ensuring data consistency and immutability. Smart contracts facilitate trustless transactions, eliminating the need for intermediaries and thereby enhancing transaction efficiency and security to a certain degree. The emergence of cryptocurrencies like Bitcoin and Ethereum has propelled the widespread adoption and advancement of blockchain technology.

The Intersection of Blockchain and AI

Amidst the AI revolution, it is imperative to reflect on the extent to which AI has transformed Blockchain, as well as the impact of Blockchain's decentralization and trust capabilities on AI.

Firstly, AI, functioning as a productivity tool, possesses the potential to diminish technical barriers, consequently reducing the hurdles within the blockchain industry and enhancing its overall efficiency.

Secondly, AI-powered games and metaverses will liberate themselves from predetermined settings, ushering in fresh narratives and gaming experiences within the blockchain realm.

Blockchain's smart contracts can establish the domains and boundaries within which AI operates or impose limitations on AI's permissions, thereby preventing its unwarranted proliferation.

Furthermore, the decentralization of blockchain can facilitate the sharing and allocation of resources, including the fundamental data and computational power indispensable for training AI models.

Moreover, the authentication capabilities of blockchain can furnish evidence regarding data integrity, identity validation, and ownership rights, thus mitigating conflicts of interest that may emerge from AI applications.

The Significance of AI for Blockchain

Firstly, AI, as a tool, has the potential to lower the barriers to content creation, allowing individuals without technical expertise to express their creativity and produce high-quality content. This encompasses various domains such as NFT creation, game asset development, metaverse modeling, and code generation.

However, the current utilization of AIGC in the NFT field is predominantly limited to generating simple images, lacking fundamental distinctions from traditional Generative Art. To fully leverage the potential of AIGC in the NFT space, further exploration is required to expand the characteristics of NFTs, akin to how Mirror World employs AI to imbue NFTs with a distinct essence.

(From A16Z Research)

Secondly, there is a significant reduction in technical barriers related to code development. Code writing encompasses smart contract deployment and hacking or white-hat activities, representing opposite ends of the spectrum. AI can facilitate the deployment of smart contracts through natural language programming, while adversaries can employ AI to analyze contract code and launch attacks. By leveraging AI, it becomes possible to iterate on deployed contract code, fostering internal competition and establishing a more robust and reliable codebase industry-wide. This foundation allows stakeholders to prioritize optimizing blockchain architecture, designing comprehensive projects, and enhancing gameplay, thus fostering innovation at the business level.

Similarly, the simplification of technical barriers by AI enables the widespread application of previously complex operations. Examples include flash loans, optimal mining strategies, and automated yield acquisition, the Judgment of Head Miner Exit Time, all of which can be accomplished by AI. AI possesses the ability to autonomously program, select paths, and directly execute these operations. This parallels the usage of skill cards in the game Yu-Gi-Oh!, where skill cards activate and take effect automatically. This accessibility empowers ordinary users to engage in operations that were previously limited to those with high technical expertise. For instance, capturing MEV typically requires programming an MEV bot. However, when such tasks become achievable by ordinary individuals, profit margins diminish as participation becomes widespread. Consequently, a gas race ensues, where elevated gas fees erode the value of MEV due to the principles of game theory. Ultimately, this leads to reduced profitability and diminished impact of MEV. This phenomenon exemplifies a form of technological development that stimulates industry optimization.

AI will facilitate the widespread adoption of blockchain technology. Currently, there are fewer than 320,000 active Ethereum users, representing a small fraction of total internet users, according to data from Footprint Analytics. The primary challenge lies in the lack of user demand and the complexities of on-chain interactions. Previously, integrating data into the blockchain or using blockchain-based tickets and credentials required establishing a blockchain system or incurring high gas fees, resulting in significant costs. However, leveraging AI technology now allows for low-cost blockchain construction and optimization of on-chain data usage, leading to reduced gas fees. As a result, blockchain technology can be applied and smart contracts deployed in various domains requiring authentication and transparency. Ultimately, an AI-driven simplified interaction system will attract a significant number of users to the blockchain industry.

The impact of AI in the blockchain context is primarily limited to the application layer. Users can leverage AI to bypass the complexities of writing smart contracts and directly deploy applications tailored to their needs. Consequently, project development emphasis will shift from issuance to innovation and operations. The application layer is expected to undergo substantial transformative changes in the future. However, AI's influence does not extend to the underlying layers, including the execution, consensus, and data layers, which necessitate fundamental advancements. Mere automation of repetitive tasks is insufficient to drive qualitative transformations in these areas. For example, the implementation of EIP1559 in the Ethereum London upgrade has bolstered Ethereum's progress, while the completion of the Shanghai upgrade is crucial for increasing ETH staking volume, reinforcing Ethereum's security, and revitalizing the LSD sector's growth.

（From Crypto.com）

The Role of Blockchain in AI

The inherent disparity between the decentralization of blockchain and the centralized AI technology paradoxically provides an opportunity to address the challenges encountered in AI.

The predominant centralization of modern AI and big data technologies under the control of a limited number of powerful entities with significant technological capabilities and resources confers influence over market trends and user behavior. Consequently, individuals are compelled to trust AI's faithful execution of instructions, leading to inherent risks such as privacy breaches, algorithmic biases, and data misuse.

The distributed and decentralized nature of blockchain provides a practical solution to these challenges. Through smart contracts, data accessibility and operational boundaries can be limited, thus alleviating the risk of malicious behavior. Deploying monitoring nodes enables penalizing misconduct by confiscating AI's computational resources. This framework ensures AI's directed focus on human development, preventing excessive utilization and unauthorized actions.

Blockchain empowers anonymous users to decide whether to contribute underlying necessary data for AI model training. Zero-knowledge (zk) technology enables the disclosure of user data while preserving personal privacy. The entire process of data collection, storage, and sharing operates on decentralized nodes, ensuring data security, availability, and source verification. Consequently, a proportionate share of the profit generated by AI model can be distributed as dividends to data owners. A suitable incentive mechanism can leverage the decentralized nature of blockchain with high data security.

Likewise, users prompting AI models can also receive partial profits based on their ownership of the prompts when utilized. This arrangement safeguards the interests of both AI data owners and prompt providers.

Computational mining is a crucial consideration due to the substantial data and adequate computational power requirements. However, the current global supply of computational resources falls short of demand. To address this, decentralized cloud computing mining pools can aggregate resources and provide subsidies to contributors. Subsequently, the auctioning of computational power for AI model training ensures efficient utilization of limited resources with computational security and reliability. Furthermore, the integration of data, algorithms, and computational power enables the development of an AI-as-a-Service protocol. Leveraging decentralization and reusability, this protocol offers AI model construction services to users in need, covering data acquisition, processing, algorithm selection, and computational resource allocation. This ecosystem-based approach mitigates centralization risks while preserving supply chain benefits.

In the realm of AI application, blockchain effectively addresses issues like piracy, plagiarism, and virtual identities that arise from AI's remarkable learning capabilities. By recording artworks as on-chain NFTs, unique smart contract addresses validate their authenticity. The value of artworks, besides their inherent artistic qualities, also depends on the identity of their creators, just as imitations of Van Gogh's Sunflower hold little value. While blockchain can prove which sunflower painting is truly crafted by Van Gogh's hand. Also, blockchain can be employed to build distributed knowledge graphs, ensuring data integrity, permanence, and availability.

To address the construction of virtual identities using personal data by AI, Owner Attested Tokens (OATs) or Self-sovereign Biometric Tokens (SBTs) can be utilized. Each blockchain action is logged, and the corresponding OAT or SBT created is distinct, enabling identity verification based on these tokens. Blockchain's tamper-proof nature guarantees the impossibility of fabricating non-existent events.

In summary, AI serves as a productivity tool, propelling the adoption of blockchain and introducing novel narratives for metaverse. However, AI is limited to replacing repetitive tasks and reducing technical barriers, unable to drive innovation in critical technologies. Consequently, AI's impact on the blockchain industry remains confined to the application layer.

On the other hand, blockchain functions as a risk controller and resource optimizer in the AI industry. It curbs excessive AI development and unauthorized operations, safeguards data and asset ownership rights, and optimizes the integration of data and computational resources required by AI. Nonetheless, its purview is primarily concerned with promoting transparency, decentralization, and data ownership within AI.

Reference

[1]"Bitcoin: A Peer-to-Peer Electronic Cash System" by Satoshi Nakamoto (2009.03)

[2]"Mastering Bitcoin" by Andreas Antonopoulos (2016.03)

[3] "Challenges and Recent Advances in Blockchain-Based Payment Channel Networks" (2021.07)

[4] "Beyond Web3: The Fantastic Drift of AIGC, the New Darling of Capital" by 0xmin (2022.10)

[5] "The Dilemma of AIGC and the Way to Break Barriers in Web3" by wheart.eth (2022.11)

[6] "AIGC: The Revolution of Content Productivity" by Yang Renwen (2022.12)

[7] "Emergence and Evolutionary Information of Large Language Models: Accelerating Protein Structure Prediction" by Zeming Lin (2023.03)

[8] "How AI Can Help Build Web3" from crypto.com (2023.03)

[9] "Reflections: The Impact of AI Breakthroughs on Creators and NFTs" by Sleepy (2023.04)

[10] "Ethereum White Paper" by Vitalik Buterin (2023.05)

#OpenAI #chatGPT-4 #crypto2023 #Binance

Author: CloudY,

Editor: Vincero, YL

Reviewer: Natalia

Layer 2, as an optimized scheme of the Ethereum public blockchain, has been a hotspot of attention, discussion and R&D. For example, R&D teams have made active attempts at the technical solutions of layer 2, such as the Ronin where Axie is in, and Starknet, Arbitrum, Optimism and ZKSync used by DYDX. So what is layer 2? The Ethereum public blockchain itself is called layer 1, main net, or main blockchain layer, and layer 2 means moving transactions from the main blockchain layer to a separate layer that can communicate with the main chain to achieve faster transactions with a lower gas fee. As shown below, layer 2 is like a sort of expressway established on the Ethereum main net to shunt the volume of transactions and ease the congestion of transactions on the main blockchain layer of Ethereum. Currently, there have been several technical solutions for layer including the status channels, sidechains, Plasma, Rollups, and so on. Sidechains and Rollups, two common solutions to the people, differ as follows: the former needs to be verified by its own independent nodes, with its safety mainly depending on itself (Polygen is one of the sidechain cases), while the latter processes transactions in batches and in a centralized way under the chain based directly on layer 1, and releases the updates to the main blockchain along with the transaction data on its chain, and its safety still relies on layer1.

(Fig. 1: Schematic diagram of Layer0, Layer1 and Layer2)

Despite the higher safety than sidechains, Rollup still has a limited effect on the current optimization of the Ethereum main net. However, it is undeniable that Rollup is truly optimized based on the Ethereum main net, and the project on the Ethereum main net can enter the chain using Rollups without making any changes,and users donot need to take the risk of using a cross-chain bridge to transfer assets; that is, any possible transaction on the Ethereum can be executed in the Rollup technology. The principles are shown below. A chain based on the Rollup technical solution will establish a Rollup contract on the Ethereum main net to monitor the state of the Rollup chain, including the account balance of the user carrying on transactions on the chain and the smart contract code of the contract herein. The information is recorded in a “state root” composed of a key-value mapping, where the key is the address and the value is the account. Each account has a maximum of four attributes: balance, random number, code (for smart contract only) and storage (for smart contract only). Since the Rollup only releases the transaction data on the main chain rather than executes the transaction on the chain, the transaction data and state root released on the main chain may be fraudulent. Therefore, the Optimistic Rollup and ZK Rollup solutions are proposed to solve the key problem.

(Fig. 2: Schematic diagram of technical principles of Rollup)

Different from the Optimistic Rollup which is optimistic about the reliability of all submitted state roots and keeps it safe by submitting the fraud-proof, the ZK Rollup is another situation. In the ZK Rollup, ZK-Sync uses the encryption proof of ZK-SNARK to release the state root and uses ZK proof technology (one party is allowed to prove something without disclosing the information required to prove this thing) to verify the authenticity of the state root, thereby avoiding the access to the data itself and ensuring the privacy. Compared with the Optimistic Rollup which takes one week to withdraw, assets can be withdrawn within only 10 minutes with the ZK Rollup. Nevertheless, ZK-SNARK, as a new technology with incredibly complicated mathematics, leads to the ZK Rollup still being under development, and thus the ZK Rollup is less adaptable than the Optimistic Rollup. Yet, the ZK Rollup also has its notable advantages; with no need for the witness of transactions, ZK-SNARK greatly reduces the data stored on the chain and increases the expansibility, and ZK-SNARK’s being able to verify each transaction and makesit safer.

Similarly, StarkWare also adopts the ZK Rollup but is based on the ZK-STARK. Since the ZK-STARK technology is improved in the expansibility, and reliability set of skipping initialization and post-quantum computing, compared to the ZK-SNARK, it is not as mature as the latter and cost higher gas fees. In addition, StarkWare uses the Cairo language, making it hard to be compatible with EVM once Turing Completeness is achieved. In response to this problem, the StarkWare team has developed a code translator Warp to seamlessly convert the Solidity smart contract into Cairo. What’s more, StarkWare has now achieved the ZK Rollup dedicated to dydx, Immutable, and Deversifi through StarEx.

Layer 2 and Rollup, one of the technical solutions to Layer 2, have been briefed above. We believe that the ZK Rollup, one of the directions of the Rollup, has more obvious advantages and better expansibility and that the chains based on the ZK Rollup are more likely to be widely used in the future. However, can the ZK Rollup chain really stand out in the numerous sidechains and Arbitrum and Optimism after launch on the main net, and occupy a position as high as its technical level? In this paper, an attempt is made to evaluate and analyze, from four dimensions, public blockchains that perform better in each dimension and speculate the development potential of the ZK Rollup chain based on this, and then the corresponding suggestions are given.

Four dimensions:

Crypto Native

On-Chain Asset

Ecosystem

Community

1. Crypto Native

The concept of the crypto native measures the importance of blockchain technology, such as the groundbreaking progress in concept and technological innovations. For instance, Ethereum has pioneered a Turing-complete virtual machine, which expands the blockchain from a payment network of Bitcoins to a network of complex interactions, making concepts such as DeFi possible. There are also many other public blockchains with unique technologies, novel concepts and different attempts. In this paper, Cosmos, Polkdaot and Solana are selected as the representatives of the crypto native to illustrate how public blockchains secure a place in the crypto native through their innovation or performance improvement.

（1）Cosmos

Cosmos perceives the future as a multi-chain universe of blockchains focusing on different functional applications. Based on this conception, Cosmos has developed three basic components: 1) Tendermint consensus protocol, 2) Cosmos SDK, 3) IBC (Inter Blockchain Communication) protocol, which has settled the inter-blockchain problem and made the multi-chain universe possible. It has streamlined the development process of blockchain applications and developed a rich SDK and Tendermint engine to enable developers to focus on the applications themselves rather than underlying protocols. More importantly, Cosmos has realized active inter-blockchain, where atomic transactions can be carried out on each chain via Cosmos’s Hub, unlike other mainstream cross-chain bridges which create pools of capital in different chains to realize the so-called cross-chain.

（2）Polkdot

Polkadot realizes inter-blockchains by “relay chains” (main chain) and “parallel chains” (chard chain). Each parallel chain is connected with the relay chain to realize its communication with other parallel chains, while each relay chain supports about 100 parallel chains. Polkadot uses Wasm as the meta-protocol, which allows parallel chains to define their own logic and language, and they only need to provide their own state transition functions for verifiers of relay chains to execute before they are connected with relay chains. Polkdot’s applications can be stored in a certain parallel chain or deployed across parallel chains. Although relay chains can be connected with each parallel chain, they have limited interfaces and parallel chains need to bid for slots by auction, which is often referred to as “slot auction”.

（3）Solana

Solana intends to expand throughput while keeping costs low. To this end, Solana uses an innovative hybrid consensus model, which combines the unique proof-of-history (PoH) algorithm with a lightning sync engine (which is another version of proof-of-stake, PoS). PoH is the core part of the Solana protocol, which can provide a timestamp for each transaction on the network to confirm the transaction that occurs at any point in time on the network. PoH, which relies on the PoS that uses the tower Byzantine Fault Tolerance (BFT) algorithm, is an optimized version of the practical Byzantine Fault Tolerance (pBFT) protocol. In addition, Solana uses unique Rust language to write the smart contract and uses BPF bytecodes to achieve a higher execution efficiency, i.e. TPS.

2.On-Chain Asset

The on-chain asset is the collection of mainstream tokens issued on the blockchain that have relatively stable purchasing power, such as BTC, ETH, BNB,USDT, USDC and DAI. The number of high-quality assets on a public blockchain determines the expandable space for its on-chain asset. There is no universal credit mortgage method currently in the blockchain, and leverage can only be increased by the pledge of assets, while the pledged assets are generally high-quality assets to ensure safety. Therefore, we have chosen three public blockchains with more high-quality assets currently as representatives: BSC, Solana and Terra. As shown in the table below, the mainstream on-chain assets on the three public blockchains are $10 billion and are mainly the public blockchain tokens, BTC and ETH, as well as stablecoins such as USDT, USDC and UST on the public blockchain. The abundant on-chain assets greatly promote the development of the on-chain ecology.

(As of April 17, 2022)

(Sources: BSCScan, SolanaExplorer, Terrascop)

3. Ecosystem

The quantity and quality of ecosystem projects are another important factors that determines the development of the public chain in addition to capital. High-quality projects can attract a large number of active users, generate considerable assets and bring massive funds. Also, establishing a perfect ecosystem requires a certain number of high-quality projects, which can create good interactive experiences for users and developers, can resist external risks to a greater extent and expand the use scope of funds. Based on this, we selected BSC, Solana and Cosmos to judge their ecosystem development through the TVL on the chain, the number of projects and the number of transfers. It can be seen from the following table that BSC has the largest number of projects, Solana has the largest number of transfers, and Cosmos has the highest TVL. That reflects the three public chains have their own advantages in an ecosystem: 1 As the Ethereum side chain, BSC is compatible with all EVM-based projects; 2. Solana can maximize transfer efficiency and optimize interaction experience through high TPS; 3. Cosmos connects all IBC chains through IBC protocol, including the TVL of all IBC chains.

(As of April 17, 2022)

(Data sources: DeFiLama, Nansen, DappRadar, BSCScan, SolanaExplorer, Atomscan, Terrascop)

These three public chains also have developer incentive plans or are supported by the tokens of the exchange to encourage developers to come to develop projects ontheir own public chain and give more resources to early high-quality projects. For example, BSC has the most valuable developer (MVB) speed plan to help high-quality start-up projects to conduct more innovation and transformation, gain mature experience and financial support in the industry, and accelerate the coordinated development of communities and projects. In addition, users naturally expect high-quality projects on BSC to go listed on the exchange. Similarly, Solana is supported by Hackathon and FTX. Therefore, on Solana, high-quality projects will also receive support and development assistance from Solana Ecosystem Fund with the prospect to get listed on FTX Exchange. Cosmos uses the SDK to make development less difficult, and it relies on the resource exchange between chains and the pledge airdrop in the ecosystem to drive the development of the project. For example, the new chain can obtain the capital of the Terra chain by introducing LUNA and UST, while the projects on the Terra chain, such as Anchor, can also cooperate with other chains to include the chain token as a pledged asset to increase the use scenarios of the token.

4. Community

Community refers to the activity of the public chain community and the support of investment institutions. A public chain needs enough attention and funds to develop in a long-term and sustainable way. We mainly observe the total number of users, the number of posts, and the content of messages on social media. Investment institutions mainly observe the early investors of the public chain and the resources they invested in the public chain, such as capital, publicity and cooperation. After a comprehensive investigation, we selected BSC, Solana and Avalanche. As shown in the figure below, the three public chain communities are large and highly active. The focus is on the interaction and ecosystem of the public chain in addition to the rise of the token price. Specifically, because of its advantages in the early stage, BSC has a rich ecosystem and accumulate a large number of high-quality active users, which is also reflected in its largest number of Twitter followers and discord weekly speeches. Solana and Avalanche have acquired many telegram and discord users based in emerging markets. The content of the message mainly includes the popularization of on-chain information science, the question about the on-chain operation, the prevention of fraud, and the consultation of ecosystem projects.

(Note: The data are all from English community, and the number of users is calculated at 11:00 am Beijing time on April 18, 2022)

Unlike the capital and resource-driven Binance, the prosperous Solana and Avalanche communities also benefit from the strong publicity of well-known institutional investors, especially SBF for Solana and Suzhu for Avalanche. They frequently introduce and recommend ecosystem projects of relevant public chains on their social media. Because they have certain decision-making power, they often promise some incentive activities, which attract a large number of new users and improve user engagement. Therefore, in addition to financial support, celebrity influence also helps make public chains popular.

The main investment institutions of the above three public chains are as follows:

The future of ZK

1. Crypto Native

From the perspective of crypto natives, the importance of ZK Rollup is self-evident. Rollup takes an important part in Ethereum towards modular blockchain to expand capacity, that is, to transfer the consensus to Ethereum, and to transfer the execution and data availability to run on Rollup. Among them, zero-knowledge proof, as a highly recognized original crypto scheme, is in essence just to reduce the amount of computation, and ensure the correctness of data. The principle of the technical solution has been described in detail above, and the highly recognized results can be seen from the current fundraising of the two major ZK Rollups (StarkWare/zkSync). What's more, even Vitalik, the founder of Ethereum, mentioned in his article that in the medium and long term, with mature ZK-SNARK technology, ZK Rollup will play its advantage in all use cases. In this way, the crypto native of ZK Rollup is obvious.

2. On-Chain Asset

The second part is about ZK's on-chain funds. We can first judge from the stock funds on Ethereum. There is no doubt that the mainstream currency with relatively stable purchasing power on Ethereum is the largest stock fund of all public chains with smart contracts. The market value of ETH remains in second place among all cryptocurrencies. Secondly, the mainstream US dollars stable currency such as the USDT issued by Tether, the USDC issued by Circle, the US dollar stable currency Dai and MIM based on digital currency collateral, and various algorithmic stable currencies such as Frax and Fei. Moreover, the anchor currency of BTC such as WBTC, HBTC, renBTC, and the above-mentioned mainstream currency with absolute purchasing power on the chain, has its main public chain circulated in Ethereum. Based on this, ZK Rollup is regarded as the much-anticipated expansion solution of Ethereum, and the natural advantages of Rollup make the above on-chain funds staying in the first layer of Ethereum come to the second layer without taking the risk of the current mainstream cross-chain bridge, and can naturally accept many overflow funds from the first layer of Ethereum.

3. Ecosystem

The birth of Ethereum has produced the most mature blockchain ecosystem in the world at present due to the first-mover advantage of web 3.0. It is in the blockchain public chain, whether it is the developer ecosystem, infrastructure and project ecosystem, or even the user ecosystem in Ethereum. For the expansion of ZK Rollup's ecosystem, except for the funds on the chain, whether it can attract the high-quality web3.0 project currently on the first layer of Ethereum to transfer its main activities, capital lock-up, and users to its second layer of the network will become the top priority. Secondly, whether users can really reduce the cost of using gas fees to the level of BSC/Avalanche or even Solana will determine whether ZK Rollup can attract back the funds and traffic overflowing from Ethereum in 2021. Finally, from the history of the public chain, whether the public blockchain can have exponential growth of public blockchain transactions depends largely on new forms of narrative stories, such as DeFi in 2020, NFT and GameFi in 2021. Therefore, whether there is a new form of web 3.0 product landing will also be a key factor for ZK Rollup to leadEthereum to a new high as ZK Rollup will bring exponential growth in Ethereum. We will describe the current ecology of zkSnyc/Starkware respectively hereunder.

Many excellent Web3.0 projects invest in zkSync according to the disclosed fund-raising news, and several CEX has also announced the opening of zkSync-based cash withdrawal channels; more importantly, any token can be used inzkSync to pay for its expenses without purchasing ETH or customized tokens like MATIC. Compared with other layer 2 and even other public chains, this function will make the threshold of zkSync's use as king's bomb. Furthermore, to reduce the difficulty of developers, zkSync2.0 has emphasized that developers can use Solidity to achieve 99% EVM compatibility through the combination of its zkEVM and compiler since its birth. This makes DeFi's large-scale application in zkSync2.0 more likely to happen.

For Starkware, StarkEx was launched in June 2020 as its L2 scalability engine, approving the creation of application-specific ZK Rollup supported by Cairo and STARKs. At present, there are projects, such as dydx, Immutable, Deversifi and Sorare based on StarkEx in operation. Now, the amount locked on the chain has reached $1.16 billion, more than 140 million transactions have been processed, and the cumulative transaction amount has exceeded $518 billion. According to their official development path, they will focus on running the same global L2 of multiple applications on the same StarkNet, to achieve interoperability between different applications, and reduce their gas fee costs due to the improvement of economies of scale, and finally realize the third stage of decentralized operation.

（Figure Source: https://medium.com/starkware/on-the-road-to-starknet-a-permissionless-stark-powered-l2-zk- rollup-83be53640880）

（Starkware: TVL$1.16B; 145M Tx; Biological Project: 85）

（Data Source: https://ecosystem.zkSync.io/, https://l2beat.com/, https://zkScan.io/ and https://starkware.co/starkex/）

4. Community

For the community, the current two projects of ZK Rollup are close to BSC, Solana and Avalanche in terms of the community activity indicators, such as the total number of social media speakers, message content, etc. Even in terms of the number of Discord speakers, zkSnyc is even ahead of other public chains, based on the fact that the main network has not yet been online. From the perspective of investment institutions, in March 2022, StarkWare carried out the latest round of fundraising with a scale of $6 billion, opening up its previous investors. This is definitely superbly top in financing. There are also well-known top investment institutions in the crypto market except for the founder of Ethereum, Vitalik Buterin, such as Paradigm, and Sequoia Capital in the era of web 2.0. On the other hand, the fundraising process of zkSnyc seems to be closer to developers and users. Except for VC, such as Union Square Ventures and A16Z, there are also a series of DeFi projects and exchanges' investments, which are also expected to bring rapid integration after the main online line of zkSync2.0.

Investment institutions and fund raising are shown in the following table:

Because ZK has attracted much attention due to its technical advantages, as seen from the above chart, two top projects of ZK Rollup have also been favored by many investment institutions. In particular, zkSync earns massive investments from exchanges and web 3.0 project parties. It is not difficult to see that many well-known centralized exchanges and web 3.0 projects are quite optimistic about ZK Rollup.

Finally, ZK Rollup has proven to us that it is feasible to exponentially reduce the gas fee in Ethereum and significantly improved the scalability. Op research urgently expects ZK Rollup to bring a new Ethereum to the community and users in the foreseeable future. If all goes well, we can boldly imagine that web 3.0 products for large-scale applications are at hand.

Reference

https://www.pcmag.com/encyclopedia/term/layer-2-blockchain

https://www.preethikasireddy.com/post/a-normies-guide-to-rollups Binance (BNB) Blockchain Explorer

https://explorer.solana.com/

https://terrasco.pe/

Author: CloudY, Sihan

Editor: Vincero, YL

Reviewer: Crystal

The sizzle of non-fungible tokens (NFT) has been surging since 2020. Cyptopunk comes first and PFP NFT projects spring up such as BAYC, Doodle, Azuki, etc. NFT becomes visible and known to the public at a breakneck rate. BAYC recently has launched APE tokens and Otherside Land, bringing record-high popularity to PFP NFT. The rise and fall of GameFi projects, such as Axie, Farmerland, Radio Caca, Crabada, Mobox, Mines of Dalarnia and StepN, has attracted a high level of interest. That tide also enables users to know what is NFT and attracts a flood of traders, especially outsiders, to the NFT market. Thus the market is wondering why NFT can be so buzz-worthy in a big and enduring way. Since the enduring popularity of NFT is the result influenced by many factors, we put our focus on how many funds NFT can raise. This paper will elaborate on how NFT develops an emerging market as a new form of fund-raising, and what makes NFT stand out. Before coming to the point, we’ll first untangle and introduce the way crypto raises funds and how it evolves to make the paper accessible.

I. How the way Crypto raises funds evolves

The way crypto raises funds evolves frequently from the shambolic market at early days to a sizable market. At infancy, cyrpto raises funds in a similar way to traditional finance. That can be revealed from the initial coin offering (initial ICO), private sales ( including angels, seed round, series A, series B, etc.), and the evolved initial exchange offering (IEO), initial dex offering (IDO), initial farm offering (IFO) and other forms of launch, and even grant&private forms such as gitcoin and hackathon. Project providers hence have more choices to acquire funds in the most suitable ways.

ICO

ICO in the crypto industry has a likeness to IPO in traditional finance. IPO is the process where companies issue private shares to the public by offering new shares and acquire funds by issuing shares in the primary market. However, companies as IPO candidates must meet the requirements of the Exchange and the Securities and Exchange Commission (SEC) before launching an IPO. Also, companies generally engage investment banks to launch marketing campaigns, evaluate demands, price IPO, and set dates. On contrary, ICO set fewer restrictions. When using ICO to raise funds, companies directly issue their tokens which will be purchased by the public with BTC, ETH or stable tokens (such as USDT, USDC, DAI, etc.). Free of review by exchanges and promotion by investment banks, fundraisers usually publish a white paper among investors to introduce projects. Because it is made directly available to the public, the entire cycle is shorter than private placement, which avoids the rehashing of values to investors. ICO is a favorite for start-ups because its costs are lower and its smart contracts can speed up the process. The reality that investors have to spend tons of time and effort to know the projects undergoing ICO on white papers and smart contracts undoubtedly increases risks, consumes time, and also results in potential fraud, thus requiring extremely high credibility. This is exactly what the chaos during ICO shows.

A security token offering (STO) is a special fund-raising form designed based on ICO. STO combines traditional IPO and ICO by collateralizing certain assets to issue securitized virtual tokens. Similar to IPO, this process is regulated by security law, which makes STO highly credible, but the issuance has to go through complicated procedures and regulatory restrictions. The strict restrictions force most projects to abandon the use of STO, and then STO is out of the spotlight.

Private Sale

Experiencing unregulated ICO, investors and project providers switch to choosing private fund-raising. Crypto also shares or directly copies the similar way of private financing as traditional finance, including angel, seed round, series A, and series B, to name a few. In each round of financing, a single big sum is raised only from a small portion of institutional investors or individual investors at all stages of projects. The advantage of the private placement is that project providers can raise funds several times by convincing investors of the quality and value of projects with prospects. Investors may inject different resources other than capital. Although private placement can offer a big sum, it lasts for a longer cycle and attracts small investors in the single series, and project providers need to lobby investors repeatedly. Even if investors are asserted to support the projects, the investment has slim contributions to valuation, especially when projects begin to raise funds.

Lanuch

Following the private sale, IEO, IDO and IFO evolve from ICO but address the issue of trust, save time in project screening, and are open to more investors. The main difference is whether fund-raising activities are based on the centralized exchange (IEO) or decentralized exchange (IDO). The exchange acts as an intermediary between investors and project providers to promote projects for money-raisers and screen projects for investors - that is also named Launch by the exchanges. As a variation of IDO, IFO changes the subscription of project tokens. Instead, investors need to pledge the quantity and times of mining to subscribe for project tokens. IFO, on the one hand, avoids unrestricted token issuance which could happen in ICO, and, on the other hand, raise the costs of project providers who must pay the launch fee to the exchange. In addition, since tokens issued by the exchange are required for subscription, investors have to consider the pressure of token price swings. The possibility of inside-trading also concerns investors.

Grant & Prize

Grant & prize such as gitcoin or hackathon donations or bonuses are simpler and more direct. When project providers only need to sign up for the current activities, investors give donations or votes if they like. Despite a long process, project providers neither bear costs nor provide certain tokens. Quality projects will get more grants & prizes and attention than other projects and more importantly, attract a fresh batch of highly active early adopters, which is conducive to financing. Therefore, more projects choose gitcoin or hackathon to build up resources since the beginning of the launch.

In general, different forms of fundraising have their positives and negatives:

ICO can help raise fund fast without restrictions on the amount and process, but it leads to high costs to building trusts and necessitates experience and efforts to screen and determine projects.

Private sale help solicits a single big sum and non-monetary support from investors, but it is an inefficient and demanding job. Generally speaking, it will be difficult to acquire funds equal to valuation unless it is an extraordinary project.

In IEO, IDO, and IFO, intermediaries can maintain project quality somehow but also increase fundraising costs. In addition, the credibility of intermediaries is the key.

Grant&prize is the least efficient with a long cycle and small amount, but the nearly-zero cost, early resources, and active crypto communities are big draws to project providers.

II. Types and Evolution of NFT Fund-Raising Forms

Unlike traditional forms such as ICO, IEO and IDO in the crypto sector, the initial NFT offering (INO) means that project providers issue NFT to raise funds. INO is mostly used in PFP NFT projects, GameFi, metaverse, SocialFi and financial NFT, but seldom used in infrastructure, public chain and DeFi - which largely depends on whether NFT has use cases in specific projects. INO can be mainly divided into three main categories:

Asset INO (Asset NFT):

This type of INO resembles the traditional ICO and IEO in the crypto industry, but the fund-raising model has shifted from traditional FT to NFT. Asset NFT is mainly used in GameFi, metaverse, SocialFi and financial NFT, such as pets in Axie Infinity, Metamon in RACA, and lands in the sandbox. There are defined rules about how to use funds and also defined profit-making expectations and mechanisms for investors. For example, holding NFT will be rewarded with FT in the game and with income in the metaverse.

Profile Picture INO (Avatar NFT/PFP-NFT):

Beginning with Cryptopunk, PFP NFT brings about a terrific amount of impressive projects, such as BAYC, Azuki, Doodles, etc. PFP NFT is issued under the form of a combined public offering with a white list. Different from asset NFT, this type of NFT is mostly profile pictures whose investment motives are decided by the community consensus and project background, and thus community is an essential ingredient to the PFP NFT project.

PFP projects at an early stage often offer INO at a lower price and free airdrop, such as Cryptopunks, and are dominated by the community later. This type of NFT changes from a community-led one to a project-provider-led one as the NFT industry prospers. The project providers pursue more professionalism and capitalization. As the price of INO keeps rising, the investment motives also focus more on profits rather than memes and mementos. As PFP NFT project providers become increasingly powerful, bars are rising much higher, investment rules are more transparent, and the profit-making mechanism is clearer, investors are more able to anticipate their returns and understand the mechanism behind them.

Ⅲ. INO（Initial NFT Offering）

1. Forms, Scale and Efficiency of Fund-Raising

Different from conventional financial routes, NFT fundraising targets a wider range of the population in a faster and more efficient manner. INO can better meet the diversified needs of capital raising among project providers than other forms of fundraising such as ICO and IEO in the crypto industry.

Traditional financial routes adopt a form of top-down fund-raising where the project providers or developers directly reach investors for targeted fund-raising or allow IEO, IDO and IFO through intermediaries whereas NFT fundraising is freer and more diversified. In the most frequently-used form, the financing quota of a project includes the white-listing quota and the public offering quota. The white-listing promises a certain predictable amount while the public offer maximizes the financing through public engagement. Project providers can set their criteria for white-listed investors. Besides, Dutch auction targeted airdrop, and other fund-raising approaches can be combined. INO fund-raising is safer because NFT itself is non-fungible and less liquid. FTs can be laundered by mixing them with tornado cash after being stolen, but NFTs are less stolen because there are many ways to mark the stolen NFT, which makes it difficult for the thief to monetize them.

INO is also continuously improving scale and efficiency of its financing. In April 2021, BAYC raised 800ETH only in nine days, and in April 2022, the newly-emerged blue chip MoonBird shortly acquired nearly 20000ETH with a higher profile. As the public becomes more accustomed to and accepts such a form, PFP INO quickly becomes larger and more efficient thanks to the endorsement by project providers and the overall advancement of the fund-raising environment.

Table - Financing of mainstream PFP NFT projects:

2. Sense of community and social component

As stated above, private fund-raising is relatively closed because it is directly initiated by project providers or developers towards only a few investors or investment institutions. NFT financing naturally pays more attention to the community and is more open than other forms of fundraising such as ICO and IEO. Project providers attach importance to communication and interaction with community members.

First of all, in terms of RoadMap, the proposal mechanism, and events, NFT project has its own culture and identity, so in a more active community, members are more ready to voice their opinions in the project proposal and social media. The interaction between community members and project providers increases stickiness between the community and NFT and enhances the sense of community. For example, RoadMap provides a variety of unique benefits to holders, making them feel more satisfied and reinforcing their sense of identity in the community. Another example is the proposal mechanism, where community members can introduce their proposals to co-build the future development of projects, delivering a sense of ownership as project providers to users. Also, the community will regularly hold online and offline activities to maintain and expand itself. Most of the currently issued NFT projects have official Discourses, and appoint personnel to chat with community members and issue announcements on Discourses to keep it hot. Unlike ICO and IEO, discussions in NFT project are deeper, including not only how price rises and falls, but also how to plan projects in the next step, how to understand projects and their fundamental cultural meanings, or their passions for NFT, which is a feature of NFT project itself.

Before the NFT project casting, most projects will require users to obtain the white list. To do so, users need to complete tasks and procedures as required. In this process, time and energy devoted by users to those tasks and procedures will drive them to pay more attention to the follow-up development and planning of NFT projects, in the hope of gains for previous pains, and thus the stickiness between users and projects will be enhanced; in addition, when users manage to qualify themselves for the white list, their moves will promote the projects and encourage a flood of outsiders who have little knowledge over the projects to have a try and join the community as new users. The community is initially formed at the stage of becoming whitelisted.

NFT project itself and the community building and maintenance ensure stable communities to project providers, which can boost the development of projects. Almost all blue-chip NFT projects are equipped with super-high-quality communities. In addition to marketing components, those communities continue to send the NFT price higher, increase NFT trading volume, and secure project providers the royalties. More than that, communities give back to projects in all aspects, including but not limited to formulating or optimizing project routes, enabling NFT, giving NFT new consensus or meanings, and extending benefits into real life. In addition, project providers can continue to promote projects and finance on current users and scale in the subsequent fund-raising, so as to make it more continuous.

3. Consensus and narrative

Traditional financing has defined mechanisms and rules around profit-making. For example, funds are distributed and used under clear and transparent mechanisms and rules. Although raising funds by issuing NFT is essentially for making profit, there are distinctive differences in how to realize it. Traditional projects seek to finance mainly for better prospects, optimized projects, and larger market share and profits. However, for some reasons, such as the MEME component, limited real profitability, and weaker long-term project planning, PFP NFT projects prefer an ALPHA community with the strong consensus after fund-raising, so the consensus is a vital and even cardinal part of PFP NFT project. For most PFP NFT projects, they will establish a strong community-wide consensus in the early stage, through which the community and project providers work together to make common profits for investors and project providers. This means that NFT fund-raising becomes an effective measure to build a high-quality consensus community. For example, Bored Ape Yacht Club, known as the club of the nobleman, has a priced-higher NFT and lacks defined profit-making logic and other elements in the infant age, which has become good criteria to join the club, find like-minded friends and build consensus.

Moreover, NFT has a totally different consensus from FT. People buy NFT and FT for different reasons, perhaps because they are optimistic about the future of the project, or because fomo comes into fashion, but NFT investors will accept the loss from investment more peacefully than FT investors. As PFPs and artworks themselves in NFT can form a basic consensus or value, NFT investors can change their consensus from investment to a collection when NFT prices continue to fall, which is impossible for FT.

Apart from the transferability of consensus, NFT also has great extendibility and extensive versatility, which promises huge potential and allows project providers to create ambitious narratives. Solv Protocol, for instance, casts NFT into an automatically-performed vesting voucher, so users can deposit ERC-20 tokens into it and flexibly set the approach and rate of releasing ERC-20 tokens. The tradable and negotiable vesting voucher can be split in due time - which means not only expanding the financial functions but also transferring the original power of the blockchain. NFT also has unique cases of use: such as the domain name, unleash liquidity from locked position, and separation of rights to own and use. Project providers can tell gorgeous stories to attract users and investors, and this brings more appealing envisions after they implement the original plan step by step. Another obvious direction for NFT is the metaverse. Almost all INO project providers will eventually shape a story that they will usher into the metaverse. The NFT they are issuing now is the ticket to the metaverse. They will also promise airdrops or white lists after the metaverse is launched. Therefore, as NFT goes further, NFT-based innovation can create more possibilities for the entire industry and inspire the public to give greater expectations to the NFT projects. In other words, it is widely believed that NFT projects will have larger prospects and more phenomenal growth.

4. Extensible to tangibles

Different from traditional FT, NFT can be turned into tangibles. On such a basis, NFT can be greatly extended to the real world, and therefore, project providers have diversified options to build brand and IP, and bring more benefits and new experiences to investors.

NFT financing can be expanded to physical objects, mainly in the following aspects:

 (1) Project providers can build a proprietary IP to extend its influence in the cultural industry - for example, creating a label, shooting movies for IP, and even establishing a theme park;

 (2) NFT re-creation by followers - for example, animating NFT, creating generative music, or building we-media;

 (3) Widely used in the retail and service sector - this also holds true for project providers and holders, such as NFT bars, NFT designer toy shops, NFT fashion, etc;

 (4) Social groups and activities - offline gathering for fans, NFT player club, etc.

If NFT is born to change the game and break boundaries, Bored Ape Yacht Club may be the Trojan horse that breaks through the wall. Being only a year old though, BAYC has set an example in breaking the boundaries between crypto and the real world: BAYC grants its holder full copyright, which means that holders can create their own brand and start business activities based on BAYC, including but not limited to NFT merchandise, movies, games, and even bands, and all incomes from that are owned by holders. This strategy is undoubtedly a great success. Devolving icopyright and rights to re-create comes to be an important component for standard and model NFT financing.

Here are examples of how BAYC is extended into the real world:

APE-IN products, co-founded by Grammy winner Timbaland and BAYC members, will expand, launch and promote Bored Apes as a top musician in the virtual world; besides, Myth Division produces anime for BAYC; Apesthetics is one of the first streetwear brands to combine the tangible product with BAYC. Its owner can use the unique smart contract sewn on the fabric to verify whether the products are authentic, so it becomes as a real NFT; by the way, Greenland Group also buys BAYC as its digital strategic NFT image, and Li-Ning has BAYC4102 under its belt to issue brand derivatives around the NFT.

In addition to BAYC, it is not uncommon to extend NFT into physical ones: Azuki permits holders to re-create and will launch Azuki stores in the real world to sell streetwear, toys, and statues. Azuki will also hold meetings, exhibitions, music festivals and other on-site activities; besides, Doodles plans to apply its IP to music, animation and other fields, and allow holders’ business activities worth less than $100,000 dollars; CloneX and Nike jointly launch physical clothing in hope of enabling holders to use NFT in different digital platforms, even their own games, and VR/AR virtual worlds.

This broader application in the real world as a result of features of NFT creates more value for NFT investment than traditional channels of investment, which is undoubtedly extremely attractive to investors. Meanwhile, this new paradigm of financing has served many useful purposes.

5. Compliance-compatible

Another advantage of NFT financing is that it is quite compatible with current laws and regulations. Of course, seeing in another way, that is because both counties temporarily have no specific laws and regulations, which help formulate specific rules for NFT financing. As the NFT industry keeps progressing, and NFT financing takes off, countries will further improve laws and regulations for the NFT industry and financing to protect investors' income. That progress will also expand and standardize NFT financing.

According to the full account and analysis above, INO has manifold features and advantages: highly efficient fund-raising, strong communities for project providers to facilitate financing, accessible consensus, and expectations, and easily extendable to the physical world and compliance-compatible. However, as a new form of raising funds, there are some problems for INO:

First, its fundraising is not tremendously sustainable. For project providers, raising funds via PFP NFT is less sustainable because the issuance of multiple rounds of NFT faces headwinds and threatens consensus. Therefore, the fundraising is concentrated in the first round of NFT issuance.

Secondly, the benefits of INO investors are nebulous and less protected. Unlike traditional financial fundraising forms and traditional ICO or IEO in the crypto sector, the concepts of fundraising for most PFP NFT projects are in between sales and conventional fundraising. Project providers neither promise nor guarantee any benefits to investors. Rules on how to use funds are either absent or undefined. What most projects can provide is only a rough RoadMap. Project development and management are not transparent. The high centralization will easily result in the issuance of additional NFT/FT and dilute investors. Furthermore, investors don't know much about the basic facts about the NFT projects during fundraising, so they can't predict the next route and risks. For instance, derivative NFT or FT issued by some projects after the initial public offering of NFT may dilute investors who enjoy benefits in name only.

At last, financially speaking, NFT is less liquid and lacks the same stable value-adding measures as Staking and LP Farming to mitigate sell-off. In addition, the vague rules make it difficult to assure the benefits of investors.

New things come for reason and also come with limitations. As a new form of fundraising, INO can satisfy the diverse demands of project providers for fundraising. It boasts manifold qualities rather than simply issuing assets to collect funds. The advancement in industry and technology will optimize and address current problems. We dare say INO will be a better form of fundraising.

Author: CloudY, Sihan

Editor: Vincero, YL, DoctorStrange

Reviewer: Crystal

I History of Traffic Access

Web3 as a whole is still in its early stages and usually acquires traffic more wildly and primitively than traditional Web2. As the Web3 industry develops, its traffic acquisition roughly goes through three landmark stages as user needs change.

Early Stage

Users largely trade cryptocurrencies in the early stage of the crypto industry. Most users often seek various functions on the central exchanges (CEXs) through websites or applications, such as Mt Gox and Bittrex. A raft of CEXs proliferates as the major traffic access, including Binance, Huobi, OKEX, KuCoin, MEXC, and Gate.io. Besides trading cryptocurrencies, CEXs enable deposit/withdrawal from peer-to-peer lending to further control traffic access, as users also have demands for crypto-fiat deposit/withdrawal. Because of its substantial market share, something wrong with CEXs will take a great toll on the market. A case in point is the collapse of Japan’s Mt. Gox exchange after most of the bitcoins it is holding are stolen.

Middle Phase

Individual users pursue richer features in a more advanced crypto industry, such as storing and transferring digital currency in blockchain wallets, and on-chain interaction. Especially with the advent of Ethereum, smart contracts give birth to the on-chain ecosystem, and DAPPs spring up. As the popularized general knowledge of crypto brings in massive new users, wallets are used more often as access to on-chain DAPP. CEXs and wallets keep expanding their business offerings. CEXs begin to develop trade-centric financial derivatives by combing futures and options to compete with wallets. Because of the unitary public chains and insufficient on-chain infrastructure, there are fewer chains compatible with those wallets, and their money transferring, cross-chain interactions and other functions are inferior to the CEX. After TRON is founded, its knockdown charges during transferring of money are a huge advantage over CEXs. Furthermore, the launch of EOS and USDT significantly stimulates the demand for on-chain interaction, and wallets have a wider range of functions. That diverts user traffic from CEX to wallets when the on-chain crypto ecosystem gradually takes shape.

Currently

User needs become more diversified today. Since the crypto industry creates many wealthy individuals, users are hungry for more direct shortcuts to make money, which requires more complex businesses. As far as traditional CEXs is concerned, CEXs introduce wealth-creating functions such as IEO and strive to integrate derivative services and DAPP into their ecosystem. Binance, for instance, rolls out the latest DeFi module and mini-program as well as Binance Pay while CEXs, such as MEXC and Gate.io, launch more shoddy projects to give users more choices. Therefore, CEXs, as the access to the Web3 ecosystem, play an increasingly critical role. Meanwhile, equipped with built-in DEXs, wallets begin to support multiple chains and audit the access security. When wallets are further used by users who demand sophisticated financial services, DeFi Summer shows up, together with a variety of DEXs, lending, oracle, and derivative markets. The wealth created by the booming currency issuance attracts a large number of new users to Web3. Some top Web3 operators develop and use their Apps or DAPPs as independent traffic access, such as Opensea and StepN. Some of them even drive user traffic to Web3 Apps by attaching themselves to traditional Web2 Apps, such as Twitter plug-ins. They also choose Telegram and Discard which enjoy the traffic spill-over to social platforms. In general, as traffic surges amid the flourishing industry, the cutthroat competition for user traffic and different demands from user traffic shape traffic access with a diverse model where exchanges and wallets play leading roles in parallel to other traffic accesses.

II Web3 Access Today

Ethereum reported $10.68 million in terms of NFT trading volume on October 28 while Reddit Collective Avatars registered $2.5 million according to NFTgo.io. In other words, Reddit NFT makes up about 25% of the trading volume on the Ethereum-based NFT market. Opensea has about 2.3 million users. Most of the 2.83 million Reddit NFT holders have signed up for the Reddit Vault account. That is to say, the number of registered Reddit wallets is almost equal to the number of NFT wallets traded on Ethereum, which stands at about 3.43 million. By issuing an NFT, the Web2 platform Reddit can secure huge user traffic comparable to Web3 NFT, and shortly attract more users than Opensea which is the largest Web3 NFT market. That indicates plenty of room for further development in Web3 although many revolutionary innovations are already there.

Looking back on how Web2 access changes, we find it evolves in this way: from the portal site to the search engine, to the social media platform on the personal computer, and to the social media platform on the mobile phone. Information display on Web2 access also changes from the collection of filtered comprehensive information to the collection of automatically filtered information, to information output by users, to fragmented information output by users, and to fragmented video-photo information output by users. Web3 shares the similarities too. In the beginning, only POW public chain investment dominated by BTC is available and then investment targets surge in the era of ICO. Currencies must be screened before getting listed on IEO and IDO. Till now, users can research, analyze and recommend high-quality projects by themselves or via DAO agencies. Whether in Web2 or Web3, information is no longer centralized, passive and complicated; they become decentralized, active, and simple.

Based on such basis, we consider where Web3 access is and will be and how it lay out. Since there’s a mixed bag of definitions, Web3 in this paper refers to the collection of decentralized applications (aka. DAPP) running on the blockchain at no sacrifice of personal data. Our discussion about Web3 access goes beyond Crypto, covering all targets that can divert user traffic to it, including traditional Web2 platforms, centralized exchanges, Web2 games, etc.

We classify Web3 accesses according to different user behaviors, sketch their features, and compare the main access falling under the same bracket. At last, we present our insights on how each Web3 access evolves tomorrow concluded from those features and comparisons.

III Compare Web3 Access

Before classifying Web3 access, we should identify what motivate users to enter Web3, or what Web3 brings to users:

Reshape the way current applications run: copyright confirmation, ownership of privacy, asset ownership, and behavior incentives

Invest in cryptocurrency

Invest in NFT

We draw the flowchart of how users enter Web3 by its functions and sort Web3 access into two broader categories :

1. Account system (based on deposit/withdrawal and fund management): centralized exchange, independent deposit/withdrawal project, deposit/withdrawal aggregator, crypto ATM, crypto bank card, and OTC trade; or EOA, CA, and MPC wallets, account abstraction (AA).

2. Web3 DAPPs (based on tools, social networking, and entertainment): DEX, NFT Marketplace, copyright market, domain names, DeSoc, GameFi, X to Earn.

Account System

1. Fund Management

Fund management includes storing, sending, and receiving crypto assets. Besides the early exchanges, wallets are the most important accesses for users to the crypto world and also the repository of their identity, assets, and reputation. Security is the first priority, and convenience is the second priority. The wallet is actually a public/private key manager. The private key generated by asymmetric crypto technologies has monopoly control over users’ wallets, public key address, and assets. Therefore, how to manage the private key is the key to different wallet products. On this basis, another battlefield is how to expand functions beyond wallets.

The wallet falls into two categories: custodial wallets and non-custodial wallets. In short, it depends on whether you control your wallets through the private key. Custodial wallets are mostly exchange accounts in which the exchange holds the assets on the wallets in trust for you. However non-custodial wallets are more diversified, including hardware wallets, externally owned address (EOA) wallets, and contract account (CA) wallets. The EOA wallet can be a plug-in or a mobile application. EOA wallet has many expansions, including the multi-party computation (MPC) wallet and the account abstraction (AA) wallet, a new wallet concept that upgrades the EOA wallet with smart contracts.

(1) Custodial Wallet

The idea that a private key means a wallet sounds secure enough, but in fact, it is because the private key or recovery phrase is too important that how to store them becomes the threshold for users to use the wallet. The user experience offered by most wallets is far from as good as Web2. This is why most users switch to CEXs as the first choice to access Web3. They just need to remember their login password on CEXs, but it has the most obvious failings — the assets squirreled away on CEXs might disappear when CEXs crash, abscond or suffer hacking. What happened to Mt. Gox is a typical example. Mt. Gox announced suspending the withdrawal in 2014 after their 850,000 Bitcoins were stolen by hackers, and then declared bankruptcy. In addition, since all funds are controlled by CEXs, the exchanges can deploy that money by modifying numbers, like infamous dump tricks with false data, or even directly misappropriate trusted funds for value added.

However, these shortcomings won’t prevent users from continuing their activities on CEXs. Exchanges are endorsed by their reputation and are easy to operate. Most users only trade in the secondary market. Thus, CEXs still gather the majority of user traffic across Web3. In December 2021, there were 295 million crypto users. Binance, the world’s largest exchange, attracted 120 million users alone, while DEX Uniswap, the largest exchange too, had only about 3.9 million users. That highlights that CEX is a much more competitive Web3 access. Simply put, most users choose to sacrifice security for convenience.

(2) Non-Custodial Wallet

In contrast to CEXs, most wallets jettison convenience for security, raising a high threshold to enter Web3. Specifically, the hardware wallet is the safest one because deploying assets it stores requires both a hardware wallet and password, but it demands onerous steps. First, it takes considerable money and must be carried around at all times when it is used. Once the hardware wallet is lost, the money in it will go astray too.

EOA wallet gives more security and convenience. EOA wallet is available on web plug-ins or mobile Apps, so users can access it more easily, but users still need to remember and keep the private key, which is actually a recovery phrase in the form of 12 English words converted from the private key. EOA wallet also has some risks. When the private key/recovery phrase is misused, the wallet will no longer be safe. The loss caused by the leakage of the private key has reached at least $274 million since 2022, and even many market makers such as Wintermute were no exception, according to CertiK.

Although MPC wallets and more scalable CA wallets emerge based on EOA wallets with new technologies to make keyless or low-threshold wallets possible, EOA wallet is still the mainstream wallet. The leader Metamask had more than 80 million users in December 2021 and acquired even more than 30 million monthly active users in March 2022. Dwarfed by Binance though, Metamask has an impregnable position among the current software wallet.

In the MPC wallet, each party has a segment of the private key. Similar to the multisig wallet, all parties sign to start a transaction. The MPC wallet decentralizes the private keys off the chain, increasing the security of the wallet account. Besides, the MPC wallet can refresh the key fragments by replacing the original key fragments held by each party with new ones in case the key is lost. Users only need to match the verification information such as mailbox or biosignature to retrieve their assets in wallets. Compared with the traditional wallet with difficult security measures, this newest solution undoubtedly increases the convenience and lowers the threshold to Web3 access.

Account abstraction (AA) might be the game changer. Account abstraction combines EOA with smart contracts to upgrade the EOA wallet to a contract account(CA) without changing the ETH infrastructure. That combination greatly reduces the threshold to EOA, and enables unlimited scalability. EOA can thus deliver most functions as a Web2 account does, like paying the gas fee, requiring no private key, social recovery, etc. Specifically, the contract account implies that the wallet can be programmed, customized, and even modularized, promising huge prospects. The contracted wallet can customize a series of scenarios closer to users as a smart contract does by setting different security thresholds for transfers of different amounts and adjusting different levels of authority for different DAPPs. There are representative cases of contract accounts: Argent is known for social recovery, Gnosis Safe for multisig, and A3S for transferability.

2. Deposit/Withdrawal

The key factors of the deposit/withdrawal project include identity verification, fiat-to-crypto deposit, and crypto-to-fiat withdrawal.

Generally, users who trade more than several hundred dollars per month have to go through KYC in the form of identity certificates (ID cards, passports, or driver’s licenses), proof of residence, and facial recognition. Most compliant exchanges require KYC when users deposit and withdraw money, but it is not always the case. The independent deposit/withdrawal projects, deposit/withdrawal aggregators, and crypto ATMs are more decentralized with fewer limits. Having said that, centralized exchanges and large OTC platforms support more types of fiat currencies thanks to more legal and technical resources.

Payment and collection of deposits/withdrawals are limited to telegraphic transfer, ACH transfer, debit card/credit card, and third-party payment (such as Google or Apple). Still, some exchanges, such as FTX, can convert cryptocurrencies into fiat currency on the platform and transfer them to the collection account via telegraphic transfer. This brings great convenience to users and avoids the risks of receiving black money on OTC or decentralized platforms.

But there are frictions in the fiat-crypto conversion, including exchange rate fees, distributors’ markup, and blockchain network fees. Generally speaking, the less the distributor grade is, the smaller the friction is. Therefore, if listed by the order of friction loss, CEX has the same friction loss as OTC, which is less than the independent project. The aggregator has the largest friction loss.

The centralized exchange is most commonly used to deposit and withdraw fiat currency. It commonly has remittance licenses in most countries, supports most types of legal currency and cryptocurrency, and charges the lowest rate. CEXs can provide cryptocurrency payment, which is another form of withdrawal. Binance Pay on Binance can be applied to book hotels and purchase gift cards. CEX boasts a large number of secondary traders who are more likely to be converted into deposit/withdrawal users.

Independent deposit/withdrawal projects, such as Moonpay, Transak, Wyre, operate as small exchanges, but most of them only provide fiat deposit/withdrawal services. Their simple and easy-to-use interfaces cost less for users to learn. However, these projects charge distributor make-ups.

As the name implies, the deposit/withdrawal aggregator — like the fiat deposit/withdrawal service on TransitSwap, KyberSwap, and MetaMask — aggregates individual deposit/withdrawal projects and CEX to achieve the optimal exchange rate and earn commissions from it. Most importantly, they can import functions such as DEX, liquidity pledge, and NFT market to enable one-stop deposit/withdrawal and swap/taking services.

The most common OTC is the peer-to-peer model where the buyer and seller directly trade fiat deposits/withdrawals. Some platforms, such as Binance P2P, must turn to a third party to eliminate the costs of trusts when matchmaking buyers and sellers at a very low rate. However, peer-to-peer means diversified payments. In theory, the buyer and the seller can agree to trade by any means, but there are obvious risks that users might be involuntarily involved in money laundering so that their cards are frozen, or they are forced to return the funds earned from the withdrawal.

Web3 DAPP：

1. Tools

Tool-like applications will have the largest potential among the three modular to function as Web 3 traffic access. More than improvements from Web2, they make epoch-making innovations. The social platform DeBox, instant social media Monaco, and collaboration platform Skiff, essentially integrate the Token economy into Web2 applications for privacy, transparency, and detrust on the blockchain, often known as Web3 xx — such as Web3 WeChat, Web3 Weibo, and Web3 Google Docs. Namely, They are not intended to motivate users to abandon Web2 and completely pick Web3; instead, they encourage users to use Web3 temporarily with Token. Therefore, we will focus on the role of DEX, NFT, and copyright trading platforms as Web3 access.

（1）DEX

DEX DAPP assumes enormous importance when users enter Web3. Users used to swap assets on CEXs, because the on-chain order exchange is far from deeper than CEX. AMM DEX removes the role of market maker, and thus its on-chain trading becomes deeper. The yield farming further optimizes the trading experience on AMM DEX. DEX allows users imported by other DAPPs to directly convert the tokens they earn into stable currencies such as USDT and USDC on the chain to lock yields.

The absence of market makers makes AMM DEX and it breaks AMM DEX too. Lack of depth in the LP pool or any big deal concluded by users will cause it to slip. On September 28, a user sold a cUSDC worth 1.5 million USDT on UniswapV2 at a price of about 520 USDT since cUSDC barely has liquidity.

（2）NFT Marketplace

Non-fungible Token (NFT), a new form of blockchain-based assets, is ideal for traffic access in Web3. When Everydays: The First 5000 Days created by Beeple is sold at a sticker-shock price of $69 million, the public begins to be aware of the value of digital assets. A large number of NFT projects emerge, including the metaverse projects (Sandbox and Decentraland), the PFP projects (BAYC and CryptoPunks) and the NBA Top Shop. Some copyright NFTs are launched such as IP NFTs, patent NFTs and music copyright NFTs to help creators identify their ownership.

NFT is the best-understood crypto asset. The value of the painting is not limited to canvas. The art itself is valuable. The digital painting also has its value. NFT is more shareable than traditional paintings, which can facilitate users to show off. Hence, PFP NFT is launched. CryptoPunks, the icon of Crypto OG, automatically award the title of Crypto Native to those who hold it. BAYC aims to build a club that breaks the gap between mainstream culture and Web3 and has also become a fame and status symbol after the arrival of stars or celebrity agencies such as Warriors star Stephen Curry, singer Jay Chou and JJ Lin, and even Chinese brand Li Ning. Different from PFP, Sandbox and Decentraland are recognized by major international companies who buy land at a high price to jump into the metaverse. Their land is a brand display platform to attract customers who will learn more about Web3 and the metaverse in return. Similarly, NBA Top Shot also draws the NBA audience to Web3 through NFT, and allures more people by virtue of the wealth creation, which further boosts the price and popularity. By the same token, copyright NFT invites creators to join in to gather the followers of creators on Web3. While diversifying creators’ sources of income, copyright NFT facilitates investors or followers to invest in or collect the copyright of works.

As the core venue to add value, NFT Marketplace is to Opensea, Rabble, and SuperRare what DEX is to most DAPPs. NFT Marketplace enables users to make profits on NFT and guides users to interact more on Web3. Derivatives from NFT Marketplace, such as the NFT lending platform, NFT fragmentation platform, and NFT trade aggregator, are the tools to assist users to access Web3.

2. Social Networking

The domain name and DeSoc for DID are typical access in Web3 applications. Similar to conventional DNS domain names and social media, they can directly carry user traffic and turn it into useful resources with fancy serial numbers and information as tools to acquire users. In 2020, there were 374 million global domain names registered, while according to Messari’s research report, 1.12 million ENS (Ethereum domain name service) were registered in the third quarter, hitting hit an all-time high. Medium had 25 million monthly visitors while Mirror only retained 2.1 million visitors. It is obvious that Web3 accesses, domain names, and DeSoc have as much as 10 times high potential.

(1) Domain Name

Web3 domain names convert complicated addresses into readable characters. For instance, Vitalik Buterin’s address — 0xAb5801a7D398351b8bE11C439e05C5B3259aeC9B — can be converted into Vitalik. Eth. That greatly lowers the bar to identify and input addresses during interactions and also what readable characters mean to users can add additional value, which might symbolize birth year, name, and brand name. The domain name is still in its infant ecosystem where the address can only be replaced with short characters. We can still see that the separate sense of identity between Web2 and Web3 is broken when users’ Twitter name is annexed with xx.eth, which means all on-chain data related to that address in the ETH ecosystem, that is to say, it records the cradle-to-grave life of the address. Its application in Web2 also indicates that all its interactions happening in Web3 are also extended out, so Web2 users can locate the exact people according to this name.

Apart from .eth and .ether, there are also domain names based on public chains, such as .bnb from BSC, .apt from Aptos, .evmos from Evmos. Companies dedicated to multi-chain domain names issue some domain names too. DAS releases .bit when Unstoppable Domains launches .nft, .crypto and .dao. Twitterscan expands the relevance of its domain names to Twitter. Currently, no other domain names are more useful and well-accepted than ETH which has the leading number of users and capital. In contrast, other domain names attract users temporarily through airdrops but fail to retain users for a long time.

（2）DeSoc

DeSoc becomes a smash hit after Vitalik Buterin, founder of Ethereum, economist Glen Weyl, and Puja Ohlhover, Flashbots’s researcher, coauthored the paper titled Decentralized Society: Finding the Soul of Web3 in May 2022. DeSoc in the paper is based on the Soulbound Token (SBT) and essentially aims to build a decentralized trustworthy society through non-tradable SBT and DID. Currently, Web3 is largely used in the financial field to increase capital utilization, enable faster and safer trading, and develop more advanced derivatives. DeSoc ditches today’s hyper-financialization in Web3 in favor of “a more transformative, diverse future, one that is constantly evolving”.

Take the sought-after DAPP as an example, the task-based platform Galxe and Quest3 convert the needs of the project providers into a series of tasks with SBTs issued as proof, while users complete tasks to obtain SBTs and wait for the airdrop by the project. Some of these tasks simply ask users to interact on Web2, like Twitter, Discard, and Telegram, which can attract a flood of Web2 users to Web3 through huge profits.

Another typical case is BAB, the SBT of Binance. Binance imports KYC-passed user traffic into BSC with the incentives of BAB, and retain users via BAB airdrop. Meanwhile, BAB-based projects, such as Lifeform cc, are developed in which users who have BAB are allowed to claim the LBT of their game characters.

3. Entertainment

Web3 applications for entertainment are an essential part of the industry. GameFi is the centerpiece of APPs or DAPPs. Compared with other Web3 access, GameFi naturally boasts huge appeal to a tremendous number of users in a certain period in which traditional Web2 users are no exception. Among mainstream GameFi games, many mature classic games which belong to the era of Web2 are transformed into Web3 chainplus, signalizing that GameFi can extraordinarily break the boundaries.

GameFi emerges as one of the most important segments in the Web3 field when it became popular last year as the public focused their attention on Axie Infinity. About one million active players keep playing games on the chain. GameFi is concentrated in three public chains: BSC ETH and POLYGON. The derived concept of X to earn is represented by StepN, the hottest creative outdoor Web3 game this year invested by Binance, which exemplifies the latest Web3 trends of entertainment. Other types of entertainment applications or DAPPs include video-like applications and the dating software. All new-generation Web3 applications are mainly designed for profitability and based on games, producing powerful cross-boundary impacts. This means that GameFi in Web3 has more mature games and attractions than other accesses.

Phenomenal entertainment applications emerge in an endless stream, such as Axie Infinity, RACA, and StepN, despite their redundant on-chain interactions and high-performance requirement for public chains. Some of them adopt traditional EOA wallets to attract external traffic, and others, such as StepN, guide users who are diverted by centralized applications to sign up for built-in wallets. These moves greatly facilitate GameFi to import traffic and convert them into new all-around Web3 users.

Insight on Web3 Application:

As above-mentioned, Web3 application access includes the account system and DAPP. Both have their cons and pros. The former is more like a top-down process. Users first deposit money on the centralized account system path to create their personal account systems like exchanges and wallets and then reach the individual point such as DAPP. This mature traditional traffic access has a sound and convenient deposit system, so users have full choice and freedom. Its user groups are less diverse and comprehensive, and it fails to customize strategies for different groups. However, the latter is more like a bottom-up process. Users are first attracted to individual applications like Web3 DAPP, and then to a broader Web3 ecosystem. This type of access allows different DAPPs to fully shine and attract their target traffic. For example, some NFT Marketplaces and the widespread Axie Infinity draw abundant traffic outside the industry thanks to DAPP’s huge influence.

For now, access in the form of an account system is more mature with a long history. The majority of Web3 users are from exchanges, and a wallet is needed to access Web3. More evidence proves that leading DAPP or Web3 Apps start to set up independent Apps or applications as accesses since their huge independent traffic and strong infrastructure and capability free them from the limits of exchanges and wallets. The emerging trend in Web3 DAPP deserves attention. However, both of them still face similar problems. For example, Web3 has higher entry barriers than Web2. Therefore, Web3 and DAPP are committed to eliminating such obstacles while playing to their strengths.

Ⅳ Outlook on Web3 Access

As the vintage project of wildly popular traffic acquisition this year, StepN temporarily put a series of plans on the back burner due to weak operations and the external environment. Based on where Web3 is, StepN has created conditions to shortly build independent access with massive traffic, which is judged by how much attention it has drawn and how much traffic it has amassed. StepN doesn’t rest on the past achievement; instead, it takes a big break to develop metaverse scenarios around the Stepn ecosystem, such as Launchpad, DEX and more DAPPs. We have to admit that it is a very visionary move. We also believe that direction is how entrepreneurs rise beyond Web3 APP or DAPP. Since how StepN imitates the path of wallets opens up perspectives — develop an ecosystem on the largest traffic and retain those traffic, this move reminds Web3 entrepreneurs that this path is not only applied to wallets, but also APP DAPP, and even future developers can try to increase traffic in such way. Recently, MOOAR, a new NFT trading platform owned by Find Satoshi Lab which is the parent company of StepN, is also about to launch. Although the project fails to have it all its way, StepN has at least set a good example.

We figure that the success made by such hottest applications, which escape the siphoning effect from exchanges and wallets by independently attracting traffic, won’t last long, that is, the window is limited both for users and entrepreneurs. It works only when the Web3 ecosystem is neither mature nor balanced. As the industry matures, the independent traffic will die away, and valuable traffic resources will be concentrated in a few leading applications. The situation will be like how the Internet has evolved. Both applications and traffic access thrive during the Internet boom. Amid maturity, most services and functions converge on several leading applications, and small and medium-sized applications are either dead or acquired. Besides capital work, human nature is the ultimate cause root, It is not the habit of users to keep visiting Web3 via complicated access. Users always prefer easy, one-stop, and integrated access, which may be the inevitable result of product needs. The decentralized Web3 applications might be able to decentralize the back end, but the front end still cannot tame user habits that are hardly decentralized.

Therefore, we are convinced that in this situation, the Web3 traffic access in the future will remain concentrated in the few in a bottom-up manner, whether the account system type or the DAPP type in Web3. Specifically, judging from the current situation, exchanges, and wallets who laugh best possibly laugh last to make it happen. If CEXs and wallets can develop accesses that fit user habits and use cases at their prime of traffic, they might be able to enhance their dominance in traffic greatly. For example, the pull-down mini-program interface attached to Binance’s launch screen integrates APP and DAPP access, which is regarded as a good try for others to learn.

We think the potential model will be the traffic access concentration in a few leaders — if chosen from the current ones, the exchange and wallet access are the closest candidates. Moreover, the way to acquire traffic does not go against the decentralization and respect for the individual user as advocated by Web3 because their back-ends are still built on overall decentralization. We should consider whether there will be better solutions that optimize this centralized traffic access without betraying decentralization.

When Musk acquired Twitter recently, what we’re expecting is the Web3 transformation on Twitter — the largest Web2 social network and huge access carrying all Internet traffic. Musk may bring big changes to Twitter, so it is thought-provoking to figure out whether there will be changes towards Web3 in such a huge Web2 Internet giant, how and to what extent they will be, and what far-reaching impact they will have on traffic access. If Twitter carries out the reform of decentralization or includes a large number of Web3 applications, the epoch-making move may disrupt the current Web3 traffic landscape. Let’s wait and see.

Reference：

Reddit NFT: Analyzing the Mass Adoption Curve from Web2 to Web3

Total OpenSea traders over time (Ethereum)

The First Web3 Class — Business Model Of Crypto-Fiat Swap

MPC-Based Keyless Wallet -The Breakthrough in Web3 Access

Low Threshold Wallet — A Must-Have Tool for Mass Adoption of Web3 Applications

Overview of Ethereum Blockchain Account Abstraction and its Potential Use Cases

From DNS to ENS: Domain Names in the Era of Web3

Learn About Decentralized Society (DeSoc)

A&T View: Gamefi Upstream and Downstream Development Status and Prospects (I)

Brief History of NFT: the Shining Moment of NFT Stars Over Past 60 years

Introduction:

DID and DeSoc have emerged as trendy topics which everyone is talking about. Whether Monaco or Lens Protocol, they are exploring what the social ecology at Web3.0 will be. Also, DeepDAO and CyberConnect are trying to create a decentralized network, while domain name service providers such as ENS are building identity systems on the wallet addresses. But between social ecology/network and identity system is an intermediate layer - the interaction record of wallet address dedicated to creating user profiles. To some extent, exhaustive and elaborate user profiles are what companies on Web 2.0 are dying for even at the price of user privacy since perfect user profiles can help them accurately locate user behaviors and provide the most efficient products or services at the least cost. However, the limited business scope and anti-monopoly only lead to less wide and deep data, companies on Web 2.0 only dream of that user profiles. On the contrary, all user data on Web 3.0 is published on the chain, and they are accessible to anyone to analyze. It causes a huge impact on Web 2.0. The problem is that unprocessed data just means a string of characters. Therefore, we need to analyze the data release credentials (such as SBT) which stand for a series of behaviors, and on which on-chain user profiles are created to increase the value of on-chain data.

Since blockchain technology is widely limited and the industry is still in its infancy, we are just collecting and analyzing the interaction record of wallet addresses. The wallet is currently used to stock assets - not an identity carrier on Web3.0 to represent user reputation on the chain. Most interactions are neglected. With the rise of DeSoc, project providers realize the need for a large amount of data to build user identity and define their influence and reputation. The ENS domain name service also reminds users that the wallet is a key to the metaverse. Especially when Vitalik Buterin mentioned soulbonding token (SBT) and user identity system on Web3.0 or social credit system on Web3.0 in Decentralized Society: Finding Web3's Soul, the DID re-emerges as a hot field drawing the most attention.

This article takes a deeper dive into the empowerment of on-chain user behavior records in the context of DID, that is, creating user profiles on the chain. Then we point out the problems caused by the lack of on-chain user behavior records and summarize and evaluate the existing solutions. And we envision possible mature solutions and their functions in this field.

1.Introduction/analysis of on-chain user profile project:

The analysis of on-chain behaviors and user profiles is still in the initial trial-and-error phase. There are neither mature solutions for on-chain user profiles nor broader use cases for both businesses and consumers. We list some mature projects for on-chain user profiles popular in the current market and analyze their fundamental elements, the pain points, and the starting points with the aim to inspire more study in development trends of on-chain user profiles.

(1) Project Galaxy

Project Galaxy is a universal underlying protocol for on-chain profiles which collects on-chain data through sub-graph search and wallet snapshot and off-chain data through off-chain data sources to establish a user interaction database. The interactive data on the user chain is collected by subgraph query or wallet snapshot. Project Galaxy uses OAT (On chain Achievement Token), NFT, and Credentials to record users’ interactive behaviors. OAT is an internal tool in the Project Galaxy protocol while Credentials centrally write down data on the Project Galaxy. The latter allows the activity initiators to distribute interactive credentials (OAT/NFT) for qualified users on its database as specific needs are required. Credentials also provide OAT oracle and API in the way the initiators can reward all users holding target credentials with air drops or voting rights. Users choose and participate in activities that interest them on their "Campaign" page for credentials. In the future, Project Galaxy will allow open APIs to connect to other projects.

Positioning analysis:

Project Galaxy, the universal underlying protocol of the on-chain user profiles, has built a Web3 DID (Decentralized ID) system.

The partners of Project Galaxy can access the syndicated user data sources both from on-chain channels and off-chain channels. They can submit parameters and badge designs to create activities and credentials. In this way, activities can encourage users to act as required on the chain, and the created credentials (such as OAT) are the rewards to users for those behaviors. The data dimensions and standards to issue such credentials are independently defined by the project providers.

For developers, Project Galaxy can provide them with application modules, credential oracle engines, and credential APIs. Developers can build and issue NFT badges (OATs) by using Project Galaxy's NFT infrastructure and on-chain credential data networks.

In addition, Project Galaxy sets a Galaxy ID or a common user name for each user. A Galaxy ID is generated after the users tie their wallet to the website. Project Galaxy uses the Galaxy ID to connect all those credentials and form a credential data network. Through Galaxy ID, users can display their credentials collected in Web3.0, such as NFT badges, to highlight their past achievements. On the website of Project Galaxy, users can view the details and rewards provided by each project initiator who is the partner of project galaxy to freely participate in any of them.

It can be concluded that Project Galaxy, as the top on-chain profile project, prefers the business-oriented on-chain profile solutions, that is, to offer on-chain and off-chain user profile syndication agreements to serve project providers, while partners and such activities further attract customers. As a universal underlying protocol, Project Galaxy, of course, actually includes a three-tier protocol, respectively for users, partners, and project developers. Users can search their data of on-chain and off-chain behaviors in Web3.0 on the website. Project Galaxy enables open APIs and provides more underlying services for project developers. In a word,  Project Galaxy has extremely bright prospects.

(2) Rabbit Hole

Rabbit Hole is a mature self-contained on-chain behavior recording protocol. It depicts user capabilities through its skills NFT, narrows down the list of target users according to user skills in the tasks, and develops tasks to help project providers who publish tasks to screen users. Rabbit Hole regards NFT deployed in the ETH under the non-transferable ERC721 standard as credentials to record user data. Rabbit Hole also adds new functions - allowing users to transfer the Soulbonding NFT to the destruction address (0x00...); one NFT credential for one address; upgrading the credential contract through the standard proxy contract. Although Rabbit hole aims to become the core component of the Web3.0 ecosystem, its protocol is developed in a centralized way, rather than directly on the basis of the universal underlying protocol. Therefore, its system currently provides two types of NFT approaches: unlicensed integration and partnership. The unlicensed integrated credential can be used with Guild, Collab.Land and other tools. The credential for partnership is customized for the project providers.

Rabbit Hole focuses on the collection and proof of on-chain data. It uses verifiable data on the chain to the proof them in terms of Skills and Quests.

Rabbit Hole classifies Quests into DeFi, NFT and DAO, and sets Topic, Level, and Season for NFT in those three directions to represent the senior level of skills. But only the introductory level and season 0 are available. To obtain the skill credential NFT in a different direction, users need to finish the interactive tasks on the chain specified by Rabit hole, such as "Mint an NFT on the Zore chain", "Join a Party in the PartyBit" and "Publish an Entry in the Mirror".

Besides, in the Quests, Rabbit Hole will release the on-chain interactive tasks prescribed by other project providers. To engage in those activities, users must have certain skills or Bright ID  and will be rewarded with a certain amount of designated tokens or NFT after completion.

Positioning analysis:

Rabbit Hole is currently the task distribution protocol for the project providers. The partners pay for their tasks, which encourages users to complete specific steps on the chain while users finish the interactions through the protocol for the protocol points or the incentives granted by the project providers. This positive interaction helps users learn new skills or methods about encryption and earn bonuses while attracting a large number of new users for the DAPP protocol.

However, the user profile on the Rabbit Hole is limited to the users’ behaviors on its websites and excludes all the behaviors on or off the entire address chain. No developers are joining for the time being. It is obvious that Rabbit Hole focuses on the business market and the consumer market and the underlying protocol functions remain to be improved.

(3) DegenScore

DegenScore aspires to build a Metaverse based on on-chain data. The research by a16z defines DegenScore as a system that can summarize and simplify the data on the address chain to make them readable and comparable, and measure users' obsession with cryptocurrency.

DegenScore has established a perfect ecosystem for the addresses on the chain, including:

① Perfect on-chain behavior scoring: including highlight moment display, tagged address, ranking system, etc.

② Partnership with other project providers: CAFE displays cooperative activities with other project providers, such as airdrop, interactions, etc.

③ DegenScore provides an easy-access interface for other projects. Any DAPP can access the scoring service provided by DegenScore in its ecosystem, which becomes one of the bases to screen and judge users.

DegenScore has a multidimensional and complete behavior scoring dimension. In V1, DegenScore develops the Degen score through a series of on-chain behaviors, including but not limited to holding specific tokens, interacting with specific smart contract protocols, and adding the dimension of time, such as early DeFi farmer. In the latest updated V2 this year, DegenScore further refined the scoring system into three sectors: DeFi, NFT, and Others. In the DeFi section, the scoring dimension includes whether it is an early agreement participant, the number of transactions and the number of transactions of DeFi tokens, the number of pools in the farm, time nodes, duration, etc; in the NFT sector, the important scoring dimensions are whether the user have participated in a series of blue chip NFT MINT such as BAYC AZUKI, or whether the user holds blue chip NFT.

Positioning analysis:

DegenScore has established a complete on-chain resume in Web 3.0 with a unified standard, and confidential scoring dimensions and standards. Users and project providers cannot freely choose the dimensions of the on-chain user profile; they only access the scores provided by DegenScore. Although this approach reduces the freedom of choice for project providers and users, it makes data more credible with the reference value. The  DegenScore can be used by both the business and the consumers. The concept of an on-chain resume has been largely expanded in the business. For example, some start-up teams of Web3.0 are using this on-chain resume as a way to find job seekers.

(4) Noox

Noox is a decentralized on-chain achievement proof platform, which allows users to publish, proof and mint on-chain achievements without permission. Therefore, it is essentially a programmable data validation infrastructure on the chain. Noox mints the user's Web3.0 achievements as Soulbound NFT (Noox Badge), which is a non-transferable ERC-1155 programmable NFT (Non-transferable ERC-1155 Token). The Noox badge contains a string of metadata, qualification criteria, and verification logic for each badge for on-chain operations. Everyone can program any rule into the badge standard to use EventLogs, Transactions, and other data to collect transaction information on the user chain (for example, the currency of the transaction, the number of transactions, the value of the transaction, the type of interaction, etc.).

Positioning analysis:

Currently, through the Noox protocol, all users can claim badges issued under the rules established by Noox, so at this stage, the Noox is more like a tool to record on-chain interactive behaviors which are independently developed by the protocol. In other words, Noox uses smart contracts and verification oracle machines to verify composable badges and the on-chain data built into the protocol to create a more collaborative and elite-managed network. Noox envisions that this network is fundamental, transparent, and open. Therefore, the mature Noox protocol is a community-driven, contribution-preferred, and blockchain-based system. It can establish a Web3.0 user profile, record how users interact on the chain and build applications and protocols to understand the structure of users' interaction behavior, which makes it also work well in the field of businesses and consumers.

(5) ARCx

ARCx is a decentralized liquidity market on ETH and Polygon. It provides the safest and most capital-efficient lending experience in DeFi by using DeFi credit scores. The main objective of ARCx is to improve the capital efficiency of the DeFi lending market by measuring and rewarding high-value lending behavior. ARCx uses the DeFi credit scores to continuously analyze on-chain behavior and evaluate the credit risk of a single wallet address in DeFi. DeFi credit scores are a numerical value between 0 and 999, which describes the credit risk of a single address based on its on-chain lending activities. The score is calculated based on the historical data and operational experience of each borrower in managing risk and avoiding liquidation over a period of time. Scores are calculated off the chain and then released on the chain through ARCx's customized oracle infrastructure. The DeFi credit score will be updated on the chain 48 hours later. The score consists of three main parts - daily score reward, survival score reward and liquidation penalty, whose combination equals to DeFi credit score.

Positioning analysis:

The starting point of ARCx is like the on-chain standardized scoring system on DengenScore, but the former is more focused on DeFi, similar to the sesame credit score in DeFi. From this point of view, the biggest challenge for ARCx is how to make this kind of scoring system more acceptable to DeFi projects to establish the reliability of their reputation system - it deserves more continuous exploration.

(6) lvl protocol

The lvl protocol is produced by indie DAO for the different types and needs of each DAO and even Web 3.0 organizations and links different Web 3.0 communities. The lvl protocol uses an interoperable Soulbound NFT to record data. The lvl token is a dynamic NFT that shows the skills acquired by users in each community and combines data from multiple sources (data from major social networking sites are stored in IPFS), which is verified by the community, and then stored on the chain. Therefore, any smart contract can interact with each other on the user's lvl protocol. It connects data from each DAO and ecosystem in the form of SBT, while maintaining interoperability on the chain so that anyone can mint lvl NFT.

Positioning analysis:

The lvl is an encrypted resume, as well as an on-chain reputation and skills Web3.0 resume, highlighting all data, experience and contributions of users in the community, DAO and Web3.0 nodes. Users can mint lvlNFT to track the contributions, skills and reputation on the chain - which changes dynamically. Community administrators can combine the lvl protocol with community data, customize the community-related data or resumes acquired by members, and summarize all off-chain data from the community, DAO, game or metaverse into the member's on-chain lvl token.

The lvl protocol is mainly used in the DAO. Any community can connect its existing data sources to the lvl rollback API. Community managers can customize their data sources and types, such as SourceCred, Coodinape, Discard, Twitter, Figma, Github, etc.

(7) Sismo

Sismo is a modular proof protocol that focuses on decentralization, privacy, and availability. The protocol is deployed in Polygon. Sismo releases SBT as a non-transferable token (ERC1155) - a badge in the ecosystem of Sismo. On Sismo, users can generate a wide range of on-chain data and proofs, such as donations to Gitcoin, voting twice in ENS DAO, or sending more than 100 transactions on Ethereum. Since Sismo is a modular data protocol, the on-chain data can be freely selected by the creator. Through identification, users can access the advanced functions in the Sismo ecosystem, or prove their reputation in the applications and protocols using the above proof. The Sismo protocol is based on several modular concepts: accounts, creator proof, registries, and badges. The open-source and modular Sismo protocol allows the coexistence of multiple proofs so that creators can work together to build, modify and update protocols together for different needs.

Positioning analysis:

On the one hand, Sismo is an underlying modular proof protocol and hence, Sismo protocol can be easily applied and compatible with other protocols. The project providers can freely select modules to meet the needs of the project providers and users. In addition, Sismo focuses on ZK badges - zero-knowledge proof badges. Currently, Sismo hasn’t published how those badges were created or used. The generation of ZK badge relies on a zero-knowledge proof mechanism and ensures the user's and data privacy. The ZK badge protects privacy by creating no links between the source account used to prove eligibility and the target account receiving the badge. This means that the project providers can screen user behaviors to issue qualification certificate SBT or some kind of reward while fully guaranteeing the privacy of user addresses.

It is clear that Project Galaxy, Sismo and even Noox are establishing themselves as the fundamental protocols applied to businesses and consumers, while DengenScore and ARCx are more inclined to establish an on-chain scoring and credit system based on their standards. In a more specific segment with definite demands, Rabbit Hole prefers to serve the business by using the established rules to educate DAPP users and attract new users and traffic; whereas the lvl protocol focuses on the on-chain and off-chain data behavior scoring system in DAO. We can have a glimpse of future trends in on-chain user profiles and gain insights from these selected projects.

2.Possible vision and use cases of on-chain user profiles:

First of all, the premise is users have the right to choose which certificates stand for them or even reject unwanted certificates, rather than being passively labeled by the protocol. Secondly, we think that the final form of the on-chain user profiles should be an open source, protocol-level, modular user behavior record ecosystem based on the sub-graph of the graph, API, and other data acquisition approaches to prevent some protocols from centrally monopolizing free user data. In this system, as the issuer of the certificates representing the user's reputation, the protocol's qualification also needs to be reviewed and selected by the users. Otherwise, a centralized institution might monopolize the credit on the chain. As a result, the protocol can be evil without cost and control the user's certificate at will. Therefore, on the basis of the choice by both parties, users and project providers can find the interaction records about the target behavior in a modular way, and cast certificates to represent the existence of this behavior, thus creating their reputation/profiles. Besides, these certificates should be interoperable among the chain or even across chains, especially between public chains that support EVM by using the same address through a private key - which is also the same identity carrier - so that the behaviors on the chain can produce comprehensive user profiles to maximize its value. For example, in the middle of development, a leading project, together with other top projects, establish a set of general ERC standards or form a certificate organization composed of DAO based on its existing certificates to standardize the identity system on the chain, and build a user profile system recognized by most projects and users. That eventually become the token standard in the on-chain social credit system as widely used as the ERC20 standard.

Only in such an environment can the on-chain user profiles be formed, the on-chain credit/reputation system be established, and the value of the interaction record in each address be evaluated and utilized. Based on the features of on-chain user profiles, we have built several use cases: 1. DeSoc; 2. On-chain resume protocol; 3. Launchpad, AMA, and other distribution protocols; 4. Unsecured financial system; 5. A comprehensive social credit system combined with the offline authentication system.

(1) DeSoc

DeSoc, a social protocol built on users’ influence, needs on-chain user behavior and their interactions with other users, which naturally fits the definition of on-chain profiles. Among the DeSoc projects, protocol-level products such as Lens Protocol and Cyber Connect aim to build an interoperable on-chain social network. Although the underlying user social graph in each protocol can be commonly used in any project supporting the protocol, the user social graph between different protocols is incompatible or even mutually exclusive. Projects have to choose a single protocol, and inevitably lose potential users outside the chosen protocol. But user profiles can deal with that. A unified user interaction record system can directly provide cross-protocol data sources that can be modularized for different projects, so projects can adjust the weight for interaction behaviors according to their positioning, and produce the most well-tailed user profiles.

(2) On-chain resume protocol

The resume protocol is the most intuitive user profile. Users process their interaction logs into proof that mirrors their capabilities and records. DeepDAO mainly scores each individual in a centralized manner and showcases information, such as DAOs which he’s in, proposals he initiated, and votes he cast. That is just a function under the sub-sector. Similarly, user profiles can work as proof of skills to code, leverage financial derivatives, and issue NFT. Furthermore, it is also a resume proof such as how many votes he has given on key proposals of famous projects, whether his several lending is liquidated or not and whether he is responsible for certain hack events, and return all funds. Formed by these tamper-proof and intrinsically valuable records, the user profile constitutes a simple and feasible resume for the user. In addition, the on-chain record in a DAO organization or project can be their resume on the chain too. To determine the quality and credibility of projects, many indicators can be referred to, including TVL, AUM, the partnership with other organizations or projects, profitability, whether they have been hacked, or other major events - such as whether the stablecoin issued has been terminated. All in all, the on-chain resume protocol can give birth to the capability evaluation system for individual users and organizations or projects, and matchmake or rank them by different needs.

(3) Launchpad, AMA and other distribution protocols

The distribution protocol is another appropriate use case for user profiles. The project providers can accurately locate and reach real potential users, and attract them with more inspiring incentives. Distribution protocol leaders like Launchpad. AMA and task releases such as TrustPad and Project Galaxy are indiscriminately addressed to all users, which will undoubtedly increase the costs and reduce efficiency because coupon clippers will just take the free ride throughout the process. But if the user profiles are created on the chain, the project providers set up a mechanism to screen interaction behaviors. In this way, they can locate more real target users at the same or lower cost. Users can also search for appropriate projects based on their own profiles, and make a difference in the infant project to maximize their earnings. This scenario is also how the resume protocol is applied to some extent.

(4) On-chain credit financial system

The on-chain user profiles embody the user's reputation and credit on the chain. Credit can’t be found in the current blockchain, so all financial behaviors are conducted on the excessive mortgage, or the operational scope of lenders must be limited by smart contracts. For instance, Aave and BendDAO run on excessive mortgage loans while Alpaca and Gearbox operate on leveraged loans. There is no exception. Those practices greatly reduce the efficiency of on-chain capital. As mentioned above, all on-chain user interactions have their intrinsic value on which a credit system can be produced for unsecured lending. In fact, this kind of loan is not necessarily completely unsecured. It can be a loan without collateral where only a certain amount is assigned based on the past behavior and existing status of the address; it can be a load with a slight adjustment to its original mortgage rate, or interest rate cuts; and it can also the loan with installment payment and the practice of buy now, pay later ( BNPL), etc; it can even be the guarantee loans for other addresses.

(5) Sound social credit system

The sound social credit system is exactly the final outcome that Vitalik Buterin expects to be generated by SBT. First, offline certification, such as an ID card, academic degree, or property certificate, can endorse the on-chain identity, and then the on-chain interactions build up the reputation. Thus, a sound social credit system combining the off-chain and on-chain elements comes into being to blend blockchain with real-world credit. Even though this system is a mature online identity solution, how to tie real-world identity to on-chain roles is still in the capacity of Web3.0 and it is not so crypto. It is a part of the final solutions though, and we believe that this system is a possible option for the on-chain credit system, and users can still choose the pure on-chain solution.

3.Conclusion:

In the era of the digital economy, it is said that user data on the Internet is a gold mine, and the dot-com process data to s add value. In the era of Web 2.0, user data is fragmented and companies hardly see the bigger picture. Besides, the data are owned by the platform, so the individual user has no access to the value increased by data processing. However, in the Web3.0 era, due to the nature of blockchain, footprints on the chain are owned by users, fundamentally destructing the data ownership structures. What’s more, to improve the reputation of their addresses, users are also willing to create their profiles on the chain. For protocol providers, wider user profiles can augment user growth and capture more value than the information island in the era of Web 2.0. Hopefully, the on-chain user profile promises the potential we are looking for in this field.

Source：

https://wrenchinthegears.com/wp-content/uploads/2022/05/Vitalek-Buterin-Soulbound-Token-Paper-May-2022.pdf

https://deepdao.io/people

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