Original author:Zixi.eth
Original author:
At the end of another year, let's try to summarize the story of 2022 and see what may happen in 2023. 2022 is a year of highs and lows. Although Ethereum fell to 3800 at the beginning of the year, we can still see the enthusiasm for transactions on the chain and the popularity of the NFT market. However, after the Luna crash and the FTX crash, the entire market began to slump, and no new narrative direction emerged.
The article is divided into three parts, mainly explaining what is optimistic about this year, what is optimistic about next year, and what needs to be observed next year.
1.1 NFTFI
NFTFI is actually a track that everyone gave high hopes at the beginning of the year. Based on the enthusiasm of NFT at the beginning of the year, countless outsiders rushed to the hot track of NFT one after another. At the beginning of the year, countless bigwigs spent a lot of money (100E+) on BAYC; the gas war in Houdi was so terrifying that the price of a mint NFT was more than 2E. When the floor price of a single blue-chip NFT was above 10E, people began to think, how can the general public participate in such a high price?
Figure 1: Opensea traded DAU this year, the number of transactions, transaction volume, etc. showed a decline
image description
Figure 2: NFT Index
Therefore, at the beginning of the year, everyone was full of enthusiasm and expectations for the NFTFI track. Everyone hopes that this track will not only have lending transactions such as P2P, P2Pool, etc., but lowering the entry threshold has also become a major direction. Therefore, we have also seen new concepts such as index trading, fragmentation, crowdfunding, buy now and pay later this year. In the first half of this year, partybid and others began to appear crowdfunding models, and Cyan and others began to appear NFT BNPL. Let us take NFT lending, which has a relatively large market space, as an example. If you only look at the borrowing volume, the overall borrowing volume will remain basically unchanged after next May, with BnedDAO and NFTFI contributing more than half of the borrowing volume. But in fact, let's look at the number of users of the platform. The total daily activity of this market is only about 100, and the number of people covered is still too small. The limited daily activities and transaction volume are partly due to the decline in the popularity of the NFT market.
Therefore, people are too optimistic about the development of NFTFI this year, but this year's Sudoswap really made the market feel refreshed.
Figure 3: NFT lending market Borrow volume
image description
Figure 4: NFT lending market DAU
1.2 C-end applications such as SocialFi/MusicFi
Let's not talk about whether the blockchain infrastructure is now sufficient to support social/music products on the chain. In the past, there have been low-level public chains such as deso that specifically support social networking, but their development is not satisfactory. The core is that the ecology and user side have not been established. The logic of SocialFi is different from that of DeFi and GameFi, but it is similar to that of MusicFi. It is based on the love generation of big V/musicians to purchase related fan Token/NFT. The logic of SocialFi is simplified to - if a big V wants to realize his social capital (obtain token), then he needs to spend time and money to prove the value of his social capital (POW proof of work). Similar to the logic of BTC/ETH, this also shows that the blockchain-based Web 3 is very suitable for the development of SocialFi. That is, the essence of SocialFi can be understood as a big V (or an individual) using their own influence based on blockchain technology to build their own social capital (that is, their personal brand reputation) on the one hand, and to build their own fans They seek benefits.
The problems of the MusicFi track still exist: 1. From the perspective of the user side, there are still fewer users of the entire Web 3, fewer users are willing to spend the limited time listening to Web 3 music, and are willing to spend real money to buy music without royalties There are very few users of NFT. In essence, it is still very difficult to rely on restricted content to rob users of their limited time. 2. From the perspective of IP, there is a lack of leading stars such as Taylor Swift and Jay Chou, and the current Web 3 musicians are relatively long-tailed. But we have also seen some top stars represented by Wang Feng try to get involved in web3 music this year. 3. From the perspective of the project side, the economic models of many project parties are not perfect, and the empowerment of tokens is very weak. The whole project is more like "I created this environment, and users want this demand, so I issued a token." Music projects with a strong social nature are similar to SocialFi. When SocialFi’s project tokens are poorly empowered and content mining is adopted to start a cold start, the consequence is that users start to create unlimited spam content and fall into a death spiral of mining, raising and selling. Therefore, when the music project starts Listen to earn and Create to earn, if the token is not given a reasonable value, the death spiral will be the final result.
image description
Figure 5: Horizontal comparison of social and music with defi and gamefi
1.3 Cross-chain bridge
Last year, the market generally regarded the cross-chain bridge as the core infrastructure. This is also very obvious. After all, the public chain structure last year was one super and many strong, and new public chains emerged one after another. There are many public chains such as BSC, Luna, Solana, Tron, Avalanche, Polygon, Harmony, etc. in the market. Due to the trust problem in the centralized official cross-chain bridge, and the scalability is relatively poor. Therefore, third-party cross-chain bridges represented by highly scalable Anyswap and cbridge began to flourish last year and early this year.
The cross-chain bridge is one of the most important infrastructures in the public chain, but for investors, due to the existence of hackers, it may not be a very profitable business. But it is undeniable that excellent cross-chain aggregators such as LiFi, Chainge, and Dbridge have appeared on the market, reducing the use and investment risks of users and investors. But (cross-chain) aggregator, a low-threshold, highly competitive business, but a frequently used tool, can it bring excess returns to investors? It is worth thinking about.
Figure 6: This year, 2 billion US dollars were hacked in the cross-chain bridge
image description
Figure 7: The number of transactions on Stargate bucked the trend and the transaction volume gradually decreased
2. What am I optimistic about next year?
2.1 Compliance Supervision
Before talking about compliance and supervision, let me share a little story.
I saw a project in 34 months of this year, which was a cross-chain bridge. One of the characteristics of this cross-chain bridge is that it requires KYC. At the beginning of the year, I couldn't understand the need for KYC for dapps on the chain. After all, the blockchain is an anti-regulatory world, and with KYC, I always feel that I have lost the spirit of the blockchain. But after the interview, I understood why the project party needs KYC. This is a cross-chain bridge project made by a large traditional financial market maker. They have an extremely large amount of funds for making markets in markets such as traditional stocks. They are also very optimistic about the entire crypto track in the near future, and began to try to use part of the funds to make markets on and off the chain. Off-chain market making is already very complicated, so they try to open up the market-making space on the chain, but multiple chains will lead to the dispersion of funds. In their daily market making, liquidity is required to move across different chains. If CEX is used, the huge amount of funds will lead to the upper limit of daily deposit and withdrawal, and there are some trust issues in the centralized cross-chain (combined with the FTX incident, this is really forethought). If you use the liquidity of the cross-chain bridge to cross-chain, the pool of the cross-chain bridge is very small, and there are large slippage and wear and tear in the cross-chain; if you add liquidity to the pool yourself, you will spend your clean money and money from unknown sources It may be that the pools of black money are mixed together, and they are targeted by hackers from time to time, so they will inevitably be subject to supervision-big traditional market makers are under the strong supervision of the SEC, and they have no need for the current crypto market making The iron fist of supervision is on the top for small profits.
So is there a way for me to continue making markets in crypto while avoiding all the problems mentioned above and complying with regulations?
KYC. After passing KYC, market makers can throw money in for liquidity. At the same time, other institutions and individuals after KYC are welcome to come in and release liquidity. On the one hand, it reduces cross-chain wear and tear, and on the other hand, it also caters to the needs of supervision, allowing larger traditional financial market makers to enter the market together to develop the land that has not yet been fully developed for on-chain market making, and make the cake bigger together . After Tornado cash was sanctioned by the U.S. Treasury Department in June this year, I became more convinced of the need for compliance and supervision. At this stage, the entire market value of the blockchain is not as large as Apple, which is half. We not only need to improve infra, but also bring in the traditional financial institutions of the C-end and Old Money to expand the market together.
Therefore, following the direction of supervision, KYC service-oriented projects have begun to appear in the market. For example, through ZK DID, users use their own information to generate ZK-Proof in the form of ZK through their own devices under the chain, and then only need to pass Proof to verify whether they are whitelisted users. For example, one day the iron fist of regulation hit Uniswap, requiring Uni not to provide services for users in Russia, Iran, and North Korea. A feasible way is that Uni cooperates with KYC service providers. Users must show their own zk proof to prove that they are not citizens of the above countries before they can use Uni. On the one hand, ZK proof protects the private information of users, on the other hand, it has also been recognized by regulators, making Uni’s money cleaner and more compliant, and it is more likely to attract traditional institutions to enter the market.
2.2 Developer Tools
In 2021 and 2022, we see a very interesting phenomenon - more and more web2 developers have a great interest in the crypto/web3 world. According to Github statistics, by the end of 2021, there will be about 73 million web2 engineers worldwide. According to Electric Capital data, by the end of 2021, there will only be 18,000 web3 monthly active engineers, with a penetration rate of less than 0.025%. Judging from the statistics of LinkedIn and ok in 2021, test engineers and cryptography experts are one of the two fastest-growing professions. Superimposed on the current phenomenon that major Internet companies in the United States, China, India, and Singapore are slowly laying off workers, more and more web2 engineers are beginning to seek the next outlet. According to relevant rumors, "In the Bay Area alone, there are currently about 3,000 Chinese web2 engineers seeking new opportunities"; due to the downturn in the domestic economy, more and more engineers from major Internet companies in China, especially from Byte and Tencent, began to I started my own web3 journey. Therefore, from the data point of view, the 2 dev market is an incremental market that may be sexier than 2C and has a more definite direction.
Figure 8: Number of web3 monthly active engineers
image description
Figure 9: Growth career directions in the global blockchain field
Let's take JSONRPC and API as an example, one of the markets where developers interact with Dapps the most. RPC is not a market with barriers. Any project party or individual can build a full node to provide full-chain data for their own projects. But this is accompanied by high fixed costs and monthly operation and maintenance costs. For the project party, it starts at 10,000U per month, and self-built nodes may also face complex operation and maintenance problems such as maintenance, which is not worth the candle. Therefore, the RPC business will continue to be centralized, which also explains the rapid expansion of node providers such as Alchemy and infura. This is essentially a market with a very high Matthew effect. In addition, there are also high-quality node suppliers such as quicknode and Infstone on the market. RPC is a very winding track. In addition, on the basis of RPC, service providers can use their strong engineering implementation capabilities to provide cloud databases (datacloud) and APIs. In terms of providing cloud databases, decentralized/centralized multi-chain real-time databases have appeared this year. Developers no longer need to spend a lot of cost and time to analyze the data on the chain. They only need to use SQL to call out and focus on Just develop the product. In addition, developers still have many strange API requirements, which greatly affect the progress of product development. If there is a product with a multi-chain real-time database, and developers can call the data combination API independently, it will meet the long-tail needs of developers and greatly reduce the time for many developers to reinvent the wheel. In the second half of this year, this type of product will start financing in the middle of this year, and the new Infra competitors - overseas Space and time, Goldensky and domestic Chainbase, etc., are competing with the old Infra-Alchemy Infura Instone The Graph in the Central Plains.
In addition, a number of data analysis tool products have appeared on the market. In addition to the more versatile dune, footprint, etc., there are also data analysis tools in more subdivided fields, such as dedicated to defi, NFT, gamefi, public chain, financing data, chain On the black and white lists, such as defillama and tokenterminal, etc., the means of monetization are nothing more than SaaS subscriptions or API interface calls, and there are more or less commercial monetization problems. The database in the subdivision field can connect the cleaned database of its subdivision field to more general databases such as space and time, chainbase, etc. First, the general database can improve its own data, and second, the refined/subdivided track database can increase its own monetization channels, which is equivalent to turning the refined database into a general database with more developers and ecological docking. API Marketplace, followed by revenue sharing.
3.1 DeFi
3. What are you still watching next year?
Influenced by FTX and Babel, etc., CeFi has once again become the target of public criticism. Let’s give an example first to explain what problems exist in the black box-manipulated asset management CeFi. CeFi attracts users essentially by relying on APY. If there are two big institutions X and Y in the market, X makes 5% APY to attract users, and Y makes 6% APY. If the branding of X and Y are similar, and the backer behind them is similar, most users will choose Y to deposit, after all, the APY is high. However, because of market competition and income issues, in order to acquire customers, X can only increase it to 6.5% or 7% to attract customers. The seemingly innocuous APY is actually harmless during the bull market. The powerful trading, quant and structured products in the CeFi institution will allow the institution to obtain a return much higher than 5%-7%. But the problem is that once the market changes too much, and CeFi institutions are no exception, there is a situation of increased leverage. When encountering 312,519, and the Luna incident, traders are easily taken away by the market slump before they have time to adjust their positions. This led to the fall of the recent stars of the market FTX and Babel. If users know where the high APY is coming from, can the above customer acquisition problem be solved?
Benefiting from CeFi's wind reviews this year, can politically correct DeFi run in a new direction next year? This still needs to be observed.
Figure 10: Dex/CEX spot volume comparison
Figure 11: DEX Market share
image description
Figure 12: Weekly DEX Market Share
3.2 Enterprise service track
The enterprise service track is also a very interesting direction. Now there are more and more startups in the blockchain. In the early days, it was not a big problem to rely on excel to manage. However, with the increase of personnel and income and expenditure, refined management is becoming more and more important. Unlike physical companies, many revenue and expenditures of crypto start up are carried out on the chain, which leads to the poor adaptation of traditional SaaS tools. In the North American market, blockchain enterprise service companies have emerged, such as the flow payment agreement Zebac (received financing of 28 million US dollars in March 2022), developer management Convex (received financing of 26 million US dollars in April 2022) , financial management Meow (received financing of 22 million US dollars in July 2022). While the direction is interesting, is it a big track? The monthly fee is 1,000 U. Assuming that there are 1,000 blockchain early-stage companies using the product after working for a period of time, the income is only 1,000,000 U.S. dollars per month. The annual revenue is up to 20 million U.S. dollars, and the PS standard 15-20 of Nasdaq SaaS company is used to calculate, then it is the ceiling of 400 million U.S. dollars. Not to mention how long it will take to get 1,000 companies under BD, and whether they can have a monthly income of 1,000U per company. Convex raised US$26 million in financing at one time, and the valuation is at least US$130 million to US$260 million, so the returns to investors may still be limited.
The ceiling of the Qifu track still needs to be observed.
3.3 Traffic track
The traffic track is an old-fashioned topic, and it usually refers to the track where game, wallet, music, and social traffic enter.
On the game track, many major manufacturers (Funplus, Photon Games, Ubisoft, etc.) have begun to slowly deploy and explore web3 games this year, but further observation is needed as to whether players are willing to pay.
For social networking, we have seen Tencent, Meta, Twitter, etc. boldly explore web3 social networking, some new web3 social products, such as debox, and some social search protocols such as lens, rss3, mask, etc. We are looking forward to the next bull market, web3 can have its own social platform, this social platform can attract enough new people into the circle, and slowly convert users.
3.4 layer2
For wallets, a "new concept" represented by AA and ERC4337 appeared this year. But if you think about it carefully, isn’t social recovery, gas subsidies, etc. just fried rice? Argent, loopring and other wallets have actually realized the similar capabilities of the current 4337 AA contract wallet a few years ago, but they still haven't come out. In essence, because creating a wallet requires gas fees, social recovery logic is buggy and troublesome, and it is not compatible with other DAPPs that require BD and other features, so the development is difficult. But everyone believes in the fact that wallets serve as traffic portals, so I still want to observe what kind of wallets can occupy a certain market space in the market recovery next year or two.
All in all, with the current modular public chain gradually becoming a consensus, the positioning of L2 is becoming more and more important. On the basis of Starkware, we can also iterate app chains for L3 and L4. Although the theory is very good and the market share of Ethereum is gradually increasing, it will take time for l2's technology to be implemented, and ecological construction will also take time.
image description
Finally, put a calendar of this year's encryption world, mourning the hardships of people's lives.
image description
Figure 14: Crypto World 2022 Calendar
However, many of the stories this year cannot be avoided. In the past six months, there have not been many new concepts. I hope that in 2023, there will be new narrative directions.
IOS
Android