HOPE TALK Review: How to design an economic model to become the growth engine of the project

Original source: HOPE

Host Sylvia: Welcome all the villagers of Houpu New Village and the heads of major projects to participate in this HOPE Talk Chinese Community AMA event. I am Sylvia, the host of this AMA. I am honored to invite OGs in the fields of DeFi and GameFi, Flex, the founder of HOPE, Yuanjie, the co-founder of Conflux, Boyang, the founder of P12, Duojie, the head of growth at AltLayer, and Fiona, the consultant of WuShuo, to participate in this HOPE Talk. The topic we are discussing today is how to design an economic model to become the growth engine of the project. Before we officially start discussing this topic, let's ask today's speaker Flex and the guests to introduce themselves.

Flex:Thank you all for coming to today's HOPE Talk. Today's topic has a lot of professional vocabulary, so later the guests may use simpler vocabulary to describe some of their ideas. Then welcome Duoduo, welcome Boyang, welcome Fiona, welcome Yuanjie.

Boyang:I am Boyang, Founder of P12. Today I am very honored to thank Flex for inviting me to participate in this HOPE Talk. The topic of discussion is a topic that we are very interested in, how to design a healthier and more sustainable economic model. I am looking forward to communicating with you.

Duojie:Hello everyone, I am Duojie. I am responsible for growth at AltLayer. AltLayer simply helps projects expand capacity, provides a one-click chain launch, and a high-performance, decentralized infrastructure. Thank you everyone, I am looking forward to today's discussion. Fiona: Hello, everyone. I’m Fiona. WuShuoBlockchain is a media with a relatively senior and influential position in the currency circle. So if there are project parties who want to cooperate in the media, you are welcome to DM me or DM WuShuoChain. Thank you.

Host Sylvia:Our first question today is mainly about economic models. In the Web3 world, the continuous innovation of economic models has always been an important sign of industry change. From DeFi to GameFi, we have witnessed the various evolutions of Tokenomics gameplay. It is like a double-edged sword that can make projects explode or sustainable, but we have also seen many projects lead to death spirals due to insufficient momentum in the economic model. The most typical example is that LUNA went from prosperity to decline overnight. So as far as LUNA is concerned, what do you think are worthy of continuation and innovation in LUNA's economic model, and what needs to be carefully considered?

Boyang:Around July-August 21, we saw the LUNA and Terra project, which attracted more attention in the industry. We read its white paper, learned about its ecology and backers, and the direction of future development. LUNA is an e-commerce model, and its business foundation tends to be offline, such as in some coffee shops in South Korea, through POI deployment. At that time, its DeFi ecosystem attracted attention and is now called RWA. In this context, stable calculation is a business/model that continues to appear and continue to be falsified.

LUNA also does stable calculation, but he is still very serious and systematically puts forward ideas and writes them in the whitepaper. Although the final result came out, it made him review and reflect. This kind of reflection is not common in the industry. I think it is very valuable for HOPE to raise this question. In LUNA's whitepaper, they conducted a lot of simulations, calculations and analyses, which were obviously carried out seriously. They have some qualified researchers who are thinking about this question. If the price of the currency drops by 50%, what will happen to our ecosystem and the price of LUNA? They have proved that they can stabilize and have even made a series of simulations when the land price dropped by 80%.

In these simulations, according to its conclusion, the entire ecosystem will not be affected and can return to this steady state by itself. Of course, we know the actual result. In fact, this kind of death spiral and run is very fast. In the current blockchain environment, it does not need to be measured in days, but in hours. This death spiral and zeroing are very, very scary, so I think what we can learn from Luna, including some of its existing actual businesses, including its attitude of taking the white paper seriously and conducting in-depth research, are still important reasons that attracted many people at the time. However, it is worth learning from the mathematical calculations on paper, especially there are many such assumptions, that the price of his own currency can only fall by 80%, or that everyone will return to a steady state after a certain degree of decline. This type of simulation is actually unreliable. Then when we evaluate the economic model later, we really can't judge whether the economic model is feasible by whether he finds a professor or whether his white paper is formal. I think this is a big wake-up call. At least for us at that time, we would also think that its white paper is still very credible, but in fact this judgment is too superficial.

Fiona:Okay, actually I still remember the whole series of events of Luna's collapse very clearly, because I remember that it was Mother's Day last year. At that time, my mother and I had dinner outside, and we found that the decoupling between ust and usdt was discovered. Because I will give you a brief introduction. Although everyone should know that it is Terra, I think it is actually a Tokenomics with a flywheel effect. It is divided into three parts. Luna is its governance token, and then its stablecoin ust. I think the last one should be its financial product, the 20%. It is these three factors that give him a continuous source of motivation. Everyone is willing to put money in, expand the pool, and raise the price of Luna, and finally form a positive upward flywheel effect. So in an ideal environment, or an upward environment, the price of Ust must be firmly anchored to the US dollar stablecoin. But one night it suddenly decoupled. That should be the second time I saw such a sign clearly. But usually the decoupling will be re-anchored immediately, but there was no such sign that night. So at that time, it was a bit like the panic first theory, and we would take the money out of Luna, because at that time many of my friends were on Luna, whether it was storage or development in the ecosystem, so this was an ecosystem that I studied more deeply at the time. Then not long after the decoupling of ust, the price of Luna began to collapse, so we can see that I think it is Tokenomics that makes it successful and Tokenomics that makes it fail.

From its flywheel effect, when it is stable upward, it can push the entire ecosystem to a high point immediately, but when it is about to collapse, it is also from the collapse of ust, to the plunge of luna prices, to the continuous drop below the liquidation point at that time. I remember that it seemed to be around 55 US dollars at the beginning, and then there was another continuous downward breakthrough, and then ust was completely unmoored, and the entire ecosystem collapsed instantly, so I think the design of its entire Token model is very clever, which is one of the reasons why it can attract so many people in the early stage, but at the same time it is also a very delicate and very fragile Token model, so when there is a problem in one of its links, once it is not controlled well, the crack becomes larger and larger, and the entire seemingly stable 10 billion empire collapses in an instant. So I think in the Token model, in addition to an upward design, everyone should actually consider, as boyang just said, when the currency price falls, how to set a protection mechanism to prevent it from collapsing immediately in an instant and give it some buffer time. From the countless crashes last year, from FTX, from Luna, we can actually see a similar failure in crisis management. So, I think this is a pity, and I hope there will be more such designs in the future Token model.

At the same time, I would like to add another tokenomics of the collapse. Because I worked at stepn for a while last year, it is a move to earth, and it has similarities with Luna, that is, there is a positive flywheel when it goes up, and it runs smoothly when it goes down, because there is no new money coming in, no new liquidity coming in, it collapses, it's just a matter of time, so I think this example is not just Luna, it's just that it collapsed particularly tragically and quickly, so we still remember the pain it brought, but there are many other slow collapses, I think their Token model also has big problems, so I also hope to hear other guests have any other opinions on this point of view, thank you.

Boyang:I want to ask a small question. Do you still remember the 20% Luna financial product? Does it have a redemption period? Or can it be redeemed immediately?

Fiona:I remember that Luna has a redemption period. You can withdraw the financial product, but you can't sell your Luna immediately. I remember it has to be locked for a period of time. So many of us told our friends at that time that they couldn't get back the Luna they staked immediately, so some people opened short positions at that time, and some people could only watch it go to zero. That's about it.

Boyang：The situation at that time was that Luna had to be locked for seven days, seven days or 14 days, and this was very embarrassing at the time. It was possible to open a short position, but sometimes the liquidity of a short position is not enough. And then, Ust seemed to be able to be redeemed instantly, which partly contributed to its collapse. So this topic is very interesting. How to have some protection when it is declining, or how can these protections have a positive effect.

Fiona：Yes, I would like to add a little bit to the last sentence. When USDT collapsed, I actually saw it on Binance. I think it was Luna officials who put up a wall of more than 100 million US dollars at about 0.9798. They wanted to support the USDT exchange rate, but it only lasted for one night, and the exchange rate was brought down. I think this kind of hard-support approach is not very desirable, because when panic selling occurs, even Silicon Valley Bank collapsed, let alone cryptocurrency projects. So I think there should be some other stop mechanisms, and maybe even suspend withdrawals. You should eliminate the panic first, and then what? Otherwise, you won’t be able to hold on any longer.  

Duo Jie:There are actually quite a few points I want to talk about this topic. First of all, it is about DeFi. The price point that Fiona just mentioned is like this. Because it is not the first time that ust has been decoupled. I can’t remember it clearly now, but it was decoupled once not long before the crash. At that time, Jump helped it to recover. So it is not uncommon for market makers to protect an important point. At that point, their willingness to rescue actually proves the market maker’s responsible attitude towards this project and the market. It is not a very strange move. But why can’t it be rescued? I think comparing it with Synthetix is a better method, because I used to work at Synthetix, and this morning I just saw a Twitter celebrity with more than 100,000 followers asking a question, who can explain why Synthetix has no problem compared to Terra? In fact, I think putting it in today’s context is also a good way to help everyone understand the Terra problem. First of all, everyone should know that UST is a stable one.  

Calculate steadily means that you can burn a Luna Token, for example, if a Luna is 50 dollars, you can MINT 50 dollars of UST, and the next second, if it drops to one dollar, you burn a Luna Token worth one dollar, and you can still mint a corresponding UST of one dollar, so this mechanism is equivalent to unlimited issuance, especially when a currency collapses, such as the Luna Token, when it collapses, you can issue UST unlimitedly, and any currency that can be issued unlimitedly is problematic, so the design of the entire mechanism is problematic, it is not the problem of positive incentives and reverse incentives as everyone says, it is its design itself, why did we like to play Calculate Stable in the past, everyone must have played the first generation of Calculate Stable, the second generation of Calculate Stable, the third generation of Calculate Stable, including Brother Maji who issued a lot of Calculate Stable, everyone has played it, what is the ending of Calculate Stable? Except for Ampleforth (AMPL), most of the stablecoins have ended up returning to zero, and the collapse of Luna is not like Stepn, where the price has slowly declined and declined until it seems to have dropped by 90%, and you think it has returned to zero. Luna has collapsed and completely returned to zero. It is more like the other scam stablecoins we have all played with, that is, its collapse and return to zero are real returns to zero, because this thing itself is a problematic design, that is, its negative spiral can kill this thing directly, and its other very fatal problem is the design of its Anchor. Let's talk about something more recent. When he first started DeFi, he actually made Mirror, which most people thought was a bit similar to Synthetix, and thought his design was good. At that time, I criticized it, saying that Mirror was a patchwork monster and could not be compared with Synthetix, but they were very popular at the time, and everyone thought that Luna was thriving and Synthetix was not, but later they went crazy and made Anchor. Why can Anchor survive? Because the market began to enter a downward cycle, the glory of the bull market ended, and DeFi innovation was stagnant at the time. All the methods that should be played, some plates have been played by everyone, and then everyone had no tricks at this time. When there were no tricks, Luna jumped out and said that I have a stable currency that can give you a stable 20% return. For such a product, in fact, many of my friends who work in traditional investment banks or traditional finance will take out their own bank deposits and put them in FTX to deposit the interest in FTX's interest-bearing account, because FTX can give a stable currency in the bull market, which can give more than 10% of the return, which is unimaginable in traditional finance or if you put it in a bank. At that time, most DeFi protocols had no income to give to everyone, but Luna took out a fixed income of 20%.

It is a seemingly risk-free income given to everyone, so everyone flocks to it. The highest scale he achieved was 20 billion. Do you think there is anyone in the world who can provide 20% interest on such a large scale of 20 billion? Where does this income come from? This is also the reason why Celsius collapsed. They also took a lot of money as a Cefi at the time, but in the end they found that they couldn’t invest the money, or they had a long-term and short-term mismatch problem. They used the money for investment, for some long-term financial management, or for ST, Lido and other long-term and short-term mismatched investments. In the end, when they had a liquidity crisis, they couldn’t get their money back. In the end, they couldn’t really provide such high interest rates, so they all collapsed. So I think this is not a problem with the token model at all, but that its design is essentially a scam. That is, maybe its purpose is not to be a scam, but all its designs, including the 20% interest rate of Anchor, are doomed to have problems. It is doomed to collapse, and at that time, many people questioned where the 20% interest came from. He said that I can subsidize it myself. I have raised a lot of money and I can afford the subsidy. But in fact, if you have economic common sense, you will know that no one can afford the subsidy for a long time. He should have admitted defeat early and said that I can’t afford the subsidy and I will lower the interest rate, because in the economic downturn cycle, when the entire market is in a bubble burst, you are trying to support it. 20% is meaningless. If it doesn't support that 20%, then I think this project has the possibility of continuing, because there will always be bubbles in the calculation of stability. As long as the bubble does not burst, you can hold on for a day. It is not a long-term optimistic thing, but it has value. Let's talk about Synthetix. Simply put, Synthetix is completely different. It is a CDP, that is, it imitated MakerDAO at the beginning. It has pledges, pledges SNX tokens, and then mints a stablecoin. Then, at the beginning, it was 8:1. Eight dollars of SNX could mint 1 dollar of SUSD. Later, it may be reduced to 4:1, but the most important thing is that when the price of SNX drops by 80%, you can liquidate.  

When your entire mechanism can be liquidated, you can protect the rights and interests of all pledgers to a great extent, rather than an infinite death loop. Of course, SNX has many other advantages, which I will not go into detail. In fact, everyone can distinguish whether a coin is stable or a collateralized CDP. Then there are two other points. Some investment institutions that I am very familiar with actually invested in Terra in 2018. At that time, their main selling point was that they were in the Cosmos ecosystem, and they had a lot of retail resources, including some store resources in South Korea. They could make a corresponding stable currency for offline Korean won fiat currency. Their idea was not to do these DeFi at all, and many people invested at that time. However, when Terra transformed and his personality was very floating, all the investment institutions I was familiar with actually liquidated their positions. In fact, some of them missed the subsequent big rise, but a person’s attitude can actually reflect some problems of the project. Then there is another friend of mine who was an early business manager of Terra. He reported to the SEC and some American institutions very early on, many years ago. Terra, they said they have serious fraud problems, so actually this project has very serious problems, not just in all aspects, not just what you see, I just hope that you don’t regard this kind of thing with fundamental problems as a misfortune, or a question of how it can be better, that’s all I have to say for now.

Flex: Actually, the analysis just now is quite comprehensive. Actually, for Terra and Luna, because of this industry, after I retired in 2021, I didn't pay much attention to these things, but in my spare time, I had a lot of contact with many parties at that time, such as people from PayPal Finance, including after I withdrew. In fact, the first half of 2022 was an extremely anxious situation, which is what Sister Duo just said that the money could not be lent out. For example, in March and April, I knew that PayPal had about $400 million to $500 million on its account, paying 6% interest, and there was no way to export it. Celsius had more, which should be between $1 billion and $2 billion at the time. So, Celsius later had no way to get assets. The core reason is what Sister Duo just said, that is, why everyone chooses to ignore such a big problem and constantly chooses the so-called Terra and anchor to do it.  

I think there are two major reasons. The first reason is that in 2021, the initial stage of the bull market is the initial stage, the middle stage and the late stage. In fact, there are three stages. In the early stage, for example, the funding rate of the perpetual agreement and the futures rate are about 20%. Then starting in January 2021, the rate suddenly rose to 50 to 60. The highest time was 70 to 80. That was also a period of time, a period of renewable time. How did the rate drop later? In fact, it comes from two reasons. One is that there is a constant flow of funds from traditional sources to chase the risk free rate of 50 to 60%. On the other hand, when the leverage in this market gradually increased, it collapsed once on 519. After the collapse of 519, the interest rate returned to normal for a period of time, but as the risk free rate dropped from 60 to 70 percent to 20 to 30 percent, in fact, the money that had already come in was mainly unwilling to accept it. One unwillingness is that the money that came in was unwilling to accept it. They felt that they had spent so much money to get the money into the currency circle. Then there is another unwillingness of these managers, that is, because the managers had made relatively high interest commitments to many of their LPs or their borrowers, so they had to look for corresponding substitutes. This is the so-called TVL of anchor at that time, which went from tens of millions of dollars to 18 billion. In fact, the highest was 18 billion, and it was just under 20 billion. This process actually started in May and June 2021, and in 2022, when Luna collapsed, I don’t think that in essence, everyone didn’t see the problem, or I think more people ignored the problem directly, because they were too anxious. When making so much money, everyone actually showed anxiety.

Whether it is the anxiety of not being able to make money or the anxiety of wanting to make more money after making money, it is very serious at that time. Well, not everyone can be sober and exit this market, but this is also the charm of this market. I believe that even if we do so many reviews and think about so many things today, when the interest rate is still so high at the end of the next wind in 2025, it is greed, and greedy people will continue to be greedy. This thing will never change, and it goes back to the story of Luna Terra. I think their entire mechanism, when they discovered this problem and started to want to reserve, it was actually too late. The entire market entered a downward cycle. The macro environment, the monetary policy was not supportive, the fiscal policy was shrinking, and the CPI was rising. In fact, they had no way to reserve VC well. It was more of a pull-up. In the small spring in March and April 2022, it was mainly the Luna team's pull-up. They kept buying BTC and told a good story, that is, they wanted to reserve 1 million bitcoins. During the whole process, most people actually believed this story. The most important thing is what I think prevented everyone from making the right choice. I think the main reason is that it would be very annoying in the process of exiting, right? Whether it was the exit of cryptocurrency in China in 2022, or the redemption from stablecoin institutions in the United States or other regions, the US dollar was actually a very difficult choice at the time. For China before, for example, for the money that entered the currency circle in early 2021, China had to convert the so-called USDT into RMB, which was a very frictional business.  

Then in overseas, actually everyone actually hoped that, because of the clamor of the entire market at that time, everyone felt that there would always be a 20% return, which was always better than government bonds, so everyone was very entangled when exiting, so in fact, the 20% interest rate was probably not a benchmark for everyone at that time. Everyone forgot to calculate what Sister Duo said just now, that is, your scale of 18 billion, 20% annualized, annualized 20%, you are 4.2 billion US dollars, more than 4 billion US dollars, where does this historical expenditure come from.  

So in fact, I think that stability has always been what I want to pursue, which is a new stone, or a new gold, but in this process, if you do not achieve some of the basic properties of the currency in essence, it will be difficult to complete this task, that is, the process of building consensus, because the establishment of consensus actually consumes a long time. In ancient times, it may take four or five hundred years for gold to establish consensus, and silver to take several hundred years, and then to exchange for the so-called legal tender of each country, and each legal tender took several hundred years, right? Then let's look at the US dollar. In fact, its growth process is still a very worthy reference example corresponding to Luna.

Maybe there is no good example in the cryptocurrency circle to explain how Luna can go in another way. Of course, Duo Jie just mentioned that it is not just this problem, but there are many other fundamental problems. Let's bypass those first and say that if we want to change it, Terra can do it again. In fact, I think the best reference is the US dollar. In fact, after World War I and World War II, the status of the pound was unstable because the whole of Europe was involved in a total war. Then most of the European families continued to send gold from Europe to the United States, to New York, and to the Federal Reserve in New York. In that process, two events occurred, which made the US dollar really become the currency that replaced the pound, although the United States may have surpassed Britain in 1880 to become the world's largest GDP country. But in this process, it actually took 40 to 50 years to truly establish the process of the US dollar replacing the pound. In fact, I think many of them are coincidental, but I think the US dollar has chosen the right path. What did he choose? He called himself the US dollar, which is the US dollar with gold reserves.  

So, why was gold so important at that time? In fact, when so many wars broke out in Europe, the German mark lost its credit. The mark used to be a gold mark, but later it became a paper mark, which means it changed from a reserve stable currency to a calculated stable currency. Then, the British pound failed to maintain its reserve stability and became a calculated stable currency. After everyone kept sending gold to the United States, the United States did a very unique and very strange thing in 1933. President Roosevelt ordered all the gold in the private sector to be collected. They didn't call it confiscation, but it must be handed over to the Federal Reserve to exchange for US dollars. That was the first step for the US dollar to move from the so-called regional currency to the reserve currency. It was to confiscate gold in exchange for US dollars in 1933. Then in 1944, after the end of World War II, during the process of global order reorganization, the US dollar still did not use debt as its reserve to issue US dollars. It still chose to use gold as a reserve to issue US dollars, and then other countries' currencies were pegged to the US dollar at a fixed exchange rate. At that time, it was the so-called Bretton Woods system. This Bretton Woods system actually lasted for nearly 37 or 38 years. So in fact, it took a sovereign country 37 or 38 years to truly establish its own credit, and then in 1972 In 2000, the dollar was decoupled from gold. Of course, on the one hand, the rapid development of the global economy made the so-called gold reserves insufficient to support the dollar market or something. I think that is a false proposition, because the issued dollars are not equal to the circulating dollars. We all know that currency has a money multiplier, and banks can also create money, right? In the so-called process from M0 to M2, banks have doubled the money they collect from deposits and lend out. Therefore, the currency multiplier of the dollar in circulation at that time was more than 20 times, which was able to support the economic development of the world. However, there were several opportunities at that time for the dollar to be completely decoupled from gold as its so-called left foot stepping on the right foot, that is, using the Federal Reserve's US government bonds as the basis for issuance.

That process actually took more than 30 years. Although our cryptocurrency circle is fast, that is to say, although the traditional economic and financial cycles are 20, 40, or 50 years, and the cryptocurrency circle has a four-year cycle, but no matter how fast it is, it is impossible for this team to gain the trust of the whole world in two years, and then to create new momentum and a new environment, especially when the algorithms in this new environment still have some room for more optimization. So at that time, I didn’t pay much attention to Terra, that is, in 2020 and 2021, because I was actually quite familiar with it at that time, and I didn’t think that they were doing poorly at the beginning, or that there was nothing particularly great about them. But when you really look back, many people will have their own opinions and views. But I think the core is that they chose the wrong order, or the causal relationship was reversed. It should be credit first before stability, not stability before credit. This is the core and fundamental problem. How can a cryptocurrency project have credit? Right? In the current environment, we have to use some assets with only credit as reserves to find out, whether it is a lending mechanism or other mechanisms. Let’s learn about the US dollar. The US dollar was originally reserved with gold. So, I think it’s basically because the cryptocurrency industry is too fast. In this too fast process, ordinary people or ordinary experiences choose to do this because of some forced or forced situations. Because you said DeFi is safer than Cefi, this thing seems to be engraved in the minds of many people. If this kind of thing can’t avoid this kind of thinking error or cognitive bias, then this loss is actually deserved, yes, but for those LPs whose money is managed, I think this loss is too innocent, there is really no way.

Host: Everyone says that the bear market is a golden growth period for BUIDLER. HOPE is a project born in a bear market. Many hundred-fold/thousand-fold coins are well polished in the bear market, and only when the bull market comes are they qualified to soar. Of course, a good project must be inseparable from a good economic model. When understanding the economic model of a project, do you have your own set of evaluation criteria or considerations? Can you share them briefly?

Boyang: This question is actually very complicated. Maybe we can provide a perspective from our perspective. When we look at an economic model, we often look at its value input. At the same time, there is also a very taboo point that any so-called perpetual motion machine that makes steady profits, if we think more rationally, we will generally avoid it, or frown, and look at it from a more critical perspective. Let's talk about these two separately. The first one is that many times for publicity, it is better to go to CX, and many times the economic model tends to go to this "I will definitely make money", no matter if you come in early, or just do this and then that, or when the price drops, you release the pledge, and when it drops, you move the position, so that you can make money steadily and protect your capital. Generally, once we see this, we basically don't believe it, and then we look at where the actual loopholes are, which is considered a negative point.

For the positive point, we will look at the value input, that is, any economic model. No matter how perfect it is designed, we often look at its value input. If something actually generates strong value and has strong external input, for example, others are willing to pay for it, buy its services, buy its various values, such as its NFT, or other values it provides, such as entertainment content, OK, then if there is this kind of external input value, we will think that its economy has a greater probability of running through, even if it has some minor problems, it has room for adjustment. On the other hand, if there is no value input at all, this economic model is very dangerous, it can only circulate and roll inward, and then collapse when it collapses. From this perspective, it is actually better than the Stepn project mentioned by Fiona just now.  

Yes, in fact, reviews like this are very valuable. We feel that Stepn has created value to a large extent. So when his economic model does have problems, he sometimes shows stronger resilience. It is because some people still like this product. For example, the product design is also very good. Its functions allow me to run or walk, which has certain value. Its shoes are beautifully painted, so I like to buy them, or I don’t want to sell them immediately.  

These are all considered value, and we attach great importance to this.

Fiona:First of all, I particularly agree with boyang’s point of view, and then the feature you just mentioned - value input, at that time we had a word with the same meaning called external positivity. In fact, we have conducted research, and we call the cryptocurrency users the most difficult group of people to please, because when they buy your shoes, the purpose of the cryptocurrency users is very clear. They don’t say that they want to be healthy, or that is not their primary goal. Their primary goal is to make money, and then they have to calculate the payback period, for example, the shoes I bought have to make me back in 40 days, etc., and when you think about it, it’s actually quite unreasonable. If you look at it from the perspective of traditional finance, it’s definitely a Ponzi scheme to make back the investment so early, and then at that time, our team at that time also hoped to attract people from web2, because people from web2 are not traditional normal people, they don’t care about gains and losses, and don’t care so much about the payback period. They will consider more that this thing seems to make money by walking, it’s a very vague concept, and then, I can be healthy by walking, it’s like I bought a gym membership in disguise, so Stepn, actually at that time I felt that he particularly hoped that his users, and in the end it was indeed true that most of his users were not native users of the cryptocurrency circle, but people outside the circle. So, at that time I participated in some offline activities in Taipei, and then I found that many people who had no idea about wallets came to participate in the event. I was quite shocked at the time. That was the first time I realized that if a cryptocurrency project can open the channel between Web2 and Web3, the possibilities it has are very huge. So back to the question itself, I actually don’t have a very good answer myself. I actually mainly hope to listen to everyone’s very excellent opinions, but I may also share a few data dimensions that I look at when looking at projects. They are not just Tokenomics, because I don’t think I am particularly good at Tokenomics. In fact, for some TO C projects, I would pay more attention to its dau and mau, which is equivalent to what your monthly and daily active users are like, and how people are actually using it. The targets that may be directly applicable should be GameFi and SocialFi. In fact, I have seen quite a lot of game projects this year, but at present, projects with dau exceeding 1,000 are very rare, but there are indeed still a few. Then if it is a decentralized financial project, I would pay more attention to its capital utilization efficiency, which I think is the most important, and its mortgage rate, etc. The last point may be more related to marketing, because I think the current market is a little different from the previous market. In the past, it seemed that I did a project, then I raised funds from VC, or I raised funds from the public, and then I launched the coin to pull the market. This story seemed to end like this, but now, because there are often more projects than users, I think Marketing has become an increasingly important part. How to let users know about your existence and how to impress users to participate in you, I think this is becoming more and more difficult, so it includes Twitter entry statistics, social data, coin holding address analysis and smart money tracking. Although smart money may not be very smart, it is probably smart money tracking. In terms of these dimensions, I also feel that more and more data dimensions need to be considered when doing a project or discovering a project. Yes, it may be a bit off, because it is not particularly related to Tokenomics. I hope to hear other people's views on this. Thank you.

Yuan Jie:I have personally participated in many projects, and I have probably seen many economic models. Generally speaking, the design of an economic model determines whether the team wants to do the project well, because many economic models are very profitable at first glance, and then they use a low circulation and high STV state at the beginning, and then make everyone's APR very high. Such projects often do not want to do it well. On the contrary, if you look at some projects, their release is actually very slow, and there is a very long term, at least in terms of currency. If we say that if it is planned for more than three or four years, then basically it is a desire to do the project well, rather than wanting to do the project through this high inflation method. In this case, you can know with a high probability what kind of mentality you have with the investment cycle of this project. On the contrary, many projects do not need it at all, and do not need to stimulate with tokens at all. For example, Uni, its token economy is simply planned to be very, very frustrated.  

So it is even that he deliberately does not do it, and only uses innovation to support its market value. But there are also some, such as Curve, which combines the economic model and the function itself, but they take a long time. So basically I will look at the economic model of the project, and I can judge with a high probability whether they are interested in doing a long-term thing or a short-term thing. Then I will decide how to participate in the project, because to put it bluntly, many times everyone says that the project party and the user are in a game. In fact, of course, it is not just the project party, because there are also big players, market makers, and many scientists involved in this market, but basically the ambition of a project party can be seen through the economic model.  

There is also this, that is, their desire to develop. I think, for example, taking our HOPE as an example, we can see that in fact, the entire release of HOPE is very gentle, and its planning is very long-term. You can see that Flex’s ambition in our HOPE project is to make this project a long-term project, rather than just finishing it in one wave and then running away, so I think this is very important. Then the second point is the economic model, the design of the token economy, whether it has the right incentives, that is, the right behavior. This is the second point I think we need to study in depth, because in fact, in many cases, I don’t agree with the projects that have established economic models at the beginning. Why? Because everyone doesn’t know whether the project’s go-to-market strategy is correct at this time. If you start to incentivize, then you don’t know whether the behavior you incentivize is correct.  

This actually requires a process of trial and error. So what is the logic that we are slowly exploring in our currency circle? First, use non-transferable points. For example, blur actually did several different incentives. First, they did three times before issuing tokens, three waves of incentives, and the logic of each incentive was different. Until the third time, their core incentive was to incentivize placing orders.  

Especially placing buy orders, that is, placing this to provide liquidity. The last time was considered to be a very core innovation point. Then based on this point, they pushed forward and issued coins. At least at that time, they achieved a good effect. Later, after they found that the effect was not sustainable enough, they were no longer in a hurry to issue coins, and began to try new products again. Then try new products, and then find out what behavior should be incentivized by the token to allow the project to develop in the long term. As for what was said before, he doesn’t care about your PUA issuing coins. Instead, he cares whether the product has really found product market fit. After finding it, he will incentivize the needs of his core users. I think this kind of team and product is very worthy of trust for them to do it in the long term. So I think that in fact, more and more people use non-transferable points, and then wait until the token has been circulated or issued for a period of time, and there are enough users to allow it to be transferred or traded. This effect, I also think it is becoming more and more, and I also think that this is becoming more and more reasonable, because sometimes, especially when you are designing innovation, you don’t know what the correct behavior is. You want to incentivize, and sometimes when you incentivize, you incentivize the wool party, or incentivize the mining, selling and withdrawal party, right? These are actually not the users you want. They may bring you a lot of users in the short term, or bring you a lot of TVL, but this is not your target user. So I think we need to think carefully about this point. How can we make this process smoother? In fact, you can complete this through a transitional stage, as Blur said. Then, the third one I see is of course some innovations in the economic model itself. In fact, in the currency circle, we don’t need to say that people who make products should innovate, because many people who make products keep innovating these things. Some do three-three, some do curve, and some do rebase. I don’t think this is a person who really wants to make products. What they need to focus on is that they can learn more from others and use it themselves. Because financial engineering is very professional in itself, it can be designed separately from your professional product, and you can learn from it. So these are my views. Thank you.

Flex：Actually, I think what you just mentioned is non-transferable points. I think this mechanism will be applied by more and more projects in the future, including HOPE. We will launch a product next to encourage everyone to use it, which is a combination of a card + NFT and an offline coffee shop. In fact, we will not issue new coins, it will still be LT, but if the original mechanism of LT is to encourage liquidity provision, then we will find a huge problem at this time, that is, the economic model of LT cannot be adjusted. That is to say, when we have two goals, one is the scale of HOPE, and the other is the number of users and user scenarios. In the process of user scenarios, which were not so clearly considered at the beginning, we actually encountered a challenge before, that is, how can we use LT to encourage this behavior? Then we said that there will be a new points system, and then based on this points system, his NFT will be upgraded. After the upgrade, it will be similar to the previous BBS. The higher the level you upgrade to, the moderator, and then the level you upgrade to, there will be other greater encouragements, including LT, including those with land rights, real land, and real real estate rights. NFT comes out as a reward for you. In fact, you will find that if each project has a long life cycle, it will need to have a different incentive method. For example, in the web2 era, when Uber and Didi were fighting or competing with each other, they adopted financing and burning money, and then subsidies, but in the cryptocurrency world, or the WEB3 world, the possible approach is to continuously issue coins and then stimulate, which is actually not very healthy. So Yuanjie just said that now this method, I think it is a good way to patch, that is, in the future, it will not be like Terra and Luna, that is, each protocol will have its own currency, and then continue to use new methods to incentivize. It is more likely that after generating some points, it will encourage everyone through the point level, through rights and interests, and through other methods, rather than completely through the currency method. I think this may be a way to motivate the right users, but we are just trying it, so this is a process of continuous experimentation. In addition, I think there are many tools that can be used or may be useful in the future. I think we should think about it. Recently, I saw some people upgrade the word Tokenomics to technology. I think it is very important because I agree with one point. In their article, he actually mentioned that the use of Token not only includes the so-called monetary value, but also ownership, different economic structures, and how to make the creators and users have better connectivity. It also includes some ways and methods to access goods and services. So it is not just an economic model. It is often a social model, or a community model. I can't even call it a social model, but I think there are many things worth thinking about, not just around the simple word of economics.

Moderator: Taking HOPE as an example, combined with the above-mentioned factors, what thoughts and plans did HOPE make when it was doing the dual-currency economic model? What roles and functions do HOPE and LT play in the entire HOPE ecosystem?

Flex: A project has different stages in its life cycle, and each stage has different incentives. Tokenomics is hard-coded in the code. When the code is written, on the one hand, it is a manifestation of keeping one's word, that is, we will not change the code again.  

At the same time, everyone will have a very clear standard for future inflation expectations, but the disadvantage is that when there are different encouragements at different stages, for example, at the beginning, the scale is encouraged, and then the behavior and activities are encouraged. It is difficult to change the method at this time, so we have to think of a multi-token model, or a dual-token plus points plus NFT model. The result of the complication is actually to make the user experience better, which is the same as our original vision. We hope to provide everyone with products with better user experience, rather than self-satisfaction, so we are also thinking about how to move forward, but back to the Tokenomics itself, in the two-currency system of the HOPE project, in fact, in essence, we are doing one thing, that is, I may say some inexplicable financial terms next, but at the end there will be a sentence to give an example, that is, first of all, we design and combine the so-called volatility of the two most representative and liquid cryptocurrencies into this token through options. The volatility of BTC and Ethereum can be monetized by us as the so-called external kinetic energy, which becomes the income of everyone.  

That is to say, when you buy HOPE, it is equivalent to buying BTC Ethereum, and selling a call of 1 times BTC Ethereum, and receiving LT as your premium. The premium is the so-called premium, LT, and the call of the entire reserve. After this long paragraph, it may be completely confusing, but to be honest, OK, what do you hold for a certain period of time? It is something that has more native returns than BTC and Ethereum. Then, at the same time, LT is a long-term lottery that never expires, that is, a lottery that never expires for bullish BTC and Ethereum.

Why is LT a perpetual call option? When you buy HOPE, it is equivalent to buying BTC and Ethereum, and selling a call of 1 times BTC Ethereum, and receiving LT as your premium.

Then LT is actually the call of the entire HOPE reserve. Because HOPE will be anchored at $1 in the long term, but the value of the reserve will continue to grow, and this space is reflected in LT.

So, in this process, in fact, for some people who want to join this industry in the future to attract some future customers and users, there may be more words, I haven’t thought of them yet, but what I have been thinking about in my mind, or an example used is that we used to say that the Communist Manifesto is an extremely complicated thing. When the Communist Manifesto and communism were first proposed, they actually wanted to reform the relationship between social practice and productivity. In that process, what everyone wanted to bring to this community or community was very complicated and difficult to describe. It involved productivity and production relations, and production involved many other communist economic models.  

But in the end, when it came to the group of people who were to be encouraged to support the communist revolution, something as complicated as the Communist Manifesto was reduced to a few sentences. For example, joining the Red Army and dividing the land, or stimulating the peasant masses, the workers and peasant masses at that time, to vent their long-term oppression against the capitalists and the so-called landlords. This encouraged that group of people to join the revolution. In fact, I haven't thought of a particularly good word or language for this matter, but what I want to say in the process is actually very simple, that is, LT actually means being bullish on this industry and being optimistic about the long-term prospects of this industry. There is only that one thing, and a statement is needed at this time, and it is not an investment advice. If you think of LT as a lottery, that is, if you think this industry is good, BTC and Ethereum will rise sharply in the future, that is to say, if you mine and get LT, you don’t have to sell it. If you sell it, it will not be cost-effective. That’s roughly what it means. But I think there will be many ideas to try in the future, including the issuance of our credit card, and then let everyone deposit and withdraw money conveniently, improve user experience, and there are many other actions and methods to motivate in this regard, which may use other things, so it is still quite complicated. In this whole process, there are still many places to think about how to move forward, but I think this kind of entanglement is okay. It happens to be a bear market. It’s luckier, so you don’t have to be so anxious.

Host: The governance mechanism in the economic model has always been one of the hotly debated topics. The community governance of some projects is in name only, and some projects have become more mature and on the right track due to the strong community consensus. In the process of designing the governance model, what points do you think need to be considered or weighed in order to make the governance model play its due role? In the process of designing a governance model, what points need to be considered or weighed in order to make the governance model play its due role?

Fiona: I might briefly talk about my views to start a discussion. First of all, I think community governance is a big difference between blockchain projects and traditional companies. Most projects allow token holders to participate in the entire governance process through voting or proposing proposals. I think this is quite meaningful, but this method also has its own risks. I don’t know if you know about the tornado hacker incident a while ago. It was actually because someone voted to pass the Troy Act. His proposal contained another malicious code. So in the end, the entire theft was approved. So I think everyone should be allowed to participate in governance, but not everyone should be able to participate in all governance, because not all token holders have the knowledge required for peer-to-peer voting, so I think there should be certain restrictions, and some bills involving code changes may need a second review mechanism to make the entire democratic governance process safer. Another point is that because I am now based in Taiwan, and I grew up in mainland China, I can actually feel the difference quite clearly. I will just say a very simple feeling. I think if everyone can participate in governance and is busy participating in governance, this is actually a very sad thing. I think what should be advocated is the governance of sages, that is, wise people participate in governance. For the rest of the people, in fact, as long as you know and believe in this thing, it will go well and progress smoothly. So I am not particularly optimistic about the previous completely decentralized organization, because I think everyone may not have that kind of experience, professional knowledge and enthusiasm to invest in the governance of a decentralized organization. I still advocate giving some people the maximum governance authority to a limited extent, and then let them maintain the routine work, and then put some bills, some Proposals are given to everyone to vote, and the rest of the people responsible for routine can handle them. There is no need for everyone to vote. This is my point of view. Thank you.

Duo Jie: I think this thing is actually two things. First, how does the token give him the right to govern, or how to use the token to incentivize the desired governance behavior. In fact, I think the best design in the entire industry is vtoken. I am not sure whether it was invented by curve, anyway, it was vtoken that was popularized by curve, and then it has basically become a consensus in the industry now. Basically, new DeFi projects will definitely have vtoken designs, including the emergence of V33. In fact, in essence, users lock their own governance tokens. He may get a governance right through a long-term lock, or a lock with different implementations. Then they also get some profits, including the income generated by the protocol, or some additional income, or even some new distribution of tokens. They have more rights to enjoy. This is equivalent to a way of forced lock-up to ensure that the interests of those participating in governance are consistent with the goals of the project. The other direction is actually the question that Fiona just mentioned, whether the people who participate in governance have governance capabilities. In fact, I think this question is rarely discussed in the currency circle, because often everyone thinks that their IQ is above the average level, or if you ask everyone about their trading ability, everyone often says that it is higher than the average level, and everyone will have a wrong perception of themselves, thinking that they are better than the average person, so everyone hopes to have this governance right, but you see that since the birth of most DeFi projects, we have not obtained the governance rights of the project, but a feature button. Someone once said that we have obtained a button. This button is the button that says you want red or yellow. That is to say, the proportion of the token distribution of this project should be 10% or 15%. We have more such rights, rather than some core designs of a real project. For example, the treasury of some projects is not actually in the hands of the governor, but in the hands of the project party. If the project party wants to run away with the private key tomorrow, it is also something that everyone cannot govern. In fact, think carefully, what are we governing in normal times, and do we have the ability to govern? I agree with what Fiona said just now. I believe that most people are actually incapable of governing a project. Before Terra went bankrupt or collapsed, no one dared to say for sure that this thing would definitely collapse. Maybe everyone had such doubts in their hearts, or would question loudly, but no one dared to say 100% that this thing would definitely perish, right? So even at that time, if there was no one who had 100% decision-making power, but handed it over to the community for governance, do you think that if the community governed, it could solve this problem and prevent its collapse? Right? So if you think about it carefully, in fact, most of us do not have the ability to govern a project. So what kind of people are capable of governing a project like DeFi? I think at least they need to have financial knowledge, and then have the ability to trade, or the ability to read code, and then have the willingness to focus on this community and spend a lot of time to participate in very detailed discussions, or the time and perseverance to discuss important functions, and then they will not be enthusiastic for three minutes today, and tomorrow I will think that this thing is not profitable, boring, and I will let it go. Synthetix is rarely talked about. In fact, it has a very interesting governance system called representative democracy, which is a parliament composed of Spartan warriors. There are actually nine people in total, and these nine people are elected by the community. The term is changed every three months. After the community elects these nine people, these nine people have the right to deal with matters big and small. In fact, they discuss important topics on Discord almost every day, and then hold meetings every week to discuss issues. After they have discussed, they will come up with some proposals for the community to see and publicize. Only after everyone agrees will they actually implement these upgrades and modifications. In fact, at the beginning, Kain, the founder of Synthetix, was not eligible to run for election. All members of the parliament are community members. Then we also have a very powerful community whale emerging. They came to run for election, and then they became very important contributors to the entire project. Then what happened later? In fact, Synthetix has been relatively quiet for a long time. On the one hand, Terra, Linear and other projects that imitate Synthetix have emerged. They have the advantage of being a latecomer because their coins are new, so the frequency of growth is higher, and then everyone is attracted to them. On the other hand, the development progress of OP and Chainlink is relatively slow. At that time, OP was delayed in going online, which hindered the launch of Synthetix's new v2, which is the launch of the derivatives protocol. So Synthetix was quiet for a while. At that time, everyone said that Kain, as the founder, should participate in the election and then become a member of parliament, so as to reduce the cost of communication between members and the team. In fact, there was a problem at that time. When the consensus reached by the members of parliament was actually handed over to the team for execution, problems would arise, that is, the order of execution, priority, or the parliament may not fully understand the limitations of the team's capacity, or some problems at the code level or some administrative levels at the time. So Kain was asked to run for election, and after Ken was elected, some of our team members also ran for election, including the Treasury, which later became a dao organization and was no longer led by our COO at the time. It is not controlled, but really handed over to the community for management, but all of this management is done by the representative system, and is managed by the parliament. I don't think I have heard of any other project that does this, but I think Synthetix certainly has its shortcomings, but it is indeed a very thoughtful design, and it has indeed had great advantages after being implemented for so many years. And there is another thing. In fact, there was a topic just now to talk about the economic model. In fact, I want to say that the economic model or the token economy can be modified. When encountering problems, we can completely ask the community to propose modifications, or the parliament or the person in charge of the proposal to propose modifications. The token economy has problems that can be completely saved, including Synthetix, which is the first project to invent liquidity mining. At that time, the suggestion of liquidity mining included that the project should no longer follow the deflationary design of 2018, but start to have a design like additional issuance. In fact, it was first proposed by the community and then completed by everyone's discussion. So I think there are very excellent elites in the community who can lead everyone to a very good new path, but not everyone has the ability to judge whether all designs or all modifications are correct, so I myself am more inclined to the design of Synthetix.

Flex：Actually, what did Fiona and Duoduo mention just now? It's actually the political system. I think that humans have already proposed a very good political system more than 2,000 years ago, called the republic.  

In the Greek period, because the Mediterranean economy was developed, productivity was the so-called market power, and the economic foundation was good, a very good community was derived before the production, and then the community derived the first generation of the republic mechanism, that is, the separation of powers. What does the so-called separation of powers mean? It means that the executive power, that is, the legislative power and the judicial power are independent. Just now, Duoduo and Fiona mentioned the legislative power together, and then Duoduo derived the legislative power, which became the so-called community governance. Everyone has a questioning attitude towards the whole community governance. Then I think the fundamental reason is that Plato has said before, and the Republic has already told that story, that is, human society may have been in reincarnation.  

I don't know whether there will be better executive power after AI appears in the future. Of course, under the current circumstances, there must be a legislative mechanism in human society. This legislative mechanism or the republic mechanism has always had the so-called legislative mechanism. Whether it is China or the United States, we have a complete legislative mechanism stipulated in the Constitution. The United States has the House of Representatives and the Senate. The Senate has two people from each state, and the House of Representatives has 500 people. The election method is not quite the same. It is actually a representative system. Then the Chinese, the National People's Congress also has Central Committee members and Standing Committee members, which is the Spartan Parliament or the so-called Standing Committee mentioned by Duoduo just now. The committee decides some important matters. In fact, I think this mechanism is what we are doing when we are doing tokens, or when we are doing this web3 community. What we are actually doing is a social experiment.  

Originally, for this social experiment, we should actually stand on the shoulders of giants, that is, we can start from the republic. Whose executive power is it? In fact, the administrative power belongs to the project party, that is to say, there are many execution tasks, such as who is the project party of the government. Let's take an example. After the National People's Congress issues this proposal, it should be implemented by the State Council. Then the project party is more like the State Council, and the National People's Congress is more like the so-called community governance mechanism. There is also the judicial system, which is the public security, procuratorial and judicial system in China and the judicial system in the United States. Then we actually noticed that the so-called time cycle of different functions is not quite the same. For example, the government is four years in the United States and five years here. Then, the Congress in the United States has different cycles. Why are there such mechanisms? In fact, these mechanisms are derived from the continuous correction and modification of human beings when they are constantly building their own social system. Finally, some mechanisms are formed. So I think that no matter what direction the project is, whether it is DeFiGameFi, I think everyone should have this kind of relatively separate rights at the beginning in the future. So, for things like Treasury, I think more attention should be paid to the so-called profit sharing. The problem is that there is a balance between different rights, and only in this process can a better mechanism be formed.

Yuan Jie:I have an experience to share with you. Have you ever seen a photo of a man digging a pit, and seven or eight people occupied the pit. Some said let’s go to BSC, and some said let’s issue NFT. Then, the person in the pit had three words written on it - project party, and above them were communities, and above their heads there was a common word, a round bubble with something called community governance. This is the real status of many of our project parties now. That is to say, before you can really find someone to help you govern the project, don’t have any extravagant expectations of community governance, although on-chain voting has greatly simplified shareholder voting, and everyone can vote very conveniently.  

But it is really like what I heard from some friends before, that is, there are too few people or atmospheres that can have such high-quality governance in our environment or in the Chinese environment, because the United States or the West is a country with a strong sense of citizenship. Their sense of citizenship also comes from their democratic system. The democratic system leads to their high enthusiasm for participating in politics, so participating in governance itself is a very important part of their lives. However, in China or the Chinese, or in the culture dominated by the East, there are very few people who participate in politics, participate in public affairs, and participate in democratic decision-making.  

Yes, so you will find that in fact, in the process of trial and error or token issuance, you can really find people who are willing to go on with you and participate in community governance. In our Chinese-led projects, it is really too rare. On the contrary, in many Western projects, you have this foundation, so I don’t think this thing has much to do with the design of the economic model. It's about how you find people who agree with your ideas and are willing to go on with you. In fact, it doesn't matter how many tokens they hold. I think they are very valuable if they are willing to make quality speeches and have quality debates. You must keep these people, right? No matter what form they take, I am working on the Conflux project, and I have been working hard to find them. Who did I find in the end? I can tell you that they are very patriotic people who treat cryptocurrency as a project with geopolitical affairs. They also think that Conflux is tied to the fate of the motherland, so they really govern in the Conflux community, and they also think that China will definitely have its own public chain. So first of all, interests should not bind everyone together, because everyone will think that if your token falls, everyone will leave.

It is true that only the identification of cultural concepts and values will make them stay here and really participate here. At the beginning of a project, you dare not even hope for such a thing. In this process, if you find a group of people who share the same values as you, you must keep them. It is not determined by how many tokens they have that determine whether they will participate in the governance of the project, but whether they really believe in you and are willing to follow you. At this time, you must have the vision to give them greater voice and greater ability and authority to allocate resources. Only then will these people follow you. But to be honest, most people, first, you can't find these people, and second, when you find these people, do you have the vision to release your rights? In fact, these are actually some very dialectical topics, very dynamic topics. It's not just about going to the blockchain, voting on the chain, and simplifying the traditional agency structure. It's more, I think, psychological. So this is my experience, right, so it's really difficult.

Host: The last question is, for the next bull market, what are the necessary conditions for the economic model to become hard-core and mature? At the same time, what kind of economic model can steadily promote the sustainable development of the project ecosystem while carrying more and more traffic. What do you think are the core elements that constitute such a flywheel effect?  

Boyang: This question is actually not easy to answer, and I dare not say that I have the ability to comment easily, but from a big picture perspective, my personal opinion is that with the crypto project, and the development of the smart contract blockchain to today, it allows everyone to issue assets without permission, which is ultimately a good thing that is very consistent with the first principles. Because he brought us the competition mechanism, the survival of the fittest, and the possibility of experimentation. If there is no blockchain, then the only countries that can issue currency are sovereign states, and there are so few sovereign states. Although there are many small countries that are very turbulent, there are only a few hundred countries. Then every time there is a change of dynasty, they re-issue currency, set some monetary policies, and then see whether it works or not. Economists can only obtain some historical evidence and data points from these processes. In this case, many people who decide fiscal policies are not necessarily the smartest people, and sometimes they are very conservative, and sometimes they have a series of different motivations. This will make the experiment very inadequate, and the information is often confidential, which is very secretive. But what we can do after we have this blockchain WEB3 is at least to fully spread out this iterative experiment. Then anyone can issue assets. Whether your assets are good or not, whether your economic model design is good or not, is for everyone to judge. Your whitepaper is public, your smart contract is public, whether the mechanism is written correctly or not, whether it is good or not, everyone can keep iterating. As long as we can avoid standing still in the next round and not completely follow the old path, we can repeat all the falsified models. As long as we don't stand still, then this economic model is getting better and better, and we are getting smarter and smarter. Whether it is entrepreneurs in the industry or the industry as a whole, we have contributed a lot of new knowledge and structures to human society. In the future, an upward trend will definitely be good. As for which specific economic model it is and how to design it well, this is difficult to predict, but from this overall perspective, I think I still remain cautiously optimistic.

Yuan Jie: To be honest, I always think that there are many good thought experiments and practices in the cryptocurrency circle. Unfortunately, we have not systematically studied them, and there is no academic journal to study these things. I hope that in the future, I can use some of my money to start a magazine about cryptocurrency finance. I have already thought of the name "The Journal of DeFi Finance", which will specifically discuss Tokenomics and some design things of DeFi, including some of the product logic level in DeFi, and some are purely Tokenomics. Our industry is a practice that is ahead of the academic level. This industry is actually the opposite of many other industries. In many other industries, academics are ahead of practice, and even many academics are so pure nonsense. Of course, I think our industry has reached a point where we have actually practiced many things, but there is really no academic. What is this? It is relatively reliable. We don’t say the best relatively reliable practice, and then this practice gradually becomes a standard practice, and then we lead everyone to iterate. In particular, there is another branch, which I think is GameFi tokenomics. For example, the logic of giving birth to a son pioneered by Axie, right? Stepn And continue to carry forward the idea of having a son. Now many of these Ponzi models are being modified based on the model of having a son, right? Some say that Ponzi's is too powerful, so they want to reduce the rate of Ponzi, or reduce inflation, etc. I don't think these things have been studied. So today you asked me a question, and I said that I can't give you an answer to the question, but I said that I have a path to the answer, which is to do research together, and combine the results obtained in practice, which is already an experimental result, and then combine their theoretical models. We should be able to derive or summarize some very good experiences. Even if this academic achievement may not be recognized by people in traditional economics and finance, it doesn't matter. We in the currency circle can study it first, right? Then in the future I may be willing to publish this magazine. If others are willing to do it, I would be happy to invite them to do it together. We can continue this work. I think there are really many things in our industry that are worth studying, and then systematizing, and then slowly it is fuzzy, that is, fuzzy and precise things to do in this direction.  

But no one is doing this. Everyone is just focusing on investing, launching projects, listing coins, and failing or succeeding, right? But I think there are some things accumulated that can be academicized, or developed, or even used to guide practice. But this is a bit lacking, and I personally think it's a pity, so I want to do this. Thank you.

Duo Jie: Actually, I think Yuanjie asked why there is no academic research on the token model of the currency circle, because in academia, or in traditional finance or in the public eye, crypto asset is still a relatively stigmatized concept, and including us, in fact, I believe that we are classified as Alternative Investment most of the time, which means we are considered an alternative investment product, we cannot be considered a mainstream investment product, and then, many people may compare us with tulips, and studying the history of the prosperity and collapse of tulips is actually not very attractive to them, because they may think that the wheel has been built before, so I think that when our asset scale reaches the scale that can be truly compared with some traditional assets, we may naturally receive real academic attention. This is the problem of the lack of academic research mentioned by Professor Yuanjie just now. In fact, I think that the best way is simplicity, which is the best token model, that is, the Bitcoin model, which is a deflationary, it is a very arbitrary determination of a few numbers to tell you that I am 2100 Ten thousand coins, and then I will halve it every few years, and I will never issue more coins in my lifetime. Then I have a game theory, that is, if you go mining, you can get income, but if you dump the market without restraint, then this thing will return to zero and have no value. Then its value is borne by consensus, and then everyone will trade with each other and let it circulate. This whole process will generate value, and then you can find the purpose of Bitcoin by yourself, and decide what the use of Bitcoin is, and then Satoshi does not need to participate in the whole process. In fact, the Bitcoin token model is the best model, but it is a pity that there will only be one Bitcoin, and subsequent coins cannot follow the old path of Bitcoin and will never be able to surpass it. The second best one is Ethereum. Ethereum has various functions. It is more like a product. Its earliest positioning may be a supercomputer. Later, it may be a consensus network. It is also a small world on which you can build infinite building blocks. I think Ethereum is the real metaverse. It is a metaverse of a virtual electronic world. We have found the possibility of making various creations on it, so we give it value. Its token model is also very simple. It will have additional issuance, and then everyone will protect the network, and you will be able to get updated tokens, and then you can add on to it, but these additions are not actually the token model of Ethereum itself. Its token model is very simple. Why do other projects have such complex token models? Or it is because our entire industry is too small, including too few truly valuable things, so our entire pool is so big, and there is so much liquidity. In order to compete for attention, liquidity, and a small piece of this pizza, everyone needs to do some fancy things to attract everyone's attention, use various methods to attract traffic, and build a flywheel, and then this coin grows, that coin rises, and then you continue to rise, which will make everyone feel fomo, and then you can get more growth, but this is not a really good product. On the contrary, good products like Uniswap have not been able to solve the problem of how to increase its coin price, because the core is that its product is good enough, it does not need a coin to support this product to be applied, so why can't his coin have value? Because he doesn't want to be sued by the China Securities Regulatory Commission, he doesn't want to be sued by the SEC, saying that he is a security token, so he can only make a useless governance token and let everyone do meaningless governance. So I think back to what I just said, I think simplicity is the best way. The cryptocurrency industry needs to become bigger, we need truly useful products, and then we need to convince the China Securities Regulatory Commission to let everyone issue security tokens in the simplest way, so that these tokens that can become stocks can become stocks. Then we will have a real token model, thank you.

Interactive session:

Q: Recently, I saw HOPE participated in Caixin's financial summits in Hong Kong and Singapore. Can you please share the current views of traditional finance on Web3? Or the views of traditional finance on the macroeconomics in the next 1-2 years?

Flex:I think it can be explained from two aspects. First, at the Caixin event, I talked about the views of traditional finance on web3. Traditional finance is actually quite divided now. In Caixin's Hong Kong and Singapore, I actually encountered many Chinese and Hong Kong-funded companies that are eager to try. In other words, these institutions that have an appearance in Hong Kong or have appeared in Hong Kong have a deep belief in cryptocurrencies.  

Even the past prejudices against cryptocurrencies have been overcome. This time, we have met some people outside the venue who have a lot of interest and understanding in cryptocurrencies. Even many license schemes have begun to see how to participate in this opportunity. So I think this has great prospects and space in Hong Kong. This is consistent with what I said before, that the opening of Hong Kong's cryptocurrency is actually an important part of China's de-dollarization, which is Plan C, that is, Plan A, the application of CBDC for the internationalization of the RMB, and Plan B is the Hong Kong dollar, and Plan C is cryptocurrency. As an important part, cryptocurrency will be a very important thing in the next Hong Kong policy. So what I see is that Chinese or Hong Kong capital is more interested in this area, but they certainly cannot mention it in China. In fact, China and Hong Kong are completely different. Hong Kong is a region without capital control, right? There are some capital controls in the mainland, so in this regard, I think there is this observation. Of course, before Caixin, I actually went around the Middle East, Europe and the United States, and I noticed several phenomena. The Middle East still has a very deep interest in cryptocurrencies, but it may not be as deep as before, but because of the recent events, the Middle East has a very important thinking about cryptocurrencies, especially after the Russian-Ukrainian war, a lot of Russian money went to the Middle East, and this has become a thing they really began to pay attention to. That is to say, in the future, when international geopolitics emerges and continues to change, it has a good position as a crude oil supplier and energy supplier, so it has a good position in trade, so cryptocurrencies play an important role for it, so we see that many families in the Middle East, or such funds, have begun to have a lot of layouts in cryptocurrencies. Europe is more unique. In Europe. I can fully feel that the whole region has a different sentiment towards cryptocurrencies. After the Russo-Ukrainian war, people's perception of cryptocurrencies in Europe has changed a little. So, for example, in the Middle East, people will consider dollar-based products more, but in Europe, people will consider currency-based products, such as the returns of BTC and Ethereum, because it can be seen that many families, families or institutions in Europe already hold a lot of BTC and Ethereum. The United States is completely different. This time when I was in the United States, I went to New York and the Bay Area, and some people who had originally made appointments were temporarily canceled. In fact, it was just three or four weeks before the SEC took action. I guess they had heard the news. So essentially, the United States is extremely cold to crypto. The coldness I mentioned belongs to these early investors, or those superficial investors. We also see that the recent large-scale traditional financial institutions, whether black rock, fidelity, or other institutions, have a lot of interest in the institutional industry, but they still see opportunities in the future. So I think it mainly depends on where the traditional financial people are. Different places have completely different attitudes towards Crypto. These are two aspects. Then, as for the macroeconomics in the next one to two years, in fact, the recent article has said it very well, that is, there is a demand for the depreciation of the RMB against the Japanese yen. In addition, next year is an election year, and there is a demand for loose fiscal policy. In fact, in terms of monetary policy, because of the current high interest rates, the US banking system already has an unrealized loss of about 700 to 800 billion US dollars. Because the United States has just solved the debt ceiling problem, when the United States is going to issue one to two trillion bonds, if everyone buys short-term bonds, and then many people who have deposited money in banks rush into the short-term Treasury bond market, it will be a huge blow to banks. So, in general, I think it is the last gasp now. The so-called high interest rate environment can be maintained, right? That is to say, this is more of an expectation adjustment by the central bank. When the bullets are gone, it has to rely on bragging, right? To change market expectations, or to maintain market expectations, so the monetary policy will gradually move towards easing. So what I see is that the policy trend and tendency of macroeconomic and financial aspects in the next one to two years will be relatively loose. At the same time, because of these changes in international geopolitics, cryptocurrency is an important tool to reconnect the world, and I think there is also a great opportunity.  

Q: The crypto market has plummeted in the past two weeks due to the SEC's accusations against Binance. In the face of the regulatory policies that have been on the way, what do you think about the so-called compliance? And at the regulatory/compliance level, how does HOPE view it and what evasions have been made?  

Flex:If this question is for me, in fact, my original plan or planning for HOPE is to try not to touch the license where possible, because we are a distributed stablecoin, we have a distributed distributor, so from the perspective of the distributor, we look for institutions that comply with local laws and regulations, because in fact, the regulatory authorities pay more attention to monitoring and regulating activities, that is, the most important thing for the regulators is actually the deposit and withdrawal, or the channel connecting the two worlds, because they are worried that the risk of cryptocurrency will be transmitted to the traditional world. I think this also gives the entire Asian project a good opportunity. If the United States has such a policy and attitude now, many project parties will return to the East, whether it is Hong Kong or the Middle East, right? I think this is a good opportunity for this industry and the people here. So the benefits of cryptocurrency are also reflected. It is a distributed thing, so any country or unilateral action alone will not completely destroy it. For example, China's actions in 2017 and 2021 not only did not destroy cryptocurrency, but cryptocurrency also flourished in other places. I even believe that this time the US action will not destroy cryptocurrency, but will flourish in other places.

Question: It was mentioned earlier that many basic preparations were made for the bull market. Do you think there will be a bull market? Or what factors will contribute to the occurrence of a bull market?

Duo Jie:I think that Black Rock, as the strongest player in traditional financial institutions, is going to issue a BTC ETF, which actually shows the future of BTC.

Flex:I always think that cryptocurrency is an important link and a bridge to reconnect the world. I think it is very important. Then cryptocurrency itself is the most sensitive asset to monetary policy and fiscal policy. So as long as this policy changes, cryptocurrency will perform more eye-catching than the so-called high-risk stocks. In addition, the last one is that many people think that AI and blockchain are combined. In fact, there are many things that are very ridiculous recently, but I think there will be a very significant combination in the future, because when AI progresses to the next stage, it is now a large language model, but it has not evolved to the so-called self-awareness. In the next words, I believe that it will soon have the so-called sovereign consciousness. Of course, this may be 10 or 20 years. When this sovereign consciousness appears, will he believe in the government's ledger? No, will he use a bank account? No, I think it will definitely use crypto, so if it wants to provide a service to others, and others want to request algorithm services, it will definitely only charge crypto, and then it will pay the computing power call fee, such as the data center, like paying electricity bills, paying the data center, that is, the computing power call fee, he will also pay cryptocurrency, so, although Ethereum is technically POS now, I think in the future, as AI becomes more and more mature, Ethereum will essentially return to POW, because when you use this graphics card mining machine continuously, when artificial intelligence calls it, it may copy Ethereum for you. So in the future, I think this may return to the perspective of POW, so there are many important combinations.

This article is from a contribution and does not represent the views of BlockBeats