Reflections on the overall architecture of the crypto industry after TOKEN2049.

2023-09-19 11:10

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Original Title: "Post-Token2049 Reflections on Crypto"

Original Source: IOBC Capital

Token2049 has ended, and Crypto entrepreneurs and practitioners from all over the world have dispersed. The Crypto atmosphere in Singapore has returned to calm. After the high-density exchanges and discussions during this event, I have some new thoughts on the narrative of the new cycle.

The overall architecture of the crypto industry has been improved this year:

1、Layer0's most popular narrative is still Omnichain

Layerzero not only defines the interoperability of ultra-light node mode, but also defines the new standard of Omnichain Fungible Token (OFT). OFT provides a more user-friendly and efficient cross-chain transfer solution. OFT has two versions, v1 and v2, with the main difference between the two versions being that v2 can support non-EVM chains (such as Aptos, etc.). In addition, there are also OFNT721 and OFNT1155 to support Omnichain NFT.

Many projects have already adopted Layerzero's OFT standard. For example: Ethereum layer2 Metis, Multichain stablecoin MIM, CDP protocol TapiocaDAO, Wrapped Bitcoin protocol BTC.b, multi-chain lending protocol Radiant.capital, and so on.

During the Token2049 event, Layerzero dispatched an electric vehicle fleet to safely transport attendees to any Token 2049 related activities on many Singapore streets. Attendees only need to present their conference pass or wristband to ride for free and go to the event destination, and they can also receive a small gift from Layerzero.

2、Layer1 This cycle is no longer the top-tier narrative

There are different opinions on Layer1 projects in this cycle. Move, a new public chain, has received some attention, but other new public chains focused on DeFi or NFT, or those that support multiple programming languages to attract millions of Web2 developers, seem to have not gained widespread consensus. (This is only based on the communication during Token2049, and even without widespread consensus, it does not mean that the prospects are not good. Differences may even lead to alpha gains.)

Many people no longer believe that there will be a new public chain that can surpass Ethereum, even if they still believe that Ethereum may not be the End Game and are not willing to invest heavily in the New Layer1 direction. Of course, there are still many institutions investing in New Layer1, such as Jump Crypto, Coinbase, Circle Ventures, etc., which are common VCs for New Layer1 project financing information. 3. The pattern of Layer2 has basically been determined, and Layer2 Middleware is also ready. Optimistic Rollup is mainly dominated by two players - Optimism and Arbitrum, while the first-tier ZK Rollup/zkEVM mainly includes StarkNet, zkSync, Polygon, Scroll, Taiko, etc. The Middleware supporting ZK Rollup/zkVM is also in place. According to the Transaction Flow of ZK Rollup:

The key Middleware mainly includes:

Sequencer - The commonly called for Decentralized Sequencer Network in the industry, with top projects including Espresso system, Astria, Altlayer, Radius, Madara, Fairblock, etc.

Prover - There are already many projects that do ZK Proof. According to their expertise or well-known specific ZK Proof directions, they include: Nil Foundation, which specializes in Layer2 ZK Proof; Axiom, which is more oriented towards Applications ZK Proof; Risczero, which does both Layer2 ZK Proof for its own Layer2 Bonsai Network and Applications ZK Proof; and Provers belonging to a certain project, such as Stone, Platinum, and Sandstorm, which focus on StarkNet CairoVM.

Hardware Accelerators - One of the constraints limiting the performance of ZK Rollup/zkEVM is the slow speed of zkp generation. This has led to the development of hardware acceleration projects for generating zkp, such as Ingonyama, which combines GPU, FPGA, and ASIC hardware acceleration, Cysic, which has released SolarMSM (based on FPGA accelerated MSM computing performance), and Accseal, which specializes in privacy computing hardware acceleration.

4、Middleware 中不乏现金牛

Translation:

4. There are many cash cows in the middleware industry.

After ETH2.0, the LSD track became the second "cash cow" business direction in the crypto industry after Bitcoin PoW mining. Under the Ethereum PoS mechanism, the annual output value of Staking is about 680,000 ETH (over 1 billion US dollars). There are also some very high-quality or potential projects, such as the market leader Lido, the mainly B-end user-focused Alluvial, and the Slash-resistant Puffer.

Due to the MEV-Boost proposed by Flashbots as a practice outside of the protocol, the MEV track has already started rehearsing the future benefit distribution mechanism before Danksharding implementation. For MEV value capturers, in order to obtain more MEV opportunities, they must have sufficient Orderflow; for users, in order to avoid their transactions being targeted by MEV value capturers, it seems that they can only choose to join if they can't beat them. Because it is impossible to completely eliminate MEV, this business inevitably exists, and the currently more reasonable way of existence is to feedback the MEV income to the user's wallet, DEX, or other dapps.

5、The "risk-free return" of Gao Qi has created application layer opportunities for LSDFi and RWA

ETH Staking yields Crypto "national bond yields", and LSDFi further helps to increase the yield for ETH holders. According to current Lido data, Ethereum's PoS annual yield is about 3.6%, which is similar to the positioning of national bonds in the Crypto industry. After the upgrade in Shanghai, ETH Staking can be withdrawn at any time, and there is sufficient liquidity between stETH and ETH for mutual exchange at any time. This greatly increases the confidence of ETH long-term holders to participate in Staking and obtain ETH2.0 mining income.

Due to the existence of stETH and other similar tokens, ETH used for staking now has liquidity, which has led to the emergence of more LSDFi applications. For example, Lybra Finance, a stablecoin supported by LSD, has stETH as its underlying collateral asset, which generates interest and is further supplemented by token rewards. Lybra Finance's stablecoin eUSD can bring holders an annualized yield of about 7%, making it an "automatic interest-bearing stablecoin". Currently, Lybra Finance's TVL is about $72M. Pendle, an interest rate swap protocol, gives users the opportunity to execute various yield management strategies by dividing the yield tokens into principal tokens and yield tokens. Currently, Pendle Finance's TVL is about $144M. Some DeFi protocols have also risen due to capturing more LSD tokens, such as the emerging AMM Maverick, which has successfully entered the first-tier AMM market due to its high market share of LSD tokens such as swETH, wstETH, and cbETH.

ETH Staking has an annualized yield of around 3.6%, which can be further increased by LSDFi's additional earnings, allowing long-term ETH holders to capture more profits. In contrast, the annualized yield of US Treasury bonds of around 5% has pushed RWA into the spotlight, but this can only be said to allow existing Crypto users to enjoy the higher yield of recent US Treasury bonds, and it cannot be proven that RWA can help Crypto attract new users. In any case, the current "risk-free rate of return" is indeed quite high, which is a glimmer of hope for Crypto long-term holders in the bear market.

6、With Mass Adoption as the goal, reducing the user experience threshold is a fundamental requirement

This cycle's User Service Layer has quite a few innovations. The common narrative is to lower the user experience threshold, and the ultimate goal is consistent - all for Mass Adoption.

Intent Centric is a recent hot topic, centered around intent. There are some differences in the entry points of several top projects. Bob the Solver focuses on attracting more users, dappOS aims to reduce the user's usage threshold, Anoma aims to help users achieve better demand expression, and Essential focuses on helping users reduce MEV squeezing. In fact, summarizing these projects, they are either solving the problem of "difficult to use protocols, even more difficult to combine protocols", or solving the problem of "maximizing user benefits".

TGBot is another hot topic and one of the landing applications of Web3+AI. Telegram bots are small applications that run within Telegram. Users interact (chat) with the bot in Telegram's chat window, and with just a few simple commands, they can support users in monitoring token information, making some on-chain DEX transactions, and copying trades. With the increase in the number of Unibot users, trading volume, and token prices, TGBots quickly gained market attention. In a very short period of time, TGBots has developed trading, analysis, airdrop & mining products. Essentially, TGBots also lowers the user experience threshold and helps achieve Mass Adoption.

7. There are many projects combining Crypto and AI at Token2049 this time.

The combination of Crypto and AI is a choice of the times. Crypto and ZK technology create Trustless, which is more suitable for intelligent robots, non-sovereign currency, and smart contracts. There are many entrepreneurial projects combining Crypto and AI at the Token2049 event, which left a slight impact and impression after communication.

Humans, who are carbon-based life forms, have created silicon-based AI to better achieve automation, improve production efficiency, process large-scale data, and explore the vastness of space. In this process, AI has gradually been endowed with the ability to think. While 70% of the Earth's surface is covered by oceans and is suitable for carbon-based life, the wider anaerobic and water-deficient universe makes it easier for silicon-based life to survive. The crypto, aerospace technology, and green energy developed by humans may ultimately be used for AI, allowing intelligent robots to better survive and produce in space, and thus better serve humanity.

Currently, I mainly see the following types of integration between Crypto and AI:

On-chain interactive automation: TGBots represented by Unibot. For many new users, the threshold for using on-chain products in Web3 is too high and difficult to use, while Bots products have a market. Telegram has over 500 million monthly active users and is relatively open and friendly to Crypto. The emergence and popularity of TGBots is a natural fit.

To Earn Empower AI Business: represented by Public.ai. Public.ai is an annotation company focused on the medical field. On the one hand, it provides professional medical annotation tools and annotation services. On the other hand, it integrates global professional annotation talents in a decentralized manner to improve annotation quality and reduce costs. Web3 version ChatGPT: represented by Lasso and Kaito. Lasso is a natural language search engine for on-chain data. Without SQL or other complex smart contracts, users can search for chains, data, etc. using natural language. For example, if you want to know the TVL of Lido Finance and Rocket pool over time, users only need to enter the natural language "Show TVLs of Lido Finance vs Rocket pool over time", and Lasso can present the results in chart form.

ZKML: This direction has been vocalized more by Modulus Labs. When we talk about ZKML, we are discussing zero-knowledge proofs for the inference step of creating ML models, not for training them. The effect of ZKML is that the prover can prove the correctness of the computation of the ML model without revealing any further information. Modulus Labs is building some use cases, including RockyBot, Lyra Finance, and Self-improve blockchain.

最后

translates to

Final

in English.

Singapore is an important hub connecting the East and the West in the Web3 industry. This Token2049 event has over 10,000 participants, reportedly the largest event so far this year. Most of the important projects are present, with service-oriented projects occupying the main exhibition booths at the main venue, and narrative-oriented projects hosting Side Events. At the main exhibition booths of Token2049, I walked through them all and learned about the approximate costs of various booths. I found that most of the exhibitors were public chains, Layer2 projects, exchanges, and payment solution companies, and the exhibition and sales format may be more valuable for these types of companies. Most of the Side Events were hosted by top Infra projects or VCs, with many projects from the Infra project ecosystem and joint ventures from VC portfolios. In terms of event formats, social Dinner Parties and competition-based Hackathon/Workshop + Demo Days were roughly equal. We still need to continue building.