2023, is blockchain still a good business?

23-10-30 10:49
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I'm afraid no one can figure out how many chains there are now.


Once upon a time, blockchain replaced Bitcoin as the synonym of the entire industry, and became the pearl of the entire crypto industry. The market would discuss the similarities and differences of each chain as if they were treasures. However, with technological iteration and narrative migration, times have changed - the more chains there are, the more use cases are proven false; when old chains are proven false, new chains will fill the gap. Who knows how many chains there are now?


In "One Hundred Thrusts with the Rapier and Dagger", a book about cold weapons written by German fencing master Michel Hundt, his final suggestion is for his lord to choose a hot weapon, the firearm, as a secondary weapon in duels.


Not only can no one count how many chains there are, but more importantly, in the eyes of the market, both Layer 1 and Layer 2 with large-scale financing are no longer sexy. Faced with homogenized experiences, it seems that only airdrop hunters and automation programs are persevering. Through data, we can see that the TVL value of more than one chain is now worth less than the financing amount of the project, and the market value of tokens on public chains is almost negligible compared to the value of assets on the chain. It seems that the narrative that once ran the entire "world" on the chain only served the chain itself in the end.


In the financial industry in recent years, it seems that storytelling can always serve as the first productivity. Everyone grew up listening to stories, but the stories in the encryption industry have turned into narratives, with content shifting from childhood favorites like Little Red Riding Hood and the Big Bad Wolf to adult pursuits of paradigm shifts and "To the moon".


Every "king-level" project or popular track is wrapped in a story. It's best to have a story that can evolve and iterate repeatedly. The narrative crafted from such a story is a favorite of event-driven investors - where there is a story, there are expectations, and where there are expectations, higher valuations can be obtained. As a strongly cyclical industry, the narratives that emerge after the tide always seem to be caught naked, and the stronger and more powerful the narrative, the stronger the negative feedback it receives.


Although storytelling is good, don't overindulge. Timing is crucial for projects derived from various narratives. "Each project has its own era and threshold. If you miss the threshold, it becomes a barrier. When the era abandons you, it won't even say goodbye, and you won't be able to keep up with its footsteps." The era of traditional public chains may be slowly closing its doors.


Instances of narratives similar to public chains being once the most attractive are abundant. From the historical patterns of the cryptocurrency industry, this is inevitable. Technological advancements give rise to new opportunities, but eventually the blue ocean turns red.


In the era of Bitcoin, parameter and algorithm adjustments gave rise to Litecoin and Dogecoin. Narratives of Polkadot, Cardano, Zilliqa, Qtum, ICON, and Aeternity, among others - the Ethereum and Ethereum killers of X land - have created too many zombie chains that now seem to exist only in name. Even IOTA, which once sparked the popular concept of DAG (directed acyclic graph), is now included in this category.


More well-known are DeFi Summer and the EVM chain situation, from DEX to yield aggregator machine gun pool to decentralized contract and options platforms, and finally copying Ethereum's protocol to other EVM-compatible chains. The poor imitators on various EVM chains still active in the market today are likely less than 10%.


Take DEX Clipper as an example. Clipper serves retail investors and promotes optimization of transactions below $10,000. In 2021, it raised $20 million from institutions such as Polychain, 0x Labs, 1inch, and DeFi Alliance. However, even after the token was launched this year, the total circulating market value is only $3.6 million. If the project had launched in 2021, even if the DEX data had not changed much, the situation would have been much better, which is all about timing.


Even the chain is the same, if the timing is not right, the effort will be wasted. As Richard Chen from 1confirmation said, despite many media reports of a lack of funding for crypto VC, new financing is actually ongoing. However, investors are no longer interested in supporting projects that have already raised funds and spent them during the bull market without achieving product-market fit.


PMF, Product Market Fit, refers to making something that users want. It was mentioned by Marc Andreessen, the founder of a16z, in a blog post in 2007 and has since been widely promoted.


Under the traditional model, a chain that requires a large amount of financing may no longer be a good business opportunity.


One-click Link Sharing Era is Coming


Faced with the influx of high-valued public chains, which are still pouring in, users urgently need to break the long-standing concept. In the cognition of most people, running a chain requires a lot of technology, money, and time. But with RaaS (Rollup as a Service), the chain is no longer an unattainable gem for ordinary people, but more like a swallow in the old Wang Xie Tang.


The author had a conversation with the DF Archon team, who previously used Altlayer to build an L2 solution. During the conversation, the team expressed their recognition of the ease of building RaaS L2 and mentioned that mature code from various EVM networks can be directly deployed on the chain, which is very convenient.


DF Archon team previously (date) conducted a community round test of the full-chain game Dark Forest. Unlike the official version built on the xDai sidechain (now Gnosis), the community round used an L2 testnet supported by Altlayer. In communication with the author, team members indicated that building an L2 testnet is relatively easy and was also supported by Altlayer's free services.


DF Archon hosted the DF ARES v0.1 Round 1 competition, which reportedly received support from projects such as AltLayer, Weirdo Ghost Gang, 01a1, briq, and TownStory Galaxy.


Not only Altlayer, there are now a large number of ready-to-use RaaS services in the market. The author also used another RaaS product, Conduit, which helped Zora launch a testnet and mainnet based on OP Stack. After testing, the author can say without exaggeration that building an OP L2 test chain only requires a click of the mouse.


When deploying the testnet, both L1 and L2 of Conduit are in a testnet state, which may be the reason why ordinary deployment users do not need to pay fees.


It requires a certain amount of deployment time.



Transfer on the L2 testnet that has been set up


According to the official documentation, in addition to deployment, users will also receive logs, monitoring, Blockscout browser, and samczsun's transaction tracker. With the upgrade of Conduit, users will also automatically gain access to new components. Unlike Altlayer, Conduit does not currently support using its native token to pay for gas fees, as they explain that "because these native tokens will eventually be transferred to ETH through DA". However, these details are not set in stone and anything is possible with the iteration of the business model.


In short, if you are willing, you can build an on-chain Gomoku game on your own testnet, achieving regret-free moves. Or test any potential use cases such as Dark Forest, and experience the thrill of dominating the "Machine Room Chain" by pausing the chain.


Aside from RaaS, L2BEAT, which focuses on researching L2, recently released an article guiding users on how to deploy a sovereign Rollup chain. The article, titled "Build Your Own Rollup," can be found at https://medium.com/l2beat/build-your-own-rollup-72423f4255e7.


BYOR, which echoes the common phrase in the crypto community, DYOR (Do Your Own Research).


BYOR's codebase consists of three programs: smart contracts, nodes, and wallets. The following technology stack is used:






















Not only is there a new way of income distribution, but the division of labor between chains and applications can also be optimized. In the current trend of building their own chains, whether it is Argus and Merit Circle, which focus on onchain games and chain game guilds, or Zora, which focuses on NFTs, or dYdX and Aevo, which focus on derivatives, have already launched or planned to launch their own chains. Many of these projects are not starting from scratch, but are being developed through cooperation or reference.


Source: How to scale app rollups


Similar to the previously popular white-label companies on centralized platforms. For professional public chain teams, building a decentralized network for protocols with specific use case demands can be a good way to earn service fees and project development commissions. Public chain teams can also focus on technological iteration, providing users with a fast user experience and providing developers with a good development environment. Avoiding the complicated affairs of foundation operation and marketing may also be a relief for "tech geeks".


Conclusion


When we look at public chains from the perspective of usage on the chain rather than coin price, decentralization, technology, and legitimacy, there is a significant shift in focus: the chain is more inclined towards product. Even Ethereum has to admit that "products evolve, they are not planned", and being obsessed with 100% decentralization seems unrealistic.


The direction in which the narrative will continue to develop is unknown, but one thing is certain: blockchain is no longer a "rare thing". Returning to the original question, how many chains are there exactly?


The following data is only for reference: ChinList, a website that provides RPC-related services, has collected over 550 mainnets that are compatible with EVM. DefiLlama, a data website, has recorded 221 chains, of which 132 are EVM-compatible. L2BEAT has recorded 48 L2s, including 15 upcoming projects.


When discussing this issue with developers at LobsterDAO, a community member stated, "I estimate that there are another 500 private and non-public chains operating besides those listed on ChainList."


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