Fundamental Insights

#1 Zero-Knowledge Application

ZK is applicable in recent years. The two main thesis of ZK is rollup which improves computation efficiency and privacy. For the private thesis, it is intuitive since ZK shares no knowledge with the verifier except the statement itself. The rollup thesis heavily relies on two characteristics of ZK: succinct and recursion. Succinct characteristic helps verifiers save lots of computation resources instead of rerunning the whole program. Recursion characteristic helps to save storage space. With recursion, the blockchain can keep a fixed size. This is also beneficial for decentralization since the tiny blockchain node does not require high-end hardware.

The ZKRU(ZK Rollup) offers higher TPS and lower fees. This sounds familiar? Back to 1-2 years ago, we see lots of chains with higher TPS and lower fees. They call themselves “Ethereum Killers”. Most of them died and survivors find their own directions. Some focus on social applications and some focus on GameFi. Thus chains with higher TPS and lower fees are not competitive today. What about “Ethereum Killers” with a complete ecosystem？ Moonbeam is one example. It launched with first-tier DeFi infrastructure last year. Its TVL decrease till today.

Thus we are more excited to see app-chains, chains with featured apps. Both Cosmos and Polkadot are heading in this direction. For Ethereum Layer2, dYdX would be a good example of app-chains. Here is the TVL graph for dYdX.

Another main thesis for ZK is privacy. The total market cap of privacy sector is around $10B, around 0.45% of the total crypto market. The daily trading volume is around $1B. However, Rollup is more promising than privacy. Privacy does not make sense, because the blockchain is designed to be transparent. The privacy culture is somewhere against the transparent spirit. Also, privacy may have compliance problems. In the Web2 era, we do not see the prosperity of privacy apps. In the same category, the top product does not heavily focus on privacy, although more and more institutions improve their privacy protections. Privacy does have tradeoff. Most of the time is availability, which is the key to users.

#2 SocialFi is On The Way

In SocialFi, things haven't really started yet. Personal token offerings are also likely to converge to a unified standard, which means social networks will have to provide value to users in other ways than just helping creators make their own initial public offerings, and those values will add value to the platform.

Personal tokens may have the greatest potential for percentage growth, but they are also the riskiest in terms of investment. They appreciate in value based on the accomplishments of the individual creator, so they can be asymmetrically lucrative for early investors. Still, the accumulation of total value is limited. It is difficult for individual influencers to reach tens of billions of dollars because they are limited by their personal brands.

What a group can accomplish is larger in scale than an individual, and therefore has correspondingly greater potential for growth. Unlike ICOs, which are widely criticized for issuing coins out of air, community tokens are issued based on certain value underpinning either the profitability, popularity, popularity or reputation of their creators, and the open nature of crypto-economic primitives can facilitate the formation of a fan-driven value discovery market. This value, native to the Internet community, is easier to capture than physical assets on the chain. Until a real-world asset uplink solution is perfected, community tokens may become one of the most promising incremental markets to the real world.

Tokens with liquidity or other financial attributes are more likely to succeed than those that do not explicitly provide revenue to token holders. All three social token categories have the potential to be financially successful as social tokens continue to grow. For the earliest users, there is likely to be a larger percentage return at the individual or community token level, while distribution and aggregation platforms will yield higher returns. Finally, incubators and a number of other businesses serving the growing social token trend will create significant value. The transition from Web 2.0 to Web 3.0 becomes particularly important, whether it is better compatibility with user habits, user experience, content richness, learning costs, and regulatory exploration. Middleware like Mask Network is undoubtedly able to capture some value, and middleware may also bring bright performance in this transition process.

#3 Does the creator economy necessarily need a better token incentive model?

SocialFi, as the name suggests, combines the concepts of content creation with token mechanism. But creation and mining are two completely different directions, one is heavy and the other is heavy. The so-called 'Write to Earn' is nothing new at the present. Using a money-making mechanism to incentivize junk data creation, which may largely damages the user experience. Though benefiting growth in the short term, it will harm long-term development interests. This has been verified in the web2 era (i.e. Qutoutiao). In addition, compared with GameFi’s clear rules and simple purpose of making money, “content mining” is more difficult to manage because it involves many problems such as plagiarism and grouping mutual comments and likes. Then it is more difficult to build a benign economic environment. Under the threat of the "wool army", it is difficult to achieve a long-term profit-making.

As the head of the Bluesky project mentioned, content monetization probably makes user behavior driven by monetary incentives and gradually their creation becomes unnatural. Once the financial attribute is overemphasized, SocialFi will often go into a death cycle. The financial attribute is so obvious that a large number of invalid social content increases, and further the phenomenon of bad money driving out good money will strengthen. This monopoly will continue to strengthen under the blessing of “DeFi attributes”, which will make the project unsustainable. Ideally, money should be a facilitator, not a driver of interaction.

Regardless of whether the token incentive models such as Steemit have been falsified, we can’t help thinking: Does the creator economy necessarily need a better token incentive model? If the essence of SocialFi is still based on the value precipitation and benign circulation of content, will the introduction of Defi help the sustainable development of the content community? If we urgently need a long-term stable and flexible token incentive model in the future, how can the real "Data to Earn" be realized? Perhaps from the common failure cases of a generation of SocialFi, we can make it clear that the real "Data to Earn" must be based on valuable content communities, and the introduction of the Defi mechanism should be icing on the cake rather than distracting. We guess that the social application of traditional Internet web2 will be transformed/integrated through web3, and the advantage of SocialFi will be more obvious.

Fundamental Insights

#1 Zero-Knowledge Application

#2 SocialFi is On The Way

#3 Does the creator economy necessarily need a better token incentive model?

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