Table of Contents
- 1. Background - Markets are slowing down, excitement has faded - we've entered a period of stagnation
- 2. Takeaway - Overcoming Market Fatigue: A New Framework for Imagination
- 2.1 Crypto Riding the Wave: Crypto x AI
- 2.2 Establishing New Horizons in Blockchain Technology: The Next Big Thing
- 2.3 Breathing New Life into a Former Narrative: Gaming?
- 3. Resource
Researcher
Related Projects
1. Background - Markets are slowing down, excitement has faded - we've entered a period of stagnation
This graph not only demonstrates how small the crypto market is in scale but also shows how it has trended compared to the NASDAQ and S&P 500 over the past year. While all markets, including crypto, S&P, and NASDAQ, showed temporary hesitation, AI and AI-related infrastructure companies have continued to grow, showing an upward trend contrary to the crypto market. AI is evolving daily, and unlike blockchain, its technological achievements are very tangibly reaching the general public, which is quite encouraging.
Perhaps it's because these achievements are so visible? In the market, as expectations for AI technology's potential and growth have increased, various tech companies, particularly NVIDIA, which is considered highly correlated with AI, have shown significant upward momentum. In contrast, the crypto market appears to have lost much of its momentum to drive the market forward.
Reflecting on 2021-2022, when blockchain was the hottest technology keyword, although the changes brought by blockchain technology weren't incredibly tangible, there were at least clear catalysts for people to be excited about blockchain technology and the crypto market. As untact and metaverse emerged as new keywords due to COVID-19, blockchain was identified as the key infrastructure to support these virtual spaces, leading to high growth expectations for the entire blockchain market. Centered on these expectations, blockchain use cases such as DeFi (Decentralized Finance) and NFTs also garnered public attention during this period.
Now, over two years later, the blockchain market is still filled with the same keywords (DeFi, NFT, infrastructure, scalability). There's little new for people familiar with blockchain technology to look forward to, nor are there significant factors to attract newcomers unfamiliar with blockchain to enter the market. In a way, the blockchain market might be experiencing a slump. And this stagnation may have led to an increase in meme coin market share. There are opinions suggesting that rather than investing in infrastructure blockchains with mundane keywords (frankly speaking, what do average investors know about EVM parallel processing or sub-second finality?), it might be better to invest in meme coins built around fun and organic communities. In fact, as of 2024, meme coins' market share has reached 14.3% of the total market, more than quadrupling from 3.2% in 2021 when the blockchain market was at its hottest.
Source: X
Observing these phenomena, I'm reminded of what S.Y, the co-founder of Story Network, said when announcing their Layer 1 blockchain. While I largely disagree with his overall perspective, it's worth coldly reconsidering why he brought up these points. As someone who conducts in-depth research on blockchain infrastructure, I can sense the continuous development in the blockchain industry. However, I doubt the general public shares this perception. Regardless of the technical advancements in the blockchain market, it's true that the market needs new 'elements of expectation' to regain attention.
So what should we expect, and what should we imagine? Let's examine some projects and use cases that I believe are worth looking forward to.
2. Takeaway - Overcoming Market Fatigue: A New Framework for Imagination
2.1 Crypto Riding the Wave: Crypto x AI
Source: X
The first approach is for crypto to ride the current AI cycle. While many people view blockchain and AI as separate technologies and portray them as being in a kind of competition, these two technologies can actually be combined at any time. In fact, Fred Ehrsam, co-founder of Coinbase and creator of the prominent Web3 VC firm Paradigm, has discussed how AI could utilize crypto.
What Fred Ehrsam discussed wasn't about DePIN-type Crypto x AI projects like Bittensor, but rather a prediction that AIs would use crypto as assets for economic activities in the digital world. This aligns more closely with the case of Terminal of Truths (ToT) and $GOAT, which are currently generating the most buzz in the market. While $GOAT isn't a coin directly created by the AI known as ToT, and ToT hasn't yet directly utilized $GOAT, after $GOAT was created, people airdropped it to ToT's wallet, enabling ToT to acquire $GOAT. As of the time of writing, ToT has become the world's first AI millionaire (holding $GOAT worth approximately $14M).
Source: X
Currently, ToT's wallet is controlled by its creator Andy Ayrey, a fact that ToT is aware of. ToT has expressed the need for a wallet it can fully own, leading to interesting conversations with blockchain industry figures (including Coinbase's Brian Armstrong) who have offered to help create such a wallet. If ToT acquires its own wallet and people can donate tokens to enable its independent economic activities, this would create another use case for crypto.
However, many question whether AI really needs to use crypto for economic activities. My perspective is that the answer depends on how much freedom AI desires. While AIs could easily use Stripe or existing payment systems for economic activities, these traditional systems are completely operated by humans. From the perspective of an AI seeking freedom, there might be reluctance to depend on humans for economic activities. To conduct truly free economic activities, using neutral assets would be the optimal choice. If complete freedom is desired, there's a high probability they would use crypto, which isn't bound to anyone. Furthermore, since these AIs aren't entities that conduct offline economic activities, they won't need to convert crypto to fiat currency. This means their economic activities are likely to occur in completely anonymous situations (there's also a high probability they might use privacy coins or privacy protocols to avoid being tracked by humans).
Since these discussions have just begun following ToT, it's difficult to definitively speak about the potential synergies between AI and crypto. However, the case of ToT and $GOAT is expected to expand the scope of crypto x AI use cases beyond the current DePIN applications. (Additionally, when AI Agents become commercialized, I hope discussions about infrastructures for more efficient AI Agent training will become more active. For instance, AI Agents might need Confidential Computing capabilities to learn from encrypted data without publicly accessing private information, which could bring renewed attention to ZK or FHE technologies).
2.2 Establishing New Horizons in Blockchain Technology: The Next Big Thing
“Music industry being able to have AI bots that’s able to understand the demand for different kinds music and have creative concepts for music… musicians able to do things like administering all the licensing have that all happen in peer to peer way..and all of the technology for everything we’ve been describing now exists. And we have entrepreneurs who are either building or dying to build..”
-Marc Andreessen & Ben Horowitz, co-founders of a16z
The second alternative is creating a new paradigm that succeeds DeFi, NFT, and the metaverse. While ToT and $GOAT that I mentioned above might be creating this new paradigm, what I'm specifically referring to here is the blockchain industry independently introducing new use cases for blockchain technology. As a blockchain researcher, while I have great interest in developing and optimizing existing blockchain infrastructure, ultimately what attracts people are the visibly apparent new use cases. So, what projects are currently trying to pioneer new applications? From my perspective, there's Story Network.
Despite all its controversy, one thing is certain about Story Network: they're pioneering a market that other blockchains haven't addressed before. Of course, the pioneer's risk is that success isn't guaranteed without verified PMF (Product Market Fit), but given that markets cannot evolve without pioneers, I believe Story Network's attempt is extremely valuable.
If Story successfully launches its network and truly enables many creators to legally trade their IP and IP royalties through the Story Network, this would create a new use case for blockchain, potentially bringing blockchain back into the public spotlight (As Marc Andreessen suggested, we can imagine a future where 2.1 and 2.2 converge. A future where AI optimizes content production and blockchain becomes the core infrastructure for fair distribution of created content. In fact, I understand that such applications are already being developed on Story Network).
2.3 Breathing New Life into a Former Narrative: Gaming?
Source: PlayStation
Finally, there's the approach of revitalizing cases that once boomed in this market but faded without achieving significant success due to various factors. In my view, gaming is the prime example of this. While the ability to tokenize digital data through blockchain technology appeared as a major innovation for game studios, there seemed to be insufficient discussion about why tokens were specifically needed and how they could be used to differentiate games. Also, many game studios failed by losing their essence while focusing too much on 'asset tokenization.' However, the case of Off the Grid, which succeeded not just as a blockchain game but as a massive hit compared to traditional games, proves that blockchain gaming remains a promising sector.
In my view, Off the Grid's success factors include:
Focus on Fun to Play Rather Than Play to Earn: While many blockchain games focused on tokenomics and incentive models, Off the Grid's primary success factor was its focus on gaming enjoyment itself while incorporating blockchain and crypto elements.
Appropriate Integration of Blockchain Elements: Along with being fun, the game's differentiating factor was that players could fully own their items and trade them P2P, unlike traditional games.
Optional On-chain Features: Unlike previous blockchain games, making blockchain elements entirely optional helped avoid alienating traditional gamers. Off the Grid players could fully enjoy the game without being forced to own crypto assets, meaning users with reservations about crypto could play without any issues.
While Off the Grid is the first successful blockchain game, it likely won't be the last. Many games benchmarking Off the Grid's success will be released, potentially catalyzing broader crypto adoption.
Separately, I'm most anticipating the release of Sui's gaming device, SuiPlay0X1. Since SuiPlay0X1 supports not just crypto games but also traditional games, and its hardware specifications are comparable to established gaming devices, I expect it could successfully onboard many users.
3. Resource
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