Summary of the 2049 Run Conference - Industry Development Chapter Before going to TOKEN2049 this time, I set a very important goal for myself. It is to have as many in-depth exchanges as possible with participants at different levels in the industry, especially experienced players who have gone through multiple cycles and accumulated long-term experience. I want to clarify a few questions: What stage is the industry currently in? Can the cryptocurrency industry continue to move forward, or is it a sunrise industry? Where may the future opportunities lie next? Is it still worth it for young people to enter the workforce? Can individual investors still generally make money? And, for those of us who have been in the industry for many years, can we still expect to make big profits in the future like we did in the past? This time, I had in-depth exchanges with some senior VC partners, very successful project founders, old KOLs, KOL agencies, and friends from exchanges, and each exchange lasted for more than an hour. Time and resources are limited, and about 70% of the people I talked about are Chinese, 30% are foreigners from Europe and America (as well as a Japanese partner in a European American project). It is interesting that there are significant differences in people's judgments about the future. I want to first present these different viewpoints and then talk about my own feelings. After all, instead of just seeking voices to support one's own judgment, it's better to first see what everyone is arguing about. ~~~~~~~~~~~~~~~~ The core judgment of pessimistic friends is: The era of huge profits in the cryptocurrency industry may be coming to an end 1. Compliance No industry can prosper forever, it will go through a difficult budding stage ->a staggering childhood ->a bold and ambitious youth ->a steady but somewhat dull adulthood ->a twilight and declining old age. The encryption industry has already gone through the stage of wild growth in the early dark forest. The main theme is inevitably compliance, and the result of compliance is that various bug dividends caused by unclear rules and lax control are filled, and the window for ordinary novices to collectively become rich is narrowed. The cryptocurrency market today has reached a point where it can no longer be ignored by governments around the world. Over time, regulatory, tax, and legal departments in various countries have become increasingly familiar with the workings of cryptocurrencies. European and American countries have become increasingly mature in terms of cryptocurrency taxation, and their control over CEX licenses is also becoming closer to traditional finance. This will result in several inevitable outcomes: 1. CEX used to have no threshold through the Internet, and they could draw retail investors from all countries into their own markets to trade and pump water, but now big firms in developed countries have begun to follow relevant regulations step by step, Travel Rule， The multiple of contracts and the entry threshold for derivatives are cooling down the previously blindly injected funds. 2. The number of people and funds who dare to pull and save will decrease. When it comes to sudden wealth, it's hard for me to forget the FTX during the LUNA and SBF periods. One helped Real Madrid create a miraculous single player paper wealth of 800 million US dollars but ended up empty handed. The other used user funds to lift the early Solana ecosystem to the sky. The reason why such cases rarely occur in the US stock market is precisely because of strict compliance control. The influx of a large amount of black and gray funds into the cryptocurrency industry has to some extent promoted the temporary prosperity of crypto, such as the former Wanghui funds, Russian casino funds, and funds from sanctioned countries. It will be difficult for these funds to enter the pool and become the driving force behind the increase in coin prices in the current tightening of compliance. 2. Traditional funds entering Web3 channels interrupted Many people only see that altcoins have fallen, Meme is no longer fun, and retail investors are no longer buying. But if we take a deeper look, we will find that the important capital cycle that has supported the prosperity of the cryptocurrency industry in the past few years is gradually becoming ineffective. After the previous round of loose liquidity, a large number of traditional funds, including home run funds and mutual funds, have found a relatively compliant way to enter the cryptocurrency industry: That's investing in Crypto VC. These traditional funds do not need to trade Meme themselves, nor do they need to directly participate in various on chain speculations. They only need to allocate their funds to cryptocurrency funds. After VC receives the money, some of it may be allocated to mainstream assets such as BTC and ETH, while others may be invested in the primary market. The project party obtains financing, recruits a team, develops products, promotes the market, distributes airdrops, connects with exchanges, and finally the project goes online. The tokens are sold in the secondary market, and the VC withdraws the funds. This forms a fairly complete capital cycle. But since last year, this model has been facing serious challenges. Traditional investors are gradually realizing that the experience of investing in Crypto VC is not ideal. Firstly, the investment cycle is long and the capital recovery is slow. Secondly, after the listing of altcoins, it becomes increasingly difficult to reach the crazy valuations of the past. Even if they do, by the time they can unlock them, they will have already fallen by very little. More importantly, retail investors are no longer willing to pay for these overvalued projects. When VC cannot create ideal returns for investors, new fundraising will naturally become increasingly difficult. And when VC cannot raise money, it is difficult for the project party to obtain a continuous stream of financing as in the past. This is the fundamental reason why a large number of venture capitalists in the cryptocurrency industry have shut down and left the market over the past year, especially in Asia. Combined with the AI wave, the volatility of US tech stocks is no less than that of Crypto, attracting a large amount of capital and excellent entrepreneurs to leave Web3 to participate. Resulting in our industry gradually becoming a stock market lacking new participants and scarce liquidity. How to restore these traditional funds legally and compliantly, and inject new blood into the industry, may be one of the most challenging issues in the current market. 3. Lack of innovation in narrative In the short term, the bigger problem in the cryptocurrency industry is that the consensus on the narrative of altcoins, one of the most important wealth creation links in the past, has collapsed, and the successor Meme is not much better. After a lack of liquidity, DePIN、GameFi， And many once highly anticipated tracks are gradually exposing issues with their business models and actual revenue. Ultimately, this led to retail investors no longer believing in altcoins or grand narratives, and instead supporting the "anti Wall Street" Meme. But Meme used to be a weapon against VC, but now it is also starting to become rigid. Today's Meme, although breaking away from the traditional model of VC teaming up to issue coins and sell on platforms, has gradually formed another set of interest groups. Coin issuing groups, call out groups, and various interconnected small groups are beginning to dominate more and more opportunities. It has become increasingly difficult for ordinary retail investors to achieve several times or even dozens of times higher returns through early participation or personal cognition. Recently, Vtalik also mentioned that, http://Pump.fun The small group on the platform has harvested over 100 million US dollars through the continuous issuance of Meme, and the proportion of individual investors who play Fomo losing money exceeds 90%. Regardless of the specific case, the issues reflected behind it are worth paying attention to: Meme games, once marketed as fair and open, are gradually being dominated by new profit structures. Old games are being broken, new games are becoming rigid again, and we haven't been able to find the next exciting new game mode that can benefit a relatively large number of retail players and make the game less intense. ~~~~~~~~~~ Optimists, the core judgment of their friends is: The improvement in industry fundamentals is visible to the naked eye, and we have already emerged from the bottom. Although their expressions are somewhat different, many friends agree that today's currency circle may be like the state after the collapse of the ICO foam in 2019. At that time, the market's trust in the previous mainstream narrative (everything can be ICO) completely collapsed. No one has any new projects on the market, and old projects have died in batches. Practitioners do not know where the future direction is, and they have jumped back to the financial industry and the Internet. The entire industry seems to have no projects that can be implemented and generate sustained revenue, and there is nothing worth looking forward to. But the result is that in the bear market that lasted nearly a year, Defi, this dazzling flower, was born. And now, similar things are happening again. Actually, I have had this feeling since last year. At that time, the market began to decline and retail investors were no longer willing to pay for altcoins, while Meme remained popular for a while. At that time, I felt that the industry might need to undergo a more thorough clearance. I have also written a long article specifically discussing the VC clique and the projects that have led to a complete deadlock in the industry. I don't know who can untie this knot, otherwise the bear may come quickly. The rise of Meme and the innovative gameplay of Binance Alpah continued the market for more than half a year, until after 1011 when market liquidity significantly declined, but the market went through a long and gradual process of decline. It wasn't until almost a year later in 2049 that I clearly felt that those old projects on the market had been cleaned up almost completely. Those who can go to the clinic have already gone, and many who cannot have already died. From this perspective, the current industry downturn may not necessarily be a bad thing. It's more like a long detoxification process, and detoxification takes time. Only when old things gradually exit the market, new narratives and new gameplay have the opportunity to truly grow. The so-called 'no breaking, no standing'. After winter arrives, truly living things have a chance to sprout again in the next spring. If we extend the time dimension, we may be able to view the current market environment more rationally and patiently wait for the next innovation. Moreover, we can now see that there are some projects that can continuously generate revenue and have a stable user base. It is difficult for others to dismiss cryptocurrency as a castle in the air. Regarding the compliance process issue mentioned by pessimists, optimists take a different perspective-- Cryptocurrencies are being accepted by more and more countries and gradually entering the mainstream financial system. Isn't this exactly what early participants like us once dreamed of Looking back many years ago, what did early Crypto believers hope for? Cryptocurrencies can truly be widely used. More and more people are becoming aware of blockchain and digital assets. Cryptocurrency is no longer just a game within a small circle, but can enter the financial and commercial systems of the real world. Now, these things are gradually happening, such as @ circle and cryptocurrency companies going public, many exchanges being invested by mainstream financial institutions, Hyperliquid being mentioned by Trump, 82 million American Samsung phones starting to embed stablecoin wallets, Robinhood and Futu providing users with cryptocurrency trading entrances. These seemingly far fetched benefits from our daily earning Alpha are likely to become the cornerstone for a larger number of users to flock to Crypto when the external environment changes, such as liquidity easing again. Just as we cannot assume that the industry is doomed just because the popular ICO is no longer working, nor can we assume that the entire industry is no longer working just because the VC coin issuance model is no longer working and the Meme model is difficult for retail investors to make money. ~~~~~~~~~~~~~~ There are actually quite a few more contents, but I don't want to be too lengthy. I will separate the questions raised earlier and slowly give my own thoughts and answers. I just want to extend the time dimension and approach the development of the industry with a more open mindset, rather than using old game rules to judge whether a new era still has a future. This may be the most worthwhile thing for me to continue thinking about after exchanging ideas with different friends on TOKEN2049 this time.