"CRYPTO THESES 2024" on toC products

Previous chapters of the report:

Today begins sharing the toC product section:

The ownership economy will continue to be important in an AI-driven future. NFTs and public blockchains are crucial for tracking the provenance of AI-generated content. Stratechery points out:

PC Era: We controlled the copying of information.
Internet Era: Distributed information at zero marginal cost.
AI Era: We need ways to control and track AI-generated information.

NFTs and blockchain will become key tools for tracking the provenance and ownership of digital content.

1. DeSoc

DeSoc (Decentralized Social) covers multiple compelling applications, such as Lens, Yup, and XMTP.

Its main influencing factors include:

: Allows users to retain their social network and history across different applications.
: Ensures free exchange, especially encrypted conversations.
: Provides developers with space to create new business models and features.
: Shifts traditional social media revenue from platforms to creators, meeting people's needs for connection and independent thinking.

2. friend.tech

The novelty of friend.tech lies in its unique "crypto" characteristics combined with:

: Economically enforced scarcity and gamified elements with points (possibly tokens added later).
". These keys can be bought and sold through bonding curves. Each user's bonding curve is the same, ensuring liquidity in incremental key prices, with the maximum room size approaching Dunbar's number. This also means that bot armies can quickly design strategies to "make people go public" (bidding on their early key supply).

The project has great potential because:

People love celebrities: Many are willing to pay high fees for private interactions with celebrities (like Taylor Swift).
Cancellation defense / more authentic chats: Smaller audiences reduce the risk of social attacks, as long as key prices don't drop, the risk of cancellation is low.
High-profit killer app: The platform shares high transaction fees with users. Even if alternatives emerge, many will compete on cost, which is an advantage where users benefit from high fees.

So far, the platform generated $50 million in fees in 2023, once having daily revenue ten times that of OpenSea. Even after activity cooled down, it still generates $4.5 million in monthly revenue, becoming one of the top crypto apps in less than six months.

3. NFT Market

As a pioneer in the NFT market, OpenSea faced challenges in the difficult year of 2022:

: The NFT market fell into the death spiral warned about in 2022, with project prices plummeting due to the unlimited number and diversity of NFT projects, and only a few having real meme or artistic value.
: Blur dominated the "NFT financial infrastructure" field by reducing trading fees, forcing OpenSea to lower creator royalties.
: OpenSea was forced to adjust its enforcement of creator royalties.

If OpenSea and Blur can maintain their market leadership in the current market cycle, they are likely to thrive when the bull market returns.

4. Penguins' Advance and Ordinal Theory

Penguins is a project at the intersection of NFTs and AI-generated content. In the AI era, protecting identity and intellectual property is a trillion-dollar market.

Bitcoin enthusiasts may eventually realize that the success of Ordinal-related projects will be the sole driver of continued fees for proof-of-work miners.

5. Crypto Games and Digital Native Brands

The gaming industry undergoes a paradigm shift approximately every ten years, and the rise of crypto games resembles the emergence of free-to-play (F2P) games ten years ago. Monetization enabled by crypto will become the dominant business model in the gaming industry.

6. TBA

Token-bound accounts (TBAs), which are NFT-owned on-chain smart contract wallets, were formally proposed in ERC-6551.

Some impacts:

TBAs have changed the entire NFT market model. They turn buying "skins" into purchasing digital characters with a combination of non-fungible and fungible assets, including reputation.
In NFT lending, TBAs provide the possibility of "cross-margin" for NFTs, which could increase liquidity, reduce liquidations and bad debts.
All value obtained from "minting" and "collecting" can accumulate in the Profile wallet rather than directly entering the owner's address. Lens is currently the top project utilizing TBAs.
TBAs complement "non-transferable" or "soulbound" tokens, allowing soul-bound tokens to be sent to TBA, but you might not want your NFT social credit score attached to your public ENS, rather to Lens's TBA.

7. Co-creation and UGX

Polygon and Immutable are currently the most actively developing ecosystems for on-chain games (approximately 70% market share, though hard to measure precisely), while Solana may see greater development in 2024 following recent hype.

In terms of narrative, "co-creation" through platforms like Story Protocol, Shibuya, StoryCo, and Storyverse aims to use NFTs and programmable payments to disrupt large creator platforms and expand a broader creator ecosystem. It is expected that by 2025, 5-7 on-chain games will reach the standard of 100,000 active users daily.

8. Betting Games and Information Markets

Polymarket had a trading volume of about $6 million in November 2023, and is expected to reach $300 million in October this year.
Prediction markets are the largest and simplest subset of "curation markets."
The annual growth rate of the sports betting and internet gambling market is in the mid-teens percentage, while according to Kel, the "betting game" model alone could potentially add $10 billion in annual revenue for Fortnite alone.

The market size is huge, and the gambling element makes it an ideal gray market application for cryptocurrencies, while the ability to bet on crypto games may give them a marginal advantage, helping them surpass other centralized game manufacturers.

9. Network States

Balaji Srinivasan's concept of "network states" is an important idea that envisions a new form of decentralized governance using Web3 technology.

He defines "network states" as an online community connected socially, possessing characteristics such as moral innovation, States awareness, recognized founders, and collective action capability. This concept combines integrated cryptocurrency, consensus governance limited by social smart contracts, and crowd-funded physical archipelagos. It also includes a virtual capital and an on-chain census, demonstrating sufficient population, income, and real estate footprint to gain diplomatic recognition.

10. Technological Optimism

Conservative blockers like Elizabeth Warren and Gary Gensler won't save America or advance human progress. But builders will.

We can only succeed by building products people love and promoting spirits people respect.