In the era of encrypted entertainment, do we need new technologies or new applications?

Written by Matti

Compiled by: Yangz, Techub News

Article source: Techub News

The reality will make you ask yourself, "Do we need more infrastructure to attract more users? "The answer is that we don't need too many new technologies compared to new applications.

The technical narrative in the industry has always been to capture more value, and in the process of pursuing value, we have entered the era of encrypted entertainment, and everyone, including institutions, wants to participate. .

There’s new news about hot infrastructure funding in the industry, but are cryptocurrency’s technical frictions really holding back mainstream adoption? Or are we just afraid to face the really tough problems?

I saw a video of the founder of Shopify, and he said that the venture capitalists who missed out on the company initially thought the TAM (addressable market size) was too small. At that time, they counted about 50,000 online stores. Today, Shopify alone has 1 million merchants.

Shopify’s solution creates a new market by solving the technical friction of creating an online store. The question for the on-chain economy is: to attract users, do we need more use cases or better technology? Or is the hype about the technology itself a use case?

Are developers the product?

The current situation is that there are more developers building products for other developers than building products for actual users. Optimizing projects to attract venture capital has also become easier. The more obscure the product, the more reflexive the token becomes. Currently, we are also launching more technologies than use cases.

In response to the above situation, I think at least one of the following points is correct:

1. We first need better technology to eliminate user friction

2. But technology is not that important, we need to build for users first, then build infrastructure (e.g. Amazon/AWS)

3. Technology is the product, and VC is both a consumer and a funder

If we extrapolate Shopify’s success story to today’s on-chain application status, we can assume that the lack of good use cases can be attributed to technical friction. If the hypothesis is correct, I think we need to abstract away the complexity of blockchain rather than adding infrastructure. That is, the answer should be to roll out fewer new technologies, not more. At the same time, we need better use cases that go beyond speculation and attract more funding.

Reason for reducing the introduction of new technologies

Blockchain design itself is very complex. Based on redundancy, blockchain liberates state preservation from closed databases. Block space is a container for updated status, but its generation is not easy, and the principles behind it are extremely complex.

Developers and entrepreneurs have proposed various forms of blockchain abstractions. These solutions should make it easier for people to interact with the blockchain, such as bundling various wallets together in a convenient way, building bridges between chains, and deploying applications at lower costs and faster speeds. In a sense, they are the middlemen between the blockchain space and its users.

From a macro perspective, the blockchain abstraction is to bundle the block space with development tools/composable infrastructure for users to use. But are we teetering on the edge of centralization with over-engineered solutions? Does this mean that what we end up with is complex multi-sig as the “AWS of Web3”?

If you don’t think abstraction is the solution and you are a technology geek, then you may be looking for the next ZK/FHE (Fully Homomorphic Encryption) solution so that the general public can use blockchain .

Solutions to today’s technology frictions can be summarized into the following two aspects:

1. Reduce new technologies: Simplify the complexity of blockchain

2. Add new technologies: expansion and cross-chain (faster, cheaper, seamless transmission)

To absorb the next batch of 500 million users, we need to be scalable and interoperable The operational blockchain enables users and developers to interact more easily.

Developers are vigorously promoting wallets and universal applications with better user experience to attract new users into the industry or grab some of Metamask’s market share. But from a user perspective, the user experience of cryptocurrency applications has evolved, and what is needed now is new use cases and more interesting and useful functions.

It is much harder to come up with new use cases than copying something that already exists and then adding some minor changes. Many applications are only built with "what should be" in mind, such as "users should want to have their own data" and "Twitter shouldn't have so much power", without considering actual needs.

Therefore, I think the problem is not the technology, but the lack of imagination in use cases. Given the fact that there is more money in the industry than ideas that can be executed correctly, we end up in the “Lollapalooza” effect of the cryptocurrency cycle. (The "Lollapalooza" effect was proposed by Charlie Munger, also known as the "joint effect", which refers to the superposition of multiple interconnected factors in the same direction to produce a strong amplification effect)

Lollapalooza Embodied in the Cryptocurrency Industry

When you don’t know what to build, you develop more technology. When you're at a loss for money, you'll find a variety of financial tools. And when you're bored, you browse memes on the internet. It is in the midst of all this that the cryptocurrency industry escapes reality time and time again.

I call the current macro cycle of the industry "entropy". In this cycle, speculation is eating the industry, and the industry is eating the speculation. For past and future macro cycles, I have divided them into the following four eras:

1. 2009-2014: The Cryptopunk Era (Conception)

2. 2014-2020: The era of crypto startups (increasing entropy)

3. 2020-2025: The era of crypto entertainment (decreasing entropy)

4. After2025: The Deployment Era (Negentropy)

Currently, the industry is caught between two extremes: on the one hand, a utopian embrace of memes with no intrinsic value; Utopian technological promises cannot solve today’s vexing problems. No one is focused on answering hard questions (use cases). As shown in the figure, this is a true portrayal of entropy reduction:

#Although the judgment of the group in the middle of the curve will be correct at the end of the cycle, this may also mean , right now they can’t make any money (nor will they lose money). Cryptocurrency has become a reality for betting on the future; everyone is both a technology investor and a meme investor, and since there are no barriers to entry, everyone can participate in the trend of the times.

Looking at the groups on the left and right sides of the curve, they will continue this grand "playing game" and benefit from it. The rules of this game are simple, just sell the coins to any investor willing to take over.

Although it sounds a bit "bad", when the economy itself relies on "alchemy" and few people can justify it without relying on the performative economy, how can we Is it anchored in reality? Some would say the $400 billion global consulting market is a joke, but the fact that it exists makes it hard not to engage in this particular kind of pretend game.

In fact, the market has become an entertainment industry to a large extent, and this is the impact of the 24/7 information flow on society. Cryptocurrencies offer great product-market fit in this highly performative era. We are blurring the lines between games and reality.

this is the truth. I don’t do normative analysis, and I’m not saying this is bad. What I want to point out is how the financial game has evolved. This evolution can make something that seemed worthless become priceless in the future (and in most cases worthless again).

In this day and age, following the money means following the Lollapalooza trend. If you can master this game, congratulations, you have better sales skills than KOLs. In my opinion, the current cryptocurrency industry is largely the entertainment industry. What we are in is the token sale business.

Of course, I don’t think this is the final shape of the cryptocurrency industry. A Great Recession (real disillusionment) is expected to be lurking ahead, as the cryptocurrency industry’s “dot-com bubble” has not yet occurred. Here’s why I guess so:

1. Most of the financing we see is for technology and technology

2. Blockchain Unable to scale for mainstream needs

3. Consumer-facing use cases are few

4. Institutional support and adoption of traditional finance is immature

Despite what you may think, we are not ready or qualified to absorb trillions in institutional inflows. If these funds are realized through ETFs, the final degen giants will be entering the final leg of the macro cycle that began in 2020.

From a macro perspective, the success of cryptocurrency only depends on whether more funds enter the market. In the short term, its success may become a self-fulfilling prophecy, in which “financial degeneracy” ignites the very systems that cryptocurrencies seek to replace. In the long run, anarcho-capitalism will use the Trojan horse of "revolutionary technology" to bring "financial Degenization" into the city of "traditional finance".

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