After Token2049 Discussing Derivatives, Ton Ecology, Games, and ZK in the Primary Market Trend

Key Topics Discussed at Token2049 Derivatives, Ton Ecology, Games, and ZK in the Primary Market Trend

After Token2049, let’s talk about derivatives, Ton, games, and ZK. First of all, this is not a short essay about Token2049. Because of some personal matters, I couldn’t attend Token2049 this time, so I regretfully missed the chance to meet my long-time “internet friends” in person. If everything goes well, I will attend Token2049 in Singapore next year, and I hope to see all my dear friends there.

This article mainly discusses some market phenomena observed from the perspective of the primary market in the past two months, focusing on derivatives, Ton, games, and ZK, which are relatively popular tracks. I believe that many of you have read many articles about Token2049, and most of them are overall neutral with a hint of pessimism, such as VCs and project parties running out of money, the lack of breakout applications… These are all true. In the past two months, we have also clearly felt that there are fewer projects in the market from the perspective of the primary market. We used to have about 20 projects to discuss each week, but recently it has dropped to around 10. When a good project appears, all VCs are competing for it, giving a feeling of “more wolves, less meat”. As for the secondary market, let’s not even mention it…

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However, I still want to say something optimistic, which I will mention at the end. Let’s discuss the main topic first.

1. Derivatives

In the past few months, besides Aptos and Sui, we rarely see new projects on the chain that focus on spot DEX or lending. Almost all new projects are concentrated in the field of on-chain derivatives, mostly contracts and a small number of options.

• The biggest trend in the derivatives field is becoming more like CEX.
• For example, you can register with an email (MPC wallet technology).
• For example, you can trade multiple assets, such as off-chain high-speed order books.
• For example, you can KYC and even have trading rebates, VIP gold cards, and so on…

Overall, the trading experience of derivatives is gradually approaching that of CEX. It is fast, has a large number of assets, and self-custody wallets are more secure. Trading pairs can be quickly listed permissionlessly, and retail investors can act as liquidity providers (LP) against traders (for example, some projects are developing neutral strategies to hedge against the problem of LPs suffering significant losses when traders make huge profits). From a rational perspective, it can be said that with sufficient liquidity and market makers, the overall trading experience of on-chain derivatives in the next 1-2 years may even be better than CEX.

Of course, user trading behavior and habits cannot be switched overnight. Binance and OK have a good industry reputation and the experience of derivatives is indeed satisfactory. If it weren’t for the FTX scandal, on-chain derivatives might still be suppressed. Now, at least we can see the possibility of the next bull market starting.

By the way, http://Friend.Tech, do you think it is more suitable for on-chain derivatives like I do? For example, a top on-chain derivatives platform allows traders who have passed KYC (such as using Twitter KYC like FT) to issue their own shares. 10% of the trader’s monthly profits are automatically distributed to all shareholders through a smart contract. Due to the volatility of trader’s profits, some months may bring huge profits while others may result in huge losses, which will cause the trading volume of shares to fluctuate greatly. Sometimes holding shares can bring a large amount of money, stimulating a surge in the number of shares held by the trader, but the next month, due to losses, everyone may sell off his shares… I feel that FT, which does not require counterparty trading and is “virtual trading” on the curve, is very suitable for this scenario. And there can be many ways to play, such as if you want scarcity, you can initially only allow the top 100 traders on the leaderboard to issue shares. If you want to stimulate trading volume, you can require buyers of shares to complete a contract transaction volume of more than 1000U… Of course, there are many details to consider, such as if the trader suddenly changes their address or stops trading, various technical or economic measures can be used to restrict them. As for why the trader should allocate a portion of their profits to issue shares, it could be for reputation, or to cash in some future earnings in advance (taxes can be deducted from the buying and selling of shares), or simply for fun. Buyers of shares have an additional perspective to profit from small funds and leverage high returns, which may be more profitable than trading contracts…

2. Ton

Ton has recently been very popular, and everyone has high expectations for this “foundation” with 800 million monthly active users. The launch of Ton SLianGuaice official wallet this month can be seen as a milestone. However, what I want to say is that the short-term potential of Ton’s ecosystem may be slightly overestimated.

Firstly, the popularity of Ton is actually driven by bots, and the users of these bots are originally Web3 Crypto Degen users, not traditional Telegram users from Web2. Secondly, the official wallet of Ton has actually been online for a year, but it used to be “custodial”. This time, Ton SLianGuaice has become self-custodial. In other words, the built-in wallet has only become more decentralized, rather than the process of creating something from nothing as many people think.

We have talked to many projects and foundations in the Ton ecosystem, and so far, we haven’t seen anything truly “exciting”. The Defi ecosystem is still dominated by Uniswap, Lido, and other replicas. Can Ton SLianGuaice, which has transitioned from custodial to self-custodial, achieve the platform-level applications that everyone is expecting, such as WeChat red envelopes and tipping? I personally have doubts about it.

But overall, with Telegram’s 800 million monthly active users, Ton is definitely a public chain worth paying attention to. Its technical characteristics are similar to ICP, not like ETH, which achieves global consensus through all nodes’ computations, but more like a “local consensus” with a semi-centralized and user experience-oriented performance. Therefore, whether it is the technical architecture or user profile, we believe that Ton’s momentum is unlikely to rely on traditional Dex, lending, and other Defi suites, but more likely to enter the fields of payment, bots, social, games, etc. If there are good projects in these directions, please feel free to introduce or reach out.

3. Games

The game industry is currently divided into two camps.

One is Web2.5, and the other is full-chain games

Among them, Web2.5 games are becoming more and more like Web2. The first generation of Gamefi with “rough” playability like Axie has completely disappeared. The new Web2.5 games are getting closer to Web2 in terms of playability, and the elements of Web3 are also becoming less prominent. It can even be said that their main target audience is Web2 gamers. The involvement of wallets, NFTs, and Tokenomics only happens when players find the game enjoyable and become curious about and have a demand for in-game items.

Therefore, the new Web2.5 games we see now are no longer trying to strike a balance between play and earn, but to create extreme playability that is close to Web2 or even the top Web2 games, while “incidentally” adding some elements of Web3 to differentiate themselves from Web2 games. Many games are also directly launching mobile versions instead of desktop PC versions. The teams consist of many top talents, including employees from giants like Tencent, NetEase, miHoYo, and 1-2 Crypto OGs. A few days ago, when discussing projects, I even encountered the founder of a legendary game IP with great reputation in Web2, who has also jumped into Web3 “multiple times entrepreneurship”. Although it is uncertain whether the Web2.5 path can be successful, it is clearly visible that more and more “talents” and funds are flowing into it.

As for the whole-chain game, it seems that there is no question of whether it can be achieved. It is almost certain that it can be done, but how long it will take is uncertain. Our team members recently had a close experience with various Onchain Games, and the conclusion is “interesting but not addictive, easy to get started but not fun”. To truly make Fully Onchain Games “fun”, perhaps another round of bull and bear is needed?

IV. ZK

The hotspot of ZK is no longer Zk-Rollup, but two new types of applications:

One is the concept of coprocessor represented by Axiom, also known as Storage Proof. Competing products on the market include Lagrange, HyperOracle, and Herodotus. If I were to describe what a coprocessor does in one sentence, I think Dr. Dong Mo from Celer put it simply and clearly – “providing smart contracts with the ability of Dune Analytics” (by the way, Celer is also entering this track).

The other type is more general purpose, with ZK computations and verifications that are not only for Web3 users, but also for Web2 users. There are various virtual machine architectures, such as those based on WASM, LLVM, MIPS, and even Risc V like Risc0. Proof systems like Plonky2, Plonky3, Nova, and SuperNova can be seen. Currently, this type of project generally faces a problem of “lack of application scenarios”, but in the long run, especially starting from the first principles of blockchain, I think general purpose ZK computation is a promising track. If the first principle of the Internet is “to shorten or even eliminate spatial distance”, then the first principle of blockchain should be “to eliminate trust”. BTC/ETH eliminates the trust in on-chain computation through full node settlement, while general purpose ZK can theoretically “eliminate trust” in all traditional computation processes through off-chain computation and on-chain verification. It is still unknown what new types or scenarios of computation will emerge once it matures, so we need to take one step at a time.

V. Final Words

Finally, let’s talk about something optimistic. Although the first and second-tier markets are currently cold, the vitality of the entire industry is still strong.

From a technical perspective, in addition to the increasingly mature public chain system, we also have ZK, which conforms to and expands the first principle of “eliminating trust” in blockchain. Moreover, ZK technology is advancing rapidly, keeping pace with AI.

From an application perspective, we have the whole-chain game, which is a future-proven route that just needs time. The continuous exploration of RWA, Web2.5 games, the ongoing evolution of DeFi and NFT, the new exploration of AI+Crypto, and the potential of third-world payments… There will always be a few truly useful scenarios in the future.

From a talent perspective, the proportion of top-tier Ivy League schools among blockchain entrepreneurs is quite high. It feels like about half of the founders of the projects I talk to are from Harvard, Yale, Oxford, Cambridge, and the rest are mostly from top Chinese universities like Tsinghua and Peking University, with occasional appearances from Zhejiang University and Xi’an Jiaotong University. In other words, the smartest young people in the world are either doing AI or coming to Web3. The founder of the legendary game mentioned above (not the online game “Legend”) has come to Web3 for another startup. From a pessimistic perspective, it may be because Web2 games are too competitive and they have been forced to move. From my optimistic perspective, Web3 is still a “Wild West”, where capable individuals can fully demonstrate their abilities.

So, why be pessimistic? Just build it and you’re done.

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