The Predicament and Self-Rescue of Established Star Public Chains

This article is an original piece by Chain Catcher, authored by Yun Yin.

Hoffman pointed out in "Crossing the Cold Winter" that many entrepreneurs use ICOs as a way to raise funds. This is a very successful fundraising method that can easily help you raise billions of dollars, but it now increasingly resembles a Ponzi scheme. Unfortunately, some bad actors have abused the entire system, continuously driving up the value of tokens to cash out without using the funds to start a real business.

As the industry with the most ICO applications, blockchain has seen many public chains emerge, but most of them have fallen victim to the test of time. For most entrepreneurial failures, the reasons for their demise are both subjective and objective.

In the context of the ICO wave and the sexy narrative of Ethereum attracting hot money, issuing tokens and telling stories undoubtedly allows for quick revenue generation, and entrepreneurs do not need to think about which market problems they are solving or whether these problems are real needs.

1. Current State of Public Chains

If we observe the blockchain industry chronologically, it can be roughly summarized into three important development stages: the first stage is the ongoing Bitcoin mining wave, the second stage is the ICO wave brought about by Ethereum's innovative smart contracts and the emergence of numerous chains, and the third stage is the explosion of DeFi, which has truly advanced financial transformation through blockchain. The prosperity of the latter two stages is inseparable from Ethereum.

The launch of Ethereum pushed the ICO wave to its peak, and in this context, a large number of "big narrative + high fault tolerance" public chains emerged, leading the blockchain industry to welcome the year of public chains in 2018.

However, as Hoffman said, there are always some bad actors who abuse the entire system, continuously driving up the value of tokens to cash out without any intention of creating a real business.

Hoffman's words serve as both experience and warning; over 90% of the thousands of public chains that emerged in response to the wave have fallen within less than a year. Coupled with the impact of the bear market cycle, the remaining public chains have also lost their luster, falling into difficulties such as landing challenges, funding shortages, and talent drain.

Although the current market is in a bull market phase, the public chain track is still dominated by Ethereum. While technical and scenario bottlenecks make it difficult for Ethereum to complete the narrative of a world universal supercomputer, its success in innovation, capital operation, governance mechanisms, economic model design, and developer ecosystem construction, along with the moat provided by DeFi, increasingly highlights its financial attributes.

Under the demonstration effect of Ethereum, the development of public chains is increasingly focusing on vertical fields. The once-popular public chains EOS and TRON are now making efforts in gaming and entertainment, while other public chains are exploring areas such as social public chains, IoT public chains, content sharing public chains, AI public chains, etc., while also seeking breakthroughs through DeFi as an entry point.

2. Transition to DeFi

Among the established star public chains transitioning to DeFi, typical examples include BitShares, Zilliqa, Algorand, Polkadot, Nervos, Conflux, and aelf, whose chosen paths can be roughly divided into two types.

One approach is to take on the DeFi overflow caused by Ethereum's congestion; they generally create Ethereum-compatible layer-two networks or cross-chain solutions while developing DeFi applications within their own ecosystems. The other approach is to stick to their original development path while developing their own DeFi applications on Ethereum. The vast majority of public chains choose the former, with only a few opting for the latter, and aelf is one of them. Here, we will analyze aelf to see the current development status of mid-tier star public chains.

When it comes to aelf, the industry's basic understanding is that it is a cloud computing public chain with high-performance networks and cross-chain protocols. However, in terms of self-definition, aelf has always been clear—it's a public chain based on a main chain and multiple side chains that supports cross-chain communication. Side chains can communicate with each other through cross-chain protocols, and the future goal is to allow everyone to experience high-speed blockchain.

As one of the domestic star public chains, aelf is backed by funding from dozens of well-known investment institutions, including Galaxy Digital, Huobi Capital, Binance, FBG Capital, Dedong Innovation Fund, Huachuang Capital, Node Capital, and Bitmain, with a total market value reaching as high as 19 billion yuan, which once attracted significant attention.

Although the market was in a downturn around 2019, hindering aelf's development, their self-definition has not changed. Aelf's early investor Lin Xiao told Chain Catcher that the founding team has consistently advanced their business according to the original roadmap, and they had already delved deeply into research before the DeFi surge, with the decentralized exchange SashimiSwap being their representative work.

SashimiSwap is a DeFi application developed on Ethereum, evolving from a liquidity mining platform at launch to a decentralized exchange with an AMM mechanism, and then to Sashimi Lending, which allows users to achieve lending while mining through Investment and Vaults to enhance overall user returns. The development team has fully constructed a comprehensive DeFi platform through the interaction of multiple components, with its TVL once reaching 500 million USD, even gaining recognition from the Ethereum developer community.

Currently, SashimiSwap has also deployed smart contracts on the Huobi Eco Chain (HECO) and Binance Smart Chain (BSC).

"During the process of developing Sashimi, we realized early on that AMM has a capital utilization problem. Generally, the capital utilization rate of AMM is around 10%, indicating that a lot of capital is idle," said aelf's relevant person in charge.

Therefore, the aelf team has integrated Sashimi Investment into AMM, which is the first contract to maximize the utilization of funds in the trading pool. This contract invests the assets placed by LPs in the pool through various financial products to enhance LP's overall returns. Additionally, some assets can also be invested in Sashimi Vaults, which act as a yield aggregator, allowing users' staked assets to be invested through other DeFi products and continuously switch to the highest-yield DeFi platforms to ensure maximum returns.

"As a result, the capital utilization rate of AMM has reached around 80%, significantly increasing LP's returns," the relevant person in charge stated. To improve AMM's capital utilization and the income of liquidity providers, the Sashimi development team has built a technical architecture that utilizes the funds in the liquidity pool for automated strategy investments, and this development experience has given them confidence in developing more innovative DeFi products on the aelf mainnet.

3. Path to Breakthrough

According to official information, the aelf mainnet has been successfully deployed and is currently in the stage of connecting with centralized exchanges. Users will soon be able to use related products within the ecosystem on the mainnet. Once fully supported by exchanges, aelf will completely become a multi-chain public chain with no entry barriers.

"The concept of main chain + side chains, as well as cross-chain, was written into our white paper from the very beginning, and this has always been our goal. Now the technical aspects have basically been implemented and will soon be pushed to the market," the person in charge told Chain Catcher. Aelf has achieved all the functions envisioned by Polkadot; not only can the main chain operate normally, but multiple side chains can also run, and with the maturity of the cross-chain protocol, aelf can now realize asset transfers between different chains.

According to members of the aelf technical team, the original intention of developing Sashimi was to migrate assets from Ethereum to aelf, and then leverage aelf's higher performance and the infinite scalability of its multi-chain structure to become a layer-two network for Ethereum, solving the existing problems and pain points of Ethereum.

Thus, in addition to connecting with Ethereum, aelf can also facilitate cross-chain communication with Binance Chain and Huobi Chain, creating greater application value and space.

Beyond the technical aspects, the person in charge added that aelf will also make a series of changes and upgrades in community governance, economic model design, and developer construction.

First, in terms of community governance, aelf will initiate node elections, during which a public vote will be held to determine the parameter design of the mainnet and other important decisions.

Secondly, in terms of developer community construction, aelf will focus on product development, creating convenient products in areas such as lending, NFTs, social enterprise applications, fair lottery systems, and voting systems, allowing users to experience the performance of applications without needing to understand the underlying technology.

Finally, in terms of economic model design, aelf's token ELF was previously mainly used for paying resource fees and governance decisions, including operations such as smart contract deployment, upgrades, and execution (e.g., transaction fees, cross-chain data transmission fees), as well as governance decisions like the election of accounting nodes, approval of new system features, and decisions on major product updates.

However, despite significant progress, there are still many doubts within the domestic community regarding aelf, mostly concerning the departure of core members and development stagnation during the bear market. At that time, the market was in a downturn, and almost all domestic star public chains were facing development bottlenecks, with notable examples including Nebulas and BUMO.

However, compared to aelf's continuous updates and the recovery of its token price, many public chains have seen their faith collapse and have fallen silent. In contrast to the domestic community, the overseas community has higher expectations for aelf, as seen on Twitter with messages like, "Go, aelf! I am an early supporter of yours, and I appreciate seeing your progress!"

In fact, aside from the efforts of established star public chains, the market still has certain expectations. The general viewpoint in the blockchain industry is whether there is still an opportunity for other public chains to emerge, aside from Bitcoin and Ethereum.

Although this is a pessimistic question, it reflects a kind of hope. This hope is a rare opportunity for public chains that have a relatively clear early roadmap and have not given up on exploration. If established star public chains can continue to make efforts in funding support, community building, technological innovation, and asset introduction, then time may provide a satisfactory answer.