Roundtable Forum: Searching for the Next Crypto Unicorn

The "Calling for Web3 at the Center of the World" event hosted by Jinse Finance held its third AMA, themed "Finding the Next Crypto Unicorn," with guests Roy Zhang, Southeast Asia Head of JZL Capital, Tan Yuefei, CEO of Fairyproof, and Jimmy, Head of Marketing and Investment at Footprint.

Host: Today's title is "Finding the Next Crypto Unicorn." Mr. Tan has not arrived yet, so let's have the two guests introduce themselves first.

Roy Zhang: Hello everyone, I am Roy. I am currently responsible for investments in Southeast Asia and the overall investment banking business. I would like to thank Jinse Finance for the invitation to share some of our views on the market and the current state of the bear market.

Jimmy: Hello everyone, we are engaged in on-chain data analysis. We hope to provide a one-stop e-commerce data analysis platform with a simple drag-and-drop experience, allowing those who cannot code to easily discover on-chain data. Personally, I have seven to eight years of experience in traditional securities analysis and have extensive experience in expanding overseas financial markets. Thank you.

Host: Alright, let's start today's discussion. We are currently in a crypto bear market, but our theme today is unicorns. Let's first review which unicorns left the deepest impression on you during the last bull-bear cycle.

Roy Zhang: I tend to focus more on public chains in terms of investment and research, so I will give two examples in this area. One is Solana, which many people may be familiar with and has recently faced criticism from the industry. When we learned about it from the market and conducted in-depth research, it was around $20. During last year's major bull market, despite a small bear market in mid-July, it rose to $260 by the end of the year, and we participated throughout the process. Why did it rise so much? I believe it mainly solved the pain points of the industry at that time and grasped the rhythm very well.

The other is Sandbox, which has been established for a long time but has consistently adhered to a development goal without being overly influenced by other events. It allows users to have a UGC experience. We participated early in the sale of its land and continuously created content within it, which shows that its community building is very restrained and steady. I believe such companies will not only emerge as unicorns in this bull-bear cycle but may also acquire more companies during the current bear market to gradually expand their sectors and continue to increase their valuation and growth in the next cycle, allowing more people to participate in this industry. This is my simple thought.

Host: Indeed, public chains were one of the biggest winners in the last bull market. Now let's ask Jimmy to share his thoughts.

Jimmy: From the current perspective, which projects from the last market downturn are undoubtedly unicorns based on data, and why did they become unicorns? I will briefly discuss this. For example, the decentralized exchange Uniswap has a TVL of around $5 billion now and ranks among the top in decentralized exchanges. It is currently the preferred DEX for all stablecoins. Its prosperity comes from solving liquidity issues and providing solutions for the crypto space.

Next is a stablecoin. If we consider Web3 as a country, it must have its own currency, which needs to connect with traditional finance, that is, centralized stablecoins. In the next bull market, centralized stablecoins may reach a scale comparable to centralized RMB.

Host: Alright, Mr. Tan, please share your thoughts on impressive crypto unicorns.

Tan Yuefei: When looking at unicorns, I generally tend to analyze from two angles: the first is what pain points exist in the current market that must be solved; the second angle is when a completely new business model emerges that exceeds current market understanding, and when most people do not understand it, is there a possibility of unicorns emerging in this new model?

From these two angles, in the last market, I mainly focused on three areas: the first is DeFi, the second is Layer 2 scaling, and the third is NFTs. Many things during that era were unknown to people, but if we maintain an open mindset and a willingness to embrace the unfamiliar, we may easily grasp the next new unicorn.

Host: I appreciate the insightful remarks from all three guests. Mr. Tan mentioned that innovation can open a whole new perspective on the world. Recently, the high-leverage liquidations in DeFi and the Federal Reserve's interest rate hikes have led to reflections in the entire crypto market. What are your thoughts on these events?

Roy Zhang: The overall crash of the crypto market at this stage and the previous high-leverage liquidations are, I believe, a relatively natural process. Why? It is comparable to the cycles and fluctuations we have experienced in the financial industry before, and because it is a new behavior or movement occurring globally in the virtual world or on-chain, it leads to shorter cycles and stronger volatility.

Although this time the impact on the market and the harm to investors has been significant, we believe it is a very good time to整理之前的经验教训, whether it is about investment mistakes or issues in the project development process. It is a very good time to整理经验教训, and the logic will be quite similar to the previous development of capitalism.

We can see that truly capable and restrained institutions may expand their territory during this period, and whether for altruistic reasons or for maximizing their own interests, they will continuously encompass more tracks or more developers as the foundation for the next bull market.

Jimmy: Regarding the external environment, since 2019, the entire financial market has been injecting liquidity. The Federal Reserve's balance sheet has roughly doubled in three years, releasing so much liquidity. Coupled with the rise in energy prices due to the Russia-Ukraine war this year, the global inflation issue has led to a tightening cycle starting from the US and extending to the Eurozone. Once interest rates rise, funds tighten, and risk appetite decreases, prices begin to collapse.

For offline finance, what problems faced by investors or participants can be solved in Web3 is very important.

The core of Web3 is the spirit of decentralization. After this wave of market changes, everyone recognizes that the first is that decentralized consensus is very important, and another is systemic security. For example, projects like YOGA and OpenSea, which have a strong decentralized consensus, can truly solve user problems in transactions, currency circulation, and identity recognition. These applications have not been driven away, and it is foreseeable that these projects will continue to survive and thrive.

Tan Yuefei: I believe the collapse is not only natural but also, throughout the process, I find it very elegant and perfect. This precisely realizes our predecessor Nick Szabo's vision for smart contracts. The liquidation process is exactly what smart contracts should have in such situations, and this process is something we lack in traditional financial crises.

So when I saw Terra being liquidated during this crisis, I viewed it with a very appreciative perspective. From the perspective of pure security auditing, we believe that in the current auditing market, when we talk about security audits, I believe that the vast majority of people first think about whether there are issues with the smart contracts. This is almost the first thought that comes to mind. Then, digging deeper, it involves whether there are potential risks or security vulnerabilities in the smart contracts, right? Of course, that is correct.

However, if we carefully observe the evolution within the ecosystem, we will find, for example, a simple case: Did Terra's collapse have issues with its smart contracts? Not at all. Where was the problem? The problem lay in its economic mechanism and the lack of governance. Therefore, as a security company, since last year, we have been laying out our strategy. In addition to auditing the technical aspects of smart contracts, we are also researching and exploring the discovery of security issues within economic models and governance issues.

Host: It truly is a feast of ideas, discussing history and local matters. Mr. Tan also mentioned the 2008 financial crisis, which I have also studied. For the next new cycle, what new crypto trends do you think will emerge?

Roy Zhang: We believe that after experiencing this bear market, more projects will turn back to what we call the fundamentals. Their narratives may be closer to real life. As more institutions continuously pay attention to the crypto world or market, there will also be more guidance. Overall, we will see a more reasonable design framework and founders who are more restrained in this environment, but we may see many interesting projects emerge. This is my thought.

Jimmy: If there are new trends in the next round that you do not understand, at this point, we, as builders, should focus on data or look at things from an investment perspective. We can only see three months to half a year ahead. Beyond that, it is up to innovation itself to play its role.

Tan Yuefei: I personally believe that the driving forces behind new trends and narratives must have two fundamental drivers: the first is technology-driven, and the second is user group-driven. From the perspective of user groups, I believe there will be significant trend space in the NFT field. Specifically, we can discuss NFTs further. For example, beyond the current FT avatars, there may also be FT music and future NFT-based games. These tracks may all have new trend space, and this is my understanding.

Host: All three guests have a vision for the combination of the future and the real world. In fact, I feel that the third question has already answered our next question: the bear market is indeed a good time for builders. Thank you to all three guests for sharing. Investing may seem easy, but it actually requires a high level of ability. Therefore, every investor should primarily focus on enhancing their understanding. Today's sharing has provided a lot of valuable insights, and I hope our users can learn from the guests' sharing and strive to elevate their status in the next cycle. Thanks to the collaborating media for this AMA: DeFi Dao, Foresight News, Chain Catcher, MarsBit News, Planet Daily, Panews, Deep Tide, and the 0x499 community.