Where is the next mainstream crypto narrative?

Written by: Matti

Compiled by: aididiaojp.eth, Foresight News

When telling myself to take it easy during a bear market, I find that some have already begun to look for signs of the next bull market. As history has shown, bear markets always brew the next round of bull markets.

Everyone in the crypto cycle is like a hero's journey, taking time to go from "returning to the origin" to embarking on "a new adventure."

Some people are always preparing for the next adventure, turning every possible narrative into supernatural assistance. However, supernatural assistance does not often appear in real life, and it even feels like it will never come, with rising interest rates, inflation, and economic warfare…

Before we imagine the emergence of supernatural phenomena, we feel that the bear market is incredibly long, as if it will never end. We begin to become desensitized to what is happening in the market, treating repeated crashes in coin prices as mundane occurrences.

On the journey to the next bull market, we will encounter false prophets, some of whom begin to talk about strange things referred to as fundamentals, which they had previously avoided during the once-super bull market.

It is very ironic that we mock fundamentals during bull markets, but hope the market acknowledges them during bear markets. The recent Ethereum merge serves as a warning.

The importance of the Ethereum merge goes without saying, but those hoping for a quick rescue will be very disappointed. It will take time for such an important event to gain widespread recognition in the market.

The biggest disappointment comes from those who firmly believe that new lows will appear, which is when most people lose all hope. Fear begins to turn into disappointment, then into drowsiness and lethargy. People start to feel bored, as if there is nowhere to go.

Most of those who have lost interest do not realize that some are working hard to study, and later, quantitative changes lead to qualitative changes, gaining supernatural assistance in the next cycle. To prevent us from becoming dull during the impending dull period, let’s explore some potential narratives that were once considered supernatural assistance.

Macroeconomic Factors

As a risk asset, the true supernatural assistance for cryptocurrencies is the Federal Reserve's money printing machine. Of course, this opportunity applies to all assets. If the Federal Reserve reduces the money supply in the next year or two, new speculation will not easily emerge.

Of course, new shiny narratives are very important; they are a crucial part of the industry's long-term development. Until enough shiny new things appear, crypto narratives will remain constrained by macro factors and will not achieve explosive growth. However, when everyone is trapped in a bear market with a lack of innovation in technology, the crypto market will be doubly impacted.

Bitcoin repeatedly emphasizes this point. Bitcoin is also changing its narrative; since the market crash in 2018, cryptocurrencies have been collectively shouting, "Institutions are coming."

As a technology, Bitcoin has not changed at all. But Bitcoin believers are missionaries who cleverly use global macroeconomic events to promote the value of a true currency, continuously refining it in the process. From payment systems to digital gold and inflation hedges, to credible neutrality.

Another trustworthy neutral asset is Ethereum, which has completed its upgrade, is mature enough, and can rival Bitcoin in terms of macro narrative. Additionally, Ethereum offers "real" yields.

In the current macro environment, one viewpoint is that we are experiencing a macroeconomic transformation triggered by geopolitical factors, a new interpretation of the conflict between Eastern and Western civilizations.

As geopolitical adjustments are taking place, understanding central banks from the bottom up is not useful. This is not a time of peace, but a war economy, meaning liquidity will be injected more into building real infrastructure and meeting real needs, rather than into the risk asset crypto market.

This line of thought is based on the premise that this round of inflation is not demand-driven but structural (supply-driven) and will not ease in the short term. Globalization has ended, and cross-border trade will become fragmented.

Due to the freezing of the Russian central bank's foreign currency assets, many countries are beginning to consider holding assets other than the dollar to reduce potential risks in international trade.

I expect cryptocurrencies to attempt to develop narratives around these geopolitical events. Some may even become a reality, as credible neutral currencies fundamentally represent a strong narrative proposition. Can the crypto kingdom dominated by Ethereum and Bitcoin defend its sovereignty and profit from war like Switzerland during World War II?

New Shiny Narratives

In the past, macro narratives often required a long time to generate sufficient consensus, and only when technological innovation drives the realization of narratives will market reactions accelerate. Because we should not rely on long macro narratives, we should explore potential technological realizations for the future.

The bull market of 2021 began with the DeFi summer of 2020, where speculative lending feedback loops became the main catalyst for the bull market. NFTs and GameFi soon emerged, but what other technological triggers are likely to break through in the future?

The Arrival of DeFi 2.0

Although we have all heard of DeFi 2.0, it has not truly materialized yet. I expect DeFi 2.0 to be released in the next year or two, and here are my thoughts on DeFi 2.0:

• More sustainable yields

• More complex on-chain tools, including the ability to build complex structured products

• More KYC

• Products related to the real economy

• New stablecoin experiments (this time possibly not algorithmic stablecoins)

• Close attention to OlympusDAO, which firmly believes in the mission of an independent cryptocurrency reserve currency

At the beginning of the COVID-19 crisis in March 2020, I began looking for applications of DeFi in the real world. As cross-border travel and global trade gradually collapse, countries around the world will gradually localize their economic cycles. The local lending dApp may become a way for the real economy to provide crypto expansion, and some may even propose a WIR Franc crypto model.

Connecting DeFi with real businesses will make DeFi a more sustainable product, becoming a truly Web3 native solution rather than just a speculative tool.

Web3 Business

A typical case of Web3 business is GameFi, such as StepN, which is achieving actual user growth with its early massive success. But now it faces the challenge of transforming the Ponzi scheme of tokens into a user-driven sustainable development.

Virtual assets purchased in-game, utility NFTs, and other projects can lead us to decentralized business. Currently, I have not seen any successful prototypes, but we need to get users to spend money on the blockchain, rather than on gas fees or for speculation.

The decentralized business model is also related to the monetization of content production. Given that cryptocurrencies have a natural capital-driven effect, community-owned and operated media companies could be an interesting proposition.

Although people are skeptical about DAOs, it is indeed necessary to accept the high failure rate similar to that of startups. However, DAOs may still become effective management institutions for content production and monetization. To reach that point, we need applications that combine Discord and Kickstarter, and we need a smooth user experience.

Currently, Web3 business seems most likely to succeed in blockchain gaming. When items in games are truly owned by people, it will help build projects that can be transplanted across different games.

Web3 Social

Web3 social is a hot topic, and we have previously written a deep article. Of course, there will be some critics arguing that "socializing" on the blockchain is unnecessary. But we believe Web3 social will attempt to separate social graphs from platforms, allowing users to have sovereignty in the digital realm and to transplant across various social venues.

If Web3 social is only applicable to the crypto community, it may fail. It is not enough for Web3 social to merely provide a motivation for ideological change; the key lies in introducing new business models, and new social tools must be intuitive and easy to use.

Returning to the advantages of frictionless capital formation in cryptocurrencies, the next generation of social software may emerge around crowdfunding and community governance. Currently, social media has become the mainstream way to monetize content, and Web3 solutions can expand possibilities for creators and their audiences.

This is also why if NFTs have an intrinsic connection with future social media, the next major social application will be crypto-driven. However, whether there will be an intrinsic connection between the two remains in question.

Decentralized Science (DeSci)

According to future.com, DeSci has two broader trends. In short, in addition to the systemic issues described in the introduction, the current problems in academia can be summarized as follows:

• The academic world has developed a bureaucratic system after institutionalization, which often supports published journal papers more to optimize internal reputation, historically driving innovation.

• Innovation funding in academia is centralized, corrupt, and unproductive, unlike entrepreneurial funding.

• Knowledge is closed-source, locked behind paywalls, concentrating data in the hands of a few major publishers.

Funding research to alleviate specific problems through online communities has a good prospect. Demand-driven innovation is evident as I see many people sharing tips about health issues online, especially when modern medicine has no real answers.

The idea of funding online communities to develop cures for diseases sounds indeed exciting, but suggesting turning Reddit into a crowdfunding platform for scientific discussion, research, and development seems outrageous.

The Atomic World

The "atomic world" here refers to the real connection between cryptocurrencies and the production economy.

During the bear market in 2018, we realized that applications on the blockchain were not as revolutionary as we thought. The technology we had at the time was not mature enough, but perhaps it is time to revisit some of our ideas from back then.

The Energy Web, which accelerates the decarbonization of the global economy, still exists. It attempts to achieve something that ordinary people can benefit from, although I believe this is a long-term goal. When we talk about the energy crisis, optimizing the grid and decentralized energy markets are areas worth focusing on.

Potential synergies may concentrate on providing cryptocurrency loan services to local businesses or creating entities or products in the form of DAOs, all of which are still in the undeveloped stage.

In a bear market, there are no truly low-hanging fruits; meme coins rarely rise, and builders should dig deeper for inspiration. Perhaps it is time for cryptocurrencies to expand outward into real life and attempt to solve actual problems for ordinary consumers and producers.

Conclusion

Although bear markets are tough, we need not be overly pessimistic. Many founders are also exploring decentralized computing and other niche market solutions, and there may be other narratives that will lead us into the future. In any case, we will seek new innovations and narratives to reimagine the future.