Is the Aptos monomer, Cosmos module, and Internet application the new main stage for Chinese entrepreneurs?

Author: R3PO

The world of crypto is not short of stories, and Aptos has contributed to an incident.

The power of the Move ecosystem should not be underestimated. Following the launch of the Aptos mainnet, there are already domain service Aptos Names, wallet Pontem, multi-signature wallet Momentum Safe, NFT marketplace Souffl3, and lending protocol Argo.

This is the first time a multitude of applications has launched alongside a mainnet, and it seems that the traffic and ecological anxieties that plague other public chains do not exist on Aptos.

But is this the end of the story? R3PO believes not, at least from the perspective of the overall landscape of public chains. The next era will be the budding and explosive period of super Dapps, and the competition between monolithic and modular approaches is far from over.

Chinese entrepreneurs have once again arrived at a decisive point of fate: should they continue to cling to the remnants of the past in hopes of a turnaround, or should they learn from their predecessors to venture south, traverse the Silk Road, and ultimately reach a truly vast world belonging to all humanity?

From the gathering of talents at Token 2049 in Singapore, one can see the dissatisfaction and resentment of many, but the few Chinese at DEVCON in South America reflect our reluctance to part with the warmth of home. The times are offering Chinese people a new opportunity—super Dapps are on the rise.

Such opportunities in crises have occurred countless times for generations of Chinese entrepreneurs. R3PO has reviewed the history, from the peak where Chinese miners accounted for 90% of Bitcoin's hash rate, to the era of exchanges where the three major exchanges dominated the world, and then to the NFT space with X2Y2 and Element, all witnessing the synergy between Chinese people and Web 3 lies in application and operation.

One basic judgment currently is that the underlying foundation of Web 3 has been built, and moving towards a super Dapp era with hundreds of millions of users, escaping ineffective internal competition, is the inevitable path for survivors to continue forward.

R3PO summarizes the current competitive landscape of the Web 3 track as follows, stripping away irrelevant historical flotsam; the historical trend has never been so clear:

• High-performance public chains have Ethereum's vertical layering model, Cosmos's horizontal segmentation model, and the parallel model of the Move ecosystem.

• The leading DeFi ecosystems coexist, and super Dapps have already taken shape. Uniswap has become a deep source for other aggregated DEXs, and dYdX is preparing to move to the Cosmos application chain.

• NFTs have reached a regulatory moment, a rite of passage that both Ripple and Binance have experienced; compliance is always the front line towards broader markets.

Currently, what is lacking is a truly super application with millions or even billions of daily active users. R3PO believes that the terminator will emerge in the Ethereum ecosystem or Cosmos. There is no need to elaborate on Ethereum's victory, but in the era of Cosmos 2.0, the technical characteristics and mechanisms designed specifically for super Dapps will carry another kind of hope.

It is hoped that Chinese entrepreneurs can create truly great global Web 3 applications on it, just like in the mining and trading era, but this time facing a trillion-level market of 7 billion people.

A Story of Creation:

The Traffic Model of Cosmos 2.0

To date, the development of public chains has gone through three waves: the single-function chain represented by Bitcoin, the modular functional chains starting with Polkadot and Cosmos in 2016, and the layered ecological chain of Ethereum. It has been proven that Ethereum's route is the most successful; ecological prosperity is an absolute moat that can offset all disadvantages. Image Caption: Number of Dapps Supported by Public Chains. Image Source: R3PO

Currently, only Ethereum can truly run millions of Dapps while maintaining high activity and growth trends, whereas Bitcoin and Ripple are remnants of the old era, envisioning a model where one blockchain is responsible for one task, such as Ripple's cross-border transfers.

Polkadot and Cosmos 1.0 saw the future of Dapps, but Polkadot could not solve the efficiency problem of multiple Dapps running collectively. The so-called limit of parallel chains is around 100, and building application layers on top of that becomes overly complex, making success difficult to achieve.

Cosmos's plan is to directly develop application chains, with Cosmos Hub only responsible for the most basic functions and having no control over each chain, which can be seen as the most thorough decentralization.

Image Caption: Monthly New Dapps on Ethereum

Image Source: https://www.stateofthedapps.com/stats

Ethereum's advantage lies in the tidal effect formed by the accumulation of funds and applications; other public chains have always been unable to escape their dependence on Ethereum. The attempts to convert the compatibility of EVM, cross-chain bridges, lower fees, and higher efficiency into their own traffic have been ongoing, but no one has succeeded.

Ethereum remains steadfast, while new public chains flow in.

Image Caption: Activity Levels of Various Public Chains. Image Source: R3PO

From the perspective of various indicators, Ethereum is not the best performer; for example, it is not as fast as Solana, and it does not have as many transaction addresses as BSC. However, all technical characteristics fall short in front of Ethereum; only ecological longevity can ensure user longevity, granting public chains the power to traverse bull and bear markets.

The latest story is the disappointment of the Aptos mainnet launch, which closed its Discord speaking area before launch and had a TPS of only dozens after launch, far from the anticipated 100,000+.

The question now boils down to one point: where does the traffic come from? R3PO believes that borrowing traffic from Ethereum is not the optimal solution; creating super Dapps is the optimal solution.

Chinese teams have considerable experience in application creation; perhaps they lack creativity, but their execution ability far exceeds that of other groups. BNB Chain, OKX Chain, and others are public chains based on Cosmos SDK that are also compatible with EVM, but they cannot be said to belong to the Cosmos ecosystem; they are more about leveraging the development convenience of Cosmos and Ethereum compatibility.

Public chains compatible with EVM are essentially EVM side chains or L2s, ultimately only thriving within the Ethereum ecosystem, while non-EVM public chains are not without the possibility of survival.

Taking Terra as an example, it was driven by Delphi, and its high efficiency and prosperous ecosystem are strong evidence of Cosmos's capabilities. However, it fell due to a Ponzi economic model. From the perspective of public chain operation and construction, it is still worth learning from, at least compared to another non-EVM public chain, Solana, which has no risk of downtime.

The model of Cosmos 1.0 is based on the official cross-chain bridge (IBC), where ATOM's priority is lower than that of sovereign application chain tokens, attempting to cold start and establish its own traffic accumulation.

Cosmos 1.0 provided public chain developers with enough freedom, allowing them to interpret sovereignty as 100% fiscal autonomy, letting birds fly high, which stands in stark contrast to Ethereum. What will kill Ethereum is not a better Ethereum, but a completely new species:

• Ethereum's problem: exchanging high costs for security, excluding ordinary users and high-frequency demands. L2 + ZK + sharding constitute solutions for short and long-term, trading time for space.

• Cosmos's advance: trading space for time, giving up profits to various chains, with Hub and ATOM only providing security. Terra, dYdX, and Sei prove usability from the past, present, and future.

The improvements in Cosmos 2.0 lie in how the risks and opportunities of application chains will develop: will the future be dominated by a few super Dapps, or will it be a pluggable Lego component system? Will the future Web 3 application landscape be characterized by native protocol applications, or will it continue the product competition of Web 2?

In this regard, R3PO has no direct answers but can conduct the most basic logical deductions. First, one must break free from platform thinking; even if super Dapps are born, they will not occupy the profits generated by users, just as Uniswap has long refrained from opening the fee protocol switch.

Secondly, protocols and applications are not entirely opposed. The fat protocol theory suggests that the protocol layer will capture the vast majority of value, but Ethereum API service providers like Infura and node storage providers like AWS are centralized applications that do not affect ETH's price. What truly impacts customer experience is the front end; protocols and applications compete for front-end traffic entry, and the method of service provision is not absolute.

Image Caption: TVL of Cosmos Applications. Image Source: R3PO

Under the significant "benefits" stimulated by Cosmos, various applications supported by Cosmos and public chains developed from it have formed a unique system, but what is lacking is a leader.

The high fall of Luna and UST also hurt Cosmos in the last bull market. A turnaround in adversity requires a new model system; this is a reconstruction from the inside out.

In the updates of Cosmos 2.0, there are mainly two parts:

1. Enhancing ATOM's Value Capture Ability:

• Interchain Security (ICS) for cross-chain safety, where Cosmos Hub provides security, and application chains "purchase" security using ATOM.

• Liquid Staking, increasing the number and types of staking service providers, including Quicksilver, Persistence, Stride, and Lido, while providing staking services for both ATOM and application chain tokens.

2. Enhancing Mainnet and Interchain Activity:

• Interchain Allocator, essentially an on-chain fund allocation plan, establishing an ecological fund organized by the ATOM treasury to promote the prosperity of Cosmos applications;

• Interchain Scheduler, allowing flexible block space arbitrage operations, with practical operational models still in design.

Overall, the main improvement in these two parts is that ATOM will deeply integrate into the operations of various application chains. In fact, each application chain cedes part of its economic sovereignty in exchange for security; as long as the tax rate is lower than Ethereum's, it will still be attractive. Additionally, a more proactive distribution mechanism will redistribute ATOM's profits back to each chain, creating a flywheel effect to get the traffic rolling.

Unlike attracting "top-tier" dYdX to settle in, the Interchain Allocator can also support native seed applications like Osmosis and Keplr, catering to the super Dapps' urgent needs for security and efficiency while also having the opportunity to cultivate more projects like Terra, preventing a single chain's collapse from endangering the entire universe.

This is no longer a passive cold start but emphasizes a more proactive operational capability, which is the stronghold of the Chinese. Although Chinese teams did not form an absolute advantage during DeFi Summer, in Cosmos 2.0, various projects are still in the land-grabbing phase, and at least opportunities are abundant.

Cosmos 2.0 lays the foundation for the emergence of super Dapps; now is the time to see the real moves.

From Zero to Infinity: The Scale Economy of Cosmos

The traffic model of Cosmos is quietly changing, and this change will lead to a business model that Chinese people are more familiar with—scale economy.

Image Caption: Cosmos Ecosystem

Image Source: https://mapofzones.com/

Applications dominated by the West need to be localized and adapted for groups in different regions and cultural backgrounds around the world, which makes maintaining operations more difficult and expensive. However, the foundational protocols are universally applicable, which is also an important reason for the traditional internet pattern of the West focusing on infrastructure while Chinese people excel in applications.

In the Web 3 world, East and West are competing on the same stage for the first time. R3PO believes that we are still in an era of a few early adopters; true super Dapps are still brewing. For example, Ethereum has 500,000 active addresses, while MANA has only around 8,000 active users, indicating that Web 3 has almost no impact on the majority of the global population in terms of applications.

Yet Ethereum's market cap exceeds $100 billion, and MANA's valuation can reach $1 billion, which is solid data.

Why is it that despite the lack of users, the market cap significantly surpasses previous levels? Based on this, how should we evaluate the worth of a Dapp with billions of daily active users?

For the first question, one cannot use the current state of Web 3 as a basis for argument; unsustainable economic models cannot last. Fair value requires a long time to adjust back to a normal curve.

For the second question, the Cosmos 2.0 model is more suitable for exploring the development model of a single Dapp. First, one must understand the deeper meaning of protocol revenue. A Dapp's revenue model consists of several parts: transaction fees + service fees + gas fees + other costs.

The economic model of ATOM 2.0 consists of the security rental fee of Cosmos Hub + application transaction fees, which is the ideal situation. Taking dYdX as an example, if it truly migrates to Cosmos 2.0 and the application itself is willing to purchase security, users only need to pay the dYdX transaction fee.

Image Caption: Market Cap, TVL, and Market Cap/TVL Ratio of Various Public Chains. Image Source: R3PO

From the perspective of the market cap/TVL ratio of various mainstream public chains, Ethereum is the direction Cosmos will strive to catch up with. However, from another angle, the Cosmos ecosystem still has more than a hundred times growth potential, and further boosting the value of ATOM will also stimulate the collaborative progress of various application chains.

In this context, unlike Ethereum's vertical layering model, Cosmos's horizontal model is conducive to scalable expansion. In fact, vertical layering creates a Matthew effect, where the cost of catching up for latecomers in the same track is too high. However, on Cosmos, early-stage Dapps can "circle their own territory," enjoying the same security as super Dapps while steadily developing their unique features. This even creates a driving effect for Polkadot, as the Polkadot community has already proposed related measures to distribute DOT across chains, creating more usage scenarios for DOT to enhance mainnet security and stabilize DOT's value.

In summary, Cosmos 2.0 turns left towards Ethereum and right towards Polkadot. Cosmos has fewer auction and maintenance costs for parallel chains than Polkadot, while having more horizontal expansion opportunities than Ethereum, potentially rolling out a large-scale application economy.

Conclusion:

Will Cosmos be the ultimate answer for super Dapps? Items that cannot be exchanged cannot be measured for specific economic value, such as on-chain security and user habits. Cosmos's advantage lies in its ability to make more adjustments before a solidified pattern forms. Every public chain development has its time window, and overall, there is still an opportunity for Chinese entrepreneurs to create super Dapps at this juncture.

Ethereum's consensus layer is quite stable and solid, making it difficult to create a better consensus layer than Ethereum.

However, the richness of the Ethereum ecosystem also implies "fragmentation." The intercommunication between L2s, interactions between L1-L2-L3, and the security of cross-chain bridges are three prominent issues. Cosmos has targeted improvement opportunities, but surpassing Ethereum still requires successful super applications. Only by establishing a unique ecological accumulation for Cosmos can it truly stand firm.

Moreover, whether ATOM can transition from benefiting application chain tokens to capturing more value remains questionable. If all are to share profits with the underlying protocol, why not directly seek survival on Ethereum? The token model cannot be solved simply by deflation or enhancing value capture ability.

Market demand creates demand, and technology meets that demand.

R3PO hopes to uncover opportunities in Cosmos and provide some inspiration for Chinese Web 3 entrepreneurs drifting around the globe, creating super Dapps for all humanity.