MT Capital Research Report: Interpretation of Messari Report, Focused on Betting on Solana and AI + DePIN Track
Cryptocurrencies represented by Bitcoin are naturally suitable as payment currencies for AI.Author: By Severin, MT Capital
TL;DR
Messari has shown strong optimism towards Solana, DePIN, AI + Crypto, and the Perps track in the report.
From the distribution of analysts' holdings, the most favored within Messari remains Solana and the AI + DePIN concept.
Key Investment Themes
Solana:
The rapid release of new products on Solana, the surge in on-chain liquidity, and the continuous expansion of developer tool availability have been highly anticipated.
From a technical perspective, upgrades such as Local Fee Markets, QUIC, and Stake-Weighted QOS have significantly reduced the occurrence of Solana outages, making its operation more robust. The emergence of technologies like cNFT has drastically cut the costs of NFT minting and management on Solana, allowing protocols like Helium and Render to significantly reduce expenses and promote the prosperity of the Solana DePIN ecosystem.
Market expectations for Solana in 2024 focus on the following aspects:
- Achieving over ten times the throughput and performance improvement through the Firedancer and Sig clients. Firedancer enables Solana to process 1 million transactions per second. Improvements in user experience can attract more developers to participate and develop on Solana, enriching its thriving ecosystem.
Developing lightweight clients through Tinydancer, allowing validators to complete verification work at a lower cost, achieving a higher degree of decentralization.
Deploying the token - 22 standard to expand Solana's token capabilities. For example, token - 22 will support interest-bearing tokens, allowing complex contract logic to be triggered during token transfers, etc.
Solana's Local Fee Markets and state compression technology make the following applications "only possible on Solana."
DePIN: Projects like Helium, Hivemapper, and Render have migrated to Solana. Render abandoned its own blockchain in favor of Solana for compressible cNFTs, faster transaction speeds, and composable on-chain order books.
Payments: Solana has partnered with Visa, allowing users to transact with Solana USDC on Shopify at lower costs and faster speeds through the Solana Pay plugin.
Consumer apps: The extremely low-cost cNFT can boost emerging consumer applications centered around NFTs. For instance, DRiP collaborates with artists to distribute NFTs for free to subscribers. Since the end of March, it has minted over 78 million cNFTs to 1.6 million wallets, with each NFT costing only about $0.00036.
DeFi: Extremely low transaction fees and faster final state confirmations enable DeFi protocols on Solana to create a full on-chain order book model, providing a smoother user experience that other blockchain networks cannot support.
DePIN, DeSoc, DeSci
In non-financial areas, Messari is increasingly focused on the future development of DePIN, DeSoc, and DeSci. These three tracks have enormous potential market sizes and can make more practical changes to the shortcomings of real-world business processes.
Messari pays special attention to the following four sub-tracks of DePIN:
- Decentralized Storage: The current cloud storage market has a market size of $80 billion and continues to grow at an annual rate of 25%. Despite decentralized storage services being 70% cheaper than cloud service providers like Amazon S3, the market share of decentralized storage is still less than 1%, indicating a huge market opportunity.
- Decentralized Databases: Decentralized databases have previously suffered from performance and latency issues, which are expected to be resolved in 2024. The emergence of DeSoc, gaming, dynamic NFTs, ML, AL, and other applications will greatly increase the demand for decentralized databases.
- Decentralized Wireless Network: DePIN projects represented by Helium Mobile have gradually found their PMF, leading to increasing user adoption. For example, Helium Mobile initially attracted users by offering low-cost services and tokens, and user growth further drives token price increases, attracting more users and payments, thus spinning the growth flywheel.
- Decentralized AI Machine: The development of artificial intelligence currently faces computational bottlenecks and a lack of collaboration. DePIN projects focusing on AI can effectively address these two issues. Gensyn can provide ample decentralized computing power support for AI model training, while Bittensor enables individuals to participate in open-source AI model training. DePIN and AI have a natural synergy.
In addition to DePIN, Messari also pays extra attention to the DeSoc and DeSci tracks. Similarly, creators in the social media space have contributed $230 billion in revenue, but only a small portion of creators can receive corresponding revenue sharing. Friend.tech has shared $50 million in revenue with its creators just months after its launch. Messari believes DeSoc has the potential to replicate the wave of DeFi Summer in 2020.
In terms of DeSci, blockchain can effectively optimize key processes in scientific research such as peer review and funding, and can promote research development in key scientific fields through DAOs and token sales.
Although DeSoc and DeSci have not yet reached the breakout capabilities of DePIN, Messari remains optimistic about them and looks forward to applications in the DeSoc and DeSci fields that can lead to mass adoption.
AI & Crypto:
Messari believes that advancements in AI will increase the demand for cryptocurrency solutions, with cryptocurrencies represented by Bitcoin naturally suited as payment currencies for AI.
The integration scenarios between AI and Crypto include:
AI Agents can utilize crypto infrastructure for payments and autonomously access digital resources.
Innovations like zkML enable smart contracts to securely schedule AI Models, supporting more complex application logic.
Tokens provide a way to reward individuals for fine-tuning models and collecting valuable real-world data, making them naturally suitable for integration with DePIN.
Perps
Messari explicitly states in its report that if you are to focus on a sub-track of DeFi this year, it should be Perp DEX.
With dYdX migrating to a customized Cosmos application chain, dYdX's central limit order book can better provide a trading experience similar to CEX. Considering the regulatory pressures faced by CEX, the gap between dYdX and CEX may further narrow.
In addition to the Perp DEXs in the Solana ecosystem (Drift and Jupiter), Synthetix is also worth noting. With the launch of the Synthetix Andromeda version, Synthetix will introduce full collateralization features, support multiple new collateral types, and a series of improvements in trading, liquidation, and more. Synthetix has also eliminated years of token inflation and may transition to token deflation. In terms of token price, Synthetix has been the fourth-best performing DEX since the beginning of the year.
ETH
ETH is currently in a dilemma. Its appeal to institutions is not as strong as the narrative of BTC as digital gold, and other L0, L1, and L2 competitors are gradually eating into Ethereum's transaction volume. Although ETH currently appears to have a low investment cost-performance ratio, the Cancun upgrade of ETH is still worth paying attention to. The Cancun upgrade can reduce the transaction costs of Rollups by 90%-99%, making Rollups as cheap as other Alt L1s. The delivery date of the Cancun upgrade is one of the most noteworthy dates.
Analyst Holdings
The most interesting aspect is the holdings of Messari's analysts. The following chart shows the distribution of the top-performing holdings of Messari analysts in 2023. It can be seen that the analysts' main profits come from the Solana ecosystem and the AI + DePIN concept. This also reflects that the analysts have well captured the leading narrative of this round of market uptrend.
The following chart shows the current distribution of tokens held by Messari analysts (with tokens appearing only once removed). The main tokens held by analysts are similar to those with the largest gains in 2023, still concentrated in Solana and the AI + DePIN concept. Interestingly, for other tracks that analysts are strongly optimistic about, such as DeSoc, DeSci, and Perps, analysts do not hold any related tokens.
The following chart shows the tracks favored by Messari analysts (with tracks appearing only once removed). Similar to previous situations, Solana and the DePIN concept still dominate. However, decentralized derivatives have surpassed AI to become one of the analysts' favorite tracks, and the ZK concept has also reached an important level on par with AI.
Reference
MT Capital
MT Capital, headquartered in Silicon Valley, is a crypto-native fund focused on Web3 and related technologies. We have a global team with diverse cultural backgrounds and perspectives, allowing us to have an in-depth understanding of the global market and seize investment opportunities in different regions. MT Capital's vision is to become a leading global blockchain investment firm, focusing on supporting early-stage technology companies that can create significant value. Since 2016, our portfolio has covered various fields such as Infra, L1/L2, DeFi, NFT, and GameFi. We are not just investors; we are the driving force behind the founding teams.
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