The new bull market redefines Ethscriptions: a new direction for crypto evolution

Author: Exploring Cat

Preface:

1. The value system of Ethscriptions and the Ethereum smart contract asset system, although different, can also constitute value. The standardization of calldata data and hash binding with timestamps, while Ethereum's zero transfer is simultaneously broadcasted to the blockchain and stored on Ethereum, constitute information-based value. Ethscriptions are also L1 assets.

2. The logic of crypto evolution may be the evolution of L1, rather than a direction like L1, L2, L3. This year's bull market explosion in the Solana ecosystem is gradually confirming this view. Perhaps Ethscriptions / Facet have advantages over L2. Because Ethscriptions / Facet (the tokens issued by the Facet computing platform are actually also Ethscriptions tokens) are themselves L1 assets. The new ecosystem formed by Ethscriptions assets is also part of the L1 ecosystem.

3. The evolution of blockchain L1 refers, on one hand, to newly evolved L1s that are widely adopted, like Solana, which has become the third pole after Bitcoin and Ethereum in this year's bull market; on the other hand, it refers to the evolution of already widely adopted L1s themselves, which is the evolution of L1, not a direction like L1, L2, L3. Ethscriptions are Ethereum L1 assets, and their emergence and evolution are also the evolution of L1, which aligns with the logic of crypto evolution. Ethscriptions represent the future of Ethereum blockchain L1. The formation and development of the non-smart contract ecosystem of Ethscriptions will also be the evolution of L1.

Ethereum inscriptions Ethscriptions will celebrate their first anniversary on the 18th of this month. This year marks a new round of bull markets; how can we re-recognize Ethscriptions in the context of this bull market trend?

1. First, we need to clarify whether Ethscriptions are valuable?

I remember an article from last year that claimed Ethereum inscriptions ETHS are essentially financial speculation rather than product innovation. I wonder what the author would think now that this year, purely community-driven meme coins have become the dominant force in this bull market?

In this article, the author provided what they believed to be a simple standard for distinguishing L1 assets from L2 assets: whether its state can be restored on Ethereum's "world state," and whether L1's EVM can reference, call, query, and modify the state of that asset. If it cannot, then it is not an L1 asset.

From this description, it is clear that the original author limited L1 assets to smart contract assets. Indeed, Ethereum's proudest invention is the smart contract EVM, but the emergence of Ethscriptions has actually broken through Ethereum's original boundaries by standardizing calldata data, redefining value on Ethereum, because this standardized data is stored on the Ethereum blockchain, immutable, and timestamped, thus can certainly constitute value.

What is value? I believe value is the energy and information required for entropy reduction. Work requires energy and information; these two are the foundation of value. For example, bread, air, and water are all elements that can form value. These elements must drive biological entropy reduction to be called value, meaning they create "demand" for individuals or groups. The energy and information that drive entropy reduction, including the information that drives entropy reduction, is also value, and a key aspect of this is time. Information unrelated to time will not form value. Data broadcasted to the blockchain with timestamps can form the basic elements of value.

The standardization of calldata data, hash binding with timestamps, and storage on the Ethereum blockchain constitute the foundation of information value. Although the value system of Ethscriptions is different from that of Ethereum smart contract assets, Ethscriptions can also constitute value. Here, the key to data forming value is that the data has timestamps, and the zero transfer on Ethereum is also broadcasted to the blockchain. Many people discredit inscriptions as not being valuable because they do not truly understand what value is.

It can also be said that Ethscriptions are L1 assets, a true native digital asset type of Ethereum, and through the continuous upgrading and development of umbrella protocols, they have become an alternative scaling solution for Ethereum. I even believe that in the future, they can be understood as an Ethereum expansion solution, rather than Ethereum L2.

Why is it called an expansion solution? Because perhaps in the future, the Facet off-chain computing platform can be further expanded from the Ethereum blockchain off-chain computing platform to the Bitcoin off-chain computing platform, and to more mainstream blockchain off-chain computing platforms, becoming a central hub for off-chain computing connecting various blockchains. The free flow of value between different blockchains is a future trend and an inevitable outcome.

In the crypto field, regardless of what is being done, whether it can persist and develop in the future, as long as it is the first to do it, it will naturally attract attention. If lucky, it will become "Dragon One," leading to more projects imitating and referencing it. The attention economy in the crypto field has reached its peak.

2. What kind of bull market is this new round? What is the engine of this new bull market?

Recently, several events related to Ethereum have occurred.

One is that Ethereum founder Vitalik has frequently expressed "controversial views" on Twitter. On one hand, not long ago, Vitalik retweeted an old tweet from Ansem, and on the other hand, he commented on meme coins from celebrities. These all imply a certain unease from Vitalik regarding the current development state of Ethereum. In the past month, Ethereum's market cap has grown by 22%, reaching $454 billion, while Ethereum's fee revenue has dropped by 33% to just $128 million, as popular transactions have shifted to Solana.

At that time, I thought that many Ethereum celebrities would soon express "outlandish" opinions about Ethereum, either from extreme Ethereum maximalists or from those expressing dissatisfaction with Vitalik and the Ethereum Foundation. This would mark the beginning of Ethereum's descent from its pedestal.

Soon after, I saw Synthetix founder Kain mocking Vitalik's comments on meme coins, and Wintermute CEO Evgeny Gaevoy also expressed his opinion. Gaevoy stated that Vitalik and Hayden (the founder of Uniswap) and more of the Ethereum community are trying to prove that "the end result is worth it (healthcare, open-source software, art, etc.)" is what deserves respect. In other words, the market is random, not determined by some super will; only the market itself can determine the direction of crypto evolution, and only the market can decide the market—no individual or group can define what is right or wrong.

Mocking the market itself is quite ridiculous.

Blockchain is a game of money for the common people, where countless individuals form a macro effect driven purely by profit, and pure market laws determine the short-term fluctuations and long-term evolutionary direction.

From the perspective of crypto ecosystem evolution, this actually means that Ethereum will become the next "Bitcoin," becoming a thing of the past in crypto history. Ethereum will also see many "Ethereum maximalists." Crypto evolution is random, purely governed by market laws, not a predetermined inevitability, which is truly fascinating.

Another event that occurred a bit earlier is that in the latest Gitcoin Grants 20, the Facet project ranked first in both donation amount and number of donation addresses as a web3 infrastructure project, but ultimately ranked seventh. Netizens expressed their anger, but there was nothing they could do. Only natural laws can teach the vested interests a lesson, and the lessons from the market itself are the most natural and real. Gitcoin violated the principles of fairness, openness, and justice, and did not even have the opportunity to appeal like other projects. The crypto field purely follows market laws; if this continues, from the start of this year's bull market to the future, Ethereum and L2 may not truly rise, and not following market laws may destroy the advantages that Ethereum has built.

Now Solana is rising, becoming the third pole outside of Bitcoin and Ethereum. Solana itself, as L1, may be the engine of this new bull market.

Some may ask, can an L1 become a bull market engine?

What is a bull market engine? It is something that triggers a bull market, usually something that suddenly erupts around the time of Bitcoin halving, such as previous ICO financing, or the sudden explosion of Uniswap in May 2020, or the recent explosion of Solana meme in March. This can be a specific project, a model, a method, or a type of technology.

Solana can be considered the engine of this bull market, and the principle is the same as that of every previous bull market engine, which is new demand and a new mechanism that can produce explosive growth.

The AMM mechanism of Uniswap was the explosive mechanism of the previous bull market, activating a variety of DeFi projects' explosive growth in that round. SHIB was the culmination of community-driven and AMM mechanisms. It can be said that the previous bull market started with the sudden explosion of the Uniswap dog coin cluster in May 2020 and culminated in SHIB, which grew robustly within Uniswap.

The process of SOL tokens rising from tens of billions to nearly a hundred billion in market value is a result of more than a year of history, creating a super huge profit capital pool that will produce a massive super leverage effect under the influx of capital from outside the crypto circle (such as ETFs). The result of this effect will be the birth of super large market value meme coins in this bull market.

Every bull market engine is naturally formed by the market; there is no super will pre-designed to specify which model or platform will inevitably become a bull market engine. Any category that can explode in the subsequent bull market has already sprouted in the previous bull market, going from obscurity to being despised as non-mainstream to truly becoming the dominant paradigm of the new bull market. The previous DeFi was like this, and the current meme coins are too. Perhaps meme coins are the key to unlocking large-scale adoption of cryptocurrencies.

Every bull market engine is not a continuation of the previous bull market; this is a lesson history has taught us. This is the most fascinating aspect of the crypto field. The allure of the crypto field lies in its unpredictability, much like the characteristics of micro-quantum. There is no super will that has pre-arranged or designed anything; it is entirely the natural evolution of market laws. Only the market itself is always correct; no one can determine that the entire evolution must develop according to their designed direction.

Solana becoming the engine of this year's bull market is entirely randomly formed; no one deliberately designed it. What is deliberately designed is Ethereum L2. This is not driven by the natural laws of the market.

Now returning to the article's author's claim that "Ethereum inscriptions ETHS are financial speculation rather than product innovation," in fact, financial speculation itself is also one of the most important attributes of crypto evolution. Community-driven tokens do not need financing or KOLs to initiate dissemination before they start, just like the previous SHIB, which actually began spreading within various communities, and many KOLs initially dismissed it as just a copycat coin. It was only after SHIB's market value suddenly skyrocketed that various KOLs began discussing and spreading it, which is completely different from VC coins.

The main external driving force of this year's bull market is retail investors in the US stock market. Note that this external driving force mainly serves to activate the existing crypto circle. It is completely different from the previous round of DeFi large capital mining. ICOs siphoned traditional financing models, DeFi attracted large capital to make money at zero cost, and this year's meme is driven by retail investors in the US stock market leading the current Bitcoin ETF. Many people mistakenly believe that the purchase leadership of ETFs is from institutions, but statistics show that a large proportion is still from retail investors in the US stock market, which is a cognitive bias of older crypto investors. The bull market is related to capital supply and demand; different stages of new technology activate different categories of capital demand, combined with a favorable external environment. ICOs are a new alternative model siphoning traditional equity financing, DeFi is a paradigm revolution attracting large capital to earn coins at zero cost, and this year's meme is driven by the massive influx of retail investors from the crypto IPO.

The significance of Bitcoin is that it opened up a whole new world of cryptocurrencies. But a new world must evolve; there will not only be one cryptocurrency existing. Even if a second Bitcoin appears, there will not only be the first and second. Bitcoin maximalists and Ethereum maximalists are the same; they just change their rhetoric. The world moves forward, and in this year's bull market, the third most influential entity has emerged: Solana is the third pole.

Regarding how to understand meme coins, I believe the fundamental reason lies in the logic of crypto evolution, where most people's previous understanding was incorrect. The direction of crypto evolution may not be what is usually thought of as L1, L2, L3, but "may" just be the evolution of L1. If it is the latter, then it will naturally explode in prosperity at a higher-level L1, and the "beginning" must be the rise and fall of pure token issuance projects. In fact, meme and ICO tokens are no different. Understood this way, the great prosperity of memes this year corresponds to the great prosperity of Ethereum ICOs in 2017; the larger-scale meme wave has not yet arrived.

Every "demand" that erupts in a bull market has already implicitly hidden the engine for the next bull market. The first bull market saw the explosion of Bitcoin fork coins, and the demand that erupted was the demand for token issuance. This demand stimulated the transfer of capital and talent to projects that could solve this problem, leading to the emergence of Ethereum and Vitalik. In the second bull market, smart contract ICOs perfectly met this demand. Various financing demands discovered a new continent and rushed to issue tokens for financing using this model. Many ICO projects, with their phased token sales, also concealed new demands, which is to reduce human factors, and the decentralized applications based on smart contracts gradually improved, finally leading to the explosive growth of DeFi in the third round. The collapse of many super large market value projects also concealed new demands: not allowing large capital to plunder public funds.

Thus, the demand for the fourth bull market is "de-VC-ization," and community-driven projects have already shown signs of this since last year's inscriptions. As a platform, Solana's accumulated "profit leverage" energy from last year will truly erupt this year; this platform has a profit capital of $100 billion, and how can other platforms compare? They simply cannot.

With the trend of de-VC-ization this year, the massive influx of external funds comes from retail investors in the US stock market, naturally leading to a massive explosion of memes.

The logic of crypto evolution now trends towards the evolution of L1, rather than a direction like L1, L2, L3. On one hand, all current L2s are still in the "training wheel" phase, while the third pole, Solana, is truly rising. The logic of L1, L2, L3 is a narrative led by the Ethereum Foundation and certain VCs, who use narratives and capital to attract retail investors. However, the narrative of VCs is not necessarily correct; the characteristic of crypto evolution is purely market-driven, and every evolution to a new higher level carries randomness, whether from the Bitcoin fork wave, the ICO wave, or the DeFi wave.

3. How to re-understand and re-recognize Ethscriptions in the context of this new bull market?

The logic of crypto evolution may be the evolution of L1, rather than a direction like L1, L2, L3. Of course, this is my personal view. According to this view, perhaps Ethscriptions / Facet have advantages over L2. Because Ethscriptions / Facet themselves are L1 assets and correspond to a new ecosystem, which is also part of the L1 ecosystem, such as the Ethereum metaverse. The identity system of Ethereum inscriptions may later become a supplement or even a replacement for the smart contract identity system.

The evolution of blockchain L1 refers, on one hand, to newly evolved L1s that are widely adopted, like Solana, which has become the third pole after Bitcoin and Ethereum in this year's bull market; on the other hand, it refers to the evolution of already widely adopted L1s themselves, which is the evolution of L1, not a direction like L1, L2, L3. Ethscriptions are Ethereum L1 assets, and their emergence and evolution are also the evolution of L1, which aligns with the logic of crypto evolution. Ethscriptions represent the future of Ethereum blockchain L1.

It is very likely that the L2s we are proud of today will, in the future, fade away like many super large blockchain projects that once flourished but now exist only in legend. Once a certain technology connects all blockchains, there will be no need for L2s, because there may be better L1s, and the value circulation between different L1s will be very free. The evolution of blockchain is not in the direction of L1, L2, L3, but just the evolution of L1.

The trading costs of Ethscriptions tokens are far lower than those of Ethereum mainnet smart contract tokens; isn't this the evolution of L1? The formation of a completely new "non-smart contract ecosystem" itself will also be the evolution of L1.

Additionally, the biggest feature of the new round of bull markets starting this year is "de-VC-ization," where community-driven projects will shine. This is very beneficial for Ethscriptions / Facet inscription tokens.

Often, the large market value meme coins and community coins that can suddenly rise are those that were previously inconspicuous and looked down upon. This is particularly emphasized; VC coins do not work this way. VC coins often start with promotion and are widely known from the beginning. There are too many L2s, which have diverted Ethereum's capital flow and attention flow. Such diversion does not align with the logic of crypto evolution. The fragmentation of L2s will ultimately lead to Ethereum being surpassed by new L1s. This fragmentation of L2s itself has rewritten crypto history, becoming an unexpected outcome for everyone, not the result that Vitalik, the Ethereum Foundation, and VCs conspired to envision.

No one can predict the future; otherwise, the human world would be meaningless. It is precisely because of the unpredictability and randomness that it is interesting. The direction of crypto evolution will also follow this randomness, evolving along the lines of Bitcoin, Ethereum, and Solana, rather than Bitcoin maximalism and Ethereum maximalism.

Asian funds focusing only on networks and protocols may be mistaken. Asian project parties are not good at original infrastructure; even if they engage in infrastructure, it is often a patchwork or based on others, which is meaningless. Asian project parties are particularly good at "re-promoting" based on Western foundations, such as previous mining tycoons, mining machine giants, and exchange giants, which can become the largest in the world. I believe that future decentralized applications may also have a new direction to become the largest in the world. Decentralized applications will not only be smart contract applications but will also include a large number of non-smart contract applications.

From small market cap tokens around ten million dollars (note that here, small market cap does not include those below ten million dollars, as they have not yet matured and carry higher risks) to becoming large market cap tokens with global influence, there are some patterns:

Global influential trading platforms + low market cap + explosive growth (this growth occurs at the peak of overall market heat) are the three magic weapons to activate the transformation into globally large market cap tokens. In fact, any globally large market cap token in history has satisfied these three magic weapons. Those that do not meet these three magic weapons cannot become large market cap tokens spread across the globe, and their growth potential is extremely limited.

The inscriptions that erupted last year were mainly from domestic players. Now, more importantly, is to siphon players from around the world.

Western users are not averse to tokens with domestic elements (recently, some hot meme coins have particularly emphasized Chinese concepts). The main reason is that they are unfamiliar with the trading platform; the vast majority of people worldwide are the same—they will not play with tokens on trading platforms they are not familiar with. On a trading platform familiar to Western users, if a token skyrockets, no one would refuse to make money. However, if the market cap is already large and it is listed on major exchanges, no one is willing to take over; not to mention foreigners, even domestic investors are reluctant to take over. If a coin rises from a trading platform unfamiliar to Western users (here, rising means reaching a market cap of over $200 million), it basically has no chance of becoming a globally large market cap token, as it lacks one of the three magic weapons. Even if it satisfies two, it cannot activate the global market.

To be precise, what determines the future potential of a cryptocurrency is the trading platform during its rise, especially the trading platform during the process of rising from a market cap of ten million dollars to over a hundred million dollars. This trading platform determines the future potential of the token. In the last bull market, tokens like TRON rose through Binance; even though everyone knows TRON is a domestic coin, if it were not for Binance (which later gained global influence), it would be hard to say. In the last DeFi bull market, SHIB rose through Uniswap, and the AMM mechanism of Uniswap, along with Uniswap being a global decentralized trading platform, is a fundamental basis. If SHIB were on another trading platform, it might not have reached a market cap of hundreds of billions of dollars.

In the crypto field, very few people have a long-term investment mindset; most are driven by short-term interests, chasing this today and that tomorrow, purely motivated by short-term gains. Therefore, whether for retail investors, VCs, or project parties, those who can truly make big money are definitely the intersection of long-term mindsets, which must be an extremely small group. Very few retail investors, VCs, or project parties can survive a bull-bear cycle. Those who can make big money are those with insight, courage, and luck.

Repeated wash trading and painful experiences may be the best investment. The body and mind also gain experience.

In the crypto circle, the core is a word "trust." For individuals, trust is like planting a seed; naturally, there will be a harvest. Without trust, there is no seed planted, and naturally, there will be no harvest. You reap what you sow; this is a natural law. For cryptocurrencies, as more people trust, consensus is formed. He Yi said that because she trusts Binance, she bought a lot of BNB at the beginning. In the last bull market, many people had heard of SHIB early on, but too many who did not trust it thought it was just a dog coin and looked down on it.

Any project that can sustain development, whether Bitcoin or a newly emerged small meme coin, whether large market cap or small market cap, must go through different stages. Each stage will have different ceilings, and once a ceiling is surpassed, the market cap rises to a new level. Each rise to a new level requires breaking out of the limitations of the previous circle; this is the process of breaking out of the cocoon and becoming a butterfly.

The value of ETHS has not yet been widely recognized by the market. Inscriptions are expected to see a third wave of overall explosion, during which ETHS will break out of its cocoon and become a butterfly.

Now, NVIDIA's market cap has surpassed Apple's, and with a slight increase, it will surpass Microsoft, becoming the world's most valuable tech company. This signifies that human technology will transition from the internet era to a higher level, the era of artificial intelligence. Crypto and AI will open the door to the future.

Embrace the new trend, embrace the new bull market!