Sorting out the cryptocurrency ecosystem: How can young people break through the competition?

Author: Alan YW, Crypto KOL

Note: The content of this article is derived from the X Space event held by AC Capital on July 30, organized by crypto KOL Alan YW.

1. What is the ecosystem of the crypto world like?

This industry is like a pyramid, divided into three layers: upper, middle, and lower, with each layer further divided into three tiers. Want to climb up? It's not that easy. If you want to jump from the fourth tier to the third tier, you basically need the big shots from the second tier to pull you up. Squeezing from the seventh tier into the sixth tier? You also need someone from the fifth tier or above to give you a hand. That's the logic.

Upper Three Layers: The Players

First Layer: The big sharks from Wall Street. These people started entering the market after 2020.

Second Layer: Giant exchanges like Binance and Coinbase, as well as top-tier incubators like A16 Z. A16 Z invests tens of millions of dollars in projects, with some even exceeding a hundred million. Why? They have raised LP funds and need to spend them to continue earning management fees, so they can only engage in bigger plays.

Third Layer: The top-tier funds we can see, the most powerful exchanges in South Korea, and the owners of exchanges like KuCoin, along with some big fund leaders.

These people are responsible for setting the rules and creating trends. The Deepin project in North America and the entire DeFi scene in 2020 were their masterpieces. They then spread the word through their subordinates.

Middle Three Layers: The Messengers

Fourth Layer: Major incubators that everyone can access, like Pantera. There are also the bosses of some secondary top-tier quantitative funds. To establish a foothold in this layer, you need at least $100 million in cash.

Fifth and Sixth Layers: These are basically stepping downwards. The fifth layer consists of the subordinates of the fourth layer, while the sixth layer consists of the subordinates of the fifth layer. They are all incubator series funds and exchanges of various levels.

The sixth layer is the endpoint for most retail investors. They might be directors of large funds, holding tens of millions of dollars, having some influence in the circle, and possessing their own fan base.

These three layers are responsible for transmitting concepts from above to the retail investors below.

Lower Three Layers: The Retail Investor Concentration Camp

This consists of ordinary retail investors and C-end users, responsible for taking over.

The entire industry operates like this: the upper layer creates, the middle layer transmits, and the lower layer takes over.

Eastern and Western Capital: Two Worlds

Interestingly, Eastern and Western capital in this market are like two parallel universes. Taking last October as an example, Eastern capital is focused on Bitcoin Layer 2 and derivatives, while Western capital is working on Deepin.

The problem arises: these two concepts do not recognize each other. Eastern Bitcoin Layer 2 is ignored by Binance. Only one MouseBit got listed on Binance, and one Merlin got listed on OK. OK is a tier below Binance, you know what I mean. Without the backing of Western capital, this market cannot grow large, and Eastern capital cannot take over again. The same goes for Western Deepin; the first two rounds of financing did not allow Eastern capital to enter, and only in the third round was a small group allowed in. The result? The communication chain is broken, and Eastern retail investors cannot take over. There are indeed people mining IO, but very few truly take over the project.

If the upper three layers produce something, then it would be a world of harmony. Binance would definitely take over first and would have to get listed. How many subordinates does Binance have? They are spread all over the world. This is called integration, opening up the channels. Arbitrage opportunities? Yes, but it's difficult. If you can break through this information barrier, the money will come. For example, taking a concept that Chinese people have played out and selling it in Korea, what do you need? To know wealthy people in Korea. Get them to spend money on concepts left over from other places, and then find a batch of local retail investors to make it happen.

Sounds simple? In reality, it's as difficult as climbing to the sky. This industry is very information-closed; you see those people attending conferences everywhere, but it’s actually of little use. People in one circle only play with others in the same circle; outsiders cannot get in at all. How to insert yourself? It depends on your ability.

So, this industry appears flat on the surface, but in reality, the hierarchy is clear. Earning tens of thousands, hundreds of thousands, or millions is not difficult, but to make money while lying down? That requires climbing up and crossing layers. This process is painful; you have to step out of your comfort zone.

Want to do well in this industry? Don't just focus on knowing a lot of people, drinking, and listening to a few grand theories. The key is to establish deep connections with a few people. Everyone's logic for making money is different; you need to find what suits you.

2. How to learn and enter the crypto circle?

To do well, you must first have an interest in this industry. Don't just mix in for the sake of making money; that will limit your potential. This industry is vast, and you will definitely find parts that interest you. Once you find it, go and explore.

This is an industry of long-tail effects. Find what interests you, then find a big shot who can make money effortlessly in that area and connect with them. People like to help those who are on the same path as them.

I am in the fourth layer and know quite a few big shots in the second and third layers. They don't show off, and I don't show off to those in the fifth, sixth, and seventh layers either. We are all young, so we chat about whatever. This is the good thing about this industry: there are many directions, people are pragmatic, passionate, and have beliefs.

If you want to quickly enter the crypto circle, young people should go out and meet people offline. Every conference has prominent bags; see if they are positive or negative. Some people know a lot of people, but everyone thinks they are foolish; there are many such people. Some can mingle in both big and small venues and can transmit information; these people will go far in the future.

If you are looking for a job, I suggest aiming for important positions in the fourth, fifth, or sixth layers, or positions that can lead to important roles. It’s better to go for a marginal position in the third layer than to go to the fourth, fifth, or sixth layers. Those small exchanges in the seventh layer, KOL assistants, etc., are of little significance. When looking for a job, first look at the boss; ensure they have money and have achieved great results. Those who inflate after hitting a few million are purely foolish. They might be fine as employees, but they are far from being able to be bosses.

Regardless of the direction, quickly find a big shot with their own model or young people like you.

3. What is the relationship between token models and investors?

When doing a project, you need to understand that at the beginning, investors are on your side. They invest money to make a profit upon exit, while you distribute airdrops to meet operational targets. These are two different matters: one is about capital entry and exit, and the other is about operational execution.

Why can some projects airdrop on Binance? Because they have the resources to secure Binance! You need to understand this money and relationship. They first secured Binance and built a large user base before designing the airdrop model. It’s not about airdropping first to attract users and then getting listed on major exchanges. This logic is reversed; you need to think clearly.

So, pushing forward, what’s the conclusion? As long as impressive people recognize you, the project is not far from success. So what should we do? Prioritize the interests of early investors! Ensure that those who support you make money. Remember: the money of the gentry is split 70-30, while the money of the common people is returned in full. This is your first principle.

How to do it? Stimulate the enthusiasm of investors, tie them to your chariot, and expand your influence. Not just airdrops, but also be able to paint a vision. Paint a vision for investors and users; it depends on your level. You need to practice operational skills or find a good operator.

After painting the vision, let more unfamiliar capital come in. But remember the rules: those who invest directly in you cannot be cut off; those they introduce can be cut off at will. This is an unspoken rule that must be followed. Mutual cuts between introducers have nothing to do with you because there is no vested interest. Even if I introduce friends to you and they get cut, my friends won’t blame me. They won’t give you money just because of my face; they must have done thorough research before investing. You need to clarify who can be cut and who cannot.

Once your project grows large, take care of everyone around you, and only cut retail investors. Do you know retail investors? Do they know you? Does it matter to you if people unrelated to you lose money? Those playing Crypto are using spare money, like taking a million and playing with a hundred thousand, or earning ten thousand a month and playing with a thousand. Losing money is no big deal. People like Liangzi, who lose everything, are rare; they don’t count as people.

If you want to cut, cut these kinds of people; don’t touch your first-layer relationships. In short: try to ensure the interests of those around you, make more wealthy friends, and cut the people around them. This is the right path.

4. How to handle user relationships and investor strategies?

If user relationships are not handled well, as soon as the coin is launched, no one will pay attention. Like those AI coins and mining coins, if the airdrop expectations are not handled well, they will be quickly dumped once launched. This way, even early investors cannot be satisfied.

Let me take projects on Binance as an example; I don’t understand others. For instance, BounceBit, our company values the restaking track and has invested quite a bit in it. However, BounceBit gave us a pitiful proportion; one Bitcoin only yields about 100 USDT a month. What does this indicate? The project party hasn’t used a large amount of money to take over the airdrop; they must still have money on hand.

How do retail investors think? They think the project party is foolish, giving too little, and they won’t play with you anymore, leading to a massive sell-off. But we insiders know that the project party has money to take over. Once the sentiment is right, they will buy in large quantities at the low point.

What can early VCs gain? They can accurately know how much the project party has airdropped, how much cash they have on hand, and which parts of the published tokenomics are false. As VCs, they will definitely prepare more money to bottom-fish in the secondary market, knowing when to buy.

Let’s talk about TIA and TICO; we have invested in both. TIA was traded at over 3 USDT in the OTC market, and retail investors are bound to lose. Why? The first-round price was only 0.015, which is a huge difference. Where will that price be? Probably around the benchmark price of 1-2 USDT in the OTC market. Below 2 USDT, we will go all in and buy several million dollars. Later, it rose to over ten dollars, making us tens of millions of dollars. This is called giving the project party an explanation.

Investment is a continuous process. If you don’t invest, you won’t know that the first round was 0.015 and the second round was 0.5. Only by investing can you get insider information. A mature investor should know where to make money; it’s not about doubling in six months. The key is how to operate when going live to make a profit.

If retail investors do not take over, it must be a problem with the marketing department; either the operation is not good, or the resources are insufficient. It cannot be a problem in the investment phase. It’s very difficult for retail investors not to take over. A major incubator typically invests in media companies, has dozens of KOLs under its wing, and manages funds, doing LP funds.

We in the fourth layer must become LPs of third-layer funds. Invest $5 million, for a five-year term, able to see financial reports and have advisory rights. This is what a major incubator should do.

If you are a small shareholder or a newcomer, then you can only target retail investors. You have to explore layer by layer, stepping on enough pits to find a methodology. Then, use this methodology to socialize upward with your money and team, finding a big brother to guide you. This is the correct positioning.

Don’t go looking for KOLs one by one, spending hundreds or thousands of USDT. If you spend all your money on publicity, you won’t have money left to pump and do things. How to give an account to investors? Taking money from those around you when you are immature will definitely lead to a crash.

5. How can young people break through the barriers?

Today's college students mostly think, "I want to work hard and complete the tasks assigned by my leaders." But in reality, this is far from our generation.

When we first came out, there was no money! The subway was three yuan, the bus one yuan; I would rather wake up an hour early just to save those two yuan. To save a few cents, I could endure not eating. Your generation has not experienced such hardships, so you cannot endure as much.

Now college students might think, "My family is doing okay; I can casually find a job in finance and earn two to three hundred thousand a year. Why should I endure this hardship?" This kind of atmosphere has affected everyone's drive to push forward.

So how can young people break through the barriers? By being slightly better than others in various aspects. First is cognition; you need to know more than your peers. Especially for men, what matters most in youth is not how much money you have or how high your position is, but how much you have seen and experienced. Your vision determines your future height.

Next is emotional intelligence. It’s not about flattering your boss every day or calling him brother. True emotional intelligence is about letting your boss see how much benefit you can bring him and making him feel comfortable working with you. What leaders need is to see how much return you can bring in the next five to ten years, as well as your loyalty and good character.

After that come professional skills and learning ability. In simple terms, people with normal IQs and good education have similar learning and comprehension abilities. After a month of training in our company, you can basically learn how the entire industry operates.

The most important thing is actually character. In our industry, including my brothers, what everyone values is character, the ability to create value in relationships and benefits.

As for when to venture out on your own, working with a big brother and starting your own business is not contradictory. Those who truly care about you will give you opportunities once they see your capabilities. With someone backing you, you will have more confidence. For example, if you are taken to a dinner party to meet people, in the span of one meal, your project might secure investment.

This relationship is mutual. You are my resource, and I am yours. If I have excellent young people around me, others will think I am a good person who can be recognized by young people and not abandoned by the times. This way, I can gain a greater advantage in business negotiations.

I prefer to find employees or collaborators who can be trusted and can bring about a win-win situation.

Today's young people are indeed different from before. Perhaps because family conditions have improved, they are not as desperate. Do you know what kind of young people venture capital loves the most? Those from less privileged backgrounds, even middle-class or worse. Why? Because these entrepreneurs can maintain a sense of hunger, and hunger drives them to constantly pursue success.

However, when looking for employees, you still need to ensure they can bring about a win-win situation. Everyone hopes their employees become better. But the key is to trust employees, believing that once they become capable, they will give back to you.

You are right; this industry started as a makeshift team, relying on passing down knowledge. The person who mentored me once told me that when I become successful, I should not forget to help others, with a sincere heart, just like he helped me back then. This is his expectation of me, and I believe I have fulfilled it.

This is more like a master-apprentice system.

6. How to balance Web3 and Web2 work and advance in the Web3 field?

I not only have a Web3 industry; I have a lot of Web2 industries, even more than in Web3, and the achievements I have made in Web2 are actually greater than those in Web3. It’s not that I don’t work; it’s that I don’t work in Web3 because I have many brothers helping me with these tasks in Web3, but I still need to struggle for a long time in Web2.

To judge whether someone is excellent, first look at their energy. I sleep only 4-5 hours a day and have persisted for over a decade. You must not give up on Web2 while also working on Web3. Let your Web3 grow step by step, so you can continuously motivate yourself: I am strong, and I can be stronger.

Earning four to five thousand USDT a month in Web2 is actually good. If you give it up, your mindset will change. If you can’t earn that much in Web3, you will feel that giving up a stable job is painful. When anxious, it’s easy to make mistakes. Remember, slow is the key.

You can split your time. Sleep 1-2 hours less each day, play less, and work more. Set a goal for yourself for one or two years. For example, what achievements do you want to reach in Web3 in two years? You need a clear plan in terms of money, cognition, and connections.

To achieve results in Web3, consider all aspects. For example, when going out to play, you should meet industry friends from all over the world who can host you.

Many young people say they want to make money, like earning 1 million or 10 million. But you need to think clearly about how to earn it. Suppose you want to earn 5 million in a year; you can plan like this: the first 10 months are just about surviving, starting in the 11th month, and earning 4.9 million in the 12th month. Then think about what to accumulate, learn, and who to meet in the first 10 months to push yourself.

Making money through investment research does not conflict with your studies. I suggest you first intern at a company. Why? This will allow you to systematically understand how this industry operates, what can be done and what cannot. You will know whether those bad news in investment research are useful. If you just guess, what you see are all the information others have released, and you won’t know if they are reliable.

Interning at a company, even for just a month or two, allows you to deeply connect with your colleagues and the leader who guides you, maintaining long-term contact. When you finish college and pursue a master's degree, a few years later, if they have risen to a high position, wouldn’t it be great to go back to them?

This industry is like this; whoever has helped you will continue to help you as long as you have no issues. It’s not that those you have helped will help you in return; it doesn’t work that way.

So, go to the company and get to know some excellent and active colleagues. Even if you enter through HR normally, you should find ways to get your boss to appreciate you. This way, your future path will be much broader.

7. What skills and knowledge areas should be focused on to enhance employment capabilities in Web3?

From my perspective, enhancing social skills is very important. No matter how high your research level is, if you don’t have a strong social network and resource acquisition ability, it will be difficult for you to make substantial progress in this field. For example, when we invest in projects at Easy Fund, we do not rely solely on research results because even if we are optimistic about a project, if we don’t have the opportunity to enter, it won’t matter. Moreover, if your resource acquisition ability is insufficient, you may only see public financing news about the project and miss early investment opportunities.

I used to be an I person; you might not believe it. I used to study hardware programming and participated in various robotics and ACM competitions. However, in my junior year, I started minoring in finance, which made me realize that managing resources in economics is the core.

I respect those who focus on technology, but I won’t become one of them. In this industry, many things need to be advanced through relationships, which is my strength and specialty. Therefore, when you ask what skills to improve to enhance employment competitiveness, I believe that besides technical abilities, social skills are equally important. Unless you are applying for the CTO position of a company, very few bosses only value technical skills.

8. How to effectively build a professional network in the crypto field?

Initially, I also built my social network through various channels. Because I had no money but wanted to make money, I called people one by one, joined some top WeChat groups, and looked for the influential people in those groups to add them on WeChat. Basically, I would ask them how to make money and if they could take me along. I would tell them about my university experience and the value I could provide, asking if they could give me some guidance.

That’s how I approached these people like a "bootlicker" every day for about six months. At first, we had no resources and could only humble ourselves. We were forced to operate and needed to think of various ways to seize opportunities, meet more people, and gradually build our social network.

As a young person, especially someone in their early 20s, when you let go of your pride, you are actually the coolest. Others will see you lowering your guard and think you are sincere and have face. Try more, keep learning, and grow from it.