The Crypto Insider Report #16: Investments in Layer 1
Disclaimer: Everything we write in "The Crypto Insider Report" is an x-ray of the industry as we see it, through the lens of publicly available information. We are not financial advisors.
I strongly believe in what Remi wrote in the tweet below:
Over time, we've tried to encourage people to research on their own because no matter how much content we launch on different channels, there are many things we don’t cover. An example of this is how we understand the development of Layer 1 projects, the infrastructure of the future web3.
There are several facets of this discussion, and all of them are important.
Technology
Developers
Network effects
Community
Capitalization
I won't go into the details of each of them because that would mean writing thousands of words, but I'm going to point out a few aspects worthy of consideration.
Technology is important, but we must not forget that it evolves very quickly. Most layer 1 solutions tried to capitalize on the obvious flaws of Ethereum, and speed, for example, was one of them. What they missed out (and with them, those in the community as well) is that the new protocols that have emerged in the meantime benefit from technological evolution and reach superior performance much faster.
Developers are essential because, as a layer 1, you are busy making sure that what you're building doesn't have points of failure. If you center and you hit with your head, you're not an infrastructure project, you're a sect, and smart people (especially tech people) are just the opposite.
Network effects, as Raoul pointed out in the discussion we had, keep you in the game. You have them, you matter; you don't generate them, you end up in the dustbin of history. We saw this very easily in the rise of various social media platforms at the expense of others that had started earlier or had more interesting features. Instagram has won and caught on worldwide, Snapchat stayed longer on the American continent, and there is already less and less talk about it. Network effects are given by Dapps and their utility. I mean, we circle back to developers.
The community is quintessential. To build technology in such a noise is hellish. To close your eyes when everyone spits at you because the price has dropped is a huge stoic exercise, and few resist. Even communities have a network effect or become irrelevant. In the beginning, quality > quantity, but as you grow and token holders are profitable, a lot of idiots will inevitably come. Even so, in difficult times, you still rely on the few good ones. That's precisely why they are the ones who have to make the most money from the investment in your project.
Capitalization is the fuel for attention, and the price of the token is the most important feature in the early versions of the story. It is what it is. Until you have something to show, it's good for the world not to lose money with you because guess what ... in crypto, there is always something HOT, and people queue up to buy the all-time high of that next sexy thing.
We will have many apparent winners on layer 1. In the top 15 by mcap, there are 7 layer 1, stablecoins, meme coins, Bitcoin, and Matic. If we look at the top 20, 2 more layer ones appear: Algorand and Cosmos. Ethereum will not prove to be a killer, just as the chances of Ethereum killers winning are given by its failure more than by its own success.
You already know who's pumpy in the short term to make money for themselves and what characteristics the long-term bets need to have, the time horizon where we can also make money.
Until then, remember this:
Take care,
Vlad
P.S. Now that StakeBorgDAO has a few weeks behind, it seems as if what Kain said is even more logical:
Don’t hesitate to retweet :)
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The first steps in crypto: What Is the Metaverse?
The metaverse refers to a shared, immersive virtual world in which avatars representing people have the possibility of interacting with one another, creating new experiences, and building in-world objects or even landscapes.
A metaverse has its own economy and currency, thus allowing people to buy, sell, or trade digital real estate, accessories, and so on. This can be experienced using a computer, a smartphone, or a virtual reality headset.
What Is a Crypto Metaverse?
A crypto metaverse is not different, on the surface, from the type we’ve already discussed, but it does stand out for using a blockchain as the underlying technology and crypto assets, like tokens, for its economy.
Among the best-known crypto metaverses already in existence, we can mention The Sandbox, Decentraland, and Axie Infinity.
The metaverse has been around for quite some time but using blockchain, crypto, and VR, all wrapped into one, makes a world of difference.
Metaverse crypto assets and items, like digital land or objects, are usually represented by various types of metaverse tokens. Their possession is recorded on the blockchain, and in some cases, they can be traded for digital assets such as Bitcoin or Ether.
Key Feature: Decentralization
In the case of the previously created virtual worlds, they used to be completely owned and controlled by a company. The crypto metaverse should be fully decentralized, with as many parts as possible being created on blockchain technology.
As a result, a blockchain metaverse strays away from the typical mainstream structure of a classically-run business.
This different structure of blockchain games means there are more equitable engagement chances for those taking part. Furthermore, ownership of the metaverse is divided between the participants, instead of one single company taking full ownership of it.
This means that even in the case that the creator of a game was to stop being involved for any reason, the game itself would be able to continue existing forever.
Provable Provenance si User Governance
The items in a crypto metaverse appear as crypto tokens, like NFTs. Buying items or making progress in the game can offer value to gamers.
Since NFTs are unique, the metaverse tokens and items are usually coded so that they can be used as proof of in-game user-generated content but also as gaming assets under the form of NFTs.
Crypto metaverses such as Decentraland rely on DAOs and governance tokens to allow users to control the direction in which the game is headed.
Therefore, users can make changes or update the game using voting. As a result, a metaverse can become more than a simple crypto game, but it can be a whole society with its own economy and elected leaders.
The Economic Value in the Real World
Since a crypto metaverse relies on crypto tokens and blockchain infrastructure, the economy of such a space is connected directly to the wider crypto economy.
This lets those who own metaverse tokens, skins of avatars, or real estate in digital form make trades among themselves on NFT marketplaces or DEXs, thus influencing the value in the real world of the investments they made inside the game.
Conclusions
The crypto metaverse has just begun developing, which means that this world is one full of potential, socially and economically.
It can let you discover new and various ways of playing, investing, and even interacting, all while making money from these actions.
While every news regarding one metaverse is already exciting, what truly shines is the potential of all of the separate metaverses being able to interoperate and interact with each other, which could push the value of the blockchain gaming ecosystem even higher to the point where it becomes part of the global economy.
The potential is so big that we still don’t know exactly how much this idea can grow, but by using VR elements, the relaxing and fun idea of playing video games, and the value of crypto, the crypto metaverse is most likely going to be a very important part of the next phase of the Internet and of the real world as well.
Animation of the day: About the importance of seed-phrases
For more animations: Cryptomatics
Tania
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The Altcoin Pulse
1. Chainlink had a year of accelerated growth.
2.Convex Finance, a yield-boosting protocol in the Curve Finance ecosystem, has reached a TVL of $21.2bn and is ranked 2nd among the top DeFi applications.
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Interesting Headlines
1. The year 2021 ended with flows of fund inflows of $9.3bn in the funds tracked by CoinShares, an increase of 36% compared to 2020. During the year, the no. of digital assets included in investment vehicles increased from 9 to 15, and 37 new funds were launched in 2021 (vs. 24 in 2020), leading to a total of 132. The last week of the year stood out through net outflows of $32m. The flow of net fund outflows over the past three weeks totals $260m or 0.4% of total assets. Most volumes were withdrawn from Ethereum funds ($61m). The funds destined for altcoins have experienced net inflows, with the funds on Binance ($20m), Tron ($4m), and Solana ($3m) standing out.
MTD=month-to-date (Decembrie), YTD=year-to-date, AUM=active totale.
2. OpenSea conducted a $300 million Series C funding round at a $13.3 billion post-money valuation (post-money, including the amount raised). The round was led by Paradigm and Coatue Management, the latter being investors in SpaceX and UiPath (exited). The funds raised will be used to develop the platform (including new features), improve customer support and client safety, invest in the NFT and Web 3.0 communities, and grow the team.
https://opensea.io/blog/announcements/announcing-openseas-new-funding/
3. Plans for the digital Yuan continue: the Chinese government has launched the digital wallet app for e-CNY on Apple and Android app stores.
https://decrypt.co/89761/china-releases-digital-yuan-wallet-bitcoin-crackdown-continues
4. One of the research teams at Goldman Sachs wrote in a note to investors that BTC will continue to gain from the gold's market share in the store-of-value segment. Zach Pandl, co-head of global FX and EM strategy, sees the current proportions at 20%/80% (for BTC capitalization using an adjusted value, and for gold an estimated quantity for investment purposes of $2.6 billion). If the BTC share were to increase and in 5 years the ratio would be 50%/50%, then the price of BTC would be at $100,000, equivalent to a compound annual growth rate of 17%.
5. The $1 billion milestone surpassed by the sales of Bored Ape Yacht Club. The volumes were also stimulated by the adoption coming from celebrities, and their access was mediated by MoonPay, which introduced concierge services in November 2021 through which it brokers acquisitions.
https://www.theblockcrypto.com/linked/129084/bored-ape-yacht-club-crosses-1-billion-in-total-sales
6. The Metaverse plans of one of China's leading tech companies.
7. Approximately 9m ETH are in the ETH 2.0 staking contract. The graph below shows the segmentation by staking service providers. Hobbyists=addresses that contributed only the minimum of 32 ETH.
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Tweet of the week: Adam Cochran with a mega tweetstorm. Long but worth reading.
Business book of the week: Antifragile: Things That Gain from Disorder by Nassim Nicholas Taleb. A reference book, written by a man who has lost the notion of his own theories precisely when it comes to crypto, an industry that is antifragile by definition.
Youtube clip of the week: If you haven't watched the interview with Raoul Pal because of ho-ho-ho, it should not be missed out:
Quality content, as always! Thank you