Editor | Wu Blockchain
This episode was an OKX-organized Space, where guests had an in-depth discussion on the key events and trends in the Web3 field in 2024. The topics included: why there was a huge meme coin explosion on Solana; the sudden rise and temporary decline of the small game craze on TON; Solana and TON's strategic plans for 2025; how to address the community's aversion to VC coins; HyperLiquid's reflections on the industry; Dragonfly's investments in the three main tracks of exchanges, public chains, and stablecoins; and OKX's investment philosophy.
Please note: the guests' views do not represent the views of Wu Blockchain. Wu Blockchain does not endorse any products or tokens. Readers should strictly abide by the laws and regulations of their respective jurisdictions.
The audio recording was generated by GPT, so there may be some errors. Please listen to the full podcast:
Xiaoyuzhou FM:
https://www.xiaoyuzhoufm.com/episodes/6775715c1e823e72d380ce25
YouTube:
Solana: From Infrastructure Advantages to the Rise of the Memecoin Craze
Colin: First, let's welcome Adam, as he is the OG of Solana and a former employee of FTX. The topic that many people may be most concerned about is that Solana has become the gathering place for memecoins this year. But I've seen some of your previous sharing, saying that you didn't mainly push memecoins, and this is a very natural phenomenon. You actually focus more on things like PayFi or infrastructure building, etc. So from your perspective, why do you think memecoins have concentrated and exploded on Solana this year?
Adam: Thank you, Mr. Wu, for the question. I think there are both accidental and inevitable factors here. Memecoins, as we all know, started with things like Dogecoin and Pepe. At the very beginning of this cycle, if I'm not mistaken, it was after the FTX blowup, on December 24, 2022, that the BONK project started an airdrop activity targeting wallets that had interacted before. Due to its price performance, this triggered a huge craze. Later, people found that just by participating, they could get similar airdrops, which attracted more people to participate. This was the starting point of this round of memecoin craze, which then evolved into the first wave of various memecoins themed around dogs or other animals.
I think Solana's ability to become the focus of this wave is mainly due to the advantages of its infrastructure. Solana's fast speed and low transaction fees mean that users almost don't feel any friction or loss when attacking memecoins or making large-scale transactions. This good user experience laid the foundation for the growth of the memecoin community.
In addition, I think the cohesion of the Solana community is also a key factor. The Solana ecosystem has gone through many ups and downs, but the project parties, teams, and users in the community have shown strong unity and activity, which has largely driven the inevitable and accidental trends of its development.
Colin: I'll follow up on this. PumpFun is one of the core participants in the Solana memecoin ecosystem and has made amazing profits. Do you think Solana Foundation has provided a lot of support for it? Or did it grow naturally through wild growth? The core value of PumpFun is to provide standardized support for the issuance and initial liquidity of memecoins. How do you view its success and why it has gained such a monopoly position?
Adam: Actually, PumpFun's UI design is not very user-friendly, and it feels a bit messy when you go in. Nevertheless, it timed things perfectly. The initial memecoin issuance was often just posting addresses on Twitter, and people were frantically transferring. PumpFun seized this key node of flow conversion, providing users with a way to issue Tokens independently. Combined with the fact that the timing coincided with political events and cultural attributes, this gave it an advantage in the time node.
As for the Solana Foundation, I think they have hardly spent any resources or energy on memecoins, largely due to compliance reasons. But in terms of the overall ecosystem development, the Foundation has indeed done a lot to improve the user experience, such as promoting the mobile ecosystem applications, enhancing network security, providing better development environments, and exploring frontier technologies.
Colin: I see. Do you think there will be any progress on the Solana ETF next year? Can you share some thoughts on that?
Adam: I think the ETF is a very long-term thing. BTC and Ethereum ETFs are currently seen as a bridge between Crypto and traditional finance, and this may also happen on Solana.
Colin: Indeed, Solana has gone through a lot of ups and downs in the past year or two. After the FTX incident, Solana's price was very depressed. But with the active developer community and the support of some major institutions, it has emerged from the trough. Do you think Solana's success is mainly due to institutional support or the power of the developer community?
Adam: I think the core is still the power of the ecosystem. The end of 2022 to the beginning of 2023 was the darkest time for the market, but teams like BONK were like a light in the darkness, driving the entire ecosystem projects forward. Developers remained focused on innovation and development even when the market was gloomy, and this resilience and focus have gradually restored the ecosystem. Capital is opportunistic, but the actual development and changes behind its opportunism are the important reasons for Solana's resurgence.
Colin: I see, I think both aspects play a role. Thank you, Adam, for your sharing.
Dragonfly's Investment Strategy and Addressing Community Criticism
Colin: Okay, why don't you first briefly introduce Dragonfly's investment focus in this cycle? My impression is that Dragonfly was more inclined towards the East in the early days, investing in a lot of Asian projects. In the middle period, you were particularly focused on DeFi, and achieved great success in the previous DeFi boom. Of course, you may have also invested in some centralized institutions in the later period, such as some well-known cases. So what is your main investment strategy in the current cycle?
GM: Okay, thank you Mr. Wu for the question. Dragonfly was founded in 2018 and is an institution focused on investing in the crypto field. Our first fund was from 2018 to 2021, the second from 2021 to mid-2022, and we recently entered our third fund, which is the one you've been seeing the recent investments behind.
Over the past two and a half to three years, our strategy has become more focused. For example, in this fund, we have focused on investing in projects like Ethena, ZKSync, Monad, MegaETH, Kaito, and Polymarket. Compared to our previous funds, we have continued to double down on the industry's leading projects, usually from seed rounds, Series A, to Series B. This is the biggest difference in our strategy from the previous two funds.
Colin: I see. I remember some of the projects you invested heavily in include Ethena, MegaETH, Monad, and a few others. I may not have the full list, can you elaborate on these projects and your investment rationale?
GM: Okay. I think the projects that have had the highest exposure in the past cycle, based on everyone's perception, should be Ethena, Monad, ZKSync, as well as the ones that have been very hot on social media recently, like Kaito and Polymarket. These projects have had a significant impact in the industry and have received widespread attention.
Our overall approach is to invest around the three largest and most mature business models: first, exchanges; second, public chains (including Layer 1 and Layer 2); and third, stablecoins. Our investment strategy has always focused on these three tracks and their combinations, or new players emerging in these tracks. From a business model perspective, these three are the most mature and successful models in the Crypto field, and they are the core focus of our investments.
Colin: Your partners are also very well-known KOLs on Twitter with a large following. As a VC, how do you view the recent community sentiment against VCs? Especially before Q4 last year, the opposition was very intense, particularly when the market was down. Although the market has rebounded since Q4, the criticism still exists. Is this phenomenon unique to the Chinese community?
GM: I believe this phenomenon is real and very important. The root cause lies in the cycle from the end of 2021 to the beginning of 2022, when the primary market raised too much capital, and the market size itself did not match these funds. This led to several issues: first, there were not enough high-quality primary projects in the market to absorb these funds; second, these funds were forced to enter the market, driving up project valuations; finally, these high valuations made it very difficult for the secondary market to discover value.
Now we have entered an adjustment period, with primary market funding clearly decreasing, while secondary market funding is increasing. Especially from Q4 to the recent period, I feel the market has more participation opportunities.
Colin: Which projects do you think performed best during this period?
GM: I believe the most outstanding projects in 2024 include Ethena and Hyperliquid. The common features of these projects are, first, they create tremendous value for investors, the ecosystem, and developers; second, they release this value to the market in some way, such as Hyperliquid opening up the market trading mechanism to more participants. This is the most interesting and valuable part of the Crypto market, and I believe it will be an important trend in the future.
GM: The next step is to release this value to the market through some means. For example, in the Ethena project, the basic trading mechanism (basis trade) is opened to users, or in Hyperliquid, the market trading mechanism (market making bot) is opened to more participants. This release of value is the most interesting, valuable, and influential part of the Crypto market. I believe this model will become an important industry trend in the next year or even longer.
Colin: Has your team considered a model like Hyperliquid? It's very unique, without VC support, no centralized exchanges, and completely self-market-making. Do you think this model could become a benchmark for other projects to emulate?
GM: I personally really like Hyperliquid's approach. I believe that in the Crypto field, the most valuable thing is first to create a valuable product, and then to release that value to the community in a community-based form. Achieving value creation does not necessarily require the VC financing route.
Even in traditional industries, there are a few examples like Hyperliquid's founder Jeff Yan, or the Deep Seek team in the AI field - they have enough capital, resources, and experience (know-how) to complete product development independently in the early stages of startups, without the need for external financing. Even more extreme, many of Elon Musk's projects often do not rely on external capital. As long as the product itself has value, this is a very good thing for industry development.
Of course, after communicating with many excellent entrepreneurs, we find that most founders do not have the initial capital reserves like Hyperliquid. This is also why the VC financing model and community financing model will continue to exist in the long run.
Colin: You just mentioned AI. From your observation and research, is the combination of AI and Crypto truly valuable, or is it more of a hype?
GM: Currently, the combination of AI and Crypto has indeed generated tremendous market attention and attracted many developers to explore the possibilities in this field. We have seen many preliminary attempts, but apart from the Token-based business model, there are no long-term viable models yet. Most projects try to increase their appeal by distributing Tokens and leveraging AI features, but the sustainability of this approach is limited.
However, I am confident in the innovative capabilities of developers. Over the past year, the discussion of AI in the Crypto field has accounted for more than 40% of the Crypto circle, becoming one of the most concerned areas for developers. I believe that with the increase in resources and attention, more interesting and innovative models will emerge in the future.
Colin: Although everyone's innovative capabilities are exciting, we can't rule out the possibility that this craze may be just a flash in the pan.
GM: That's true, that's also a possibility.
Colin: Like many past new models, even though the hype is high, whether they can really stay depends on the core value of the model itself. Okay, let's stop here, thank you for your sharing.
Challenges in the Telegram Ecosystem and TON Foundation's Future Plans
Colin: OK. The TON ecosystem was once extremely hot this year, such as Binance continuously launching four or five TON mini-games, which once caused great enthusiasm. But the enthusiasm seems to have quickly subsided, and even second-tier exchanges rarely list TON mini-games anymore. How do you view this phenomenon? Why did it suddenly explode and then cool down so quickly?
John: Thank you, Mr. Wu, for your question. First, let me slightly correct your statement. In fact, second-tier exchanges have continued to list TON-related projects, up until the end of December, with seven or eight projects being launched. Of course, the definition of "second-tier" may be debatable, but I'm referring to the top ten exchanges globally. As for Binance, it did pause new actions after launching four or five mini-games.
As for why the enthusiasm has waned, I think the reasons are quite clear. The mini-games listed on Binance were mostly very simple in gameplay, and could hardly be called "games" - apart from Catizen, the others were basically just "clicker" apps. In essence, these projects were mainly aimed at helping the exchange attract users. After Binance launched multiple similar projects in a short period of time, the suspension is reasonable due to user fatigue and strategic adjustments.
Another reason is that many Telegram mini-programs are not connected to the TON chain, but to blockchains like Solana, Aptos, and Sui. A large portion of the trading volume of these blockchains also comes from Telegram mini-programs. However, next year we plan to take some restrictive measures, such as requiring mini-programs to only connect to TON-related wallets through TON Connect, similar to WeChat's ban on Alipay links.
This year is the first time the TON ecosystem has truly entered the public view. We have experienced both peaks and valleys. The current downturn is not a bad thing, as it has allowed us to identify the problems. While the ecosystem is not yet fully mature, appropriate macro-control is necessary. This is similar to the need for capital controls in the early days of China's reform and opening up. The TON ecosystem has a large user base, but relatively low per capita capital, making it a relatively "poor" chain. In the future, we will strive to increase the capital base and lay a solid foundation for ecosystem building.
Colin: You mentioned that TON is currently in the Memecoin stage and has some problems. Can you elaborate on that?
John: In the second half of the year, Memecoins have gained a lot of traction on Solana, while TON's performance in this stage has been poor. The main reasons are that TON's gas fees are relatively high, the development language is complex, and the learning curve is steep, resulting in a relatively small number of developers. These issues make TON not well-suited for the initial Memecoin development stage.
To improve this situation, we plan to optimize the Memecoin infrastructure, such as reducing gas fees, improving development tools, and launching better LaunchPad tools. The success of Memecoins largely depends on the driving force of social scenarios, and TON has a natural advantage in social networks (Telegram), so we are confident about the future.
Colin: So you plan to implement restrictive measures on Telegram ecosystem mini-programs next year?
John: Yes. We will require Telegram mini-programs to only connect to TON-related wallets through TON Connect. This decision has been reached internally, but has not yet been officially announced. More detailed information will be published by our founders on the blog.
Colin: From my perspective, Telegram is the only Web2 giant that actively supports Web3 applications, which is the core advantage of the TON ecosystem. Compared to platforms like Facebook or WeChat, Telegram's attention and support for Web3 is unique. But the performance of TON has indeed experienced ups and downs, such as the explosion and rapid extinction of mini-games. Was this unexpected?
John: That's right. April to June this year was the hottest period for TON, and our strategy at the time was very successful, but the enthusiasm came too quickly and also brought some problems. In the subsequent adjustment process, we realized the need for longer-term planning, rather than relying solely on momentary hype. This has also prompted us to focus more on optimizing the infrastructure, laying a solid foundation for long-term development.
Colin: Wasn't anyone surprised by your own sudden explosion?
Here is the English translation:John: To put it this way, the outbreak in April this year was the result of the accumulation of efforts over the past 12 months. We have made solid preparations in many aspects, and then concentrated the outbreak in April. Let me give you a few examples: First, the issuance of USDT, which is a very critical point. At the end of April, our founder announced this news on the stage in Dubai. Previously, the TON ecosystem did not have a stablecoin, and DeFi was almost impossible to carry out. The issuance of USDT filled this gap, and Tether is very satisfied with the performance of TON. This year, TON is the blockchain with the fastest growth of Tether's stablecoins in history, and the current liquidity has exceeded $1 billion. This figure is expected to grow significantly next year, as the potential of social payments has not been fully tapped.
Another important event is the launch of the mini-game project Catizen. I met their team in March 2023 and invited them to join the TON ecosystem. Before launching Catizen, they tested multiple mini-games and finally chose Catizen, which had the highest retention rate, for development and launched it at the end of March. This also became a key driver of the TON mini-game craze.
In addition, the Hong Kong conference in April this year was also a highlight. We booked the main stage on the third day of the conference to showcase the TON ecosystem and projects. Next April, we plan to book the main stage of the Hong Kong Web3 event again and plan to add more event content. If any projects in the TON ecosystem are interested in sponsoring, they can contact us directly.
Finally, the high-frequency exposure of TON's founders in April also played a big role. He participated in the Token 2049 event in Dubai and was interviewed by the Financial Times and other media. These were his first appearances in the media in seven or eight years, which clearly boosted the heat of TON.
Colin: This does seem to be a highlight moment. So what plans does the TON ecosystem have in the DeFi field going forward?
John: DeFi is an area we need to focus on breaking through, and the current main obstacle is the high difficulty of the development language. We are developing a new language called TOLK, similar to JavaScript, which was announced at the Dubai conference in November. This language will significantly reduce the development difficulty and is expected to attract more developers to join.
In addition, we plan to strengthen the layout of BTCFi. In February, we will jointly host a BTCFi hackathon with ecosystem project parties, focusing on promoting the construction of cross-chain bridges from BTC to TON. The test network of the cross-chain bridge has already been launched, and the official version is expected to be launched in April. This will attract Bitcoin holders to enter the TON ecosystem, boosting TON's DeFi TVL and liquidity. At the same time, we also plan to explore innovative application scenarios through the combination of mini-games, mini-programs and DeFi protocols, such as products similar to Yuebao.
Colin: You mentioned that the TON ecosystem also plans to promote the development of Memecoins. What is the strategy in this regard?
John: Yes, we are hosting the official Memecoin competition "Meme LANDING", providing incentive support for both unlaunched teams and already launched projects. We also realize that the TON ecosystem needs to further improve the infrastructure in the Memecoin field, such as reducing Gas fees and optimizing development tools. We hope that through these adjustments, the TON ecosystem can better support the issuance and development of Memecoins.
Colin: The TON ecosystem also has great development potential in the mini-program field. What plans do you have in this area?
John: Mini-programs are an important strategic direction for the TON ecosystem. Currently, we have seen projects in the AI field achieve commercialization in Telegram mini-programs, such as an AI character generator project that has already made a profit and is beginning to try to combine Tokenomics with AI gameplay. In the future, we hope to attract more similar applications to join.
At the same time, we expect that some major Internet companies in China will launch mini-programs and public account channels for the TON ecosystem next year. This will further expand the application of TON in real-world scenarios, extending from mini-games to e-commerce, short videos and tool applications. We are full of confidence in the future of the TON ecosystem, and we also know what areas need to be further improved and expanded.
Colin: The development language you mentioned is indeed a challenge, and lowering the development threshold will greatly promote the development of the TON ecosystem. I look forward to your performance next year!
OKX Venture's Investment Philosophy
Colin: Can you briefly introduce whether OKX Ventures has paid special attention to any tracks or interesting projects this year?
Kiwi: Okay, first of all, a special thanks to the guests. We have very deep connections with Dragonfly, Solana and TON, and have co-invested in many projects. The past year has indeed been an impressive one, with many shocks and stories. I recently saw a year-end summary report that listed OKX Ventures as one of the most active institutions in the industry last year, mentioning that we invested in 50 projects. The actual number is even higher, but this also reflects that we have been actively supporting the development of the industry. OKX Ventures not only pursues financial returns, but also hopes to create some interesting and useful products for the industry.
Colin: So OKX Ventures not only pursues financial returns, but also serves the overall strategy of the group, right?
Kiwi: Yes, this can be viewed from two perspectives. First, of course we hope that investments can generate returns, which may be financial returns or bring cooperation opportunities and traffic to the OKX exchange, promoting overall growth. On the other hand, as a relatively experienced institution in the industry, OKX often chooses to support some early-stage projects when the narrative is not yet mature and has not formed scale. For example, at the beginning of last year, we started investing in the Bitcoin ecosystem, when the adoption rate of the Bitcoin Taproot client was still very low, only 1% to 3%. Although the narrative was not yet mature, we still chose to support the development of these early-stage projects, which has been our strategy all along.
Colin: Indeed, OKX has done very well in this regard, such as opening up APIs and other industry feedback measures. So what are the criteria you use when choosing to support startups?
Kiwi: To be honest, investing is a "craft". Although AI has now done a lot of complex things in investment analysis and forecasting, investment is still essentially a one-on-one judgment of the project. This is not a formulaic process, and it cannot be decided whether to invest or not simply by using a few scoring dimensions.
Of course, we will pay attention to whether the product has an innovative idea, whether the technology is unique, whether the operating data is outstanding, and whether the economic model is reasonable. These are all important considerations for investment, but in my opinion, more importantly, it is the initial intention of the founders and their team, and whether they really want to do a good job. The human factor is indispensable in investment.
Colin: So looking ahead to next year, what tracks will you focus on?
Kiwi: That's a good question. The point mentioned by GM just now made a deep impression on me. I think AI is currently the most important narrative, gradually replacing the development direction of many industries, including DeFi, games and so on. The influence of AI is becoming greater and greater in all aspects, but the current investment pace is relatively slow. In fact, there are very few investment institutions that can keep up with the AI trend at the moment, and I think this is a manifestation of VC lagging behind the market narrative and progress in this cycle.
In the future, we hope to maintain closer contact with the market and pay attention to the latest technologies and trends. OKX Ventures has just released an annual investment review, summarizing the 60 projects invested in the past year, and predicting 14 future trends. If you are interested, you can go and take a look at that article, most of which I wrote, and it can also better represent my views.
Colin: Thank you very much for your sharing. OKX Ventures has indeed contributed a lot of excellent content, and I look forward to your future performance!
