Author: Matti 👾
Compiled by: TechFlow
So you left in 2022. Or you didn't leave, but you were drawn into the surface narrative of chasing generational wealth, hyping Memecoins. Or maybe you just occasionally browse some articles. Now you want to figure out what actually happened. What do you think you missed?
In the present era, it seems there are two phenomena dominating the world.
Elon's Razor: The most entertaining outcome is the most likely to occur.
Things that were once entertainment have become serious, and things that were once serious have become entertainment.
The first point is easy to understand. The mere fact that Elon Musk is running a department called DOGE in the US, which was unimaginable by 2016 standards, is just 8 years ago.
The second point is a manifestation of the first. The US election is like the season finale of the reality show "America". Politics has become entertainment. War casualties are live-streamed. Jokes are canceled. Movie plots are used to convey agendas. Social media posts are prosecuted.
A niche manifestation of "things that were once serious have become entertainment" is money, specifically Memecoins. They are referred to as "magic internet money" or "funny money", like a 24/7 online Meme lottery.
Not everyone can become a Meme to extract profits, but everyone can emulate Meme to get close to it.
Clearly, sovereign nations acquiring large BTC reserves (emulating innovators like El Salvador and Bhutan) is nothing more than expressing dissatisfaction with Germany, which was eager to sell in August. In hindsight, it is clearly unrealistic to expect a country that has decided to continue shutting down nuclear power plants in the midst of a proxy war with its former largest energy supplier to make economically rational decisions.
Meanwhile, Michael Saylor is plotting the largest bubble in history, allowing Wall Street to outpace sovereign nations in this race. But these are the type of news that readers of the Financial Times are not really interested in. So what's really going on behind the scenes? What is brewing beneath the surface bull market that could drive the market?
If you don't know who the user is, then you are the user.
For insiders, cryptocurrencies have become a way of life. It's uncomfortable to admit, but it's true. It's a lifestyle of consuming various high-end crypto brand goods. It's a lifestyle based on capital flows, losses, and hoping to retire effortlessly. Mable expresses it more optimistically:
"It's a lifestyle where only the 'now' and the 'present' matter, because the impact of any person or thing is almost instantly reflected in our experience. The concept of an ultimate outcome is almost obsolete, because the world has truly become an infinite game."
The pace of change in cryptocurrencies is accelerating, with "seasons" now lasting just a few weeks. The performance period of Altcoins is now just a week, and the narrative rotation is faster than ever. There are too many distractions to choose from.
Cryptocurrencies have truly entered Kevin Kelly's "gradual utopia"; "Today's problems are caused by yesterday's technological successes, and the technological solutions to today's problems will lead to tomorrow's problems."
Cryptocurrencies are in a state of endless evolution. In the long run, incremental improvements may not be obvious, but just a little push, a small amount of liquidity, and the expectation of political tailwinds can transform the sum of these increments into a financial frenzy.
Everything in cryptocurrencies is driven by money. It is money. It is the hyperfinancialization of attention.
Even if you don't know, you are the user. Living in the gradual utopia, in a state of constant evolution, you may not even be aware that you are in it, because you are forced to upgrade every day.
You are a newbie every day, even if you don't feel like one:
"The rapid development of technology forces us to constantly chase the latest things, and these new things are always replaced by even newer ones, so the sense of satisfaction is always elusive."
Going back to 2017, on-chain trading through order books (hats off to Ethredelta) was a terrible experience, and automated market makers (AMMs) were considered inefficient. By 2018, the problem became that no one wanted Tokens. However, by 2020, the market suddenly realized that they could swap Tokens on Uniswap without permission, while earning rewards by providing liquidity.
Okay, so tell me what the code is?
What I know is that each situation is different, yet there are similarities. The difference is that each frenzy exceeds the imagination and expectations of most people. We cannot predict where this will lead us, especially with so many ecosystems and applications flourishing in various directions.
I suspect the pace of market rotation will accelerate, with some trends returning multiple times, and in this environment, the ability to "break path dependence" will be the most crucial. As trends become more application and use case driven, the importance of the underlying ecosystems (L1/2s) may gradually diminish.
The themes of "Agents" and "DeSci" are particularly interesting to me, as they are closely connected to the existing DeFi and Memecoin industries. This synergy could lead to a "Cambrian explosion" of new use cases, some of which may be more eye-catching, while others have the potential to truly change the world.
If value can flow freely between DeFi, DeSci, and Agents, we may be able to productize "investment in progress" and package it in Meme form. This would create a self-reinforcing cycle and expand the crypto market into realms we never imagined.
We need to create new markets that allow cryptocurrencies to drive positive-sum games. Perhaps this is why the big players in the industry are exploring these themes that can quickly have real-world impact. No one expected Memecoins to become Real World Assets (RWAs).
As with every frenzy, the desire for brilliant ideas will inevitably bring a lot of counterfeits, gimmicks, and scams.
The so-called "cults" are not really cults.
The triggers for innovation are often only visible in hindsight, because in the gradual utopia, the accumulated incremental progress can suddenly manifest in a short period of time. Then comes the validation phase, which blinds people, and the desire for success breeds a sense of privilege, ultimately leading to megalomania.
Bitcoin was once the "gateway drug" to the crypto world, but it is no longer the case, at least not for the average investor. Memecoins, as a monetized attention market, are becoming the entry point for new users. However, they are essentially a momentum trade, unable to look to the future.
This phenomenon is like the old shock value being replaced by new shock value, with no insight to predict. The speed of these changes is as swift as social media posts, and they have become a new media form. Memecoins have redefined the possibilities of social media posts.
Recently, people have realized that Memecoins can be attached to a vision and given a unique personality. The loose association of GOAT with the "Truth Terminal" is an example of Memecoins first linking their personality to AI agents, followed by LUNA. Although their expressions are rather ordinary, this indicates that there is a design space to be explored.
A few days ago, I was shocked by a Memecoin related to intelligent agents, which controls global robots for driving and streaming (Disclaimer: Frodobots is one of our portfolio companies, and we have purchased SAM). If people continue to innovate at this pace, this game will remain interesting. This also confirms that we are at the peak of the crypto entertainment era. (Meme)coin has become a new medium of consumption for people. Currently, the intelligent agent element is mostly just a superficial decoration, and also a form of automated sales. But it brings freshness and expands our imagination. It drives a certain degree of innovation, rather than just the promise of a "sect". Some people use words like "religious following" and "sect" lightly. But in the crypto field, the only "sect" is the belief in "always going up". Interestingly, this belief pursues the maximization of rational economic choices when making irrational financial decisions. However, true sects never call themselves sects. So, whether you participate or not, what you may miss is that crypto is actually evolving into a consumer product. In this era of short attention span and pursuit of pleasure, it creates a new consumption medium, whose value seems somewhat ephemeral. At the same time, it is also moving forward in the tailwind of the economy and politics. The most interesting result will be a two-way development, where wealth may disappear in an instant, and the greatest opportunities always lie in asymmetric outcomes. What seems to have the greatest potential today may have been inconspicuous yesterday, and the greatest threats are often overlooked. In the crypto field, opportunism is the truly powerful "sect".
