The rules of the narrative game that have driven the cryptocurrency industry forward are beginning to shift. Market participants are developing a meta-awareness of the game itself. The industry urgently needs applications that create genuine demand for block space.
Cryptocurrency's greatest strength lies in its ability to assign economic value to any idea and provide a platform for trading it. We are now witnessing novel experimental forms leveraging the attention economy and speculative nature of crypto, such as memecoins, social trading, and prediction markets. The future holds the potential for a wider variety of on-chain applications and business models.
For on-chain applications, speculation is one of the most powerful features. The growing social demand for speculation continues to attract 'degens'. However, the long-term goal for the industry should be to provide value beyond mere speculation. It's crucial to convert users drawn in by speculation into those who genuinely appreciate the core value of a service, building sustainable token economies that ultimately offer social graphs and product value that transcends speculation.
The Evolution of the Narrative Game
Everything began with Bitcoin. Since its inception, the crypto industry has undergone countless developments, yet Bitcoin remains the benchmark for the entire sector. Its success set the standard for the protocols and tokens that followed. Most tokens in crypto possess both commercial and asset characteristics.
A unique culture of the "narrative game" began to flourish. Emerging industries often prioritize future potential over immediate user benefits. In the crypto space, this narrative-driven approach has become dominant. The success of this game isn't just due to effective marketing; its biggest advantage is the permissionless nature and ownership models that allow anyone to tokenize any idea and assign it economic value.
The memecoin frenzy that began earlier this year exposed the very essence of this narrative game. The phenomenon of tokens with little to no actual utility or vision being sought after in the market fully demonstrates that the narrative game remains a dominant force.
The significance of crypto narratives and the way practitioners consume them is changing. It's unclear how long the old套路 of creating new stories to justify high valuations can persist. We are witnessing a development of this narrative game in a polarized manner. One side laments the lack of new innovation, while the other constantly hypes new memecoins, watching them burst like bubbles.
The Current State of the Crypto Industry
Looking back, 2024 has been a vibrant year, highlighting the multifaceted nature of the cryptocurrency industry. Bitcoin gained institutional acceptance through ETFs. Ethereum successfully implemented the Dencun upgrade. Rollups were deployed across numerous projects. Solana staged an impressive comeback.
The development of infrastructure and applications is synergistic. Applications inspire the demand for infrastructure, and advanced infrastructure, in turn, lays the groundwork for new types of applications. There is still significant room for improvement in blockchain technology, but the industry's narrative has been overly focused on technical improvements and ideological concepts.
The industry is now at a crossroads. It could maintain its current state, making incremental improvements only in mature areas like token value storage or DeFi. While playing the role of a money market is meaningful, continuing down this path would mean the industry remains a market driven primarily by enthusiasts.
We have now crossed a critical threshold. Despite various challenges, cryptocurrency continues to move forward. However, it's undeniable that blockchain applications are still mainly confined to finance and trading, catering to a limited user group and lacking mainstream appeal. The ideal scenario involves leveraging crypto's potential as an application layer to usher in widespread adoption and new business models.
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Tokenizing Everything: The Power of Economic Value
Traditionally, leverage was only available to individuals or businesses with capital and labor. The proliferation of software and media changed this landscape. Software enabled individuals with minimal capital to develop applications, leading to innovation. Platforms like YouTube expanded individual influence.
Cryptocurrency provides the unique value of being able to assign economic value to any idea and provide a trading platform. In traditional systems, market formation requires intermediary intervention and permission to maintain economic value and mutual trust. Blockchain technology provides the foundation for tokenization, enabling users to exchange economic value and form markets with others over the internet without needing to trust or get permission from a third party.
The concept of the "meme," introduced by Richard Dawkins, is a cultural unit representing an idea, trend, or style. Memes have adapted to internet culture. Crypto allows ideas and interests to be assigned economic value, allowing users to own their attention and profit from it.
Memecoins represent the ultimate expression of the "attention equals value" framework. While memecoins themselves are not the end goal, they demonstrate the raw potential of tokenization, hinting at the possibility of new application types. The ability to assign economic value to attention paves the way for unprecedented markets and applications.
This has been particularly evident in the first half of 2024. The crypto market regained its vitality, and applications that transformed attention into speculative demand quickly gained traction.
- pump.fun on Solana became a major platform for launching memecoins.
- Friend.tech and Fantasy.top integrated social trading features.
- DEGEN on Farcaster attracted significant user activity.
- Polymarket saw a massive increase in activity during the US presidential election.
- Hamster Kombat on the TON ecosystem achieved 100 million users.
Work on developing applications that leverage crypto's unique properties has only just begun. We should place greater importance on these initiatives as they provide meaningful experimental results for how crypto applications can meet user needs.
Speculation as a Feature, Not a Bug
Blockchain is a backend technology. Most networks provide a generic execution environment and database for applications to run on. In principle, most applications we use daily could run on a blockchain. Eventually, "blockchain" or "crypto" will no longer be used to describe applications; users should be able to use an application without knowing about the underlying chain or wallet.
However, in the current limited blockchain environment, this assumption is merely a hope. The present blockchain development environment remains challenging. Besides a small group of enthusiasts, most users require a strong incentive to use on-chain applications. We need user experiences and functionalities that are only possible in an on-chain environment.
Most users in the industry are airdrop "hunters" and traders whose primary purpose is to satisfy speculative demand. It is no exaggeration to say the cryptocurrency industry is built on capital injected through speculation. The fact that most on-chain transaction volume is based on speculative demand is undeniable. Degens are a vital pillar of the crypto industry.
The preference for speculation is not limited to crypto; it's a social phenomenon. Deepening economic inequality and shortening attention spans have increased people's risk tolerance for investment assets. While the current situation may seem dystopian, the high volatility of tokens is seen by many as a chance to change their fate.
Speculative assets like memecoins have proven to be a primary means of attracting new users to cryptocurrency. Users attracted by speculative demand inadvertently learn about digital ownership, wallets, and markets, becoming assimilated into the culture and potentially converting into organic traffic.
While most on-chain applications attract short-term attention through unique user experiences and speculative demand, their lifecycles are often short due to rough design and high volatility. However, it is premature to conclude that on-chain applications cannot achieve structural retention.
The reasons for short lifecycles include a user base with low product loyalty, fewer resources allocated to product development compared to infrastructure, and an excessive focus on short-term speculation over long-term utility.
In the long run, it is essential to convert users attracted by speculation into those who genuinely appreciate a service's core value. Furthermore, a token issuance and distribution framework capable of withstanding short-term price and demand fluctuations must be established to ultimately provide social graphs and product value beyond speculation.
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Frequently Asked Questions
What is the 'narrative game' in cryptocurrency?
The 'narrative game' refers to the practice within the crypto industry where a project's value and potential for growth are heavily driven by its story, vision, and community belief, rather than just its current technical utility or revenue. compelling narratives attract investors and traders, creating demand for a project's token.
Why is speculation considered important for crypto's growth?
Speculation drives trading volume, provides liquidity, and attracts new users and capital into the ecosystem. While often criticized, this activity funds development, raises awareness, and serves as an on-ramp for users who may later engage with more substantive applications and core Web3 concepts.
What are some examples of applications leveraging 'attention economics'?
Applications like pump.fun (memecoin creation), Friend.tech (social trading), and Polymarket (prediction markets) directly convert user attention and social activity into speculative economic activity. They tokenize engagement, allowing users to potentially profit from trends and collective attention.
How can the crypto industry move beyond speculation?
The industry can move beyond speculation by focusing on building applications that offer undeniable utility and a superior user experience that is only possible on-chain. This involves converting speculation-driven users into long-term retained users by delivering real value, such as unique digital ownership, censorship-resistant social platforms, or new creator economy models.
What is the biggest challenge for on-chain applications today?
The biggest challenge is achieving sustainable user retention beyond short-term speculative frenzies. This requires prioritizing product development, creating robust token economies that incentivize long-term holding and use, and designing experiences so compelling that users stay for the product itself, not just the potential for profit.
Is the crypto industry only about finance and trading?
While finance and trading are currently the dominant use cases due to crypto's native connection to value, the underlying technology holds promise for a vast range of applications, including gaming, social media, content creation, and supply chain management. The industry is still in its early stages of exploring these non-financial use cases.
The End of the Prologue
Market sentiment often fluctuates more violently than token prices. The industry has developed to a level where it can operate and evolve without external intervention. However, the next two to three years will be critical in determining whether the industry can realize its Web3 vision and become mainstream.
The first general-purpose blockchain, Ethereum, was launched a decade ago. Despite extensive research, development, and market cycles, it has only recently matured into a technology that can be reliably used by actual users. While token prices and narrative games have propelled the industry forward, now more than ever, the focus must be on products and their impact on real users. The prologue is over; the main story must begin.