IOSG Founder Talks Singapore 2049: Industry Confidence and Innovation at Risk Amid False Prosperity
authorship |Jocy @IOSGVC
This article is the author's personal opinion and does not represent Wu's opinion.
The scale of this Token2049 exhibition is beginning to grow. The number of people has doubled from last year, surpassing 20,000 people. Even Grab's drivers lamented that the number of people attending the crypto event this week seemed to outnumber visitors to F1. Overseas visitors and speakers accounted for more than half of the many events. There is no doubt that this exhibition will be the most successful and profitable in Token 2049 history.
US VC and “Heavenly” Projects Reveal No Real Users in the Industry
Funds that made great strides in the first half of this year (some came up with three valuations in the same financing round), funds and large investors that bought OTC/ Level 2 transactions in earnest at the beginning of the year all began to slow down. The volatile and rebellious nature of the crypto industry is awe-inspiring. The financing market is getting worse, or even very poor. Most of the active investment deals only take place in undervalued and new directions. Fund investor LPs are influencing the VC market. The VC market has stricter requirements and selection of early-stage projects and entrepreneurs, and the problem of financing difficulties for entrepreneurs has become more prominent. At the same timeBinanceRequirements for listings such as exchanges have also been further increased.
The TGE project, which is valued at around 100m and has not yet been completed, abandoned plans to go to Binance because it was too difficult. The infra, which is valued at 300m to 500m, is still undergoing difficult financing (basically, it can be said that investors are unstoppable). And for those projects that have already completed TGE, FDV dropped an average of 80% compared to the last round of VC valuations if the initial launch strategy was poor. Liquidity projects on Binance are still looking forward to a reversal in the bull market, while projects that are not on Binance have already begun planning new projects or the next phase of work.
The industry calls for real users and new funding, and innovation support is in jeopardy
Everyone is busy in this industry. Some use false data and revenue to deceive exchanges and investors, while others are constantly discussing academics in the technology community but forget that good infrastructure is to obtain applications and users. The exchange has become the biggest winner because it has a good revenue model, providing the best working environment and income level in the short term, but it makes it harder for startups to obtain outstanding talents. This is a bit like the boom of the 2049 conference, where few people are discussing how to get real users and revenue, and a stable and sustainable business model under the Shengshi boom.
Altcoins are likely to perform worse than expected, forcing industry participants to re-examine innovation and real-world use cases. The interests of VCs, exchanges, project parties, and retail investors are not consistent, and all participants are harmed by the market. The four parties have no trust or cooperation with each other at all. Without reform, they will only reach a dead end, unable to let new money and talents/users come in. Even if Bitcoin succeeds, the entire Web3 industry will still fail.
Here, I am advocating adjustments to the utility of tokens and unlocking terms. The investment lockdown period for traditional IPOs only requires 6 months to 1 year. For investments in ultra-early crypto seed companies, the overall liquidity lock is actually 3 to 4 years. Most of the project tokens did not have any utility. In the first half of the exchange's launch, market makers were willing to set the market and adjust prices, but after that, no one cared for the price, and no one was responsible for retail investors who bought in the VC and secondary markets. After countless damage and loss of money, it would greatly damage more people's support and confidence in innovation.
If everyone is fooling themselves and expecting a big rebound in the bull market, but don't think about what kind of application scenarios let real users enter, then they will fall into a situation where they sit back and forth. People who enjoyed the early dividends of the industry don't understand human suffering. America's largest 16-letter fund formed its own. The 10-year ten-dollar fund allows them to survive well without cooperating with any institutional/market force, and most successful founders don't care about young entrepreneurs like they were 5 or 10 years ago. However, the industry is at a difficult stage, and we need these successful forces to point the direction and bring faith, so that more people can persevere and see the dawn of the next bull market.
This time, I learned that their biggest internal principle and consensus is to find long-term entrepreneurs. In the past, some founders who falsified data chose to cash out and lay back after a successful launch, leaving a bunch of claims for the community, while entrepreneurs with long-term ideas are committed to growth and finding more reliable, effective and sustainable business scenarios at any stage.
EthereumWhere to go (return to actual application scenarios and avoid false prosperity)
After “The Merge” switched to PoS, Ethereum actually entered a 20-month deflation cycle due to a drastic reduction in ETH issuance and the existence of a burning mechanism. However, due to the slump in L1 transactions over the past few months, the L1 gas price has been in single digits for a long time, causing ETH to return to the inflationary trend, and the total supply is likely to return to the level of “The Merge” in the near future.
IOSG continues to be optimistic about Ethereum in its investment strategy, and we haven't found a more successful technology ecosystem than Ethereum. The TVL of the overall ecosystem of Ethereum grew from about $34b a year ago to $88b, with a growth rate of 159.5%; this significant increase further indicates the possibility that Ethereum will drive new innovative projects in the future.
But in reality, a large number of airdrops and liquidity mining are driving the false prosperity of Ethereum. The actual number of users brought by airdrops and incentives is limited, and people have begun to hate airdrop customer acquisition strategies. Third-party research showed that the user churn rate was as high as 80% after the airdrop ended, which was not beneficial to the founders or the project. Take Friendtech as an example. This was an influential and eye-catching project in the market before, but with subsequent token launches and no price maintenance, all users abandoned the app. The restaking circuit also experienced similar bottlenecks. After the airdrop ended, TVL withdrew or switched to a new agreement.
According to the latest Metamask monthly active user data, it fell from the peak of the bull market of 30 million to 1 million, marking a significant decline. The EVM-compatible L1/L2 chain also saw a 50% drop in user activity. This fragmentation of liquidity has led to a wide dispersion of applications, developers (asset issuers), and users. Developers and users are rapidly moving to chains with subsidies and memes. Liquidity between different chains and L2 is too fragmented, and high-performance chains are not bringing high-performance applications.
Ethereum is experiencing an unprecedented challenge. Since the launch of the ETF, there has been a net sell/ capital outflow of more than 1.2 billion US dollars. From Ethereum core researchers/EF to developer community organizations, to Consensys-related commercial companies and external investors, there is a huge crisis of trust. V God needs to better indicate direction and goals for different participants, because Ethereum is already a very large decentralized commercial entity in the entire crypto market or even in traditional markets. There has never been such a commercial entity in history, and the test for the entire Ethereum community and God V will still be tested It's getting more and more serious, and even to the point where it's unbreakable.
The most discussed ecosystem in 2049 this time was actually the Ton ecosystem. Of course, currently Western funds are generally not optimistic or optimistic about Ton and Web2 platforms. They are not optimistic, but they have not answered the question of investing/not investing. However, it is obvious that in this difficult cycle, Ton has brought new vitality to the crypto market. There are about 3 million real gamers among 900 million monthly active Telegram users, and the customer acquisition cost for each Ton user is 0.7 US dollars. It is likely that Ton's model of bringing new users from Web2 to Web3 will also be used in the growth of new L1/L2. It is expected that these platforms will allocate a specific budget to subsidize this portion of user growth. At the same time, we can also see an opportunity. After the strategic deployment of the crypto finance ETF is completed, the US will begin to consider allowing technology companies' applications to access and penetrate Web3, and the one-stop experience where users are unaware of the chain will become the new standard.
Over the past two years, 90% of Gamefi projects were launched after listing (compared to the last round of VC investment round valuation), and it seems that all 3A games/full-chain game/Degen gaming community platforms have been abandoned by retail investors. Of course, Pirate Nation, which A16Z invested in at the beginning of the year, and Small Brain, which recently completed financing, still have a good community base. The game circuit has become extremely difficult, and all participants are losing confidence. Crypto games use a more difficult model to force participants to leave or make more innovative products and fun games. Of course, we are still continuing to find teams that believe in games and have a consensus on the Crypto market.
About 5 years ago, when we visited Ethereum's official website, we were finally able to see a list of several other L1 competitors to let everyone understand Ethereum's shortcomings or problems in a completely open, transparent and comparative manner. Today, Ethereum is more powerful than ever before, but how can we make this network more open and diverse, a problem we urgently need to solve?
Solana's BreakPoint was well received by the community! It shows that the Solona community is extremely motivated and more pragmatically pursues user growth and exit. I think Ethereum is worthy of being on par with Solana in these directions in understanding the core developer community and educating the mentality of users.
I hereby appeal to more successful people who have received industry dividends to pay more attention to the root problems currently faced by this industry, support the construction of public goods, and create a better environment for business innovation for these long-term entrepreneurs. IOSG will also take the lead in setting an example, providing support from 0 to 1 for early entrepreneurs in the industry. It will also continuously reflect and iterate on its own investment thesis to guide entrepreneurs to think about new business models and customer acquisition methods. The industry must not always be covered by homogenization and matrimony; more innovation is needed. In this cycle, it is more about faith that tests the community!
At the same time, in 2049, we also saw more founders involved in Web3 startups from traditional AI, Computing represented by Gensyn and Hyperbolic, Web2 type All in players represented by Schelling AI, and Title.xyz, an image/video generation model dedicated to the Midjourney art style, AI+Consumer+Depin is becoming an active bet for industry funds A new racetrack. I hope my peers and exchange listing teams can focus more on long-term entrepreneurs. Supporting these talents will definitely bring better use cases and growth to the industry, stay optimistic and move forward!
