From “Looking Up” to “Looking Straight” — How I Demystified Web3

Author: @LiamWang88 Independent Web3 Researcher

I first heard about and participated in blockchain in late 2017 and early 2018. At that time, I was working in a large Internet company. Thanks to the inherent advantages of Internet companies in trying new technologies first in their business and the relatively strong programmer atmosphere, I had the opportunity to get in touch with blockchain relatively early. At that time, I often hung out with a group of programmer friends, and the most common topics they talked about were: "Bitcoin", "mining", "ICO", "air coins", etc.

I don't come from a technical background, so what they said at the time was completely confusing to me. But because I come from a content background, my intuition tells me that blockchain is a very different technology.

So, I started to read the Bitcoin white paper and the Ethereum white paper. I remember very clearly that one night I read the English version of the Bitcoin white paper 10 times and didn't understand it. I only remembered the title: "Bitcoin: A Peer-to-Peer Electronic Cash System". This title was deeply engraved in my mind, and my intuitive feeling was three words: awesome!

This is where it all began. Or to use a more popular phrase on the Internet: the gears of fate began to turn.

Interestingly, although I started to learn about blockchain from Bitcoin, I listened to my friends' advice and started playing with air coins. As you can imagine, I did not escape the fate of being a leeks.

So at that time, my attitude towards blockchain was very contradictory. On the one hand, like many people, I thought it was a new scam to cut leeks - in fact, at that time, there was indeed such a situation; on the other hand, I felt that at least the concept of Bitcoin was very new, indicating some possibilities in the future.

In the following 2019-2020, I did not participate too much in this industry, but only as a learner and observer to understand the development of this industry. Until now, I still think that "learner" and "observer" are the most suitable labels for myself.

2021: Immerse yourself in the beauty of Web3

If 2017-2018 was a "dragonfly-like" experience of blockchain, then 2021 can be said to be a year of "deep personal experience".

That year, I worked in a US dollar fund. Thanks to the platform advantages of VC work, I had more opportunities to learn about the development of cutting-edge technologies and emerging fields. Coincidentally, it was also this year that the crypto market ushered in a bull market, and "Web3" replaced blockchain and began to become a new narrative.

If I recall that bull market, what can I think of immediately? There are several things that impressed me:

• In early 2021, Bitcoin reached a market value of 1 trillion US dollars for the first time.

• Large companies like Tesla disclosed their holdings of Bitcoin.

• An NFT work "Everydays: The first 5000 days" by artist Beeple was sold for $69 million.

• Basketball superstar Stephen Curry spent $180,000 to buy a BAYC NFT. Yes, you read that right, $180,000.

• El Salvador passed a bill to make Bitcoin a legal tender.

• DAO — a new social organization model for Web3 is beginning to emerge.

Looking back now, the entire mood of the Web3 industry that I have personally experienced in 2021 was very high. This upsurge is reflected in:

1. Investment and entrepreneurship are hot

Because I am in the VC industry, there will be many opportunities to communicate with investors and entrepreneur friends. Throughout the process, Web3 will always be a topic that will not be absent. At that time, I saw many investors begin to leave the traditional investment field and transform into Web3.

Not only investors, but entrepreneurs are the same. In traditional VC investment, senior talents from large companies are often the first choice for investment. But in that year, I also saw many outstanding talents from large companies begin to flock to the Web3 field to start businesses.

When I asked investors and entrepreneurs who have invested in Web3 about the reasons for choosing Web3. A common answer is: the Web3 industry is like the Internet in the 1990s, it is a blue ocean, and the sooner you occupy the ecological niche, the more industry dividends you can get.

Second, the hot speculation

In Web3, speculation is a common verb. Especially in the bull market, speculation is even more indispensable.

1. Speculation of coins, especially speculation of contracts. If you look at it simply from the K-line, the increase in the entire crypto market in 2021 is very sharp. So at that time on social media, you can always see many people showing off their huge earnings and sharing their experiences on how to make money easily in the crypto market. There is such information almost every day. If you read too much, it will give people an illusion that it is very easy to make money in this industry. No matter what your professional background and academic qualifications are, if you leverage the bull market and are bold enough, everyone can make money easily.

2. Speculating on NFT. In 2021, the most talked-about thing is undoubtedly NFT. In particular, BAYC's popularity has converted a large number of Web2 users. At that time, the greatest value of NFT, in addition to hype, was to be used as an avatar. If your social media avatar is a bored ape or a CryptoPunk, then congratulations, many people will regard you as an OG or a very powerful person, because usually people who own this kind of NFT are either worth a lot of money or have a good reputation. It can be said that NFT very specifically satisfies the satisfaction of showing off in human nature. So many people around me were speculating on NFT at that time, especially some young friends. Since many NFT castings are not based on Eastern Time Zone 8, if you want to cast an NFT that you like and has a high price hype, you have to stay up late to wait. At that time, the industry jokingly called NFTs small pictures. As for the behavior of speculating on NFTs, the industry jargon is: Have you worked hard today?

3. DAO practice is hot.

Until now, I still think that the emergence of the word DAO in 2021 is a very valuable thing. Because the word DAO means decentralized autonomous organization, compared with the behavior of speculating on assets such as coins and NFTs, DAO's tokenization speculation is relatively less, and more is exploring an organizational form that is completely different from the traditional organizational model. Such an organizational form has three very important characteristics: ① Decentralization, there is no so-called distinction between leaders and subordinates; ② Collaborative work based on consensus and democratic rules of procedure; ③ Remote work can be done, and tasks are completed through online collaboration.

Of course, like the path of many things, DAO also first became popular abroad. At that time, the well-known DAOs were: Bankless DAO (aims to promote the large-scale application and social consensus of a truly de-banked financial system), Pleasr DAO (composed of digital artists and collectors to acquire culturally significant works), ConstitutionDAO (raising funds to bid for a copy of the U.S. Constitution), etc. Later, DAO organizations also took root in China and some experimental DAO organization projects emerged.

Just like the hype of NFT, young people are the main group participating in DAO organizations. They are more receptive to new things. At the same time, many young people at that time called themselves "digital nomads", and organizations like DAO were more suitable for their digital nomad lifestyle.

Looking at it in 2021, I was inevitably affected by the Web3 bull market. My feelings about Web3 in 2021 can be described in one word - immersive admiration. This immersive admiration comes from the high technology represented by this industry — Web3 integrates new technologies such as cryptography, distributed ledgers, and smart contracts. It also comes from the fact that this industry seems to have an easier way to make money than other industries, and from the emergence of new organizational forms such as DAO, exploring the possibility of new organizational forms and new forms of collaboration in the future human society.

If you sum it up in one sentence, it is: everything is beautiful in the bull market.

2022: From admiration to calmness, changes are always lightning fast

If everything is beautiful in the bull market of 2021. Then, 2022 is a year of beauty and disillusionment for the crypto market.

Too many historic events that can be remembered in the crypto industry have happened this year:

• In May 2022, the public chain Terra exploded, and the Luna token returned to zero overnight.

• In July 2022, Three Arrows Capital, a leading investment fund in the crypto industry, filed for bankruptcy protection.

• In November 2022, the leading exchange FTX was exposed to have misappropriated user funds. From the discovery of the problem to the declaration of bankruptcy, the whole process took only a few days.

Although there were some positive events that could give people comfort this year, such as the Ethereum consensus mechanism completed the transition from PoW to PoS. But the occurrence of the above events can be said to be the darkest moment in the history of the crypto industry, and it also directly set the tone of "depression" for the Web3 industry in 2022.

I no longer hear those inspiring and emotional news, but more disappointing and terrible voices: XXX suffered heavy losses in currency speculation, XXX withdrew from the circle, XXX project stopped operating because of lack of financing, and XXX crypto fund stopped investing. No one is discussing which coin is worth speculating, no one is discussing whether NFT will rise or not (on the contrary, everyone is selling, but because NFT liquidity is too poor, many NFTs are basically zeroed in their hands), no one is discussing what DAO will do next, and no one is discussing how to mass adopt in this industry. The entire industry has quieted down, or to use the word I said above, the entire industry has fallen into depression.

Like many people, after witnessing and experiencing so many thrilling and ups and downs in the industry, I have also begun to break away from the mood of admiring Web3 in 2021 and slowly become calm:

On the one hand, the huge fluctuations in the crypto market have shown me that people who set foot in this field not only have the ecstasy of getting rich overnight, but also the regret of huge losses overnight. Especially for those who increase leverage and speculate on contracts as spot, they regard Web3 as a destiny field of "taking a chance to turn a bicycle into a motorcycle".

On the other hand, the problems exposed by this industry, such as the opaque use of funds and the lack of effective supervision, have really hit people's confidence in this industry. Although for a long-term development, the sooner such a problem appears, the better, it does pour a bucket of cold water on an excited mood, allowing everyone to begin to look at Web3 objectively and calmly.

Finally, for those attempts that I think have more social value, such as further exploration and discussion of the DAO model, and promoting charity and environmental protection through tokenization, they did not make great progress this year, but fell into silence along with the trend of the crypto market industry.

For a while, I have been thinking about a question: Why are there so many new people entering the circle in 2021? I think media like NFT have played a big role because it has expanded the application scenarios of Web3 (even if it is just as an avatar), allowing more Web2 people to intuitively feel NFT and Web3. The problem is that when everyone comes into contact with NFT, they will immediately realize that this is an investment/speculative product. So overall, Web3 is weakly combined with real-life scenarios, and the core is still in asset attributes or financial attributes - creating more tokenized financial derivatives to attract and enhance the liquidity of capital, and create more investment and speculation possibilities. So at that time, I thought that if Web3 really wants to develop as an industry in the long run, it must take into account the balance between financial speculation and application scenarios.

2023: The market is recovering, but it can't go back to the past

After the bear market in 2022, 2023 can be said to be a year of self-healing in the crypto circle. This year, the price of Bitcoin has slowly climbed from $16,000 per coin at the end of 2022, and mainstream exchanges including Binance have begun to increase investment to promote compliance operations. But when I talked to some friends who invested in primary projects, they chose to configure the secondary or continue to wait and see. As a friend said to me at the time, "The prices of mainstream coins in the secondary market are so low now, why should I invest in primary projects with high uncertainty?"

At the same time, I originally thought that as the market slowly recovered, the discussion on Web3 on social media would heat up again. I remember that during the bull market in 2021, a small social platform, Moments, gathered a large number of people interested in Web3. In the circle of the Web3 Research Institute, if you post a dynamic, you will get a lot of likes. But when I opened this social software again in 2023, I found that some people or project parties who were often active before no longer posted updates, and some new posts had almost zero likes and comments. Everything seemed to be unable to go back to the past.

So in this year, I began to consciously communicate with many people, including people outside the circle, people who had just entered the circle, and players who had a lot of experience in playing DEFI and MEME. When I asked them about their views on Web3, I got a coincidental answer: Web3 is a casino that cuts leeks, and the key is to see who is the leek.

Based on the feedback from communicating with them, I began to have the idea of ​​publishing a book, hoping to give more people an objective introduction to the development of Web3 at that time, so that I and those who want to understand and enter this field can look at Web3 at eye level, rather than putting a subjective good or bad prejudice on this field. So, I and more than a dozen friends in the circle — they all have deep professional backgrounds and knowledge accumulation in their respective fields, jointly published a Web3 popular science book "From Technology to Application: Ordinary People's Web3 Learning Manual", which was officially published at the end of 2023 and received a lot of praise. Looking back now, although only half a year has passed, the chapter system and framework in the book are far from enough to cover the current status of Web3 development. I admit that my attitude towards this industry has changed a lot, but what remains unchanged is that this industry is still developing rapidly at its own unique pace.

2024: The bull market is back, is Mass Adoption still far away?

At present, the bull market in 2024 is a sure thing. In this year, two major events have become catalysts for the continuous rise in the price of crypto assets: one is that the US SEC approved the issuance of Bitcoin spot ETFs, which means that more and more Wall Street funds will flow into Bitcoin, directly pushing up the price of Bitcoin and even other crypto assets; the second is that Bitcoin will experience a halving cycle. From historical experience, every halving of Bitcoin will drive a bull market, and this year is likely to be no exception.

Based on my own observations, I also compared this round of bull market with the bull market in 2021 to see what is unchanged and what has changed.

What remains unchanged is:

1. The bull market amplifies the power of speculation. In 2021, NFT was a speculative product, and in 2024, MEME coins became a unique speculative product. In my opinion, there is no right or wrong in any speculation related to assets. After all, the traditional stock market also has short selling and long selling. It's just that the crypto market is too volatile and lacks effective supervision. Therefore, in the bull market, when the speculative game of each participant is aggregated into a K-line, it will be infinitely magnified.

2. Tokens still need better liquidity and the ability to make money. In addition to NFT, GameFi and SocialFi are also the tracks that attract attention in the bull market of 2021. The unique tokenization attributes of Web3 need to rely on specific tracks or businesses to better realize the flow of tokens and create more assets. The same is true in 2024. On the one hand, the Bitcoin ecosystem has been hyped up. From inscriptions to runes to Bitcoin Layer2 and Bitcoin re-staking protocols, Bitcoin has gone through almost everything that Ethereum has gone through. On the other hand, re-staking projects based on Ethereum have become a hot topic. Since Ethereum transformed from POW to POS in 2022, which resulted in staking, what people want today is far from the income from staking, but how to continue to improve the efficiency of capital utilization on the basis of staking to obtain higher returns.

What has changed is:

1. The paths of Mass Adoption have become diversified. In 2021, everyone placed the Mass Adoption mission of Web3 on games, social networking and other projects, but the results did not meet expectations. In 2024, Web3 and AI are increasingly combined, and they are also beginning to combine with offline physical infrastructure to shape another narrative DePin, hoping that "curve-saving the country" can achieve the goal of Mass Adoption. From this perspective, Web3 needs AI or the Internet of Things more, rather than AI and the Internet of Things need Web3 more. In addition, in my opinion, the passage of Bitcoin spot ETF and the acceptance of crypto asset donations in the US presidential election have shown that crypto assets have become mainstream, but this is a kind of Mass Adoption that everyone can have, not a Mass Adoption that everyone needs.

2. The importance of MEME culture in Web3 is further highlighted. In the decentralized world of Web3, I think it is a spiritual core to believe and maintain what you believe in, and MEME is the direct expression of the original spiritual core of Web3. This is enough to explain why the increase of MEME coins will be better than other altcoins in this bull market.

After experiencing two rounds of bull markets from 2021 to 2024, as I said before, my view of Web3 has changed from looking up to it at the beginning to looking at it flatly now. In my opinion, Web3 is a person or a group of people "selling" an idea or vision and raising funds from the public. Those who agree and participate are rewarded with token incentives, and in order to make the tokens effective or circulate, they are given financial attributes. In simple terms, it is a consensus of a group of people dressed in a financial coat, and then constantly looking for utility scenarios that tokens can empower.

End: How to better gain a foothold in Web3

The above is my understanding of Web3. As I said at the beginning, I regard myself as a learner and observer in this field, so in the process of deep participation and personal experience in the past two years, I have had many opportunities to communicate with friends and practitioners in the circle. I found that many people will face a common problem, that is, when we choose Web3 as the field for future development, how can we better gain a foothold in this field?

This question varies from person to person. After all, everyone will come up with different answers based on their own experiences and feelings. I cannot call myself a Crypto native because I have more experience in Web2, and I have no experience in working in well-known Web3 projects or investment institutions for a long time, so it is difficult to say that I have any outstanding achievements (although my personal investment rate of return is OK), but fortunately, in the past two years, I have met many practitioners in the industry and learned a lot of experience. Combining my own experience with that of my friends, I would like to share my comprehensive views:

• Don't enter this circle with the mentality of speculating in coins. This industry seems to have many opportunities to make money, but in fact, there are not so many. I have heard of a saying before that there is a pyramid model for making money in this field. The first is to gather together to do projects or plates; the second is to do VC investment; the third is to do arbitrage and quantitative strategy traders; the fourth is to invest after investment research; and the fifth is to hoard coins. My own experience is that those participants who often speculate in coins may not have a high rate of return, but traders who do arbitrage and quantitative strategies and investors who foolishly hoard mainstream coins will have a stable rate of return. The former is because of professional ability, and the latter is because they believe that mainstream coins such as Bitcoin have long-term value that can cross bull and bear cycles. Therefore, in Web3, for most people, having a sustained and stable rate of return is far better than frequently speculating in cryptocurrencies to get a high risk and high return.

• Judge people with the greatest goodwill. Web3 is a relatively mixed field. Since everyone's purpose of entering the market is different, and since many communications and collaborations are based on virtual online methods, the cost of trusting people or projects is relatively high. If you have found a team that you can work with for a long time, then congratulations, you are lucky. If you haven't found it yet, it doesn't matter. In the process of communicating and trying with different people, although you will encounter some disappointments, you will find like-minded partners to do something with you in such an experience. The more liquid and trust-cost-intensive the field is, the more you should judge people with the greatest goodwill.

• Do Your Own Research. This is the most widely circulated sentence in Web3, and it is recognized by everyone as a very valuable suggestion. Because there are all kinds of people, speeches, opinions and information in this field, when we try to guess people with the greatest goodwill, we also need to form our own independent thinking and judgment in a dazzling environment, so as to form our own thinking mode and professional investment methodology. Please remember, don't be kidnapped by emotions, don't be kidnapped by other people's CX, everything needs DYOR.

I wrote this article, to some extent, to summarize my change in cognition of Web3 for a period of time. Because this field provides me with a better investment return rate than other traditional investment products, and also allows me to meet many different people, including real industry builders, powerful traders, and some speculators who want to make a short-term investment. This is a very interesting thing. More importantly, through personal experience in this field, I also realized my niche in this field and how to stick to some of my principles.

Of course, these are based on my own personal experience and feelings, and are not universal. I believe that everyone in this field will have their own cognition, understanding and feelings about Web3. I wish everyone can make money while finding a niche that suits them.