What are the three key factors for the growth of the Web3 industry? Cryptocurrency analysts provide a unique analytical framework.

Cryptocurrency researcher Ignas believes that the growth of the crypto market is primarily driven by three forces: technological innovation, token issuance, and market narrative. If all three are met simultaneously, one can anticipate rapid growth for the project or industry, allowing for trend judgments in the market.

Key Drivers of the Cryptocurrency Market

Technological Innovation

Technological innovation is the key to progress, bringing unique growth momentum to new projects. Without technological innovation, industries will stagnate and eventually disappear.

Bitcoin started it all, and then Ethereum enabled more complex transactions through smart contracts. The 2017 bull market began with the invention of ERC-20 tokens and ICOs. The last bull market was driven by NFTs and DeFi, with innovations such as AMM, lending protocols, and algorithmic stablecoins.

This shows that technology is usually the primary force driving the market, sparking imagination and creating narratives, as explained later.

The catalyst for this current bull market has seen many potential new technological innovations, including:

• Maturity of Layer2 technology and RaaS (Rollups as a service)
• Account abstraction and intent-oriented design
• RWA
• Bitcoin ecosystem narratives and DeFi
• Re-staking

The advancement of these technologies has accumulated energy in this market cycle, helping to drive market sentiment and fuel growth in the cryptocurrency market.

However, not all technological innovations are equal when it comes to making money; other factors need to be considered simultaneously.

Token Issuance

Token issuance is essentially like printing money, attracting attention from all. Tools for token issuance, such as ERC-20 in 2016 and AMM and staking contracts in 2020, have been powerful, especially the latter's liquidity mining which acted as a catalyst in the last bull run.

Token issuance used to be difficult and expensive, requiring forking the Bitcoin network and having enough supporting nodes to successfully issue new tokens, as seen with examples like BCH and BSV. However, as the industry matures, token issuance becomes increasingly easier.

Similarly, not all technological innovations will translate into profitable tokens. Some technologies are particularly challenging to tokenize and monetize, such as account abstraction or soulbound tokens, while RaaS and competitive chains are well-suited for tokenization, enhancing ecosystem activity.

Market Narratives

Stories capture people's imagination and beliefs, creating a powerful community.

Telling stories gives life to the technology and token economic models, making them something people can connect with, believe in, and become a part of.

Without compelling narratives and belief in the potential of these tokens, there will be little to no drive for new users to join and invest in the ecosystem.

The narrative of Celestia: "Hold TIA for airdrops" is a strong story that helps maintain its valuation, even though few truly understand the significance of the DA technology's data availability.

DA doesn't store historical data? Data availability doesn't mean permanent availability.

The more innovative the technology, the stronger the storytelling capability. Tokens can be boosted through narratives alone, but without real innovation, tokens will be sold off just as quickly.

Rapid Growth Does Not Guarantee Long-Term Success

Whether it's technological innovation, token issuance, or market narratives, having two or all three can maximize market growth momentum.

DeFi has three key pillars. It drove rapid growth at the time by promoting technological innovation through smart contracts and self-custody, converting innovative value into token participation in the market, and creating a strong narrative for building a new financial system.

However, the long-term success of a project still depends on many other factors, including product strength, regulatory risks, brand management, business model completeness, and even unforeseeable black swan events that can affect whether a project can operate long-term.

Terra's UST is a notorious example; it achieved remarkable growth by innovating with algorithmic stablecoin technology and leveraging a massive structure to drive a currency flywheel effect, along with a narrative of 20% APY passive income. It firmly held onto the three pillars but eventually failed.

When evaluating whether a new project has the potential to attract market attention in the short term, this framework can be used for analysis to better understand current market trends.