Opinion | After the price crash, are art, running, inclusive finance, and Web3 still important to you?

With each bull market cycle, new believers enter the scene. Phrases like "Blockchain brings inclusive finance," "Cryptocurrency enables asset redistribution," and "Web3 is the future" resonate once again. As the tide recedes, blockchain and cryptocurrency become the target of widespread criticism as Ponzi schemes. Is each cycle just a different packaging of the same logic? Amidst the ups and downs, what are the key issues that need to be addressed?

We have compiled insights from dForce founder Yang Mindao, renowned blockchain writer 0xSoro, and cryptocurrency investor 0xHamZ. Their questions and perspectives on cryptocurrency development can shed light on our understanding of "Web3 applications" and "token economics."

Distorted Web3 Applications Due to Financial Attributes

dForce founder Mindao Yang recently discussed a point worth considering about "Web3 applications." He stated:

"One issue with Web3 applications is that behaviors are highly correlated with token prices, leading to the alienation of behaviors themselves, depriving them of their intrinsic joy. This contradiction is extremely difficult to reconcile." He seems to have been inspired by the popular trend of playing blockchain games like Stepn. In fact, many believe that Stepn's model represents the breakout of Web 3 applications.

However, so-called Web3 applications seem to find it challenging to escape the innate financial attributes of cryptocurrencies, where the motivation behind "behavior" is often related to money rather than purely for "fun" or "exercise." This is also the contradiction faced by blockchain games in balancing the enjoyment of gaming and profit incentives. He expressed: "When prices drop, many people develop a physical aversion to running; with learn-to-earn, seeing an English word can be infuriating; when items drop in value, the game becomes unappealing. If NFT prices fall, even aesthetics change, monkeys suddenly look ugly; when coin prices drop, every word feels like a heavy blow."

The author believes that regardless of the market's good times, there are many praises and imaginations beyond "price" for these applications, such as art, health, games, communities, etc.; however, once the profit expectation is lost, or even results in losses, the glamorous filters for these applications quickly disappear. So, are the true attractions of these applications really as convincing as we make ourselves believe? Or is the most fundamental motivation from beginning to end solely "profit"?

For existing industries that have not yet adopted Web3, such as art creators and game companies, perhaps the "distorted nature" of Web3 is a true "threshold." Yang pointed out: "Many Web3 applications belong to scenarios of behavior monetization, this process of commodification also involves a process of moral degradation, which is not a benign behavioral model; this is probably also the reason why many traditional gamers and artists resist GameFi/NFT. Moral commodification is an inherent contradiction in x to earn applications, driving significant growth during the upswing; on the other hand, accelerating user aversion/defection during downturns, a phenomenon tentatively referred to as Web3's double paradox."

[Note: The double paradox Antinomy refers to the phenomenon of two theories or doctrines forming contradictory theories or beliefs about the same object or issue, simply put, self-contradiction.]

Side Effects of Web3's Open Financial Market

Renowned blockchain writer 0xSoro @realsatoshinet mentioned the side effects of the Web3 token economy in response. He stated: "In the traditional market, projects stack rounds of VC funding, and when the project valuation grows successfully, it goes public, with retail investors coming in at the final stage, a relatively open separation between users and speculators: those trading stocks are in the stock market, and a stock price drop won't excessively affect users of the app. The overlap between stock traders and users is not that high."

It seems that 0xSoro believes that the identities of investors and users in Web2 do not influence each other as much. The author agrees that this is indeed the case, and the impact is significant in the opposite direction. The token economy indeed brings significant changes to new venture financing and rapid user acquisition and expansion in the world of Web3; however, it is the overlap of the "product" and "equity" mediums that allows the token economy to prioritize maintenance over product optimization, or perhaps the token economy is the product itself.

0xSoro mentioned that he is unsure whether this state is progress or regress. He even questions whether the financialization attribute of blockchain will evolve into a more intense form of crypto capitalism than in past history.

Did Cryptocurrency Deconstruct Ponzi Schemes?

Renowned cryptocurrency investor 0xHamZ @0xHamz recently made remarks that challenged the common perception that "if the US stock market rebounds, cryptocurrencies will also bounce back," dealing a strong blow. He stated: "Discussions on relevance require a flow framework. Stocks can attract buying interest as funds flow from assets like bonds and find balance, while cryptocurrencies rely on newcomers." He went on to say that this is why stocks can rise even when cryptocurrencies are stable or falling, rather than the expected "decoupling."

0xHamZ believes that stocks have cash flow exceeding spending, allowing for more flexible liquidity withdrawal in the face of buybacks and perceived value. However, the high-quality collateral rates, token production, and security expenses of cryptocurrencies make their spending exceed earnings, making cryptocurrency prices highly sensitive to liquidity changes.

On the same day, Mindao Yang also discussed the topic of "Ponzi schemes," but he did not express such pessimism about cryptocurrencies.

He stated that cryptocurrency is an extreme paradigm of financial deconstruction, which also deconstructs Ponzi schemes themselves.

"Unlike traditional Ponzi schemes, crypto's composability blurs the internal and external boundaries, allowing even Ponzi schemes to efficiently transition from internal zero-sum to external gains, achieving system stability, with Bitcoin and Ethereum being prominent examples." He believes: "Time is a determining factor, and in the long run, many financial products in the fiat world are Ponzi schemes."

Due to the Terra incident, he believes it is easy to see the difference between the cryptocurrency circle and traditional ones. "In traditional projects' collapse, it is difficult to transform or recover because the internal system collapses, making it impossible to transition externally, with clear boundaries between life and death." However, the cryptocurrency circle is different, as everything in the circle can be financialized, with blurred boundaries between life and death. Even tragedies and bankruptcies can be tokenized, hijacking exchanges and old token holders, then introducing external trading partners to continue the game, allowing time to smooth over everything.

Rise and Fall

From ICOs, DeFi, NFTs to GameFi, has each wave truly departed from the "robbing Peter to pay Paul" pattern? Founders attempt to increase funding efficiency, attract users with different reward models, retain user funds in various forms; investors expect faster returns and higher capital utilization. Under different narratives, these two roles are iterated and replaced by different people. The overall cryptocurrency market today has strong composability, expanding in unison, connecting complex mechanisms and shared interests; when the tide recedes, it contracts and collapses, with funds flowing back.

You cannot deny the significant help DeFi and NFTs have provided for financial innovation and creators; however, finding more benefits beyond "investment speculation" is also a key challenge for the widespread application of cryptocurrencies, isn't it?