Pima: Analyzing the business model of the cryptocurrency circle and the value path of blockchain investment

Author: Pima

You are in the public chain market orBlockchainWhat is the industry buying?BlockchainWhere is the way out for the business model?

The performance of the copycat market that is lower than expected has caused many people to have industry concerns. In a complex environment and at different stages of industry development, it is inevitable that investment difficulties will increase, but the fundamental problem lies in finding a business model for the long-term sustainable development of the project.

Ten years have passed, and I’ve found that many people, even those who have been in the industry for a long time, still don’t quite understand why public chains have always dominated the TOP100 list, and why the top public chains with billions or hundreds of billions of funds are flocking to them, while your coins with only millions or tens of millions are deserted. I personally like to simplify complex things, so I’ll try to analyze them.

From the first principles, P=E*PE, that is, stock price=profit*valuation, so in the long run, the only factors affecting stock prices are profit and valuation;

First, valuation PE. This is more complicated, and there are many influencing factors, such as growth/interest rate/penetration rate/industry space/how much the central bank releases/monopoly, etc., which are all factors that determine people's different valuations of different stocks in a certain period of time. Idol Buffett said not to buy BTC because BTC has no cash flow (you can think of cash flow as profit). In the long run, I feel that most of what he said is right, but in the above stock price formula, only profit E is considered, not valuation PE. So from another perspective, MEME/BTC are both in the same category and can be attributed to the PE factor. As long as your MEME keeps attracting people to buy, your MEME can rise to a certain stage without creating cash flow by itself, but there is a very important premise: within a certain market value. The larger the market value, the more people you need to attract, and without continuous cash flow support, it is very difficult to sustain.

Second, profit E, we will mainly discuss this. Profit comes from revenue, so if the stock price is to rise, revenue must increase.Xiaobai NavigationWhere does the revenue come from? It is the business model. By definition, it is a business activity that makes a profit by providing goods or services to others. In simple terms, it is how your companymake moneyof.

In 2006, Duan Yongping paid $620,000 for a lunch with Buffett. He asked a question that had been bothering him for a long time: What is the most important thing in investment? Buffett answered that it was the business model. If a company does not know how tomake moneyIt is impossible to maintain long-term sustainable development. The core driving the continued rise of the Seven Sisters of US stocks is profit, not other short-term factors.

The question is, what is the business model of the cryptocurrency world?

In my opinion, it is nothing more than: block space fee; SWAP fee, which isexchange, including DEX/CEX; lending, interest rate spread; stablecoin, pumping; MEV, parasitic on block space. The others are easy to understand, let’s just talk about block space fees.

In fact, it is very hidden that the cryptocurrency circle has created a brand new business model: selling block space, that is, the public chain charges GAS fees and charges block space fees. Global consumers purchase access and storage rights to global computing/bandwidth resources at a basic price for each transaction.

I didn’t understand the word “value” in the past. We know that most of the information on the Internet is free, such as pictures, text, videos, etc. One piece of information can be copied infinitely. Therefore, in the early days of the Internet, people did not know how to make money. Later, they gradually discovered the business model of the Internet, including SaaS subscription services.make money, advertising, transactions (e-commerce) to make money and so on.

ThatBlockchain的商业模式在哪？币圈的价值互联网我后来搞清楚了，就是付费互联网，你每点一下，都需要付费GAS。区块链的初衷是解决货币属性问题，跟免费互联网是有非常大的区别，你不能一份钱拿来无限复制重复支付给其他人，免费互联网解决不了货币问题。

Therefore, in the process of extending from currency to public chain, its uniqueness lies in that it makes consumers bear the cost of accessing block space. In the past few decades of the Internet, companies have rented machine computing resources to pay AWS bills in order to provide products and services to customers, thereby charging fees to make profits.

This is great for applications on the blockchain: users pay for the running costs of the project. Every year, global consumers pay billions to tens of billions of dollars for GAS, which is the revenue of the public chain. If the annual income is 10 billion, the yield of 5%'s national debt, with a PE of 20 times, is a 200 billion market, 10 times PE is a 100 billion market, and 50 times PE is 500 billion, so this is the fundamental reason for the huge public chain market.

For example, the current USDT issuance on TRX has reached 60 billion, thus occupying half of the entire USDT market. I looked at TRX's annual revenue in 2023, which was about 400-500 million US dollars, of which 75% were USDT transfer income, that is, 400 million US dollars in profit. If we give a 20x PE, the valuation of TRX at 8 billion is reasonable. Of course, this is not the point. The point is, can this data be expanded tenfold in the next ten years or far more than tenfold? How much future incremental market share can SOL's payment/open finance grab? We are going too far, and we will not further expand on the topic of expansion here.

You have to understand that I am only trying to explain why the public chain market is huge, that is, I am only explaining the existing phenomenon that you are willing to pay for GAS fees. I did not go further and go into why you should pay for GAS and why more people will pay for GAS in the future. The need for transfer payment? The need to get rich quickly (hoarding GAS)? The need for entertainment (paying for a certain DAPP)? The need to trade coins/commodities/stocks/SWAP everything? You have to know that if no one pays for GAS fees in the future, the public chain market will not exist.

So nowadays, we often see some fancy terms. I don’t know whether it is because the cryptocurrency industry is in its early stages of development or because it is difficult to implement and visualize. The promotions are all abstract terms that are difficult for ordinary people to understand: scalability, ZK technology,L2, UTXO, chain abstraction, modularity, homomorphic encryption, parallel EVM, etc. Because I did not participate in the early development of the Internet, I did not know until later that the words modularity/monopoly chain all originated from Internet technology, but few people mentioned it in the Internet field. Instead, it was repeatedly promoted as a focus in the currency circle. I am now very resistant to the words of narrative. Basically, after being familiar with the basic concepts, I directly ask: How much revenue can this technology bring me? How much profit can I generate for repurchase? Otherwise, what is the market fit of your technology? I can support the long-term development of basic technologies/basic disciplines, but tell me how long it will take to get a clear business model? Two years, ten years or twenty years? How to increase revenue GAS in the future and who can occupy the top market share are more complex issues that you should consider. Although I have already selected $SOL

Therefore, since the public chain is a product with revenue, cash flow and profit, its business model is clear and has a solution. What remains is for you to decide how to expand revenue, increase market share, reduce costs and other actions that are in line with the business development path.

Many projects in the cryptocurrency world have no business model, that is, they don’t know how to make money. The survival rate of the world’s top 500 companies is only 3%. Investment is about whether you can find these 3% projects and hold them for a long time. Many investment concepts are very simple, but it is very difficult to put them into practice. There are tens of thousands of projects in the cryptocurrency world in the future. How can you invest if you can’t see the value? Be serious, invest.

How long will a person live when the river is clear? Be less mysterious and unrealistic, and be more down-to-earth, otherwise you will not have much time left.

The article comes from the Internet:Pima: Analyzing the business model of the cryptocurrency circle and the value path of blockchain investment

Related recommendations: ZKsync official responseCommunityQuestion: Why are some addresses with 0 transactions still allocated?

Real users are often not afraid of risks, especially when they feel they are part of the community. Author: ZKsync 1. How to qualify for this airdrop? There are two ways for an address to qualify for the 17.5% airdrop: 1. User (89%): ZKs that bridge crypto assets to ZKsync Era and meet at least one of the seven eligibility criteria…