Because I have been busy recently, I have been neglecting for more than a month. Today, I have a little free time to write some recent thoughts. I am now more active on Twitter, and those who are interested can follow me on Twitter @liuyejinghong_.
In fact, today I mainly want to share some personal opinions. From last year to now, there have been many X to earn projects in the market, including pet-related, game-related, learning-related, and running-related projects. Various types of X to earn have been popular for a period of time, but ultimately they return to the market average over time.
X to earn? Pay to earn!
There are many ways to play X to earn projects, but ultimately they belong to pay to earn (earn dividends after paying). Regardless of the type of X to earn project, it requires you to first invest/purchase a certain type of item, which can be shoes, NFTs, pets, or passes. Then you will receive dividends in governance tokens/air coins.
In short, in my opinion, X to earn is not a revolutionary innovation, and there is even no innovation at all. It is simply putting the traditional Ponzi scheme on the chain.
To participate in such projects, you have to pay the principal first and then earn dividends. Of course, each X to earn project will have its own token economic design, but no matter what the project is, the fundamental framework is that users need to invest real money (ETH or USD) first and then earn distributed air coins/governance tokens.
Can this kind of X to earn make money? To be rigorous, whether you can make money or not is a probability problem. This involves the number of participants (which determines the size and liquidity of the plate), token economic design (which determines the selling pressure and collapse time), and the scale of investment institutions (the willingness of large funds to support the market).
Therefore, I would consider X to earn more like a blockchain Ponzi scheme, or a more euphemistic term, a FOMO project. But the act of investing money to earn dividends is fundamentally not separated from the category of Ponzi or CX, and it is even unrelated to technological development, purely a financial game.
Planned Economy in the Crypto World#
In addition, let's talk about token economic design. I personally believe that this belongs to planned economy in the blockchain. By artificially designing token production and consumption, or initiating buyback and burn plans, these behaviors are all part of planned economy.
Friends who have played GameFi games may have a clearer understanding. Many GameFi games often change the rules of the game and modify the output of game coins to control the token price. The end result is that although the token price looks good, such as a rapid increase, the actual income of users decreases.
For example, by modifying the output of the game through planned economy, the token has increased by 50%, but under the new rules, your output as a user is only one-tenth of the original, so you will ultimately lose money.
To quote a famous saying from my friend Marble: "If planned economy is implemented in the Sahara Desert, even sand can increase by 100 times."
Returning to Market Average#
In fact, in many cases, a hot project is driven by emotions or attracted by high APY. But this is not what I consider to be the value.
I personally advocate the value of blockchain projects lies in "project revenue". Project revenue actually includes multiple aspects, such as protocol fee income or transaction fee income. It is not about the increase in market value of governance tokens or token price.
A sustainable and healthy long-term development project must have sustainable profitability. Of course, many projects will continue to burn money during the development phase, such as liquidity subsidies in DeFi, which is also within a reasonable range. But what I want to describe is a project in a long-term perspective, which still needs to consider project revenue.
I have previously shared a methodology for finding projects on Twitter, and I will briefly describe it here.
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Use Token Terminal to sort projects by market-to-sales ratio or price-to-earnings ratio. Generally, projects with lower multiples have lower valuations.
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Among these undervalued projects, find those that are competitive or have a monopoly in the market. For example, JOE is a dominant DEX on AVAX.
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Combine project news to determine the timing of entry, such as launching a new major version or expanding to other public chains.
The core point is to find undervalued projects based on PS/PE, and combine project track, market information, and candlestick patterns to judge whether to invest or not.
However, it is worth noting that the objective reflection of low PS/PE is the mathematical formula of low, while low valuation is a subjective judgment. Low PS/PE can be understood from multiple perspectives. In this paragraph, I understand it as low valuation. However, in other scenarios, it can also be understood as low PS/PE because it has been abandoned by the mainstream market.
Similarly, in the current context, high PS/PE can be understood as high valuation and a large bubble. But in other contexts, it can also be explained as high PS/PE due to high market enthusiasm, FOMO effect, and strong investment willingness.
I hope everyone can flexibly use this method.
Conclusion#
In conclusion, I would like to share a small concept, teleology. Teleology refers to the philosophical doctrine that everything in nature has a purpose for its existence.
But in the investment or crypto circle, it refers to people finding reasons for the rise and fall. For example, when the market rises, people start to summarize a series of positive factors and find reasons for the rise. But when the market falls, they start to reinterpret what happened and find reasons for the fall.
Just like the method I mentioned earlier for finding projects. When you find a project with low PS/PE and it rises successfully, you will explain that the project was undervalued. But when this project with low PS/PE falls even harder, you will explain that the project has been abandoned by the market.
The point I want to express in this paragraph is that it is completely fine to have subjective opinions when looking at things, but this must be based on respecting objective facts.
That's all for this article, see you in the next one.
Remember, I never give investment advice at any time, and I don't even recommend investing in cryptocurrencies. Sometimes the messages in the background may not be displayed, so you can add my personal WeChat for communication. But please indicate the purpose.
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Author: Liu Ye Jing Hong
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