Because I have been busy recently, I have been procrastinating 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, gaming, learning, and running projects. Various types of X to earn have been popular for a while, 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, you are required to invest/purchase a certain type of item, which can be shoes, NFTs, pets, or passes. Then you will receive dividends in governance tokens/air tokens.
In short, in my opinion, X to earn is not a revolutionary innovation, and there is 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 project it is, the fundamental framework is that users need to invest real money (ETH or USD) and then earn distributed air tokens/governance tokens.
Can such X to earn projects make money? To be rigorous, whether you 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 similar to blockchain Ponzi schemes, or more positively, FOMO projects. But the act of investing money to earn dividends is fundamentally within the scope of Ponzi or CX, and it is not directly related to technological development. It is 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 on 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 game rules 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 for 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. In the end, it is a loss.
Quoting 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 continuous 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 the long-term dimension, 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 for 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. But 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 heat, FOMO effect, and strong investment willingness.
I hope everyone can flexibly apply this method.
Conclusion
Finally, I would like to share a small concept, teleology. Teleology means 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, a series of positive factors are summarized to find reasons for the rise. But when the market falls, people 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 this project was undervalued. But if this project with low PS/PE falls even more miserably, you will explain that this 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 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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