Produced by: CGV Research Author: Shigeru Blinks technology, a revolutionary innovation within the Solana ecosystem, allows users to interact directly with the blockchain via a simple URL or QR code, eliminating the need for complex wallet setup or transaction processes. This innovative interaction method significantly lowers the barrier to entry into the blockchain world, expands the application boundaries of blockchain technology, and promotes the deep fusion and transformation of the Solana ecosystem with the Internet world. The “Solana Internet” is more than just a new concept; it represents a brand-new network ecosystem. As the slogan on the Blinks official website states: “It’s time to connect Solana to the entire internet.” Through Blinks technology, the vision of connecting Solana to the entire internet is gradually becoming a reality. The CGV research team has deeply analyzed the intrinsic link between Solana Actions and Blinks technology and their potential applications across various scenarios, projecting how this technology can drive wider adoption of Solana and blockchain technology. Understanding Blinks: Why You Can’t Ignore Solana Actions? Before exploring how Blinks technology revolutionizes our interaction with the blockchain, we must first understand its foundational technology — Solana Actions. Just like a skyscraper needs a solid foundation, the convenience and powerful functionalities of Blinks rely on the support of Solana Actions. (1)Actions allow the use of complex business logic (on-chain and off-chain) to build transaction message APIs, which can be previewed, signed, and sent by clients. Native buttons, QR codes, or URLs (Blinks) can initiate Actions. Examples of Actions: Staking SOL to help secure the Solana network, including liquid staking tokens. Allowing customers to scan a QR code to pay at retail stores. Token-Gated minting experiences where only verified users can participate or enjoy specific resources and benefits. Enabling e-commerce websites to accept cryptocurrency payments directly from product pages. Recharging a trading account before margin calls. Integrating blockchain functionalities into gaming platforms for in-game asset purchases and trading. (2)Blinks are a way to interact with Actions. Blinks allow users to execute blockchain transactions directly from URLs, enabling access to decentralized applications from any platform or device. Examples of Blinks: Tipping content creators on social media without complex wallet setups. Minting custom NFTs or participating in governance votes directly from a URL. Allowing users to vote on community policies through links in newsletters. (3)The Relationship Between Actions and Blinks Imagine Actions as a “kitchen” where you can prepare a variety of complex and delicious dishes (i.e., blockchain transactions). You can add various ingredients (on-chain and off-chain logic) and follow recipes (API specifications) to cook. This kitchen is very flexible, capable of making a wide range of dishes to meet different needs. Blinks, on the other hand, are like a “delivery service.” When you have prepared the dishes in the kitchen, you can deliver them to customers (users) through the delivery service (Blinks). Customers do not need to come to the kitchen or know how the dishes are prepared; they only need a simple link or QR code to enjoy these delicacies. In summary, the relationship between Actions and Blinks is akin to that of a “kitchen” and a “delivery service.” Actions are responsible for preparing transactions, while Blinks deliver these transactions to users, enabling them to execute these transactions easily and quickly. This approach greatly simplifies the user experience, making blockchain technology more accessible and user-friendly. Blinks’ “Reducing Jumps”: The Secret Weapon for Solana to Achieve Massive Crypto Adoption? From first principles, Blinks simplify user operations by “reducing jumps,” enhancing user experience, expanding blockchain technology application scenarios, and promoting the adoption of decentralized applications. These features significantly enhance the convenience and usability of the crypto ecosystem, driving broader blockchain technology adoption. (1) From the user psychology perspective, “reducing hops” helps: Simplify the decision-making process: Each hop or additional click increases the user’s cognitive burden and decision-making time. Simplifying the process reduces the user’s thinking time, allowing them to make purchase decisions more quickly. Reduce drop-off points: Each step is a potential drop-off point; users may give up due to long page loading times or complex operations. Reducing the number of hops can significantly reduce this attrition. (2) Looking at successful internet product cases, see how “reducing hops” significantly improves conversion rates and user experience: TikTok’s video shopping feature allows users to purchase products directly within the video through embedded shopping links or shopping carts. In 2023, the number of TikTok users shopping in the US increased by 72.3%, reaching 23.7 million; 67% of TikTok users said they were inspired to make purchases by the content on the platform without the intention to shop; 68% of Generation Z consumers said they are more willing to purchase directly on TikTok. After Amazon introduced the One-Click Purchase feature, the conversion rate increased significantly. Industry experts estimate that this feature has increased the conversion rate by at least 70%. This simplified purchasing process has also been followed by many other e-commerce platforms. About 70% of shopping cart abandonment rates are partly due to complex checkout processes. After introducing the “one-click purchase” feature, the average consumption of users increased by 28.5%, the purchase frequency increased by 43%, and the types of purchased products increased by 36%. The Right Fit is the Best: Recommended Typical Application Scenarios for Blinks (1) Social Media Tipping: Example 1: A famous YouTuber like MrBeast posts a charity challenge video on his channel. Viewers can tip the related charity directly using a Blinks link in the video description. Example 2: Ethereum founder @VitalikButerin shares his views on Ethereum’s future development via a tweet. Fans can use the Blinks link in the tweet to tip and show support. (2) Crowdfunding: Example 1: GoFundMe launches a charity crowdfunding project to support Ukrainian refugees. Supporters can donate instantly using the Solana Actions button on the project page. Example 2: A Reddit community initiates a crowdfunding project to restore a historic monument. Community members can participate through a Blinks link in the Reddit post. (3) On-Chain Voting: Example 1: A well-known blockchain project like Uniswap initiates a community vote via a tweet to decide the priority of new feature development. Community members can vote through the Blinks link in the tweet. Example 2: A Reddit community discusses whether to introduce new rules through a post with a Blinks link for on-chain voting, ensuring transparency and fairness in the voting process. (4) NFT Minting and Bidding: Example 1: Artist Beeple announces his latest work on Twitter and provides a Blinks link for fans to mint and bid on the NFT directly. Example 2: SEND, currently the flagship application of the Blinks ecosystem, was promoted multiple times by Solana’s founder. The series of NFTs became the first freemint NFT project in the Blinks ecosystem, surpassing BAYC and Punks in trading volume and becoming the top project. The token $SEND was oversubscribed by over 700 times, setting a Solana presale record. However, as the community token powering the Blinks ecosystem, SEND still needs more content and time to enrich its story and development. (5) Cryptocurrency Trading: Example 1: In Facebook’s Marketplace, users find a post selling cryptocurrency. Buyers can directly purchase the seller’s cryptocurrency through Solana Actions in the post. Example 2: Famous trader @CryptoCobain shares information about an upcoming meme token via a tweet. Fans can purchase it directly using the Blinks link in the tweet. (6) Token-Gated Content: Example 1: Netflix releases a Token-Gated series, where only members holding specific tokens can watch exclusive content. Members can verify their token holdings through the Solana Actions integrated within the Netflix app. Example 2: Medium, a well-known blogging platform, allows authors to set Token-Gated content, where only readers holding specific tokens can access premium articles. (7) Advertising and Promotions: Example 1: Airbnb posts an advertisement on Instagram promoting its latest travel experiences. Users can book the experience or learn more details directly through the Blinks link in the ad. Example 2: Tesla releases its latest electric vehicle model on Twitter. Users can directly pre-order or learn more about the product through the Blinks link in the tweet. (8) Gaming Interactions: Example 1: EA Sports announces new features for FIFA 23 on Twitter. Fans can directly experience some interactive features of the game through the Blinks link in the tweet. Example 2: Blockchain gaming platform Decentraland announces a virtual world exploration event on social media. Users can join the game directly through the Blinks link and participate in the event. (9) Enhancing Community Interactions: Example 1: A LinkedIn professional community is hosting a discussion on blockchain technology. Participants can join the on-chain Q&A or share their insights through the Blinks link in the LinkedIn post. Example 2: A Reddit community discusses cryptocurrency investment strategies. Community members can vote on the strategy through the Blinks link in the post. (10) One-Click On-Chain Operations: Example 1: UNICEF launches an emergency fundraising campaign on its official website. Supporters can donate with a single click using the Solana Actions button on the website, supporting global children’s education projects. Example 2: Decentralized Autonomous Organizations (DAOs) like Bankless DAO announce events on social media. Members can participate in voting or donate with a single click via the Blinks link, simplifying the participation process. PayFi and Blinks: The Perfect Fusion of Financial Innovation and User Experience It’s worth emphasizing that the financial innovation direction of the Solana ecosystem, PayFi, is highly compatible with the user experience optimization brought by Blinks. PayFi, as defined by Solana Foundation Chair Lily Liu, is a groundbreaking financial concept focused on optimizing settlement times. Unlike DeFi, it emphasizes the advantages of instant settlement, which holds significant value for investment trading and financial markets. Combining Blinks’ functionalities can help promote PayFi in creator monetization, invoice financing, payment processing risk management, and fostering global private credit pools on Solana. Creator Monetization: Creators can monetize their content through Blinks links, allowing users to tip or purchase content without complex wallet setups, providing convenience for PayFi’s creator monetization scenarios. Invoice Financing: Through Blinks, businesses can quickly complete invoice financing operations, simplifying the financing process and improving efficiency. Payment Processing Risk Management: Blinks’ instant transaction functionality can help PayFi achieve more efficient settlement and risk control in payment processing risk management. Credit Loans: Users can submit credit loan applications via Blinks links, with credit pools automatically assessing credit conditions and making real-time loan decisions. Invoice Financing: Businesses can submit invoice financing applications via Blinks links, with credit pools quickly assessing based on business credit data and providing financing services. Cross-Border Credit Services: Users in different countries and regions can apply for and evaluate credit through Blinks links, achieving consistent global credit services. Through these application scenarios, we can see that Blinks is not just a technical tool; it is a bridge connecting users, creators, businesses, and financial markets. The combination of Blinks and PayFi heralds a new era of more efficient, convenient, and secure financial transactions. In mid-July, the Solana Foundation announced a major initiative: a $400,000 grant for open-source developers working on Solana Actions and Blinks Tools. This grant program has officially launched, inviting innovative projects from developers worldwide. Simultaneously, the Send project team launched the “Blinkathon” hackathon series for developers, aiming to inspire creativity in building and promoting the Blinks ecosystem supported by SEND. These initiatives not only provide financial support for developers but also offer a broad stage for the innovation and application of Blinks technology. The CGV team believes that the “Solana Internet” is not just about technology integration; it also represents a conceptual revolution. It embodies the perfect fusion of blockchain technology and the Internet spirit, signaling the arrival of an open, interconnected, and shared digital world. As Blinks technology continues to mature and its application scenarios expand, we are witnessing the dawn of a new blockchain era. Let us watch closely as the “Solana Internet” reshapes our digital lives. ---------------------- About Cryptogram Venture (CGV): CGV (Cryptogram Venture) is a crypto investment institution headquartered in Tokyo, Japan. Since 2017, its fund and predecessor funds have participated in investing in over 200 projects, including the incubation of the licensed Japanese yen stablecoin JPYW. CGV is also a limited partner in several globally renowned crypto funds. Since 2022, CGV has successfully hosted two editions of the Japan Web3 Hackathon (TWSH), supported by Japan's Ministry of Education, Culture, Sports, Science and Technology, Keio University, NTT Docomo, and other institutions and experts. CGV has branches in Hong Kong, Singapore, New York, Toronto, and other locations. Additionally, CGV is a founding member of the Bitcoin Tokyo Club. Disclaimer: The information and materials introduced in this article are sourced from public channels, and our company does not guarantee their accuracy or completeness. Descriptions or predictions involving future situations are forward-looking statements, and any advice and opinions provided are for reference only and do not constitute investment advice or implications for anyone. The strategies our company may adopt could be the same, opposite, or unrelated to the strategies readers might speculate based on th

Produced by: CGV Research Author: Satou In the blockchain space, The Open Network (TON) has been making significant strides in the payment sector due to its unique advantages and substantial user base. In 2024, the TON ecosystem has demonstrated robust growth across multiple areas. According to recent data, as of July 21, 2024, over 730M USDT has been issued on the TON network, serving as a crucial driver for the development of the TON payment ecosystem. Additionally, TON gaming platforms like Notcoin, Hamster Kombat, and Catizen have achieved remarkable success, attracting 35 million, 230 million, and 25 million users, respectively. As the TON ecosystem continues to mature and expand, its application prospects in DeFi, GameFi, and SocialFi are becoming increasingly clear. The CGV research team delves into TON’s “ambitions” in the payment sector, exploring how it leverages its strengths, overcomes challenges, and strives for long-term development in crypto asset management and DeFi. Unique Advantages of TON: Backed by Telegram’s Massive User Base According to Statista, as of April 2024, Telegram boasts 900 million monthly active users, ranking eighth among global social networks. In comparison, the blockchain with the highest number of monthly active addresses, Solana, has an estimated 14 million monthly active addresses, which is just 2% of Telegram’s user base From a regional distribution perspective, aside from its origins in Russia and Ukraine and the diverse population of the United States, Telegram users are primarily located in developing countries such as Southeast Asia, Africa, and Latin America. Based on user demographics, Telegram has a massive user base, but the average income per user is relatively low, making Telegram more suitable for traffic-related businesses rather than serving high-net-worth individuals. Unlike other social network projects, Telegram introduced its own encrypted public chain very early on and tightly integrated it with its social network. In 2017, Telegram founders Pavel Durov and Nikolai Durov began developing the blockchain project named Telegram Open Network (TON) and planned to launch its native cryptocurrency, Gram. In 2018, they raised approximately $1.7 billion through an ICO, which also attracted the attention of the U.S. Securities and Exchange Commission (SEC). In 2020, due to regulatory issues, Telegram announced its withdrawal from the TON project, returning development work to the community. The project was taken over by the TON Foundation, renamed “The Open Network,” and the token was renamed Toncoin, with ICO funds refunded. After several twists and turns, in 2023, Telegram officially announced TON blockchain as its preferred Web3 infrastructure and plans to integrate it into the Telegram app interface. In contrast, Facebook’s Libra (Diem) cryptocurrency network, after two and a half years of various setbacks and regulatory pressures, announced it would no longer launch. Additionally, Telegram’s emphasis on privacy and lack of regulation makes it more crypto-friendly, to some extent supporting gray industries that cannot pass regulatory scrutiny, which were early widespread applications of cryptocurrencies. As a result, Telegram hosts a large number of crypto users. Overall, TON’s ecosystem has leveraged Telegram’s advantages from the start, giving it a head start in developing cryptocurrencies. Monetizing Traffic: Overview of TON Mini-Games Compared to fully on-chain games that were once popular on Ethereum, the recent hit on TON might be fully off-chain games. These casual (and sometimes slightly juvenile) mini-games attract users through economic incentives. Fully on-chain games adopt a grand narrative of autonomous worlds, attracting users through potential cultural identity, but often fail to gain widespread adoption. TON’s mini-games are more straightforward: open your phone, tap a few times, and you can earn a point, which can be exchanged for tokens with real value in the future. Recently, the explosion of TON game projects seems to reveal the infinite potential of the industry. Notcoin : With extremely simple gameplay, users earn coins by tapping the phone screen, which can be exchanged for Notcoin tokens. It has attracted over 35 million game users, launched on Binance and OKX, with its token price soaring post-listing, reaching a market cap of nearly $3 billion. Hamster Kombat : Also using the Tap to Earn model, it offers additional ways to earn rewards through card purchases/synthesis, daily check-ins, social media tasks, and referrals. It has gained over 230 million registered users in less than four months. Catizen : A casual cat-raising game that combines game monetization with airdrops to directly establish cash flow. It has over $10 million in revenue, more than 25 million players, and has converted 1.4 million on-chain users. Notcoin has opened up the imagination space for the track, Hamster Kombat is leading the way in traffic, and Catizen represents a more refined and sustainable approach, hinting at the future direction: it’s not just about tapping but establishing a cash flywheel from day one. On one hand, simple game design allows more users to participate, leading to better user data. On the other hand, due to the simplicity, the cost of brushing data is low, so the data might be significantly inflated. In the future, TON mini-game projects will inevitably shift from competing for simple user traffic to competing for user traffic conversion rates. This requires not only better game design but also a sophisticated monetization system to generate sustainable cash flow and maintain the capability for sustainable development. Insights from Official Channels According to the TON official website, Mini Apps, GameFi, and DeFi are the key product types they wish to onboard. The TON Foundation’s Grants program explicitly mentions supporting these categories and provides examples for each. Here are some key statements: Telegram Mini Apps: Social Web3 Use Cases SocialFi: Creator economy E-commerce: Trade market for electronic or physical goods Utility: Daily tools with embedded Web3 elements Community & Brand management: Tools for managing Telegram communities Onboarding platforms: Bringing new users to @wallet or custodial TON wallets through simple scenarios DeFi Lending protocols Derivatives DEXs DEXs with weighted pools (like Balancer.fi ) Yield aggregators Liquidity layers Restaking GameFi We are always happy to support web3 games with easy onboarding, viral social mechanics, referral programs, elements of competition (squads, leaderboards, group challenges), and exciting gameplay. From the above content, it’s clear that Mini App support for Social Web3 use cases will be a development focus. For DeFi, the TON ecosystem aims to enrich the types of DeFi applications. For GameFi, the TON ecosystem can assist games with user onboarding, viral social mechanics, referral systems, competitive elements, and engaging gameplay. Predicting the Near-Term Future of TON: The Reds and Blacks Why [Temporarily] Not DeFi The explosion of the DeFi sector depends on a key metric: TVL (Total Value Locked). Currently, Ethereum leads with a DeFi TVL of $60 billion, surpassing the combined TVL of all other blockchains. This is due to Ethereum’s high native asset value (ETH), a complete DeFi ecosystem where nearly all DeFi innovations occur, the introduction of wBTC to supplement DeFi liquidity, and the release of large amounts of LST/LRT through staking & restaking mechanisms, significantly boosting TVL. For TON, the largest asset on-chain is Toncoin, with a market cap of about $17.5 billion. The second-largest asset is USDT authorized by Tether, surpassing 730M as of July 21, ranking fifth among all blockchains. According to DefiLlama, TON’s current TVL is $757 million, indicating a clear shortfall. From the CGV Research team’s perspective, TON’s DeFi ecosystem lacks the following conditions for an explosion: Onboarding of BTC and ETH: The most traded assets on CEXs are usually BTC and ETH. Therefore, a high-security, low-slippage, low-fee cross-chain bridge for BTC and ETH is needed to bring a large amount of BTC and ETH into the TON ecosystem. Currently, TON’s cross-chain bridge infrastructure is still under construction. More diverse liquid staking products: TON transitioned from PoW to PoS, with initial supply distributed to miners and the team. After transitioning to PoS, it can only choose to reward PoS miners through an annual inflation rate of 0.6%. Compared to other PoS blockchains, TON’s staking rate is less than 10%, which is not high. Therefore, more liquid staking products are needed to increase staking levels, enhance chain security, and boost TVL. More secure wallet infrastructure: The @wallet wallet built into Telegram is a custodial wallet, and given Telegram’s unregulated nature, high-net-worth individuals often do not trust TON’s security. TON needs to introduce more secure wallet infrastructure, such as MPC wallets, and undergo thorough audits to gain the trust of high-net-worth users. These conditions are unrelated to Telegram’s biggest advantage — user traffic — meaning that it might be an uphill battle. Why Payments Native USDT is being issued on the TON network at a very high growth rate. As of July 21, over 730M USDT has been issued. The blockchain with the most USDT issued is Tron, with over 60B TRC20-USDT issued. Tron’s data reveals the vast potential of the stablecoin payment track. The TRON network has over 235 million users, with over 7.8 billion transactions and $450 million in annual fees (network revenue). On average, 2–3 million user accounts transfer over $10 billion daily. Most USDT holders on Tron are “retail” or small holders. Holders with balances below $1,000 number 52.6 million, even growing during the 2022 bear market. In contrast, the $1K-$10K group has 359,000 holders. From on-chain activity, Tron’s transactions are primarily USDT transfers, with minimal DeFi adoption, almost no NFTs, and none of the hot LST/LRT or Memecoins from other blockchains. Yet, it sustains 7.8 billion transactions. Tron can be described as a blockchain designed for stablecoin payments. The reasons for Tron’s large-scale stablecoin payment adoption are: Lower transaction fees, faster speeds, and higher TPS than Ethereum Early adoption triggering a positive feedback loop of users and merchants Long-term stable service earning user trust TON’s payment business has the following advantages over Tron: Higher TPS: With sharding, it can support up to millions of TPS, with cheaper fees than Tron Closer to users: TON wallets are directly integrated into Telegram, making them more convenient and versatile, comparable to WeChat Pay More diverse on-chain activities: TON has more applications that can retain funds on-chain, not just simple fund transfers. The TON Foundation is also actively promoting USDT usage on TON: 5 million TON allocated to reward USDT Farming Pool, with up to 50% APY in Toncoin for USDT deposits On July 1, Tether partnered with Web3 shopping and infrastructure company Uquid, allowing Filipino citizens to pay social security funds with USDT on TON Fee-free, instant USDT transfers using the built-in Telegram wallet, with the ability to transfer USDT to friends without needing addresses Products like subscriptions, VPNs, gaming platforms, and eSIMs on Telegram can be paid directly with USDT on TON Payments will also serve as a key primitive, empowering Telegram Mini Apps and various types of Social Web3 Use Cases. For instance, the creator economy (SocialFi) requires payments for subscriptions and tipping; e-commerce needs payments for goods purchases. More importantly, Telegram Mini Apps could become a Web3 version of the AppStore, requiring payment functionality for managing paid apps. Telegram may follow Apple’s example by charging fees for paid services of apps listed on its AppStore, further diversifying its revenue model. Currently, TON has integrated multiple third-party payment service platforms, enabling merchants to accept payments in various ways. However, compared to WeChat Pay, TON’s payment business still has risks. The most critical is that Telegram’s privacy protection and unregulated characteristics may prevent many legitimate businesses from integrating TON payments due to compliance issues. The TON Foundation is actively seeking solutions, such as requiring KYC for rewards in the USDT Farming Pool, indicating a proactive attitude towards compliance. Conclusion In summary, the CGV Research team believes that TON’s rise in the payment sector is not accidental but the result of its strong user base, technical advantages, and ecosystem strategy. Although there are still many challenges, such as regulatory issues and user trust, TON showcases strong growth potential with its innovative payment solutions and close integration with Telegram. In the future, with more high-quality applications and user traffic conversion, TON is poised to secure a significant position in the global payment market, becoming a vital force in the blockchain payment field. — — — — — — — — — — — About Cryptogram Venture (CGV): CGV (Cryptogram Venture) is a crypto investment institution headquartered in Tokyo, Japan. Since 2017, its fund and predecessor funds have participated in investing in over 200 projects, including the incubation of the licensed Japanese yen stablecoin JPYW. CGV is also a limited partner in several globally renowned crypto funds. Since 2022, CGV has successfully hosted two editions of the Japan Web3 Hackathon (TWSH), supported by Japan’s Ministry of Education, Culture, Sports, Science and Technology, Keio University, NTT Docomo, and other institutions and experts. CGV has branches in Hong Kong, Singapore, New York, Toronto, and other locations. Additionally, CGV is a founding member of the Bitcoin Tokyo Club in Tokyo, Japan. Disclaimer: The information and materials introduced in this article are sourced from public channels, and our company does not guarantee their accuracy or completeness. Descriptions or predictions involving future situations are forward-looking statements, and any advice and opinions provided are for reference only and do not constitute investment advice or implications for anyone. The strategies our company may adopt could be the same, opposite, or unrelated to the strategies readers might speculate based on this article.

Recently, CGV officially announced its participation in the seed round financing of the innovative CeDeFi platform BitFi. BitFi completed this round of financing with a valuation of $50 million. Other confirmed investors include Fundamental Labs, IBC Group Ventures, TyreGate Capital Group, and Citizen Journalism Network Accelerator (CJNA). BitFi was founded by Liu Han, the former co-founder and CTO of Ascendex Exchange. Since the early access launch on June 25, the platform has reached a peak Total Value Locked (TVL) of $400 million within just one month. BitFi combines the strengths of centralized and decentralized financial solutions. By leveraging multi-chain adaptability and complex off-chain trading strategies, it provides users with secure staking yields and multi-level yield generation, maximizing returns on various assets including BTC. Led by a team with Wall Street backgrounds and deep expertise in quantitative trading, BitFi offers consistent, low-risk returns through neutral quantitative strategies, passive income across multiple chains, and BitFi-specific platform rewards. This comprehensive approach makes BitFi the preferred choice for BTC holders seeking to optimize returns and secure asset management solutions. CGV believes that CeDeFi represents a deep integration of centralized and decentralized finance, poised to become a key force in driving traditional financial institutions to join the crypto ecosystem. As a pioneer in the CeDeFi space, BitFi provides BTC holders with a one-stop asset management solution through secure staking mechanisms and innovative synthetic assets. While ensuring asset security, BitFi significantly enhances asset yields through a combination of on-chain and off-chain innovative strategies, demonstrating vast growth potential. This investment in BitFi represents CGV's continued commitment to the CeDeFi and crypto asset management sectors. In the future, CGV will fully leverage its industry resources to support BitFi's growth in various aspects such as investment, incubation, and business expansion, jointly promoting the prosperity and development of the CeDeFi ecosystem. — — — — — — — — — — — About Cryptogram Venture (CGV): CGV (Cryptogram Venture) is a crypto investment institution headquartered in Tokyo, Japan. Since 2017, its fund and predecessor funds have participated in investing in over 200 projects, including the incubation of the licensed Japanese yen stablecoin JPYW. CGV is also a limited partner in several globally renowned crypto funds. Since 2022, CGV has successfully hosted two editions of the Japan Web3 Hackathon (TWSH), supported by Japan’s Ministry of Education, Culture, Sports, Science and Technology, Keio University, NTT Docomo, and other institutions and experts. CGV has branches in Hong Kong, Singapore, New York, Toronto, and other locations. Additionally, CGV is a founding member of the Bitcoin Tokyo Club in Tokyo, Japan.

Produced by: CGV Research Author: Shigeru Introduction： With the arrival of the summer of 2024, the TON network has shown unprecedented growth momentum, with daily active addresses, transaction volume, and total value locked (TVL) reaching new highs. These achievements indicate that the golden decade of the TON ecosystem has set sail. The CGV Research team deeply explores “the explosion of the TON ecosystem,” analyzing the key drivers from both internal innovations and external market factors that have propelled it to become a leading blockchain platform. As we enter June 2024, every day sets new records for the TON in terms of users, transaction volume, and TVL: — The number of daily active addresses on TON has surpassed Ethereum for several consecutive days; — TON’s total value locked (TVL) has broken through $600 million, increasing a thousandfold since 2024; — In 47 days, $450 million in $USDT was issued on TON; — Steve, the chairman of the TON Foundation, suggested that a hallmark of crypto’s mass adoption is the creation of the first TON mini-app with 100 million Telegram users; Hamster Kombat achieved this the very next day. The CGV Research team believes that the arrival of TON summer 2024 benefits from both “internal” and “external” positives of TON. Internal Drivers from TON Eco — Wallet Innovation: In July 2023, TON launched a new wallet payment feature, allowing users to conduct various transactions and payments through the TON wallet, enhancing the user experience. In September, TON launched TONSpace, a self-hosted wallet allowing users to manage their own private keys and assets. By December, a secondary wallet entry was added to the Telegram app, making it more convenient for users to use the TON wallet within Telegram. — Token Lock-Up Strategy: Early in 2023, the TON community and validators decided through on-chain voting to freeze the wallets of inactive miners, which accounted for about 21% of the total supply, locked until February 2027. In October, the community launched the TON Believers Fund, a five-year lock-up plan where users could choose to donate their tokens or deposit them into a smart contract. This action locked up 26% of the supply, totaling about 47% of TON tokens locked for three to five years, effectively reducing the market’s circulating supply and stabilizing the token price. — Native USDT Deployment on TON: In April 2024, Tether announced the introduction of USDT to the TON network, adding USDT-related transactions and financial activities to TON, providing strong support for DeFi applications. The issuance of USDT on TON quickly surpassed that on Cosmos and Near, becoming the network second only to Tron, Ethereum, Solana, and Avalanche. — Blockchain Performance Breakthrough: On October 31, 2023, TON reached a peak of 104,715 transactions per second in a public performance live test, processing a total of 107,652,545 transactions. This performance, verified by CertiK, marked TON as one of the fastest and most scalable blockchains globally. — Market Promotion: In the spring of 2024, by launching the #OpenLeague Super League with a total prize pool of $150 million, TON attracted a large number of users and market attention. Additionally, the revenue-sharing strategy implemented by the TON Foundation and Telegram, along with the listing of Notcoin on several major exchanges, greatly enhanced its market performance and brand influence. External Factors for TON Eco — Significant Investment from Pantera: In May 2024, Pantera made the largest single investment in history in the TON network, not only demonstrating recognition of TON’s technology and market potential but also likely attracting more capital attention and strengthening market confidence in the TON ecosystem. — Global Competitive Environment and Market Demand: With Musk’s X app planning to introduce crypto payment features in mid-2024, TON faces pressure from global competitors. Moreover, the entire crypto market urgently needs new narratives and directions, and the TON ecosystem, relying on its innovative technology and applications, injects new vitality into the market. — Demand for New Narratives: The crypto industry needs new narratives and directions. The social fission and flywheel effect brought by TON, leading to user and transaction volume growth, provides new vitality to the market. In conclusion, the CGV Research team believes that the TON ecosystem may exhibit four major development trends in the future. These trends will shape the unique position of the TON ecosystem and may have a profound impact on the entire crypto industry. TON Eco Next Step Trends 1. Telegram’s Full Ecosystem Expansion Bringing a Black Hole Effect: Originally an instant messaging tool, Telegram has now evolved into a multi-functional platform integrating social, payment, service subscription, and mini-app functions. With TON joining, Telegram is rapidly advancing along a similar development trajectory. - Upstream (Infrastructure and Development Platform): TON provides robust infrastructure and software development kits (SDKs), attracting developers to build and deploy decentralized applications (DApps), which may weaken other blockchain platforms’ development resources. - Midstream (Application Layer and Services): Custom stablecoin solutions and micropayment systems within the TON ecosystem, along with the ability to seamlessly integrate mainstream crypto assets through official cross-chain bridges, provide users with a one-stop asset management and trading platform. - Downstream (User Adoption and Market Expansion): Telegram’s large user base provides a market access point for TON. By establishing relationships with financial institutions, media companies, and retailers, Telegram can integrate crypto technology into broader economic activities. 2. Unregulated Barriers + Fastest Public Chain + Flywheel Effect, Making the TON Ecosystem Limitless: TON’s global service capability, unrestricted by specific national or regional financial regulations, combined with its high performance and user growth flywheel effect, indicates that the potential of the TON ecosystem may have no upper limit. - Traffic Monetization: Telegram’s traffic advantage will bring significant monetization potential to TON, especially in decentralized markets like Fragment, which has already facilitated significant transaction volumes. - NFT Market: Telegram’s stickers turned into NFTs and traded via the TON blockchain indicate a massive emerging market. - Web3 Project Revenue Realization: TON’s mini-apps are expected to become high-revenue Web3 projects, leveraging their large daily active user base. 3. Joining of Global Financial Giants: Mainstream Recognition of the TON Ecosystem: As the TON platform matures and achieves cross-chain functionality, it may attract the attention of traditional financial institutions, encouraging them to explore blockchain technology and collaborate with TON. - Financial Service Innovation: Financial institutions may migrate their services to TON or collaborate with TON, taking advantage of its low costs and high efficiency. - Stablecoins and Financial Products: Financial institutions may develop new loan, insurance, and investment products on TON, or even create stablecoins linked to specific assets. 4. Shift in Investment Logic: Non-Essentiality of Token Economy: The maturation of the TON ecosystem may change the investment logic of the primary market, making tokens no longer a mandatory element for crypto projects. - Technology and Business Models: Projects may rely on more mature technology and business models to attract users and investors, rather than solely depending on the token economy. - Regulatory Adaptability: Projects that do not issue tokens may more easily adapt to regulatory environments, avoiding potential legal risks. - Investment Analysis: Future evaluations of TON ecosystem projects may focus more on actual user data and business performance, such as daily active users (DAU), user retention, and average revenue per user (ARPU), rather than just focusing on token unlocks and distributions. These trends indicate that the TON ecosystem will not only consolidate its position in the crypto field but may also attract a wider user base and participation from traditional financial institutions, marking a new stage of development. Conclusion The rise of the TON ecosystem signals the future direction of cryptocurrency and blockchain technology. With Telegram’s deep integration and TON’s innovation-driven approach, we foresee a new ecosystem forming, which will not only change our understanding of financial services, social interaction, and digital assets but will also bring unprecedented convenience and opportunities to global users. — — — — — — — — — — — About Cryptogram Venture (CGV): CGV (Cryptogram Venture) is a crypto investment institution headquartered in Tokyo, Japan. Since 2017, its fund and predecessor funds have participated in investing in over 200 projects, including the incubation of the licensed Japanese yen stablecoin JPYW. CGV is also a limited partner in several globally renowned crypto funds. Since 2022, CGV has successfully hosted two editions of the Japan Web3 Hackathon (TWSH), supported by Japan’s Ministry of Education, Culture, Sports, Science and Technology, Keio University, NTT Docomo, and other institutions and experts. CGV has branches in Hong Kong, Singapore, New York, Toronto, and other locations. Additionally, CGV is a founding member of the Bitcoin Tokyo Club in Tokyo, Japan. Disclaimer: The information and materials introduced in this article are sourced from public channels, and our company does not guarantee their accuracy or completeness. Descriptions or predictions involving future situations are forward-looking statements, and any advice and opinions provided are for reference only and do not constitute investment advice or implications for anyone. The strategies our company may adopt could be the same, opposite, or unrelated to the strategies readers might speculate based on this article.

Produced by: CGV Research Author: Cynic, Shigeru Preface: Since its inception, the concept of DePIN has consistently drawn attention from major investment institutions. In the outlook for 2024, investment entities such as Messari, Coinbase, and Spartan Group have placed their bets on the DePIN track; recently, DePIN tokens like $DIMO, $MOBILE, and $HONEY have seen significant gains, further attracting market attention; the AI concept has increased the demand for DePIN due to the popularity of LLM. CGV remains bullish on the development of the DePIN track, hence this article to share an understanding of the DePIN track. Origin: Decentralization Moves from Virtual to Physical DePIN, short for Decentralized Physical Infrastructure, was a term first coined by Messari in 2022, yet projects that fit the DePIN definition had already existed. By name, any physical device that meets decentralization requirements can be called DePIN, with the Bitcoin network being the earliest example. However, a more suitable benchmark may be a decentralized network that provides services in the physical (non-virtual) world, including storage, computation, bandwidth, sensors, energy, etc. It is generally believed that Filecoin, which emerged in 2014 as a decentralized storage solution, is the first successful DePIN project. The reason for the emergence of DePIN is the dissatisfaction with traditional physical infrastructure. Typically, due to their enormous scale, key resources such as communication networks, electricity, and water are monopolized by large companies, leaving no alternative for users. With the advent of the Internet era, computing resources such as computing power and storage are similarly controlled by large corporations, forcing users to choose between a few oligarchs. The emergence of Web3 brings hope for a solution to this dilemma. In 2008, Bitcoin burst onto the scene, and cryptocurrencies demonstrated the possibility of decentralizing the financial system; years later, DePIN attempted to revolutionize traditional physical infrastructure with decentralization. From pure Crypto to DePIN, from finance to tangible entities, the wave of decentralization has finally taken a step towards reality. Operation: Perfect Integration of On-Chain and Off-Chain The structure of DePIN can be divided into on-chain and off-chain parts. The on-chain part is responsible for coordinating distributed resources, providing a trustless, permissionless decentralized ledger, ensuring that both supply and demand sides can obtain reliable results. This part uses blockchain as a ledger, with operations of both parties recorded via smart contracts, and cryptocurrency as the medium of exchange, while also providing token rewards to incentivize users to supply resources. The off-chain part deals with the actual supply of resources, with users offering their idle physical resources in exchange for token rewards. High-operation computing resources can often be supplied by installing designated software, while more complex resources require specific hardware. On-chain handles economic consensus, while off-chain handles physical resource scheduling. The operation of DePIN projects relies on the perfect combination of on-chain and off-chain, virtual and real elements. Characteristics: Tokens Disrupt Traditional Paradigms In traditional physical infrastructure construction, it is often large companies/governments that use massive capital for initial investment, a top-down centralized model with high costs, long duration, and low efficiency. This leads to high charges to offset the opportunity costs once the infrastructure is built. DePIN completely overturns this traditional paradigm. Through tokenomics, DePIN distributes startup costs among individual participants, using a crowdfunding model to pay for the construction costs of infrastructure. Project developers only need to design the tokenomics appropriately, and the economic incentives will drive individuals to invest their resources in the DePIN network, building up the infrastructure network from the bottom up, in a decentralized manner. Decentralized infrastructure possesses the property of self-expansion: once running, the revenue is fed back to the providers, encouraging more users to join the network to supply resources. As the infrastructure’s resources become more abundant, more users will use the infrastructure, generating more revenue, further accelerating the increase in supply. This creates a virtuous cycle. Key: Practicality Drives Cost Reduction and Efficiency We emphasize that in DePIN, tokens play a significant role as the market’s regulatory signal, providing greater stability for the protocol. However, we must not overemphasize tokens and neglect real value. Pure speculation cannot sustain the long-term operation of the protocol; practicality is key in DePIN projects. On one hand, practicality comes from the permissionless nature of decentralization, which ensures users can access services without censorship and on equal terms. On the other hand, practicality comes from the cost reduction and efficiency of distributed self-hosting, which eliminates the structural costs (management, maintenance, labor, etc.) of centralized platforms, and the feature of reusing idle resources greatly reduces costs. According to historical data from the last cycle, DePIN’s on-chain revenue is the most resilient, which is the core value driven by practicality. Current State: Extensive Coverage with Flourishing Diversity This is a potential real-world scenario: At 7 am, Satoshi wakes up and his smart home is supported by the Internet of Things (IoT) from IoTex. He turns on his computer to check emails using a wireless network connected through WiFi Map, consults the Arkeen app to monitor his rooftop solar power generation, and puts his accumulated carbon credits up for sale. After breakfast, Satoshi drives to work, navigating with maps from Hivemapper. Along the way, DIMO records his driving data, earning him passive income, while his mobile network is provided by Helium Mobile. At work, as a software engineer, Satoshi begins his programming tasks, using Bittensor to select high-quality AI models for programming assistance, with the models trained by Gensyn, GPU power supplied by Akash, and data stored on Filecoin. After work, Satoshi picks a movie to watch on the Livepeer platform. After the movie, he plays some video games, with the rendering for the high-definition AAA games provided by Render Network. After years of development, we have witnessed the Cambrian explosion-like growth of DePIN in a wide range of categories such as energy, logistics, surveying, and telecommunications. Human daily life can now be entirely covered by DePIN. Case Study: Seeking Early Investment Opportunities Deeper Network Deeper Network is a decentralized bandwidth sharing network, committed to building a more open, fair, and trustworthy Internet, achieving democratization of the network and sovereignty over personal data. On the Deeper Network platform, users can establish decentralized VPNs, share bandwidth, access decentralized applications, all services based on blockchain technology for trust, security, and decentralization. On the software level, Deeper Network uses its self-developed AtomOS to ensure network security. As the world’s first lock-free network operating system, AtomOS brings high reliability, scalability, and performance to Deeper Network. In addition, the Trident Protocol, as Deeper Network’s core communication protocol, provides an excellent user experience with its adaptive tunneling, intelligent routing, IP multiplexing, and tunnel congestion control mechanisms, preventing network censorship. On the hardware level, Deeper Network has developed and produced Deeper Connect, featuring plug-and-play and zero-configuration properties, allowing users to enjoy uncensored secure network services without any professional knowledge, while also earning token rewards. On the blockchain level, Deeper Network has built the Deeper Chain, adopting the NPoW consensus mechanism. NPoW fully utilizes Deeper Network’s two-layer structure; device nodes complete tasks to gain credit, which is then used to elect verification nodes by providing credit guarantees, creating an efficient, scalable, and secure block generation process. Compared to PoW, NPoW effectively reduces the consumption of computational resources. Deeper has issued the platform token DPR, with a total supply of 10 billion. DPR is mainly used for incentives and service payments within the Deeper Network ecosystem, with a current FDV of $14 million. 60% of the total DPR will be obtained through NPoW mining, with mining rewards halving each year since 2021. On January 25, 2024, DPR completed its latest halving milestone. Just as Bitcoin halving can trigger a rise in price, the DPR halving combined with the bullish market expectations for 2024 could trigger a new surge in price. Network3 Network3, as a DePIN project within the AI ecosystem, has built an AI Layer2 to assist in AI model training, through methods like edge computing, federated learning, and model compression, Network3 aims to democratize AI in an efficient, scalable way, enhancing privacy and security for users’ data. Unlike most decentralized computing platforms, Network3 focuses on low-power, low-cost edge computing devices (such as IoT) rather than high-end industrial graphics cards. On one hand, the limited computing power of edge devices restricts the size of local models, so the computations performed by Network3 at the edge can only support smaller model parameters. On the other hand, the accessibility of edge devices means that every user has the conditions to use them, so they can process their private data locally and conduct joint training through federated learning. In fact, with strong demand for AI in endpoints (smart homes, smart manufacturing, smart health monitoring) and the inability to afford the expenses of large models, Network3’s solution has the potential to fill this gap. Currently, Network3’s software has been downloaded 50 million times, with two million MAUs, more than 58,000 active nodes in the network, serving over 2PB of network traffic. HPChain HPChain is a DePIN protocol aimed at decentralizing high-performance GPU computing to support AI and cloud gaming developers. Amid geopolitical influences, Nvidia has restricted chip imports to certain countries, and centralized cloud computing platforms (AWS, Azure) have limited usage in some countries, making a decentralized high-performance computing platform particularly important at this time, a decentralized high-performance computing platform seems particularly crucial. Currently, HPChain possesses over 1000 GPU cards, and its cloud computing and cloud service platforms have already been launched. It is also formulating collaboration plans with entities like Cambridge University, Toronto University, and companies such as M1 and TikTok. The significance of this development is that it provides an alternative to centralized computing resources, which can be critical for developers in regions affected by import restrictions or service limitations. Reference: https://messari.io/report/state-of-depin-2023 https://www.deeper.network/ https://network3.io/ https://www.hpchain.ai/ https://medium.com/@permadao/scp%E7%A0%94%E6%8A%A5-depin-x-arweave-%E7%9A%84%E7%BB%84%E5%90%88%E6%80%A7-%E6%89%93%E9%80%A0%E7%89%A9%E7%90%86%E4%B8%96%E7%95%8C%E7%9A%84%E5%BD%B1%E5%88%86%E8%BA%AB-1902f3af86a1 ---------------------- About Cryptogram Venture (CGV): CGV (Cryptogram Venture) is a crypto investment institution headquartered in Tokyo, Japan. Since 2017, its fund and predecessor funds have participated in investing in over 200 projects, including the incubation of the licensed Japanese yen stablecoin JPYW. CGV is also a limited partner in several globally renowned crypto funds. Since 2022, CGV has successfully hosted two editions of the Japan Web3 Hackathon (TWSH), supported by Japan's Ministry of Education, Culture, Sports, Science and Technology, Keio University, NTT Docomo, and other institutions and experts. CGV has branches in Hong Kong, Singapore, New York, Toronto, and other locations. Additionally, CGV is a founding member of the Bitcoin Tokyo Club. About AIFocus: AIFocus is an entrepreneurial project accelerator based in Hong Kong, co-initiated by CGV (Cryptogram Venture) and Web3 Labs. It is dedicated to in-depth exploration of the AI and Web3 domains, selecting teams with forward-thinking ideas and creativity, and providing support in terms of technical talent, resources, and funding. AIFocus adheres to the service principle of investing first and then accelerating, aiming to unearth outstanding projects and propel them to rapid success. Disclaimer: The information and materials introduced in this article are sourced from public channels, and our company does not guarantee their accuracy or completeness. Descriptions or predictions involving future situations are forward-looking statements, and any advice and opinions provided are for reference only and do not constitute investment advice or implications for anyone. The strategies our company may adopt could be the same, opposite, or unrelated to the strategies readers might speculate based on th

Produced by: CGV Research Author: Cynic, Shigeru Leveraging the power of algorithms, computational power, and data, the advancement of AI technology is redefining the boundaries of data processing and intelligent decision-making. Meanwhile, DePIN represents the paradigm shift from centralized infrastructure to decentralized, blockchain-based networks. As the world accelerates its digital transformation, AI and DePIN (Decentralized Physical Infrastructure) have become fundamental technologies driving transformation across all industries. The integration of AI and DePIN not only promotes rapid technological iteration and widespread application but will also initiate more secure, transparent, and efficient service models, bringing profound changes to the global economy. DePIN: Decentralized Real-World Implementation, A Pillar of the Digital Economy DePIN stands for Decentralized Physical Infrastructure. In a narrow sense, DePIN mainly refers to distributed networks of traditional physical infrastructures supported by distributed ledger technology, such as power grids, communication networks, and positioning networks. Broadly speaking, any distributed network supported by physical devices can be considered DePIN, including storage and computing networks. from: Messari If Crypto has brought decentralized transformation at the financial level, then DePIN is the decentralized solution in the real economy. It can be said that PoW mining machines are a type of DePIN. From day one, DePIN has been a core pillar of Web3. The Three Pillars of AI — Algorithms, Computational Power, and Data, Two of Which Are contributed by DePIN The development of artificial intelligence is generally considered to depend on three key elements: algorithms, computational power, and data. Algorithms refer to the mathematical models and program logic that drive AI systems, computational power refers t-o the computing resources required to execute these algorithms, and data is the foundation for training and optimizing AI models. Which of the three elements is the most important? Before the appearance of ChatGPT, people generally thought it was algorithms, otherwise academic conferences and journal papers wouldn’t be filled with one algorithmic tweak after another. But after the debut of ChatGPT and its supporting large language models (LLM), people began to realize the importance of the latter two. Massive computational power is a prerequisite for the birth of models, and the quality and diversity of data are crucial for building robust and efficient AI systems, making the demand for algorithmic refinement less critical than before. In the era of large models, the shift from fine-tuning to leveraging substantial resources has increased the demand for computational power and data, and DePIN can provide exactly that. Token incentives leverage the long-tail market, and the vast amount of consumer-grade computational power and storage will become the best nourishment for large models. Decentralization of AI Is Not an Option, But a Necessity Of course, some may ask, with computational power and data available in AWS data centers, which offer stability and a better user experience, why choose DePIN over centralized services? This viewpoint has its reasons, as currently, almost all large models are directly or indirectly developed by large internet companies — ChatGPT is backed by Microsoft, Gemini by Google, and almost every large internet company in China has its own large model. Why? Because only large internet companies have enough quality data and financially supported computational power. But this is not right; people no longer want to be manipulated by internet giants. On one hand, centralized AI carries data privacy and security risks, and may be subject to censorship and control; on the other hand, AI produced by internet giants further strengthens dependence, leading to market centralization and raising barriers to innovation. from: https://www.gensyn.ai/Humanity should not need a Martin Luther of the AI era; people should have the right to speak directly with the divine. A Business Perspective on DePIN: Cost Reduction and Efficiency Increase are Key Even if we set aside the ideological debate between decentralization and centralization, from a business standpoint, there are compelling reasons to use DePIN in AI. Firstly, it is important to recognize that despite the fact that internet giants possess a massive amount of high-end graphics card resources, the combination of consumer-grade graphics cards scattered among the public can also form a considerable computational power network, which is the long-tail effect of computing power. These consumer-grade graphics cards have actually a very high idle rate. As long as the incentives provided by DePIN exceed the cost of electricity, users will be motivated to contribute computational power to the network. In addition, since all the physical infrastructure is managed by the users themselves, the DePIN network does not have to bear the operational costs that centralized providers inevitably incur and can focus solely on the protocol design itself. Regarding data, the DePIN network can unlock the availability of potential data and reduce transmission costs through edge computing and other means. Moreover, most distributed storage networks have automatic deduplication functions, which reduce the workload of cleaning AI training data. Finally, the crypto-economic models introduced by DePIN enhance the fault tolerance of the system, with the hope of achieving a win-win-win situation for providers, consumers, and the platform. from: UCLA In case you doubt, the latest research from UCLA indicates that decentralized computing has achieved 2.75 times the performance of traditional GPU clusters at the same cost. To be specific, it’s 1.22 times faster and 4.83 times cheaper. A Thorny Path: What Challenges Will AIxDePIN Encounter? We choose to go to the moon in this decade and do the other things, not because they are easy, but because they are hard. — — John Fitzgerald Kennedy Building artificial intelligence models with DePIN’s distributed storage and distributed computation without trust still poses many challenges. Work Verification Essentially, computing deep learning models and PoW (Proof of Work) mining are both forms of general computation, fundamentally based on signal changes between logic gates. On a macro level, PoW mining is considered “useless computation,” as it attempts to produce a hash value with a prefix of n zeros through countless random number generations and hash function computations; whereas the computation in deep learning is seen as “useful computation,” which calculates the parameters of each layer through forward and backward propagation, thereby constructing an efficient AI model. The reality is that “useless computations” like PoW mining use hash functions, which are easy to calculate from the original image to the hashed image, but difficult to reverse, making it easy for anyone to quickly verify the validity of the computation. In contrast, for computations in deep learning models, due to their hierarchical structure, with each layer’s output serving as the input for the next layer, verifying the validity of the computation requires redoing all previous work and cannot be done simply and effectively. from: AWS Work verification is extremely crucial; otherwise, the provider of the computation could submit a randomly generated result without performing any actual computation. One idea is to have different servers perform the same computational tasks and verify the work’s authenticity by repeatedly executing and checking for consistent results. However, most model computations are non-deterministic, meaning that even in the same computational environment, it is impossible to reproduce identical results; only statistical similarity can be achieved. Moreover, repeated computations would lead to rapidly increasing costs, which contradicts the key goal of cost reduction and efficiency improvement in DePIN. Another idea is the Optimistic mechanism, which initially trusts that the results are from valid computations, while allowing anyone to verify the results. If errors are found, a Fraud Proof can be submitted, the protocol will penalize the fraudster, and reward the whistleblower. Parallelization As previously mentioned, DePIN primarily leverages the long tail of the consumer-grade computing power market, which implies that the computing power provided by a single device is limited. Training large AI models on a single device would take a very long time, necessitating the use of parallelization to shorten the required training time. The main challenge in parallelizing deep learning training is the dependency between tasks, which makes parallelization difficult to achieve. Currently, parallelization in deep learning training is mainly divided into data parallelism and model parallelism. Data parallelism involves distributing the data across multiple machines, with each machine holding a complete set of model parameters and training using its local data, followed by aggregating the parameters from all machines. Data parallelism is effective with large amounts of data but requires synchronous communication for parameter aggregation. Model parallelism is used when the model is too large to fit on a single machine, allowing the model to be split across multiple machines, with each machine holding a part of the model’s parameters. Communication between different machines is required during forward and backward propagation. Model parallelism has advantages when the model is large but incurs significant communication overhead during propagation. For gradient information between different layers, there can be either synchronous or asynchronous updates. Synchronous updates are straightforward but increase waiting time; asynchronous update algorithms have shorter wait times but can introduce stability issues. from: Stanford University, Parallel and Distributed Deep Learning Privacy A global movement is underway to protect personal privacy, with governments around the world strengthening the protection of individual data privacy. Although AI heavily uses public datasets, what really distinguishes different AI models is the proprietary user data of various companies. How can we reap the benefits of proprietary data during the training process without exposing privacy? How can we ensure that the parameters of the AI models constructed are not leaked? These are two aspects of privacy: data privacy and model privacy. Data privacy protects the users, while model privacy protects the organizations building the models. In the current climate, data privacy is much more important than model privacy. Various solutions are being explored to address the issue of privacy. Federated learning protects data privacy by training at the source of the data, keeping the data local and only transmitting model parameters; while zero-knowledge proofs may emerge as a promising new solution. Case Study: What are some high-quality projects in the market? Gensyn Gensyn is a distributed computing network for training AI models. The network uses a layer-1 blockchain based on Polkadot to verify whether deep learning tasks have been executed correctly and triggers payment through commands. Founded in 2020, Gensyn disclosed a $43 million Series A funding round in June 2023, led by a16z. Gensyn uses metadata from a gradient-based optimization process to build certificates of the work performed, and this work is uniformly executed by a multi-granularity, graph-based precision protocol and cross-evaluators to allow re-running of verification work and consistency comparison, with the validity of the calculations ultimately confirmed by the chain itself, ensuring computational effectiveness. To further enhance the reliability of work verification, Gensyn introduces staking to create incentives. There are four types of participants in the system: submitters, solvers, verifiers, and challengers. Submitters are the end users of the system, providing tasks to be computed and paying for the completed work units. Solvers are the main workers of the system, executing model training and generating proofs for verification. Verifiers are key to linking the non-deterministic training process with deterministic linear computation, replicating part of the solver’s proof and comparing the distance to an expected threshold. Challengers are the last line of defense, checking the verifiers’ work and issuing challenges, receiving rewards when the challenges are successful. Solvers need to stake, and challengers check the solvers’ work. If any foul play is discovered, they issue a challenge, and if the challenge is successful, the staked tokens of the solver are confiscated, and the challenger receives a reward. According to Gensyn’s predictions, this approach is expected to reduce training costs to 1/5 of those of centralized providers. from: Gensyn FedML FedML is a decentralized collaborative machine learning platform for decentralized and collaborative AI anywhere and at any scale. More specifically, FedML provides an MLOps ecosystem for training, deploying, monitoring, and continuously improving machine learning models, while collaborating on a combination of data, models, and computational resources in a privacy-preserving manner. Established in 2022, FedML disclosed a $6 million seed round in March 2023. FedML consists of two key components: FedML-API and FedML-core, representing the high-level API and the low-level API, respectively. FedML-core includes two independent modules: distributed communication and model training. The communication module is responsible for underlying communication between different workers/clients and is based on MPI; the model training module is based on PyTorch. FedML-API is built on top of FedML-core. With FedML-core, new distributed algorithms can be easily implemented through a client-oriented programming interface. The FedML team’s latest work demonstrates that using FedML Nexus AI for AI model inference on consumer-grade GPU RTX 4090 is 20 times cheaper and 1.88 times faster than on A100. from: FedML Future Outlook: The Democratization of AI with DePIN One day, as AI evolves into AGI, computational power will become the de facto universal currency, and DePIN will have made this process happen sooner. The fusion of AI and DePIN has opened a new technological growth point, offering tremendous opportunities for the development of artificial intelligence. DePIN provides AI with a vast amount of distributed computational power and data, which helps in training larger-scale models to achieve stronger intelligence. At the same time, DePIN also makes AI develop in a more open, secure, and reliable direction, reducing dependence on single centralized infrastructure. Looking to the future, AI and DePIN will continue to develop in synergy. Distributed networks will provide a strong foundation for training super-large models, which will play an important role in the application of DePIN. While protecting privacy and security, AI will also help optimize DePIN network protocols and algorithms. We look forward to AI and DePIN bringing about a more efficient, fairer, and more trustworthy digital world. Reference: https://web.cs.ucla.edu/~harryxu/papers/dorylus-osdi21.pdf https://web.stanford.edu/~rezab/classes/cme323/S16/projects_reports/hedge_usmani.pdf https://gensyn.ai/ https://blog.fedml.ai/scalellm-unlocking-llama2-13b-llm-inference-on-consumer-gpu-rtx-4090-powered-by-fedml-nexus-ai/ ---------------------- About Cryptogram Venture (CGV): CGV (Cryptogram Venture) is a crypto investment institution headquartered in Tokyo, Japan. Since 2017, its fund and predecessor funds have participated in investing in over 200 projects, including the incubation of the licensed Japanese yen stablecoin JPYW. CGV is also a limited partner in several globally renowned crypto funds. Since 2022, CGV has successfully hosted two editions of the Japan Web3 Hackathon (TWSH), supported by Japan's Ministry of Education, Culture, Sports, Science and Technology, Keio University, NTT Docomo, and other institutions and experts. CGV has branches in Hong Kong, Singapore, New York, Toronto, and other locations. Additionally, CGV is a founding member of the Bitcoin Tokyo Club. About AIFocus: AIFocus is an entrepreneurial project accelerator based in Hong Kong, co-initiated by CGV (Cryptogram Venture) and Web3 Labs. It is dedicated to in-depth exploration of the AI and Web3 domains, selecting teams with forward-thinking ideas and creativity, and providing support in terms of technical talent, resources, and funding. AIFocus adheres to the service principle of investing first and then accelerating, aiming to unearth outstanding projects and propel them to rapid success. Disclaimer: The information and materials introduced in this article are sourced from public channels, and our company does not guarantee their accuracy or completeness. Descriptions or predictions involving future situations are forward-looking statements, and any advice and opinions provided are for reference only and do not constitute investment advice or implications for anyone. The strategies our company may adopt could be the same, opposite, or unrelated to the strategies readers might speculate based on th

Produced by: CGV Research Author: Cynic Introduction In the rapidly advancing era of technology, the convergence of Web3 and Artificial Intelligence (AI) is becoming an inevitable trend. These two domains are no longer independent parallel lines but are increasingly intertwined, jointly shaping our digital future. Web3, as a decentralized and distributed network concept, provides a more equitable and transparent digital space. Its core idea empowers users with control over their data through blockchain and encryption technologies. AI, on the other hand, serves as a major driving force propelling this era forward. By learning and mimicking human intelligence, it enhances the speed and quality of decision-making, optimizes user experiences, and plays a significant role in data processing and analysis. When these two elements come together, we anticipate a new internet experience. In this world driven by AI and supported by Web3, we not only witness more personalized and intelligent services but also experience unprecedented data security and transparency. AI can leverage its analytical and predictive capabilities within the Web3 framework, while Web3 provides AI with a decentralized and tamper-resistant data platform. This fusion heralds a more intelligent and decentralized digital future, where technology not only serves humanity but is intricately connected to human lifestyles, values, and goals. The combination of Web3 and AI is not just a technological integration but also an anticipation and shaping of future societal forms and cultures. The CGV Research team will release a series of reports focusing on the “Integration of Web3 and Artificial Intelligence (AI),” exploring the combination of AI technology with Web3 applications such as DeFi, NFTs, computing power, data management, and discovering practical and cutting-edge Web3×AI solutions. Web3: The Next Generation Internet Upholding Individual Sovereignty Web3 is the next-generation internet centered around decentralization and blockchain technology, aiming to construct a new value system where users possess digital sovereignty. The development goal of Web3 is to break the monopolization of data by internet giants, allowing users to control the content and data assets they create. The internet’s principles are openness, freedom, and sharing. While Web2’s internet giants diverged from these principles by using centralized servers to extract user data, the open, transparent, and decentralized nature of Web3 returns control and ownership of data to individual users — a Renaissance in the new era. Early Web3 primarily focused on financial scenarios, with cryptocurrency and decentralized finance (DeFi) as the main applications. Today, the application scope of Web3 has greatly expanded, with gaming, social interactions, and governance becoming new growth points for Web3, and various traditional industries shifting towards Web3. AI: A New Era of Industrial Revolution Driven by Data and Computing Power AI simulates human intelligence through computer systems, endowing computers with cognitive abilities, focusing on reasoning, learning, and self-correction. Early AI used specialized models trained on single-domain datasets for specific tasks, including computer vision (CV) and natural language processing (NLP) — referred to as AI 1.0. The emergence of large language models (LLMs) like ChatGPT represents the advancement of AI technology into the 2.0 era. AI 2.0 utilizes vast cross-domain datasets with powerful computing support to train general models with high generalization capabilities, applicable to various tasks. Large models tailored for specific application scenarios can be fine-tuned with low marginal costs, making them more suitable for large-scale commercial use. AI 2.0’s general artificial intelligence excels in seven dimensions: text generation, language understanding, knowledge retrieval, logical reasoning, mathematics, code processing, and multimodality. It has greatly expanded productivity, becoming a new growth engine for human society after the internet revolution. Web3 x AI: The Inevitable Trend of Digital Economic Development From a macro perspective, Web3 and AI may seem to have opposing cores — Web3 emphasizes decentralization, while AI often requires significant centralized computing power for model training. However, they are not mutually exclusive; instead, they complement each other. Web3 represents advanced production relations, where individuals truly own their data, content, and property, reclaiming sovereignty. AI represents advanced productivity, liberating humans from tedious repetitive work. Their combination is the inevitable trend of digital economic development. On one hand, Web3 brings decentralized production relations to AI, addressing user incentive issues through the blockchain’s openness, transparency, and verifiability. Generative AI significantly lowers the barrier for creating high-quality content, and Web3 allows users to reap the benefits of their valuable content. With blockchain, all user contributions can be publicly, transparently, and immutably recorded, providing a platform for individual creativity. On the other hand, AI makes Web3 intelligent, enhancing productivity, broadening application scenarios, and improving user experiences. Generative AI accelerates the creative process, enhancing content quality and diversity, endowing individuals with greater productivity, expanding innovation boundaries, and allowing Web3 innovations to emerge at lower costs. With the help of AI, Web3 products can offer more intelligent services, reducing user participation barriers and driving mass adoption. The Renaissance of Industries: Landing Scenarios for Web3 x AI After years of research and development, the Web3 and AI industries are poised for large-scale deployment. The singularity of the digital economy is approaching, and various domains are embracing the synergy of Web3 x AI, sparking new vitality. At the physical layer, Proof-of-Work (PoW) mining machines can integrate with AI model training, fully unleashing computing power. As large models like ChatGPT rise, computing power becomes a critical factor limiting AI development, with only a few giants obtaining massive computing power, hindering further innovation in the AI field. In this context, a decentralized network named DePIN emerges. DePIN integrates cutting-edge technologies, including blockchain, effectively consolidating global decentralized computing resources and data, creating an open and shared computing infrastructure. This network provides a sustainable and reliable ecosystem for AI models, making training and running AI models more feasible and sustainable. At the data layer, Web3 incentivizes users to generate higher-quality data, further enhancing the quality of AI models. AI’s underlying components are algorithms, computing power, and data, with data being the most crucial factor determining the quality of AI models. Current AI models mostly rely on publicly available data for training, with low costs but compromised quality. Higher-quality data forms the foundation for efficient AI models, and Web3 allows users to regain data sovereignty, benefitting from it, and positively incentivizing the creation of higher-quality content. At the application layer, AI empowers past Web3 applications with higher intelligence, optimizing user experiences. The security of DeFi has always been a Damocles sword hanging over everyone’s head; AI-empowered contract audits will significantly reduce the likelihood of contract security vulnerabilities. In the realms of NFTs and gaming, AIGC can lower the difficulty of material creation and accelerate innovation. In DAO governance, AI can not only provide suggestions as an assistant to governance participants but also directly participate as a governance member, adding another dimension to governance. Conclusion The year 2023 marks the birth of a miracle, with widespread adoption of Web3, breakthrough projects in the social and gaming sectors creating a ripple effect; AI officially enters the 2.0 era, empowering various industries through large language models, heralding an innovation singularity. The CGV Research team believes that the fusion of AI and Web3 not only opens up new technological frontiers but also foreshadows profound changes at the societal, economic, and cultural levels. This integration endows individuals with greater digital sovereignty and creative power while bringing about more efficient and intelligent productivity and services for the entire society. With continuous technological advancements, we are poised to embrace a more decentralized, intelligent digital future, where the value and contributions of individuals receive full respect and reward. CGV firmly believes that Web3 x AI is an inevitable trend in the digital economy, potentially giving rise to more unicorn projects. Standing together with Builder, CGV has established the AIFocus Accelerator, providing comprehensive support for builders in the Web3 x AI space, collectively constructing the future of Web3 x AI. At the intersection of Web3 and AI technologies, AIFocus Accelerator warmly invites innovators and developers worldwide to join this historic journey. ---------------------- About Cryptogram Venture (CGV): CGV (Cryptogram Venture) is a crypto investment institution headquartered in Tokyo, Japan. Since 2017, its fund and predecessor funds have participated in investing in over 200 projects, including the incubation of the licensed Japanese yen stablecoin JPYW. CGV is also a limited partner in several globally renowned crypto funds. Since 2022, CGV has successfully hosted two editions of the Japan Web3 Hackathon (TWSH), supported by Japan's Ministry of Education, Culture, Sports, Science and Technology, Keio University, NTT Docomo, and other institutions and experts. CGV has branches in Hong Kong, Singapore, New York, Toronto, and other locations. Additionally, CGV is a founding member of the Bitcoin Tokyo Club. About AIFocus: AIFocus is an entrepreneurial project accelerator based in Hong Kong, co-initiated by CGV (Cryptogram Venture) and Web3 Labs. It is dedicated to in-depth exploration of the AI and Web3 domains, selecting teams with forward-thinking ideas and creativity, and providing support in terms of technical talent, resources, and funding. AIFocus adheres to the service principle of investing first and then accelerating, aiming to unearth outstanding projects and propel them to rapid success. Disclaimer: The information and materials introduced in this article are sourced from public channels, and our company does not guarantee their accuracy or completeness. Descriptions or predictions involving future situations are forward-looking statements, and any advice and opinions provided are for reference only and do not constitute investment advice or implications for anyone. The strategies our company may adopt could be the same, opposite, or unrelated to the strategies readers might speculate based on th

Produced by: CGV Research Author: Cynic Bitcoin, as the first successful decentralized digital currency, has been at the core of the cryptocurrency field since its inception in 2009. Serving as an innovative means of payment and store of value, Bitcoin has sparked widespread global interest in cryptocurrency and blockchain technology. However, as the Bitcoin ecosystem continues to mature and expand, it faces various challenges, including transaction speed, scalability, security, and regulatory issues. Recently, the script ecosystem, led by BRC20, has taken the market by storm, with various scripts experiencing over a hundredfold increase. Bitcoin on-chain transactions are severely congested, with average Gas reaching over 300 sat/vB. Simultaneously, the airdrop from Nostr Assets further captures market attention, and protocol design whitepapers like BitVM and BitStream are proposed, indicating the burgeoning potential of the Bitcoin ecosystem. The CGV Research team, through a comprehensive review of the current state of the Bitcoin ecosystem, covering technological advancements, market dynamics, legal regulations, etc., conducts an in-depth analysis of Bitcoin technology and examines market trends. We aim to provide a panoramic perspective on the development of Bitcoin. The article begins by revisiting the fundamental principles and developmental history of Bitcoin, then delves into the technological innovations of the Bitcoin network, such as the Lightning Network and Segregated Witness, while making predictions about its future development trends. Asset Issuance: Starting with Colored Coins The essence of the Script ecosystem lies in providing ordinary individuals with the right to issue assets with low barriers, accompanied by simplicity, fairness, and convenience. The emergence of the script protocol on Bitcoin occurred in 2023, but as early as 2012, there existed the concept of utilizing Bitcoin for asset issuance, known as Colored Coins. Colored Coins: Early Attempts Colored Coins refer to a set of technologies using the Bitcoin system to record the creation, ownership, and transfer of assets other than Bitcoin. This technology can be employed to track digital assets and tangible assets held by third parties, facilitating ownership transactions through colored coins. The term “colored” refers to adding specific information to Bitcoin UTXOs, distinguishing them from other Bitcoin UTXOs, thereby introducing heterogeneity among homogeneous bitcoins. Through the Colored Coins technology, issued assets possess many characteristics identical to Bitcoin, including prevention of double-spending, privacy, security, transparency, and resistance to censorship, ensuring the reliability of transactions. It’s worth noting that the protocol defined by Colored Coins is not implemented by typical Bitcoin software. Specific software is required to identify transactions related to Colored Coins. Clearly, Colored Coins only hold value within communities that recognize the Colored Coins protocol; otherwise, the colored attributes of heterogeneous Colored Coins will be lost, reverting to pure satoshis. On one hand, Colored Coins recognized by small-scale communities can leverage many advantages of Bitcoin for asset issuance and circulation. On the other hand, it is almost impossible for the Colored Coins protocol to be merged into the largest consensus Bitcoin-Core software through a soft fork. Open Assets In late 2013, Flavien Charlon introduced the Open Assets Protocol as one implementation of Colored Coins. Asset issuers use asymmetric cryptography to calculate asset IDs, ensuring that only users with the private key for the asset ID can issue identical assets. For asset metadata, the OP_RETURN opcode is used to store the metadata in the script, referred to as the “marker output,” which stores colored information without contaminating UTXOs. Since it utilizes Bitcoin’s public-private key cryptographic tools, asset issuance can be performed through multisignature mechanisms. EPOBC In 2014, ChromaWay introduced the EPOBC protocol, which stands for Enhanced, Padded, Order-Based Coloring. The protocol comprises two types of operations: genesis and transfer. The genesis operation is used for the issuance of assets, while the transfer operation facilitates the transfer of assets. The asset type cannot be explicitly encoded or differentiated, and each genesis transaction issues a new asset, determining its total quantity during issuance. EPOBC assets must be transferred using the transfer operation, and if an EPOBC asset is used as an input in a non-transfer operation transaction, the asset will be lost. Additional information about EPOBC assets is stored through the nSequence field in Bitcoin transactions. The nSequence field is a reserved field in Bitcoin transactions consisting of 32 bits. Its lowest six bits are used to determine the transaction type, and bits 6–12 are used for padding to meet the anti-dust attack requirements of the Bitcoin protocol. The advantage of using the nSequence field to store metadata information lies in not requiring additional storage. As there is no asset ID for identification, each transaction involving an EPOBC asset must be traced back to the genesis transaction to determine its category and legitimacy. Mastercoin/Omni Layer Compared to the aforementioned protocols, Mastercoin has seen more successful commercial implementation. In 2013, Mastercoin conducted the first-ever ICO in history, raising 5000 BTC and ushering in a new era. The widely known USDT, initially issued on the Bitcoin blockchain, was introduced through the Omni Layer. Mastercoin exhibits a lower degree of dependency on Bitcoin, opting to maintain most of its state off-chain, with only minimal information stored on-chain. Mastercoin essentially treats Bitcoin as a decentralized log system, using any Bitcoin transaction to broadcast changes in asset operations. The validation of transaction effectiveness involves continuously scanning the Bitcoin blockchain and maintaining an off-chain asset database. This database preserves the mapping relationship between addresses and assets, with addresses reusing the Bitcoin address system. Early Colored Coins primarily used the OP_RETURN opcode in scripts to store metadata about assets. After the SegWit and Taproot upgrades, new derivative protocols have more options. SegWit, short for Segregated Witness, essentially separates the Witness (transaction input script) from the transaction. The main reason for this separation is to prevent nodes from attacking by modifying the input script. However, it comes with a benefit: effectively increasing block capacity, allowing for more storage of witness data. Taproot introduces an important feature called MAST, enabling developers to include metadata for any asset in outputs using Merkle Trees. It leverages Schnorr signatures to enhance fungibility and scalability, and supports multi-hop transactions through the Lightning Network. Ordinals & BRC20 and Simulated Trading: A Grand Social Experiment In a broad sense, Ordinals consist of four components: A BIP for sequencing sats An indexer that uses the Bitcoin Core Node to track the position (ordinal) of all satoshis A wallet for handling ordinal-related transactions A block explorer to identify ordinal-related transactions Of course, the core is the BIP/protocol itself. Ordinals define a sorting scheme (starting from 0 based on the order they are mined), assigning numbers to the smallest unit in Bitcoin, Satoshis. This imparts heterogeneity to originally homogeneous Satoshis, introducing scarcity. It can reuse the infrastructure of BTC, including single signatures, multi-signatures, time locks, height locks, etc., without the need to explicitly create ordinal numbers. It offers good anonymity and leaves no explicit on-chain footprint. However, the drawbacks are evident, as a large number of small and unused UTXOs can increase the size of the UTXO set, potentially leading to what is known as a dust attack. Additionally, the space occupied by the index is significant, requiring specific information each time spending a particular sat: Blockchain header Merkle path to the coinbase transaction that created that sat Coinbase transaction that created that sat To prove that a specific sat is included in a specific output. Inscription, in this context, is engraving arbitrary content onto sats. The specific method involves placing the content into the taproot script-path spend scripts, completely on-chain. The inscribed content is serialized according to the HTTP response format, pushed into non-executable scripts in spend scripts, known as “envelopes.” Specifically, inscription involves adding OP_FALSE before conditional statements, placing the inscribed content in a non-executable conditional statement in JSON format. The size of the inscribed content is limited by the taproot script, totaling no more than 520 bytes. Since taproot spending scripts require existing taproot outputs to be spent, inscription requires two steps: commit and reveal. In the first step, a taproot output committing to the inscribed content is created. In the second step, the inscribed content and the corresponding Merkle Path are used to spend the taproot output from the previous step, revealing the inscribed content on-chain. The original purpose of inscription was to introduce non-fungible tokens (NFTs) to BTC. However, new developers have created BRC20, mimicking ERC20 on its basis, bringing the ability to issue fungible assets to Ordinals. BRC20 includes operations like Deploy, Mint, Transfer, etc., with each operation requiring both commit and reveal steps. The transaction process is more complex, with higher costs. Using real data as an example: [Example data not provided] The selected part is the inscribed content, and the result after deserialization is as follows: The ARC20 protocol derived from Atomicals aims to simplify transactions by binding each unit of ARC20 tokens to satoshis, reusing the Bitcoin transaction system. After issuing assets through commit and reveal steps, transfers between ARC20 tokens can be directly accomplished by transferring the corresponding satoshis. The design of ARC20 aligns more with the literal definition of Colored Coins — adding new content to existing tokens to create new tokens, where the value of the new token is no lower than the original token, resembling gold and silver jewelry. Client-Side Validation (CSV) and Next-Generation Asset Protocols Client-side validation, proposed by Peter Todd in 2017, involves off-chain data storage, on-chain commitments, and client-side verification. Currently, asset protocols supporting client-side validation include RGB and Taproot Assets (Taro). RGB In addition to client-side validation, RGB uses Pedersen hash as a commitment mechanism and supports output blinding. When requesting a payment, the UTXO receiving the token does not need to be publicly disclosed; instead, a hash value is sent, enhancing privacy and resistance to censorship. When spending the token, the blinded value needs to be revealed to the recipient to verify transaction history. Additionally, RGB introduces AluVM for increased programmability. During client-side validation, users not only verify incoming payment information but also receive all transaction history from the payer, tracing back to the asset’s genesis transaction for finality. Verifying all transaction history ensures the validity of received assets. Taproot Assets: Developed by Lightning Labs, Taproot Assets enable the instant, high-volume, low-cost transfer of issued assets on the Lightning Network. Designed entirely around the Taproot protocol, it enhances privacy and scalability. Witness data is stored off-chain, verified on-chain, and can exist locally or in information repositories called “Universes” (similar to Git repositories). Witness verification requires all historical data from asset issuance, disseminated through the Taproot Assets gossip layer. Clients can cross-verify using a local blockchain copy. Taproot Assets use the Sparse Merkle Sum Tree to store the global state of assets, incurring high storage costs but offering efficient verification. Proof of inclusion/non-inclusion allows verification of transactions without backtracking asset transaction history. Scalability: Bitcoin’s Eternal Proposition Despite having the highest market value, security, and stability, Bitcoin deviates from its initial vision of a “peer-to-peer electronic cash system.” Limited block capacity makes Bitcoin unable to handle large and frequent transactions, prompting various protocols to address this issue over the past decade. Payment channels and Lightning Network: The Bitcoin Orthodox Solution The Lightning Network operates by establishing payment channels. Users can create payment channels between any two parties, connect channels to form a more extensive payment channel network, and even make payments indirectly between users without a direct channel. For example, if Alice and Bob want to conduct multiple transactions without recording each on the Bitcoin blockchain, they can open a payment channel between them. They can perform numerous transactions within this channel, only requiring two blockchain recordings: once when opening the channel and another when closing it. This significantly reduces waiting times for blockchain confirmations and alleviates the burden on the blockchain. Currently, the Lightning Network has over 14,000 nodes, 60,000 channels, and a total capacity exceeding 5000 BTC. Sidechains: The Ethereum Approach in Bitcoin Stacks Stacks positions itself as Bitcoin’s smart contract layer, using its native token as the Gas token. Stacks employs a micro-block mechanism, evolving in sync with Bitcoin, where their blocks are confirmed simultaneously. In Stacks, this is referred to as an “anchored block.” Each Stacks transaction block corresponds to a single Bitcoin transaction, achieving higher transaction throughput. With blocks generated simultaneously, Bitcoin acts as a rate limiter for creating Stacks blocks, preventing denial-of-service attacks on its peer network. Stacks achieves consensus through the dual-spiral mechanism of Proof of Transfer (PoX). Miners send BTC to STX stakers to compete for the right to mine blocks, and successful miners receive STX rewards after successfully mining a block. During this process, STX stakers receive a proportionate amount of BTC sent by the miner. Stacks aims to incentivize miners to maintain the historical ledger by issuing native tokens, although incentivization can still be achieved without native tokens (as seen in RSK). For transaction data in the Stacks blockchain, the hash of transaction data is stored in the Bitcoin transaction script using the OP_RETURN bytecode. Stacks nodes can retrieve Stacks transaction data hashes stored in Bitcoin transactions through Clarity’s built-in functionalities. Stacks can be considered as almost a Layer 2 chain for Bitcoin; however, there are still some flaws in the movement of assets across borders. After the Nakamoto upgrade, Stacks supports sending Bitcoin transactions to complete asset movements, but the complexity of transactions makes them unverifiable on the Bitcoin chain. Asset movements can only be verified through a multisignature committee. RSK RSK utilizes a merged-mining algorithm, where Bitcoin miners can assist RSK in block production at almost no cost, earning additional rewards. RSK does not have a native token and continues to use BTC (RBTC) as the Gas Token. RSK has its own execution engine compatible with the Ethereum Virtual Machine (EVM). Liquid Liquid is a federated sidechain of Bitcoin with permissioned node access, overseen by fifteen members responsible for block production. Assets are transferred using the lock-and-mint mechanism, where assets are sent to the multisignature address on Liquid using BTC, enabling the assets to enter the Liquid sidechain. To exit, L-BTC is sent to the multisignature address on the Liquid chain. The security of the multisignature address is set at 11 out of 15. Liquid focuses on financial applications and offers developers an SDK related to financial services. The Total Value Locked (TVL) on the Liquid network is currently approximately 3000 BTC. Nostr Assets: Centralization Reinforced Nostr Assets, originally named NostrSwap, serves as a BRC20 trading platform. Upgraded to Nostr Assets Protocol on August 3, 2023, it supports the transfer of all assets within the Nostr ecosystem. Lightning Network handles asset settlement and security. Nostr Assets enables users to send and receive Lightning Network assets using Nostr public and private keys. Transactions on the Nostr Assets protocol, excluding deposits and withdrawals, are gas-free, encrypted, and stored on the Nostr Protocol relay using IPFS for fast and efficient access. It supports natural language interaction, eliminating the need for complex interfaces. Nostr Assets provides users with a simple and convenient way to transfer and trade assets, potentially finding significant applications in conjunction with the traffic effects of the Nostr social protocol. However, fundamentally, it is a method of controlling (custody) wallets using Nostr messages. Users deposit assets into the Nostr Assets relay by transferring them on the Lightning Network, akin to depositing assets into a centralized exchange. When users want to transfer and trade assets within Nostr Assets, they send messages signed with Nostr keys to the server. After verification, the server records the transactions internally, bypassing execution on the Lightning Network or the mainnet, achieving zero gas fees and high TPS. BitVM: Programmability and Infinite Scaling “Any computable function can be verified on Bitcoin.” — Robin Linus, creator of BitVM BitVM, proposed by Robin Linus, the founder of ZeroSync, utilizes existing Bitcoin OP Codes (OP_BOOLEAN, OP_NOT) to form AND and NOT gate circuits, breaking down programs into primitive AND and NOT gate circuits. It places the root of the spend script into Taproot transactions for low-cost on-chain storage. According to computational theory, all logical computations can be constructed using AND and NOT gate circuits, theoretically making BitVM Turing complete and capable of performing all computations on Bitcoin. However, there are many practical limitations. BitVM operates in a P2P mode, following the concept of OP Rollup. There are two roles: prover and verifier. In each transaction, both prover and verifier collaboratively build a transaction, depositing collateral. The prover provides results, and if the verifier calculates different results, they submit a fraud proof to the chain to penalize the prover. BitVM’s primary use case is for minimal trust bridges and ZKP scaling (ZK Rollup). BitVM’s proposal is a compromise due to the difficulty of gaining support in the Bitcoin community for increasing OP_CODE complexity. It utilizes existing OP_CODEs to implement new functionalities. BitVM introduces a new paradigm for scaling, but there are numerous challenges in practice: - Too Early: While EVM has a comprehensive VM architecture, BitVM has only one function to verify if a string is 0 or 1. - Storage Overhead: Constructing programs with NAND gates may require hundreds of megabytes of data, with billions of taproot leaves. - P2P: The current model involves interactions between two parties, and the prover-challenger structure has incentive issues. There are considerations to extend to 1-N or N-N, similar to the ideal OP Rollup (single honest assumption). Conclusion A comprehensive review of the text reveals that due to the limitations in the mainnet’s processing capacity and computational abilities, Bitcoin must move computations off-chain to foster a more thriving and diverse ecosystem. On one hand, off-chain computation and client-side verification solutions utilize certain fields in Bitcoin transactions to store crucial information, treating the Bitcoin mainnet as a distributed logging system, leveraging its censorship resistance and reliability to ensure the availability of critical data. In a sense, this approach is similar to Sovereign Rollups. It does not require modifications to Bitcoin’s protocol layer, allowing for the construction of protocols as needed, offering higher feasibility in the current scenario but not fully inheriting Bitcoin’s security. On the other hand, efforts are underway to advance on-chain verification, attempting to use existing tools to achieve arbitrary computations on Bitcoin, subsequently utilizing zero-knowledge proof technology for efficient scaling. However, these current solutions are still in very early stages, with high computational costs, and are not expected to be implemented in the short term. Of course, some may wonder why not shift to Ethereum, which, along with other blockchains, possesses high computational power. Why go through the process of re-implementing things on Bitcoin? Because It’s Bitcoin. Reference： https://wizardforcel.gitbooks.io/masterbitcoin2cn/content/appdx8.html https://github.com/chromaway/ngcccbase/wiki/EPOBC_simple https://github.com/OpenAssets/open-assets-protocol/blob/master/specification.mediawiki https://twitter.com/LNstats https://twitter.com/robin_linus/status/1723472140270174528 https://github.com/fiksn/bitvm-explained https://bitcoinmagazine.com/technical/the-big-deal-with-bitvm-arbitrary-computation-now-possible-on-bitcoin-without-a-fork https://mirror.xyz/0x5CCF44ACd0D19a97ad5aF0da492AC0388469DfE9/_k3vtpI7a5cQn5iISH7-riECpyudfI4BTeeeBMwNYDQ ---------------------- About Cryptogram Venture (CGV): CGV (Cryptogram Venture) is a crypto investment institution headquartered in Tokyo, Japan. Since 2017, its fund and predecessor funds have participated in investing in over 200 projects, including the incubation of the licensed Japanese yen stablecoin JPYW. CGV is also a limited partner in several globally renowned crypto funds. Since 2022, CGV has successfully hosted two editions of the Japan Web3 Hackathon (TWSH), supported by Japan's Ministry of Education, Culture, Sports, Science and Technology, Keio University, NTT Docomo, and other institutions and experts. CGV has branches in Hong Kong, Singapore, New York, Toronto, and other locations. Additionally, CGV is a founding member of the Bitcoin Tokyo Club. Disclaimer: The information and materials introduced in this article are sourced from public channels, and our company does not guarantee their accuracy or completeness. Descriptions or predictions involving future situations are forward-looking statements, and any advice and opinions provided are for reference only and do not constitute investment advice or implications for anyone. The strategies our company may adopt could be the same, opposite, or unrelated to the strategies readers might speculate based on th

Produced by: CGV Research Author: Cynic ，Shigeru TL;DR — — The concept of DePIN ： Exploring the concept of Decentralized Physical Infrastructure Network (DePIN), emphasizing the intersection of digitization and decentralization. DePIN combines physical hardware and blockchain technology, representing a new era of fusion between digital technology and the physical world. The article underscores the importance of DePIN in terms of data, power, and control redistribution, envisioning a more democratic, fair, and transparent future. — — DePIN’s “chicken and egg” problem： Discussing one of the main challenges DePIN faces in its development, the “chicken and egg” problem. This problem describes a dilemma: to establish a robust decentralized network, a significant amount of hardware devices is needed to participate. However, to attract these devices, there must already be an established and well-functioning network. The article highlights the need to provide some form of incentive to attract early participants to the network. — — How DePIN works ： Introducing the working principles of DePIN, including its decentralized nature relying on individual hardware devices and the use of blockchain technology to manage and secure the network. Blockchain, as a public, transparent, and tamper-proof digital ledger, records all transactions and interactions on the network, ensuring all nodes adhere to the network’s rules. Additionally, DePIN employs an incentive mechanism, typically based on cryptocurrency, to encourage nodes to participate and contribute their resources. — — Applicable industry of DePIN： Exploring the potential applications of DePIN in industries such as telecommunications, energy, data storage, the Internet of Things, and supply chain. For example, in the telecommunications industry, DePIN offers a decentralized solution, allowing devices to communicate directly without intermediaries. In the energy sector, DePIN provides a decentralized energy grid solution, enabling direct power exchange between nodes. — — Market explosion singularity of DePIN： Discussing the impact of increased technological maturity on the DePIN market, primarily due to advancements in blockchain and IoT technologies. High-throughput blockchain solutions, enhanced security and privacy protection, the development of cross-chain technologies, and the growth and maturation of IoT devices all provide DePIN with more nodes and data, strengthening its network effects. 1.The connotation of DePIN As technology advances, we are at a crossroads of digitization and decentralization. Decentralization is not just a technological trend; it represents a redistribution of power, control, and data ownership. In this context, the Decentralized Physical Infrastructure Network (DePIN) has emerged, offering us a fresh perspective on the interaction between the physical and digital worlds. This interaction goes beyond data and is primarily about power and control. Through DePIN, we can envision a more democratic, fair, and transparent future where everyone can participate and benefit. DePIN, also known as a Decentralized Physical Infrastructure Network, is an emerging technological concept that combines physical hardware and blockchain technology. These networks, also referred to as Proof of Physical Work (PoPW), Token Incentivized Physical Infrastructure Networks (TIPIN), and Edgefi Networks, represent a new era of fusion between digital technology and the physical world. In this era, data is no longer passive digits; it’s closely intertwined with the physical world. Through DePIN, we can see a decentralized future where data, power, and control are all redistributed, and everyone can participate and benefit. For example, in wireless networks, there are WiFi hotspots, or in energy networks, there are solar-powered home batteries. These networks are built in a decentralized manner by contributors from around the world. In return, these individuals and entities receive financial compensation and network ownership through token incentives. 2. Analyzing the Inherent Value of DePIN from the “Chicken and Egg” Problem In the course of technological evolution, we often encounter a series of challenges, with the “chicken and egg” problem being one of the most classic. This problem describes a dilemma: to achieve a certain goal, you need to have A first, but to have A, you also need to achieve that goal first. In the context of DePIN, this problem becomes particularly prominent. To establish a strong decentralized network, we need a substantial number of hardware devices to participate. However, to attract these devices, we need an already established and well-functioning network. 2.1 Why is the “Chicken and Egg” Problem Crucial in DePIN? The value of a decentralized network lies in its participants. The strength and stability of a decentralized network are directly related to the number and quality of its nodes. More nodes mean higher redundancy, better data distribution, and greater system resilience. However, for most hardware device owners, joining a new, unproven network carries risks. They may need to invest time and resources without a clear guarantee of returns. Therefore, to attract these early participants, the network needs to provide some form of incentive. 2.2 How Does DePIN Address This Challenge? DePIN’s solution is to provide incentives to early participants. These incentives can take various forms, from cryptocurrency rewards to special privileges within the network. For example, a DePIN might offer additional cryptocurrency rewards to its early nodes or grant them greater influence in network decision-making. This incentive system encourages more hardware devices to join the network, accelerating its growth and stability. In DePIN, incentives are not only about solving the “chicken and egg” problem; they are also essential for ensuring the health and stability of the network. A healthy DePIN requires its participants to continuously provide and maintain their resources. To ensure this, the network needs to offer sufficient incentives to encourage such behavior. This may include providing cryptocurrency rewards, granting special privileges within the network, or other forms of rewards. 2.3 Design Challenges and Opportunities Although DePIN provides a solution to the “chicken and egg” problem, it doesn’t mean it lacks other challenges. For instance, how to ensure the fairness of the incentive system? How to prevent malicious participants from exploiting the incentive system? How to ensure the long-term stability and health of the network? These questions require deep consideration and solutions from DePIN’s designers and operators. However, at the same time, DePIN offers us a unique opportunity to rethink how to build and operate networks. Through innovative incentive systems and decentralized design principles, DePIN presents a more equitable, transparent, and democratic future. 3. How DePIN works DePIN’s Operating Principles DePIN’s operation is based on decentralization and blockchain technology. Firstly, DePIN relies on individual hardware devices, which are also referred to as nodes. These nodes can be personal computers, dedicated servers, or IoT devices. Together, these devices form a decentralized network without any central nodes or authoritative entities. This decentralized characteristic makes DePIN more secure and transparent. Secondly, DePIN utilizes blockchain technology to manage and protect the network. Blockchain is a public, transparent, and tamper-proof digital ledger that records all transactions and interactions on the network, ensuring that all nodes adhere to the network’s rules. Furthermore, to encourage node participation and resource contribution, DePIN employs an incentive mechanism. This mechanism is typically based on cryptocurrency, allowing nodes to earn rewards by participating in the network and contributing their resources. DePIN flywheel effect diagram (Source: IoTeX) Advantages of DePIN Compared to Traditional Physical Infrastructure Networks Shared Ownership: DePIN encourages participants to collectively invest in the deployment and maintenance of infrastructure through a token reward mechanism. This bottom-up approach results in network ownership being shared among all participants rather than controlled by a few shareholders. Cost Distribution: Decentralized physical infrastructure networks effectively reduce operational costs and expenses by mobilizing the shared resources of network participants. Decentralized Features: Compared to traditional centralized infrastructure networks, decentralized networks offer higher security and resilience. The decentralized construction makes the network less susceptible to the negative impacts of corruption, tampering, hacking, and other potential issues associated with centralized control. Open Competition and Innovation: DePIN brings opportunities for innovation to various industries. By eliminating the entry barriers set by traditional infrastructure networks, it incentivizes new participants to compete in markets traditionally dominated by a few large enterprises. 4. Which industries is DePIN best suited for? With the rapid advancement of technology, the concept of Decentralized Physical Infrastructure Network (DePIN) is gradually becoming a reality. This network model, combining physical hardware and blockchain technology, offers countless opportunities across various industries. 4.1 Telecommunications Industry The telecommunications industry is a prime area for DePIN. Traditional telecom networks rely on centralized base stations and switches for data transmission. However, with the increasing number of IoT devices and the widespread adoption of 5G technology, this centralized model becomes increasingly inadequate. DePIN provides a decentralized solution that allows devices to communicate directly without the need for central nodes. This not only improves network efficiency and resilience but also reduces maintenance and upgrade costs. 4.2 Energy Industry The energy industry is also an ideal field for DePIN. With the development of renewable energy technologies, more households and businesses are generating their own power. However, traditional electrical grids are centralized and not suitable for this decentralized energy production model. DePIN offers a decentralized energy grid solution that allows various nodes (such as households, businesses, or small power plants) to directly exchange power. This not only enhances the efficiency of the grid but also provides new economic opportunities for participants. 4.3 Data Storage Industry With the explosive growth of data, data storage has become a significant challenge. Traditional cloud storage solutions rely on centralized data centers, which not only increase costs but also pose security risks. DePIN provides a decentralized storage solution that allows various nodes to offer storage space and receive corresponding rewards. This model not only reduces storage costs but also enhances data security and reliability. 4.4 Internet of Things (IoT) Industry IoT is another ideal field for DePIN. With the increasing number of devices, traditional centralized networks are becoming increasingly unstable and unreliable. DePIN offers a decentralized network solution that allows devices to communicate directly without the need for central nodes. This not only improves network efficiency and resilience but also provides devices with new functionalities and services. 4.5 Supply Chain Industry Supply chain management is a complex process involving multiple participants and extensive data exchange. Traditional supply chain solutions rely on centralized databases and applications, which increase costs and complexity. DePIN provides a decentralized supply chain solution that allows various participants to exchange data directly without the need for central nodes. This not only improves supply chain efficiency and transparency but also provides new economic opportunities for participants. 4.6 Transportation Industry With the development of autonomous driving technology, the transportation industry is undergoing significant changes. Traditional traffic management systems rely on centralized control centers and sensor networks. However, this model may no longer be suitable in the future of autonomous driving. DePIN offers a decentralized traffic management solution that allows vehicles to communicate directly without the need for central nodes. This not only improves traffic efficiency and safety but also provides vehicles with new services and functionalities. DePIN provides countless opportunities across various industries. Through decentralized means, DePIN not only enhances efficiency and resilience but also offers new economic opportunities for participants. With technological advancement and market development, we can anticipate that DePIN will play an increasingly important role in the future. 5. Market explosion singularity of DePIN： In the ever-evolving landscape of technology, innovation stands as the pivotal force propelling progress. Particularly in the domain of DePIN, the advancement of technological maturity is not only a milestone but also a turning point. It signifies the transition of DePIN from theory to practice, from concept to reality. The critical technological advancements behind this turning point will collectively shape the future of DePIN and pave the way for its market explosion. 5.1 The Advancement of Technological Maturity 5.1.1 Progress from Blockchain Technology High-Throughput Blockchain Solutions: With the emergence of next-generation blockchain protocols, such as sharding technology and sidechains, blockchain networks have significantly increased their processing speed and throughput. This enables DePIN to handle more transactions and data, enhancing its practicality and efficiency. Enhanced Security and Privacy Protection: By introducing advanced technologies like zero-knowledge proofs and homomorphic encryption, blockchain networks have bolstered their security and privacy protection capabilities. This provides DePIN with a more secure and reliable environment for data exchange and storage. Development of Cross-Chain Technology: The development of cross-chain technology allows different blockchain networks to communicate and exchange data with each other. This provides DePIN with broader interoperability, allowing it to integrate more resources and services. (Source: ：Messari ） 5.1.2 Progress from IoT Technology IoT Technology: The growth and maturation of IoT devices will provide DePIN with more nodes and data, enhancing its network effects. According to Gartner’s predictions, the global number of IoT devices is expected to reach 25 billion by 2025. This growth will offer DePIN more nodes and data, further strengthening its network effects. Proliferation of Smart Sensors and Devices: As the cost of IoT sensors and devices decreases, their applications in various fields become increasingly common. This provides DePIN with a wealth of data sources and nodes, enhancing its network effects. Development of Edge Computing: The development of edge computing technology allows data processing to occur near IoT devices, reducing data transfer latency and costs. This enables DePIN to more efficiently handle and analyze data from IoT devices. Enhanced IoT Security: With advancements in IoT security technology, such as stronger encryption methods and security protocols, the security of IoT devices and networks has improved. This provides DePIN with a more secure infrastructure and data source. 5.2 Support from Policies and Regulations If governments and regulatory bodies can create favorable policies and regulations that encourage the development of DePIN, it will create conducive conditions for its widespread application, including but not limited to: Innovative Tax Incentive Policies: Governments can implement tax incentives for DePIN projects. For example, they can offer tax reductions or tax credits to businesses and individuals deploying eco-friendly technologies or renewable energy facilities within the DePIN network. Streamlined Permit and Approval Processes: Governments can simplify the permit and approval processes for DePIN projects, particularly for those involving cross-border or multiple administrative regions. This will reduce barriers to project initiation and operation, accelerating innovation. Establishment of DePIN Innovation Funds: Governments can establish dedicated funds to support research and innovation projects related to DePIN. These funds can be used to finance startups, research institutions, or public-private collaboration projects. 5.3 Support from Enterprises and Industries If major companies and industry leaders can support and adopt DePIN, it will provide significant momentum. Strategic Investments by Industry Giants: Imagine if tech giants like Google and Amazon started investing in DePIN projects or established partnerships with DePIN startups. Such actions would not only provide financial support to DePIN but also enhance its visibility and reputation within the industry. Supply Chain Integration: Large manufacturing and retail companies can improve efficiency and transparency by integrating DePIN technology into their supply chain management. For example, using DePIN-based solutions to track the entire process from production to delivery. Energy Management Innovation: Energy giants can optimize energy distribution and trading by adopting DePIN technology. For example, establishing a decentralized energy trading platform that allows users to directly trade renewable energy. 5.4 Expansion of Technological Collaboration and Partnerships Collaboration and integration with other technologies and platforms, such as 5G and edge computing, will provide more possibilities for DePIN applications. For example: Integration of 5G with DePIN: Combining the high-speed and low-latency features of 5G networks, DePIN can achieve faster data transmission and real-time communication. For example, establishing an intelligent traffic system based on DePIN that utilizes 5G networks for instant communication and data sharing between vehicles, enhancing road safety and traffic efficiency. Combining Edge Computing with DePIN: By integrating edge computing technology into DePIN, data processing can occur where it’s generated, reducing reliance on centralized data centers. This is especially useful for applications that require rapid response, such as security monitoring and emergency response systems in smart cities. Collaboration of IoT Devices with DePIN: IoT devices can serve as nodes within the DePIN network, collecting and transmitting data. By combining IoT with DePIN, more secure and efficient data management can be achieved. For example, in agriculture, data collected by IoT devices can be analyzed through DePIN to optimize crop planting and resource allocation. Fusion of AI with DePIN: Combining AI technology with DePIN can enable more intelligent data analysis and decision support. For example, in healthcare, patient data collected through DePIN can be deeply analyzed with AI to provide personalized treatment plans. 5.5 Strengthening Globalization and Cross-Border Cooperation The concept and application of DePIN are not limited by geographical boundaries. A global perspective and cross-border cooperation will bring more significant markets and opportunities. For example: Global Disaster Response Network: Imagine a global DePIN system for disaster response. In the event of earthquakes, floods, or other natural disasters, this decentralized network can rapidly mobilize global resources, including drones, sensors, and communication devices, to provide real-time data and support for rescue operations. International Clean Energy Grid: DePIN can be used to build a cross-border clean energy sharing network. For example, utilizing solar energy from the Sahara Desert and wind energy from Northern Europe, decentralized energy grids can distribute energy worldwide, optimizing energy usage and reducing waste. Global Healthcare Monitoring System: Deploying a DePIN-based healthcare monitoring system on a global scale can track the spread of infectious diseases, monitor public health conditions in real-time, and share critical medical data worldwide, effectively addressing global health crises. In conclusion, the market explosion of DePIN requires various factors to work together. Technology, policies, economics, communities, and markets will all play crucial roles in this process. 6. Some representative projects of DePIN As the DePIN concept gained popularity, many projects began to explore this area. Here are some examples of projects that have successfully applied the DePIN concept and how they are leveraging this new technology to innovate and deliver value. 6.1 Helium Helium is a decentralized wireless network designed to provide Internet connectivity for low-power devices. Helium’s network is made up of hotspots deployed by individuals and enterprises. These hotspots not only provide wireless coverage, but also validate other hotspots in the network. In this way, Helium creates a decentralized, self-validating network. Participants can earn Helium tokens as a reward by deploying hotspots and verifying network activity. 6.2 HiveMapper HiveMapper is a decentralized mapping network that uses video data to create 3D maps. HiveMapper allows anyone to upload video data and use that data to create and update 3D maps. In this way, HiveMapper has created a decentralized, community-driven mapping platform. Participants can be rewarded by providing video data. 6.3 Render Render is a decentralized cloud computing platform designed for 3D rendering, machine learning, and other computationally intensive tasks. Render allows users to provide unused GPU power as part of a network. These GPU resources are pooled to support tasks that require a lot of computing power. Participants can earn Render tokens as a reward by providing GPU resources. 6.4 Filecoin Filecoin is a decentralized storage network designed to provide users with secure and reliable data storage services. Filecoin allows anyone to provide unused storage space as part of a network. These storage resources are pooled together to provide services to users who need storage space. Participants can earn Filecoin tokens as a reward by providing storage space. These projects are successful applications of the DePIN concept. Not only do they demonstrate the potential of decentralized technologies, they also provide new economic opportunities for participants. As technology advances and the market evolves, we can expect more DePIN projects to emerge in the future, providing us with even more innovation and value. Conclusion As we delved deeper into DePIN, we realized that this was not only a technological breakthrough, but also a challenge to existing social and economic structures. DePIN presents a vision of the future based on decentralized power, data transparency, and broad participation. In this scenario, each participant has the opportunity to have an impact on the development of the network, and this decentralized nature not only drives technological innovation, but also promotes social equity and justice. DePIN therefore marks not only a major advance in the field of technology, but also a shift in the way human society is governed. It represents the evolution from centralized control to decentralized governance, from closed systems to open networks. Driven by DePIN, we can expect a future of a more connected, intelligent and human digital world. ---------------------- About Cryptogram Venture (CGV): CGV (Cryptogram Venture) is a crypto investment institution headquartered in Tokyo, Japan. Since 2017, its fund and predecessor funds have participated in investing in over 200 projects, including the incubation of the licensed Japanese yen stablecoin JPYW. CGV is also a limited partner in several globally renowned crypto funds. Since 2022, CGV has successfully hosted two editions of the Japan Web3 Hackathon (TWSH), supported by Japan's Ministry of Education, Culture, Sports, Science and Technology, Keio University, NTT Docomo, and other institutions and experts. CGV has branches in Hong Kong, Singapore, New York, Toronto, and other locations. Additionally, CGV is a founding member of the Bitcoin Tokyo Club. Disclaimer: The information and materials introduced in this article are sourced from public channels, and our company does not guarantee their accuracy or completeness. Descriptions or predictions involving future situations are forward-looking statements, and any advice and opinions provided are for reference only and do not constitute investment advice or implications for anyone. The strategies our company may adopt could be the same, opposite, or unrelated to the strategies readers might speculate based on th

Produced by: CGV Research Author: Shigeru TL;DR This examines the potential of Web2 apps like X and Telegram in the Web3 world, not only as insights into the future development of these social platforms but also as a forecast of the new landscape and order of the Web3 world. X and Telegram have distinct differences in user market distribution, key features, innovation capability, business models, openness, community culture, and Web3 exploration. Their competition and cooperation may coexist in the long term. Key factors for victory in the Web3 super app competition between X and Telegram include reshaping user experience, setting new standards for privacy and security, technological innovation and ecosystem integration, and innovative business models. Despite the escalating competition between X and Telegram in the Web3 super app arena, there are still uncertainties in the evolution, and the final competitive landscape may present unexpected outcomes. The Cryptographic Evolution of Web2 Social Giants and the Potential New Order of the Web3 World Web3, representing the next generation of the internet, marks a significant shift from centralization to decentralization. Compared to Web2, Web3 emphasizes user data ownership, decentralized network structures, and transparency based on blockchain technology. This signifies not only a technological leap but also foreshadows innovations in network interaction methods and business models. For example, the rise of Decentralized Finance (DeFi) and Non-Fungible Tokens (NFTs) is a practical manifestation of the Web3 concept. According to DappRadar data, the TVL peak in the DeFi sector reached $267 billion in 2022, while the NFT market’s trading volume was approximately $25 billion. These figures highlight the immense potential of the Web3 world. In the Web2 era, WeChat undoubtedly stood as the titan of social applications. As of 2023, WeChat’s monthly active users have exceeded 1.2 billion, making it one of the most popular social apps globally. WeChat is not only a communication tool but also a super app that integrates functions like payments, shopping, gaming, mini-programs, and more. WeChat’s success lies in its all-encompassing ecosystem, enabling users to accomplish nearly all daily tasks on one platform. Its influence is not only evident in user numbers but also in how it has transformed people’s lifestyles and business models. Against this backdrop, exploring the potential of Web2 apps like X and Telegram in the Web3 world is not only an exploration into the future development of these social platforms but also a forecast of the new landscape and order of the Web3 world. Of course, other social platforms like Facebook and Kakao also have significant room to thrive in the Web3 world. However, currently, X and Telegram appear to be the Web2 social platforms most likely to make early gains in the Web3 world.” “X and Telegram, as globally renowned social media platforms, each possess unique strengths and expansive user bases. X is known for its wide-reaching influence and diverse user demographics, while Telegram is favored for its high regard for privacy protection and security. In the wave of Web3, these two platforms face challenges of adapting to decentralization trends and leveraging blockchain technology for innovative services and business models. These factors will be crucial in determining whether they can become Web3 super app giants akin to WeChat in this new era. Elon Musk has repeatedly praised China’s WeChat, stating that ‘you can do everything in WeChat in China’. His vision is to create an equally comprehensive super app, with X being his namesake for this application. To cater to the unique needs of a dating service, X may need to develop new algorithms and user interfaces. Additionally, becoming a ‘digital bank’ implies that X might introduce financial services such as payment processing, fund transfers, or even cryptocurrency transactions. This would require X to establish a robust security and compliance framework to ensure the safety and legality of financial transactions. Meanwhile, Telegram’s co-founder Pavel Durov initially envisioned TON as a means to integrate cryptocurrency transactions into chats and monetize through in-app currency. In mid-September 2023, the TON Foundation announced an official partnership with Telegram, aiming to integrate and promote the TON network ecosystem to Telegram’s 800 million active users. Their goal is to attract and convert 30% of Telegram’s active users, or 240 million users, into active TON network users by 2028. The wallet TON Space, which provides self-hosted storage, has seamlessly integrated into Telegram, enhancing user convenience and potentially attracting new users interested in cryptocurrencies. In this rapidly evolving digital age, it is much easier to encroach upon low-frequency scenarios within high-frequency settings than vice versa. Social media, as an ultra-high-frequency scenario, faces lower difficulty in penetrating financial scenarios compared to adding social elements in financial scenarios. Convenience is the key to success. Enabling users to download one less application is a clear indicator of success. Both X and Telegram are striving towards this goal, but their paths and strategies differ. Over time, we will see which platform can better adapt to the trends of Web3 and ultimately emerge as the leader of this new era. Functionalities we’ve seen on WeChat will be realized on X and Telegram. These rich ecosystems will form a powerful force, significantly increasing user stickiness and usage duration on X and Telegram. This logic is similar to the transition from the internet to mobile internet, and then from applications to mini-programs. Nonetheless, at the initial stage, this is sufficient to make a substantial impact on the Web3 world. By analyzing their current status, strengths, challenges, and future possibilities, we can gain a better understanding of the development trends and business opportunities in social media for the Web3 era. This includes but is not limited to: Expansive User Bases: Both X and Telegram boast massive global user bases. This means that as they transition to Web3, there is potential to bring hundreds of millions of users into the Web3 ecosystem. This scale of user migration is crucial for driving the popularity and adoption of Web3. Influence and Brand Awareness: As globally recognized social media platforms, X and Telegram wield significant brand influence. Their adoption and promotion of Web3 could have a substantial impact on public perception and attitude towards Web3. Potential for Innovation and Technological Integration: Both X and Telegram have a history of implementing technological innovations and integrating new technologies. Their activities in the Web3 domain could bring about new technological breakthroughs, particularly in decentralization, data security, and user experience. Shifts in Business Models: Web3 offers a completely new business model, especially in terms of data ownership and user incentives. X and Telegram’s exploration in these areas could pioneer a new chapter in social media business models. Reshaping of Privacy and Security: As users become increasingly concerned about privacy and data security, Telegram has already established a reputation in this regard. X and Telegram’s developments in Web3 may further strengthen their ability to protect user privacy and data. Community and Decentralized Governance: Web3 emphasizes the power and involvement of communities. X and Telegram’s experience in building and maintaining active communities could play a crucial role in establishing decentralized governance structures and promoting user participation. Therefore, the development potential of X and Telegram in the Web3 world deserves close attention. Their moves may have profound implications for the entire Web3 ecosystem and even the future of the internet. X and Telegram: Basic Information and Competitive Analysis X and Telegram are globally renowned social media platforms, each with a vast user base and extensive market reach. They differ in key functionalities, with X focusing more on public topic discussions and information dissemination, while Telegram places greater emphasis on privacy protection and security. The main distinctions between the two include:” Comprehensive comparison between X and Telegram 1. X: User Base: As of 2023, X has approximately 528 million monthly active users. Its user base is global, with a significant presence in countries like the United States, Japan, and India. Market Distribution: X holds notable influence worldwide, particularly prominent in Western countries. It plays a crucial role in politics, entertainment, and news dissemination. Key Features: X is renowned for real-time information dissemination, public topic discussions, and high user interactivity. It also supports features like multimedia content sharing, live streaming, and topic hashtags. Web3 Milestones: X has previously introduced blockchain-based NFT avatar verification and explored functionalities for tipping with cryptocurrency. On October 29, 2023, Elon Musk announced X’s vision, anticipating it to become a “mature” dating site and a “digital bank” by 2024. 2. Telegram: User Base: Telegram boasts over 70 million monthly active users. It is particularly popular in countries like Russia, India, Iran, and Brazil. Market Distribution: Telegram has users across various countries and regions globally, especially favored in areas with a high demand for online privacy and security. Key Features: Telegram is known for its high emphasis on privacy protection and security. It supports end-to-end encrypted private chats, large groups and channels, and file sharing functionalities. Web3 Milestones: From May to July 2023, the success of Unibot (token price increased by over 100 times within three months) triggered FOMO sentiment in the market. Based on the integration of artificial intelligence and social, Telegram Bot covers areas like trading, airdrops, communities, and cross-chain, enriching the application scenarios of the crypto industry and bringing innovative development paths to the industry. In July 2023, Telegram introduced the “Stories” feature. Users can edit content by clicking on the “+” icon at the bottom right corner of the main interface and selecting “Create Story”. It supports uploading various media types such as images, videos, audio, and allows the addition of text and location information. Similar to WeChat Moments, users can set filters to control which friends can see the posted content. This complements the product features and paves the way for Telegram to create a Web3 version of WeChat in the future. In September 2023, the TON Foundation announced a formal partnership with Telegram. Telegram will integrate TON Space, a self-hosted encrypted wallet introduced by TON, and from that day forward, all Telegram wallet users will be able to use TON Space. The next step is to roll out this service to Telegram users worldwide in November this year. In October 2023, the TON Foundation applied for a Guinness World Record for “fastest blockchain” and will conduct performance tests on October 31st to demonstrate the reliability, scalability, and speed of the TON blockchain. Four Key Elements for Decisive Victory in the Web3 Super App Competition 1. Reshaping User Experience: In the Web3 era, reshaping user experience means going beyond traditional convenience and interface appeal, towards deeper engagement and ownership. X: With its extensive user base and rich content, X can incentivize users to create and share high-quality content by introducing a cryptocurrency reward mechanism. For instance, providing token rewards for popular tweets or influential content creators can enhance user engagement and sense of belonging. Telegram: Leveraging its high emphasis on privacy protection and security, Telegram can create a more secure and private social environment. For example, by introducing blockchain-based identity verification and data storage, Telegram can provide advanced levels of privacy protection and data security. TON meets the goal of millions of TPS in the future by realizing the “infinite sharding paradigm” and brings a better user experience (Source: Beosin) 2. Setting New Standards for Privacy and Security: In the Web3 era, privacy and security will be crucial factors for users in choosing social platforms. X: Needs to put more effort into protecting user privacy and data security. For instance, X can introduce decentralized data storage solutions to ensure the safety and immutability of user data. Telegram: Already possessing inherent advantages in privacy and security, Telegram can further strengthen this advantage, for instance, by introducing a blockchain-based decentralized authentication system to provide higher levels of user privacy protection. Compared with Ethereum and the Bitcoin network, TON has obvious advantages in fault tolerance and redundant storage 3. Technological Innovation and Ecosystem Integration: Technological innovation and integration with a broader ecosystem are key aspects of the Web3 world. X: By collaborating with other Web3 projects and services, X can enrich its platform functionality and user experience. For example, X can integrate DeFi services or NFT markets, allowing users to engage in financial activities or digital art trading while interacting socially. Telegram: With its openness and flexibility, Telegram has the potential for deep integration with a wider Web3 ecosystem. 4. Innovation in Business Models: For social media platforms, it’s important to explore new sources of revenue and growth while maintaining user stickiness. X: As of 2023, X’s financial data shows that its primary source of revenue is still advertising, accounting for the vast majority of total revenue. According to 2022 financial report data, X’s advertising revenue reached about $4 billion. Additionally, X generates revenue through data licensing and other services, which, although a smaller portion, still brings in hundreds of millions of dollars in revenue for the company. X is also actively exploring new revenue channels, including launching subscription services, enhancing e-commerce functionality, and integrating cryptocurrency payments. Telegram: Since its founding in 2013, Telegram has grown into a product with over 800 million monthly active users worldwide. However, its revenue scale is not proportionate to its user base. Currently, aside from standard subscription services, Telegram’s main revenue comes from limited advertising. According to reports, Telegram’s advertising revenue in 2022 was only 10 billion rubles, equivalent to about $104 million. In comparison, Bilibili, with only a quarter of Telegram’s monthly actives, generated nearly $700 million in advertising revenue in 2022. 5. Impact of Business DNA: In exploring the competition for super apps in the Web3 era, the business DNA of X and Telegram will significantly influence their development trajectory. X: The business DNA of X is very similar to platforms like Weibo, a social sharing platform. For example, as a public platform centered around information dissemination and social interaction, this aligns closely with X’s original intent and development direction. Weibo’s success lies in its ability to rapidly spread information and aggregate public attention, which has always been one of X’s strengths. In the Web3 era, X can leverage this characteristic from Weibo to strengthen information dissemination and social interaction functionalities, while integrating blockchain technology to provide a more transparent and decentralized platform for information sharing. Additionally, X can explore Weibo’s successful experience in content creation and user interaction, such as encouraging users to create and share high-quality content through token incentive mechanisms. Telegram: The business DNA of Telegram is based on instant messaging tools, which has a close association with WeChat. WeChat, as a multifunctional social application, not only provides communication services but also integrates functions like payment, shopping, gaming, forming a comprehensive ecosystem. Telegram can adopt this model from WeChat while maintaining its core communication and privacy protection functionalities, by exploring more diversified services and applications. For instance, Telegram can integrate decentralized financial services (DeFi), non-fungible tokens (NFTs), and other Web3 elements on its platform to provide users with a richer and more convenient service experience. Additionally, Telegram can utilize its strong privacy protection features to provide users with a more secure and trustworthy Web3 social environment. In conclusion, predicting the competition results between X and Telegram is not easy. ChatGPT has provided its answer, but this is just a reference. Bold Speculation on the Future Competition between X and Telegram The competition between X and Telegram for Web3 dominance, might witness some unexpected “black swan” events that could significantly alter the competitive landscape. Let’s imagine some events that might happen one day: Web2 Giant Acquires Telegram: If WeChat announces the acquisition of Telegram, it would greatly change the landscape of the global social media and instant messaging market. This merger could lead to the integration of technical and market resources, posing even greater competitive pressure on X. It’s worth noting that just this September, Tencent Cloud announced its cooperation with the TON Foundation to support web applications and bots built within Telegram, and this collaboration is quietly underway. X Announces Major Collaboration with Web3 Project: If X announces a partnership with a high-performance blockchain network like Solana or a Layer 2 solution, it could significantly enhance its competitiveness in the Web3 arena. This collaboration could involve cryptocurrency payments, integration of decentralized applications (DApps), and more. Tip: Nowadays, when you type “Web3” in X, the logo suffix for Immutable automatically appears (though this is most likely a technical bug). Government Intervention Strengthened: Governments might enact new regulatory policies that have a significant impact on social media and cryptocurrency markets. For instance, let’s assume the U.S. government introduces new social media regulations, requiring all social platforms to rigorously review and remove content deemed as “fake news”. This might compel X to invest substantial resources in compliance, while also potentially sparking controversies about freedom of speech, affecting user activity and brand image. Geopolitical Risks: With the influence of international situations such as the Israel-Palestine conflict and the Russia-Ukraine conflict, it might potentially affect the international image and brand reputation of Telegram and X. If they are perceived as tools of a particular country’s politics or part of information warfare, it could damage their credibility among global users. Currently, the countries with the highest market shares for Telegram are Russia, Indonesia, Malaysia, Brazil, Saudi Arabia, India, Nigeria, Egypt, and Turkey; while X is primarily dominant in countries like the United States and Europe. Breakthrough in Technological Innovation: If X or Telegram achieves a significant technological breakthrough, it could bring about a major shift in competition. For example, if Telegram develops a new type of decentralized identity verification system based on ZK technology that can protect user privacy while providing efficient authentication services. This technological innovation might attract a user base highly sensitive to privacy, thus enhancing Telegram’s competitiveness in the social media market. Major Security Incidents: If X or Telegram experiences a major security vulnerability or data breach, it could severely damage user trust, impacting their market position. This might also lead to significant penalties from governments and strong public criticism. Major Partnerships: Imagine if X announces a partnership with Amazon, allowing users to directly purchase Amazon products on the X platform and make cryptocurrency payments. This would greatly enhance X’s competitiveness in the e-commerce and payment fields. Conclusion In the exploration of the super app competition between Telegram and X (formerly Twitter) in the Web3 era, reshaping user experience, setting new standards for privacy and security, technological innovation, and ecosystem integration may be the decisive three key elements. Telegram, with its advantages in privacy protection and security, as well as its close collaboration with the TON network, is actively exploring the possibilities of Web3. Meanwhile, under Elon Musk’s leadership, X is demonstrating ambition for diversified services and the concept of a digital bank. These initiatives challenge not only existing business models but also explore the future direction of social media. However, despite both platforms striving to shape their Web3 visions, the future competitive landscape remains uncertain. In the future, we may see more partners joining this competition, or entirely new competitors emerging, which could change the current competitive landscape. In summary, the super app competition between Telegram and X in the Web3 era is not only a clash of technology and business models but also a profound exploration of the future internet world. Regardless of the ultimate outcome, this competition will drive the development of the Web3 world, leading us into a more open, decentralized, secure, and user-friendly digital age. ---------------------- About Cryptogram Venture (CGV): CGV (Cryptogram Venture) is a crypto investment institution headquartered in Tokyo, Japan. Since 2017, its fund and predecessor funds have participated in investing in over 200 projects, including the incubation of the licensed Japanese yen stablecoin JPYW. CGV is also a limited partner in several globally renowned crypto funds. Since 2022, CGV has successfully hosted two editions of the Japan Web3 Hackathon (TWSH), supported by Japan's Ministry of Education, Culture, Sports, Science and Technology, Keio University, NTT Docomo, and other institutions and experts. CGV has branches in Hong Kong, Singapore, New York, Toronto, and other locations. Additionally, CGV is a founding member of the Bitcoin Tokyo Club. Disclaimer: The information and materials introduced in this article are sourced from public channels, and our company does not guarantee their accuracy or completeness. Descriptions or predictions involving future situations are forward-looking statements, and any advice and opinions provided are for reference only and do not constitute investment advice or implications for anyone. The strategies our company may adopt could be the same, opposite, or unrelated to the strategies readers might speculate based on th

Produced by: CGV Research Author: Shigeru TL;DR Rise of Inflation-resistant Stablecoins: Digital stablecoins pegged to fiat currencies are impacted by declining purchasing power, leading the financial markets to show strong interest in “Flatcoin,” a stablecoin designed to maintain purchasing power in inflationary environments. This new type of stablecoin hedges against inflation by pegging its value to a specific basket of goods, and is considered a significant direction for the future of finance by industry leaders such as Vitalik Buterin and Coinbase’s CEO Brian Armstrong. Definition of Inflation-resistant Stablecoins: Unlike stablecoins pegged to specific assets or fiat currencies, inflation-resistant stablecoins are designed to combat inflation and aim to preserve purchasing power. In countries with soaring inflation rates, it provides an effective tool to counter inflation and is used as a hedge in high inflation regions like Latin America and Africa. Design Challenges of Inflation-resistant Stablecoins: Accurately measuring inflation rates poses a challenge due to differences in countries, regions, and measurement methods like CPI and PPI. It requires reliance on reliable, accurate data sources and ensuring data validation and auditing. High system stability and security are needed to combat manipulation, attacks, and market volatility. Legal and regulatory differences across countries may impose additional restrictions and risks on stablecoin design and issuance. Effective economic models are needed to ensure the stablecoin accurately reflects inflation. Technically, real-time processing of inflation data, designing stable smart contracts, and ensuring system efficiency are essential. Market acceptance and user education are also key to success. Significance of Inflation-resistant Stablecoins in the Cryptocurrency Market: They protect purchasing power for users in high inflation environments, providing more reliability compared to traditional stablecoins. They drive technological innovation, increase the practicality of digital currencies, attract more traditional financial participants, and contribute to the formation of a clear regulatory environment. Additionally, they bring diverse options to the market and offer new risk management tools for the global economy. Analysis of Typical Projects: This includes the Frax Price Index (FPI) and the stablecoin linked to CPI-U from Frax Finance, which is fully collateralized by crypto assets. The Reserve project aims to create a decentralized stablecoin, Reserve Token (RSV), by diversifying risk. SPOT, based on Ampleforth and Buttonwood, aims to bridge the gap between speculative cryptocurrencies and dollar alternatives, providing stability through zero-clearing layering and can operate on multiple chains. Why Do We Need Inflation-resistant Stablecoins (Flatcoin)? As a reflection of economic and national power, currencies have undergone many changes throughout history. Whenever a dominant power gradually declines and is replaced by emerging powers, the status of its dominant currency also changes accordingly. The Dutch guilder dominated during its economic peak, and the British pound of the British Empire became the globally trusted currency. However, none of these currencies were able to permanently maintain their leading position. Recently, Ray Dalio, the founder of Bridgewater Associates, suggested that the status of the US dollar as the world’s reserve currency may be challenged. In an interview in 2023, he emphasized that as the influence of the US dollar diminishes globally, the international economic and monetary landscape is becoming multipolar, and the reserve currency status of the dollar faces future uncertainty. Since January 2020, the average purchasing power of Americans has decreased by 23.90%.(Data source: https://truflation.com/) Over the three-year period from October 10, 2020, to October 10, 2023, Truflation data reveals that the average purchasing power of Americans has decreased by 20.39%. This effectively means that for someone holding entirely USD-denominated assets, their ability to buy goods in the market has shrunk by one-fifth during these three years. However, this inflation phenomenon is not unique to the United States. Data from the International Monetary Fund (IMF) projects a global inflation rate of 6.6% in 2023, compared to 8.8% in 2022. The World Economic Forum further points out that due to complex factors such as deglobalization, climate change, the wage-price spiral, and highly liquid global markets, the global economy is facing a sustained period of high inflation. Certain countries, like Argentina, Turkey, and Iran, have shown extremely high inflation rates of 76.1%, 51.2%, and 40.0% respectively in 2023 due to political instability, international sanctions, monetary policy missteps, and economic management issues. In the field of digital currencies, while traditional stablecoins are designed to be pegged to specific fiat currencies or assets to maintain their stability, they are also affected by fiat currency inflation. From the first batch of stablecoins born in 2014, to the widespread attention gained in 2017 with the rise of decentralized finance (DeFi), Tether (USDT) and USD Coin (USDC) have become the third and fourth largest cryptocurrencies in global market capitalization respectively. Currently, there are approximately 200 stablecoins in the market with a total market capitalization of 190 billion USD. However, stablecoins like USDT and USDC primarily operate in a centralized manner, carrying the risk of being subject to control by central entities and potential exposure to counterparty and regulatory risks. Even more crucially, as global inflation continues to rise, the real value of these stablecoins pegged to fiat currencies like the US dollar is being eroded. Comparison of the Relative Purchasing Power of the US Dollar (Compared to Initial Issuance) (Data source: howmuch.net) In light of this, stablecoins aren’t necessarily truly “stable.” This may seem counterintuitive, but it’s a real dilemma. With the rise in inflation rates and global economic uncertainty, the financial markets, especially in the realm of crypto finance, are beginning to seek a new type of stablecoin that can maintain purchasing power even in an inflationary environment. Enter the “inflation-resistant stablecoin” (also known as Flatcoin), which has become a new focal point in the market. Flatcoin, as a decentralized stablecoin, emerged with the aim of safeguarding assets from the impact of inflation. Unlike traditional stablecoins, Flatcoin combats inflation by maintaining its peg to the prices of specific baskets of goods, thereby preserving purchasing power. Since the conception of Flatcoin, it has garnered significant attention from the crypto industry. The explicit goal of Flatcoin is to “maintain stable purchasing power while also possessing some flexibility to withstand economic uncertainties caused by the traditional financial system.” At the end of 2022, Ethereum co-founder Vitalik Buterin, in an interview with Bankless, shared his outlook on the cryptocurrency industry in 2023, mentioning three “massive” opportunities yet to be realized in the crypto space: mass wallet adoption, inflation-resistant stablecoins, and Ethereum-powered website logins. Vitalik believes that creating a stablecoin capable of withstanding various conditions, including hyperinflation of the US dollar, would provide a tremendous opportunity for the entire cryptocurrency industry. He emphasizes that providing a reliable, inflation-resistant stablecoin for billions of users would be a significant supplement to the traditional financial system. Coinbase CEO Brian Armstrong has also mentioned Flatcoin multiple times in public interviews and discussed this new technology on Twitter, ranking it as the top among ten crypto technologies. Brian believes that Flatcoin represents the future direction of stablecoins. Unlike traditional stablecoins pegged to fiat currencies, Flatcoin offers a new and more stable value storage by tracking inflation. He also emphasizes that while Coinbase has not yet developed in this area, they have a strong interest in the potential of this new type of stablecoin. What is an Inflation-Resistant Stablecoin? Inflation-resistant stablecoins, often referred to as “Flatcoins” (or alternatively as “value-stablecoins” or “purchasing-power-stablecoins”), are a type of stablecoin designed to track inflation rates rather than a specific currency. The concept of “Flatcoin” was initially introduced by former Coinbase CTO Balaji Srinivasan in 2021. The purpose of Flatcoin is to maintain stable purchasing power, even in an inflationary environment, by pegging to the Consumer Price Index (CPI) or other inflation indicators. These stablecoins are able to maintain their real value, providing users with a more stable and reliable means of storing value. Subsequently, blockchain technology development company Laguna Labs introduced a new cryptocurrency called Nuon. They claim it to be the world’s first over-collateralized and decentralized “Flatcoin.” Just as decentralized protocols are the answer to the risks posed by centralized currencies, over-collateralization is the answer to maintaining value in times of market collapse, and inflation-resistant stablecoins offer a solution for preserving value over time. With rising inflation rates, such as the United States’ inflation rate reaching 8.5% in 2022, far above the Federal Reserve’s 2% inflation target, inflation-resistant stablecoins have become an attractive option. They are typically not subject to the limitations of bank deposits and often offer higher interest rates, making them an enticing choice in the face of inflation. In Latin America, where the inflation rate reached 14.6% in 2022, and is projected to reach 9.5% in 2023, these high inflation countries are using inflation-resistant stablecoins as a hedge against high inflation and as a means to facilitate cross-border remittances across different regions. Distinguishing Inflation-Resistant Stablecoins from Other Stablecoins Different types of stablecoins can primarily be classified based on their backing assets or operational mechanisms. Here are the main types of stablecoins, along with their characteristics and examples: 1. Commodity-backed Stablecoins: - Typically backed by hard assets like gold or real estate to maintain the stablecoin’s value. For example, PAX Gold (PAXG) is a stablecoin pegged to gold, with each PAXG representing one ounce of gold. 2. Crypto-backed Stablecoins: - Typically maintain the stablecoin’s value by over-collateralizing with crypto assets. For example, DAI is a crypto-backed stablecoin issued by MakerDAO, with its value pegged to the US dollar but maintained by collateralizing with assets like Ethereum. 3. Fiat-backed Stablecoins: - Usually pegged to a specific fiat currency like the US dollar, euro, or Chinese yuan in a 1:1 ratio. For example, USDT (Tether) and USDC (USD Coin) are stablecoins pegged to the US dollar in a 1:1 ratio. 4. Algorithmic Stablecoins: - Typically adjust the supply through algorithms to maintain the stablecoin’s value. For example, Ampleforth (AMPL) is an algorithmic stablecoin whose supply dynamically adjusts based on market demand. The main purpose of inflation-resistant stablecoins (such as Flatcoin) is to protect purchasing power by pegging them to inflation indices like the Consumer Price Index (CPI) and thus, mitigating the impact of inflation. In contrast, other types of stablecoins typically maintain their value through pegging to specific assets or employing algorithms. In the design and implementation of inflation-resistant stablecoins, more complex economic models and algorithms may be required to accurately reflect inflation changes and adjust the stablecoin’s value accordingly. Additionally, these stablecoins may face more intricate regulatory challenges, particularly regarding requirements related to the accuracy and fairness of inflation data. Design Challenges of Inflation-Resistant Stablecoins: 1. Accurate Measurement of Inflation Rates: Accurately measuring inflation rates is a crucial factor influencing the design of inflation-resistant stablecoins. The inflation rate may vary from country to country, necessitating designers to find an accurate and reliable method for measurement. Inflation can be measured through various means, such as the Consumer Price Index (CPI), Producer Price Index (PPI), or other inflation indicators. However, these indicators may be influenced by various factors, including political considerations, differing economic policies, and variations in statistical methods, potentially affecting the accuracy and effectiveness of inflation-resistant stablecoins. For instance, in a use case of the Volt Protocol, its corresponding local stablecoin VOLT maintains stability by anchoring it to the Consumer Price Index (CPI). If the inflation rate remains at 7% for a year, the token will be anchored at $1.07. 2. Reliability of Data Sources: The design of inflation-resistant stablecoins relies on reliable and accurate data sources. If the data sources are inaccurate or unreliable, it may lead to a disconnect between the stablecoin’s value and the actual inflation rate, thus compromising its inflation-resistant properties. Designers need to identify dependable data providers and ensure the accuracy and timeliness of the data. Additionally, robust data validation and auditing mechanisms need to be established to ensure the authenticity and completeness of the data. 3. System Stability and Security: Any cryptocurrency project, especially stablecoin projects, needs to consider the stability and security of the system. The design of inflation-resistant stablecoins requires contemplation on how to prevent manipulation, attacks, and other factors that might affect the stability and security of the system. Furthermore, it is necessary to contemplate how to design robust protocols and mechanisms to respond to market fluctuations and unforeseen events, ensuring the continuous stable operation of the system. For example, on May 10, 2022, the price of TerraUSD, an algorithmic stablecoin running on the Terra blockchain, dropped and lost its peg to the US dollar due to a lack of collateral. This case illustrates how algorithmic stablecoins can be vulnerable to speculative attacks when the system lacks adequate collateral. 4. Legal and Regulatory Challenges: Inflation-resistant stablecoins may be subject to the legal and regulatory environments of different countries and regions. These legal and regulatory aspects may affect the design, issuance, and trading of inflation-resistant stablecoins. Some countries may restrict or prohibit the use of these stablecoins, or require projects to comply with specific regulatory requirements. These legal and regulatory challenges may add complexity and risk to the project. Towards the end of 2019, when stablecoins were just beginning to emerge, the G7 summit strongly declared them as a serious risk for international settlements. This demonstrates the influence of legal and regulatory environments on the design and application of stablecoins. In September 2023, the G20 summit approved the Financial Stability Board’s recommendations on the regulation, supervision, and oversight of crypto asset activities and markets, as well as global stablecoin arrangements. It is expected that more related regulatory requirements will be introduced in due course. 5. Design of Economic Models: The economic model of inflation-resistant stablecoins forms the foundation for ensuring their functionality and effectiveness. Designers need to contemplate how to construct an effective economic model to ensure that the stablecoin’s value accurately reflects the inflation rate. This may encompass determining the issuance, circulation, and burning mechanisms of the stablecoin, as well as adjusting its value through market mechanisms. 6. Complexity of Technical Implementation: The technical implementation of inflation-resistant stablecoins is a complex process, necessitating consideration of various technologies and algorithms. For example, how to accurately and in real-time acquire and process inflation data, how to design the smart contracts of the stablecoin to ensure its inflation-resistant properties, and how to ensure the scalability and efficiency of the system. Additionally, it is necessary to contemplate how to integrate with existing blockchain networks and other cryptocurrency projects to achieve widespread application of inflation-resistant stablecoins. 7. Market Acceptance and User Education: Market acceptance and user education are also critical factors for the success of inflation-resistant stablecoins. Designers and project teams need to consider how to educate users about the advantages and usage of inflation-resistant stablecoins, as well as how to promote their adoption for broader market acceptance. Significance of Inflation-Resistant Stablecoins for the Cryptocurrency Market: Exploring and developing inflation-resistant stablecoins holds multifaceted strategic importance for the cryptocurrency market. They not only provide more options for market participants but also drive innovation and development within the cryptocurrency industry. 1. Protection of Purchasing Power: Inflation-resistant stablecoins protect users’ purchasing power by pegging them to inflation indices. This is highly attractive for investors and users seeking asset preservation in high inflation environments. They provide a unique value storage and trading tool for the cryptocurrency market. 2. Increased Market Stability and Trust: Traditional stablecoins (such as USDT and USDC) are typically pegged to specific fiat currencies. However, in an inflationary environment, their actual value decreases along with the purchasing power of the fiat currency. By providing an inflation-resistant stablecoin, market stability and trust can be increased, reducing inflation risks for investors and users. 3. Driving Innovation in the Cryptocurrency Industry: The design and implementation of inflation-resistant stablecoins require addressing many technical and economic challenges, which contributes to driving innovation and development within the cryptocurrency industry. Addressing the challenges faced by inflation-resistant stablecoins can help the cryptocurrency market find new solutions and technologies, thereby advancing the entire industry. 4. Enhancing Practicality and Widespread Acceptance of Cryptocurrencies: Inflation-resistant stablecoins can serve as a more reliable value storage and medium of exchange, enhancing the practicality and widespread acceptance of cryptocurrencies. They may attract more participants from traditional financial markets into the cryptocurrency market and potentially encourage more merchants and service providers to accept cryptocurrency payments. 5. Promote Diversification of the Cryptocurrency Market. Inflation-resistant stablecoins provide the cryptocurrency market with more choices and diversity, allowing market participants to select different stablecoins based on their needs and risk preferences. This diversity can increase the complexity and maturity of the market, encouraging more people to participate in the cryptocurrency market. 6. Provide New Risk Management Tools for the Global Economy. Against the backdrop of increased global economic uncertainty, inflation-resistant stablecoins can serve as a new risk management tool, helping individuals and businesses more effectively manage their assets and financial risks. In summary, the exploration and development of inflation-resistant stablecoins hold significant strategic importance for the cryptocurrency market. They can bring more opportunities to the market, but also present a range of challenges and issues that need to be collectively explored and addressed by market participants, developers, and regulatory authorities. Analysis of Typical Projects: 1. Frax Price Index (FPI): The Frax Price Index (FPI) is one of the stablecoins in the Frax Finance ecosystem. It is the first stablecoin pegged to a basket of tangible consumer goods defined by the US Consumer Price Index (CPI-U). Unlike traditional stablecoins priced in national currencies, the FPI creates an independent unit of account fully backed by cryptocurrency collateral, providing consumers with a unit unrelated to any national currency. Regarding mechanisms for addressing inflation, the FPI introduces the following innovations: - Pegged to Consumer Goods: The design of FPI aims to anchor its value to a basket of tangible consumer goods defined by the average of the US CPI-U. This peg is unique as it ties the value of digital assets to tangible consumer goods, with the goal of preserving purchasing power and offering a level of price stability unprecedented in the volatile cryptocurrency market. - Inflation Tracking: The FPI mechanism uses the unadjusted 12-month inflation rate reported by the US federal government’s CPI-U. This data is then promptly submitted to the chain by a dedicated Chainlink oracle upon public release. The reported inflation rate is applied to the redemption price of the FPI stablecoin in the protocol’s contracts. This peg calculation rate is updated every 30 days in sync with the monthly CPI price data published by the US government. - Algorithmic Market Operations (AMOs): The FPI adopts similar Algorithmic Market Operations (AMOs) as the primary stablecoin FRAX in the Frax Finance ecosystem. However, the FPI’s model maintains a constant 100% collateral ratio (CR), ensuring that the growth of the protocol’s balance sheet aligns at least with the CPI inflation rate. If AMO earnings fall below the CPI rate, the protocol triggers specific operations to restore a 100% CR, such as selling FPIS tokens in exchange for FRAX stablecoins. - Stablecoin as the Unit of Account: The goal of FPI is to become the first on-chain stablecoin with a derived unit of account from a basket of goods. This aspiration is not only about becoming an inflation-resistant asset; it seeks to create a new stablecoin to represent transactions, value, and debt. In doing so, it provides a framework to better measure if real appreciation is indeed counteracting inflation and links the on-chain economy with a basket of tangible assets. - Governance and Revenue Distribution: The FPIS token is introduced as the governance token of the system. It has the right to minting fees from the protocol, and excess revenue is transferred from the treasury to FPIS holders. In cases where FPI financial revenue is insufficient to support the increased FPI backing due to inflation, new FPIS tokens may be minted and sold to bolster the treasury. The management of FPI is achieved through the Frax Price Index Share (FPIS) token, which was introduced by Frax Finance in April 2022. FPIS is intricately linked with the Frax Share (FXS) token, jointly providing economic support and governance structure for FPI. Through its unique governance mechanism and revenue distribution structure, FPIS offers support to the Frax ecosystem and provides unique governance and revenue opportunities for users of the FPI stablecoin. FPI adjusts the system monthly based on the on-chain Consumer Price Index to ensure that holders of FPI see an increase in its USD-denominated value every month based on the reported CPI growth. For example, if the inflation rate was 9.1% in June 2022, FPIS would increase at a rate of 9.1% over the following 30 days. 2. Reserve Protocol The Reserve Protocol aims to create a decentralized stablecoin called Reserve Token (RSV). It allows holders to engage in various transactions similar to fiat currencies. The goal is to mitigate risks through diversification and decentralization, while establishing a stablecoin that maintains its value, unlike traditional fiat currencies (such as the US dollar) that experience inflation, but without the high volatility seen in cryptocurrencies like Bitcoin. Diagram of RToken’s Issuance and Redemption Mechanism (Data source: https://reserve.org/protocol/rtokens/) In terms of addressing inflation, Reserve incorporates the following innovations: Dual Token Mechanism: Reserve employs a dual token mechanism consisting of Reserve Token (RSV) and Reserve Rights Token (RSR). RSV, as the stablecoin, is maintained in stability using a combination of other assets and RSR. This mechanism collectively supports the overall stability of the Reserve network. Governance Collateral Mechanism: RSV is collateralized by a basket of assets. This collateralization is crucial in maintaining the peg of RSV and ensuring its stability against inflationary pressures. When the market value of collateral tokens is insufficient to support the value of RSV, the protocol utilizes RSR to restore the peg. Reserve’s design innovations revolve around creating a mechanism capable of withstanding the impacts of inflationary market conditions, providing a stable value store, and facilitating exchanges. Through a dual-token system, collateral support, and a decentralized structure, RSV strives to offer a stablecoin solution that preserves purchasing power over the long term. 3. SPOT SPOT is a stablecoin designed to hedge against inflation, aiming to bridge the gap between speculative cryptocurrencies and dollar alternatives. Built on the Ampleforth and Buttonwood protocols, it is governed by the FORTH token. SPOT is defined as a perpetuity note backed by fully collateralized AMPL derivatives. While it shares many attributes of modern stablecoins, it is not pegged to any specific value. It employs a zero-liquidation tranching mechanism to provide stability, with prices potentially fluctuating within a range similar to AMPL. SPOT can be seen as a derivative that mitigates AMPL supply volatility. By introducing SPOT, the Ampleforth team hopes to offer the crypto-economic system its first truly decentralized unit of account. As a decentralized stablecoin immune to rebase and inflation, SPOT aims to enhance the overall distribution of the evolving digital financial system. In terms of mechanisms to address inflation, SPOT introduces the following innovations: ERC-20 Token and Perpetual Wrapper: SPOT functions as an ERC-20 token and a perpetual wrapper, abstracting away supply volatility of AMPL from holders. Its price will behave similarly to AMPL (which targets adjustment to the 2019 USD CPI), serving as a safe haven against volatility and inflation. SPOT will be fully collateralized by derivatives supported by AMPL. SPOT Rotator: By pledging AMPL through the SPOT Rotator, users can support the SPOT Flatcoin while maintaining AMPL rebase and earning AMPL rewards. SPOT is a decentralized Flatcoin utilizing a layering market instead of liquidation, enabling scalable stability. Diagram of SPOT Collateral Rotation Mechanism (Data source: docs.spot.cash/spot-documentation) Multi-Chain Availability: Due to the full-chain capabilities of the SPOT protocol, SPOT is not confined to a single blockchain. It can be used and traded on any compatible chain, such as Ethereum, Polygon (PoS), Arbitrum, Optimism, BNB Chain, and Polygon zkEVM. This allows for the maximization of unique opportunities on each chain, providing users with more reliable assets. Conclusion If there were an anti-inflation stablecoin capable of preserving its value across centuries, impervious to the erosion of inflation, it would be an exceptionally ideal asset. Imagine if you could earn some funds today and pass them on to your descendants, and a hundred years from now, they could use those funds to purchase goods equivalent to what you can buy today. What a scenario that would be! However, this is not something traditional currencies, even strong ones like the US Dollar, can achieve. In the long-term perspective of the cryptocurrency space, especially in the realm of stablecoins, industry innovation should not only expand existing asset categories, portfolios, and mechanisms, but it should also create new types of assets that remain stable in the short term, are more robust in the long term, and can withstand inflation. In this regard, anti-inflation stablecoins are bound to play a more crucial role. ---------------------- About Cryptogram Venture (CGV): CGV (Cryptogram Venture) is a crypto investment institution headquartered in Tokyo, Japan. Since 2017, its fund and predecessor funds have participated in investing in over 200 projects, including the incubation of the licensed Japanese yen stablecoin JPYW. CGV is also a limited partner in several globally renowned crypto funds. Since 2022, CGV has successfully hosted two editions of the Japan Web3 Hackathon (TWSH), supported by Japan's Ministry of Education, Culture, Sports, Science and Technology, Keio University, NTT Docomo, and other institutions and experts. CGV has branches in Hong Kong, Singapore, New York, Toronto, and other locations. Additionally, CGV is a founding member of the Bitcoin Tokyo Club. Disclaimer: The information and materials introduced in this article are sourced from public channels, and our company does not guarantee their accuracy or completeness. Descriptions or predictions involving future situations are forward-looking statements, and any advice and opinions provided are for reference only and do not constitute investment advice or implications for anyone. The strategies our company may adopt could be the same, opposite, or unrelated to the strategies readers might speculate based on th

Produced by: CGV Research Author: Cynic ， Shigeru TL;DR TON’s History: Telegram, founded by the Durov brothers, embarked on the development of its own blockchain — Telegram Open Network (TON) in 2018, aiming to meet the demands of its billion-user base. Through the Initial Coin Offering (ICO) of its token $Grams, TON raised over $1.7 billion. However, in 2019, due to a lawsuit from the U.S. Securities and Exchange Commission (SEC), Telegram abandoned further development of TON. Nevertheless, between 2020 and 2021, the NewTON team (now TON’s core team) resurrected TON development based on open-source materials, successfully rebranding it as The Open Network. Technical Features of TON: TON is tailored for massive user communities. It distinguishes itself by employing sharding technology, enabling multiple chains to process transactions in parallel, referred to as the “blockchain of blockchains”. TON’s architecture comprises three layers: masterchain, workchain, and shardchain. The masterchain serves as the coordinating hub, while actual transaction processing is handled by various workchains and shardchains. Additionally, TON’s sharding is dynamic, allowing for the aggregation of Shardchains into larger ones based on interaction patterns between accounts. Network Structure of TON: TON nodes communicate using the Abstract Datagram Network Layer (ADNL), providing the foundation for interactions between different Shardchains. By leveraging the Kademlia Distributed Hash Table (DHT) to locate other nodes in the network, TON has also established Overlay sub-networks specific to each Shardchain, ensuring effective communication. Applications and Prospects of TON: TON’s purpose extends beyond fundraising, aiming to establish a decentralized, secure, and reliable internet. Features like TON eSIM, TON domains, and TON storage are designed to enhance user privacy and data security. While current demand for decentralization might not be high, TON has allocated substantial funds for its ecosystem and, with its massive user base, is poised to attract attention and grow in the future. Despite facing challenges upon its initial launch, TON continues to garner attention in the blockchain field due to its innovative technology and vision for a decentralized future network. Its robust financial backing and extensive user community lay a solid foundation for its future development. TON’s Past In 2018, the founders of Telegram, the Durov brothers, began exploring blockchain solutions suitable for Telegram. At that time, no existing blockchain could support Telegram’s billion-user community, so they decided to design their own Layer 1 chain, naming it Telegram Open Network, or TON for short. A few months later, through an Initial Coin Offering (ICO) of TON’s native token $Grams, TON raised over $1.7 billion. In 2019, the Telegram team released relevant documents and successively launched two testnets. In October 2019, the U.S. Securities and Exchange Commission (SEC) filed a lawsuit against Telegram, accusing it of conducting an unregistered securities offering. The Telegram team halted the mainnet launch of TON and eventually chose to give up the project in their battle with the SEC, returning the ICO funds to investors. Between 2020 and 2021, the NewTON team (now TON’s core team) resurrected TON’s development based on open-source materials. In May 2021, the community decided to rename the long-running Testnet 2 to Mainnet. The NewTON team was also renamed the TON Foundation, serving as a non-profit community to support and develop TON. This is the TON we are familiar with today, officially known as The Open Network. Of the Network From the very beginning of the story, TON was designed for social networks with a massive user base, and the TON Blockchain is Telegram’s blockchain. Going back to that time, within the outdated technological framework, mainstream blockchain’s TPS (transactions per second) couldn’t achieve significant improvement. How could it possibly handle Telegram’s billion-user count and the potential for millions of transactions per second? The TON team’s idea was that a single blockchain’s TPS could only reach a few tens of transactions per second, so why not create multiple chains? TON employs sharding technology, distributing the workload of processing transactions across multiple chains, forming a blockchain network composed of multiple blockchains, referred to as a “blockchain of blockchains”. To be specific, TON Blockchain adopts a pyramid-shaped three-layer architecture, with each layer accommodating a type of blockchain: masterchain, workchain, and shardchain. Masterchain serves as the central coordinator for TON Blockchain, and there is only one of its kind. This chain encompasses protocol parameters, a collection of Validators, corresponding shares, the current operational Workchains, and their respective Shardchains. Lower-level chains submit their latest block hashes to the Masterchain, enabling the determination of the most recent state when cross-chain message retrieval is required. Masterchain acts as a coordinator and anchor, while the actual work is carried out by individual Workchains. The system can accommodate up to 2³² Workchains. Each Workchain, meeting interoperability standards, can flexibly customize rules such as address format, transaction types, native tokens, and smart contract virtual machines. It’s important to note that Workchain is a virtual concept; it exists as a collection of Shardchains and has no physical entity. To enhance processing efficiency, each Workchain is further divided into Shardchains, with a maximum of 2⁶⁰. Shardchains adhere to the rules set by their parent Workchain, distributing the workload among all Shardchains. Each Shardchain serves only a portion of the collective accounts. In typical sharding, the division is top-down, often based on account address prefixes. For instance, if a Workchain is evenly divided into 256 shards, accounts with address prefixes like 0x00, 0x01, …… 0xFE, 0xFF would be distributed across different Shardchains. In TON’s sharding mechanism, it’s a dynamic bottom-up process. Initially, each account is considered as a separate Shardchain, and then they are combined based on their interactions to form larger Shardchains, ensuring each Shardchain has a sufficient number of transactions. Now, looking back at the architectural diagram of TON Blockchain, do you see some similarities with network architecture? We have reason to believe that the Durov brothers, with their background in networking, were inspired by network architecture in the design of TON. In the initial scenario, each network device operates independently as a single point (each account as a separate Shardchain). Due to frequent communication between some network devices, they are grouped into a local area network (combining individual Shardchains into larger ones). Different local area networks communicate with each other through higher-level nodes (interoperating between Shardchains through the Masterchain). TON Blockchain is, in essence, another form of network, embodying the essence of “TON of the network”. By the Network As a distributed system, blockchain requires nodes to communicate through a P2P network rather than relying on centralized servers and client-server architecture. For monolithic blockchains like Bitcoin and Ethereum, spreading blocks and transactions through gossip protocols suffices. However, for TON, the multi-chain architecture places higher demands on network protocols. TON nodes utilize the Abstract Datagram Network Layer (ADNL) for data transmission, abstracting the network layer in the traditional TCP/IP layered architecture. To facilitate identity recognition, nodes communicate using Abstract Network Addresses instead of considering IP addresses. These addresses are 256-bit integers, derived from ECC public keys and other parameters’ hashes, facilitating communication encryption and decryption between nodes, providing the foundation for segmentation between different Shardchains. TON employs the Kademlia Distributed Hash Table (DHT) to locate other nodes in the network. When a client needs to submit a transaction to a Validator on a specific Shardchain, it can use a key to look up and retrieve the Validator’s location in the DHT. The crucial part lies in the Overlay network. Since different Shardchains operate independently and have no interest or capability to handle transactions on other Shardchains, it’s necessary to construct an Overlay sub-network for each Shardchain within the TON Network, open to nodes wishing to engage in communication. The Overlay network communicates internally using a gossip protocol based on ADNL. With its distinctive network protocol design, addressing, transmission, and application finalized, TON achieves an infinitely sharded scheme, attaining exceptionally high Transactions Per Second (TPS). This embodies TON’s essence as “TON by the network”. For the Network In today’s era of “myriads of chains,” for a public blockchain to stand out, it must play to its strengths and distinguish itself. Ethereum’s strength lies in TVL and its application ecosystem, Solana boasts a vast developer community, and Arbitrum excels in technical reliability and operational capabilities. TON Blockchain currently occupies a relatively new but rapidly rising position in the blockchain market, and it needs to set itself apart with its unique multi-chain architecture and high scalability. Firstly, its technical foundation positions it as a highly flexible and scalable platform. Thanks to its innovative multi-chain architecture, it can effortlessly handle a large volume of transactions, addressing scalability issues faced by many other blockchains. Secondly, TON’s close integration with Telegram gives it a competitive edge. Telegram’s massive user base provides TON with a substantial potential user pool, which is a distinct advantage that many emerging blockchains don’t have. However, it also faces some challenges. Other blockchain projects have established large communities and ecosystems, so TON needs to continuously work on attracting developers and users. Additionally, it needs to compete with other blockchains that offer powerful features and innovative solutions, which means it must keep innovating to maintain its competitive edge. In the competition with other mainstream blockchains, TON must prove its technical superiority and practicality, which will be crucial for its future development. By demonstrating the security, speed, and efficiency of its system, it may attract more enterprise and individual users. Overall, TON Blockchain is in a highly competitive and dynamic market environment. While it has some notable advantages, it still needs to prove its worth, especially in a market where many mature and successful projects already exist. So, what are TON’s strengths? As various scaling solutions mature and become operational, “high performance” is no longer the sole determining factor for a chain’s success. How does TON maintain the vitality of its ecosystem? CGV Research believes there are two directions: social networks and network services. Looking at the social network aspect, one only needs to consider the demands users have while using Telegram. There is a significant amount of transaction settlements on Telegram, leading to TON payment. Its operation is similar to the Bitcoin Lightning Network, and the integrated wallet in Telegram reduces the entry barrier. Users also have a demand to showcase their artistic aesthetic, which TON NFT serves as an excellent social tool. Engaging in games with friends is one of the most enjoyable activities, so GameFi can undergo rapid expansion through social networks. Network services are TON’s core expertise, as it has reengineered everything from traditional networks, shaping what is referred to as the future of the internet. The anonymous eSIM realizes Telegram’s initial vision: a privacy-protecting social network. TON domains enhance readability, making it easier for users to find each other in the TON network. TON addresses, TON proxies, TON WWW aim to provide a decentralized, secure, and reliable internet for everyone. TON storage is an upgraded version of Torrent, ensuring the safety of user data through decentralized storage. TON employs blockchain technology not only to raise funds but also to build a more decentralized, secure, and reliable internet. This embodies TON’s essence as “TON for the network.” Conclusion Unfortunately, judging by the current level of activity in the TON ecosystem, it seems that there aren’t too many users in need of a more decentralized, secure, and reliable internet. This is a challenge faced by all blockchain projects at present. Most people enter the blockchain ecosystem in pursuit of financial gains rather than a genuine need for decentralized services. Without the wealth-creating effect, projects find it challenging to sustain ongoing attention. Fortunately, the TON ecosystem isn’t lacking in funds. TON has established an ecosystem fund of several hundred million dollars, dedicated to investing in and incubating projects within the TON ecosystem. With the largest monthly active user count in the entire Web3 world, we have reason to believe that the future of the TON ecosystem will experience a surge, making it worthy of sustained attention. ---------------------- About Cryptogram Venture (CGV): CGV (Cryptogram Venture) is a crypto investment institution headquartered in Tokyo, Japan. Since 2017, its fund and predecessor funds have participated in investing in over 200 projects, including the incubation of the licensed Japanese yen stablecoin JPYW. CGV is also a limited partner in several globally renowned crypto funds. Since 2022, CGV has successfully hosted two editions of the Japan Web3 Hackathon (TWSH), supported by Japan's Ministry of Education, Culture, Sports, Science and Technology, Keio University, NTT Docomo, and other institutions and experts. CGV has branches in Hong Kong, Singapore, New York, Toronto, and other locations. Additionally, CGV is a founding member of the Bitcoin Tokyo Club. Disclaimer: The information and materials introduced in this article are sourced from public channels, and our company does not guarantee their accuracy or completeness. Descriptions or predictions involving future situations are forward-looking statements, and any advice and opinions provided are for reference only and do not constitute investment advice or implications for anyone. The strategies our company may adopt could be the same, opposite, or unrelated to the strategies readers might speculate based on th