Produced by: CGV Research Author: Shigeru "In my opinion, Japan's current development in the Web3 space is akin to the Japanese proverb 'Making a Buddha statue but not putting in the soul' , which means: 'They made a Buddha statue, but didn’t breathe life into it.' Although the Japanese government has done a lot of work in drafting Web3 policies and setting standards, there are clear shortcomings in actual implementation and critical steps." — Steve, Founding Partner of Japanese crypto fund CGV As CGV Founding Partner Steve has pointed out, while Japan has quickly embraced Web3 technologies and rolled out supportive policies, the deeply ingrained conservative culture and complex bureaucratic systems have made the pace of innovation unusually slow. This cultural tendency is rooted in Japan’s societal preference for stability and risk avoidance. Both companies and government institutions often opt for the safer path rather than boldly exploring emerging technologies. As a result, despite Japan's rapid adoption of new technologies on the global stage, the commercialization process often lags behind, making progress slow and halting. I. Japan’s Historical Lessons: The Reality of “Tech Enthusiasm” vs “Slow Transformation” The Meiji Restoration: Technology Introduction and Modernization Challenges The Meiji Restoration (1868) was a pivotal moment in Japan’s modernization. By importing Western military, industrial, and educational systems, Japan initiated rapid modernization. However, this process came with significant challenges in absorbing and transforming these technologies. While Japan learned advanced technologies from the West, fully internalizing them into indigenous innovation capabilities was a lengthy process. For instance, during Japan’s industrialization, large-scale adoption of British and German railway technologies led to frequent breakdowns and high maintenance costs due to a lack of local expertise. It wasn’t until the early 20th century that Japan gradually mastered railway technology, achieving localized innovation and improvements. Post-WWII Technological Imports: From Imitation to Independent Innovation After WWII, Japan experienced rapid development through its “economic miracle,” one of the key factors being the rapid importation and application of external technologies. In the 1950s, Japan imported automotive and electronics technologies from the U.S. and, within just a few decades, became a global leader in these fields. However, this journey was not without its hurdles. In the early post-war years, much of Japan’s automotive and electronics production was a direct imitation of Western designs, lacking independent R&D capabilities. For example, Toyota’s early post-war production lines closely mimicked those of American companies Ford and General Motors. Yet through continuous improvements, Japan developed "lean manufacturing" and eventually established global leadership. In the electronics industry, Sony is a prime example. In the early 1950s, Sony introduced its first transistor radio, a technology initially developed by Bell Labs in the U.S. By improving its size and sound quality, Sony successfully penetrated international markets and became one of the iconic examples of Japanese innovation. Through ongoing imitation, improvement, and innovation, Japanese companies transformed from mere followers into global leaders—a process that took decades and significant resources. The Lost Three Decades: Waning Innovation and Gradual Loss of Competitiveness The burst of the economic bubble in the 1990s marked Japan's entrance into what is often called the “Lost Three Decades,” during which its economy stagnated, and innovation and global competitiveness declined. From 1990 to 2020, Japan’s GDP growth remained sluggish, while emerging economies like South Korea and China surged ahead, surpassing Japan in many high-tech sectors. For example, in 1995, Japan’s semiconductor industry held over 50% of the global market share, but by 2020, this figure had plummeted to less than 10%. The reasons for this stagnation lie in Japan’s overly conservative approach to technological commercialization, with sluggish reactions to new markets and emerging technologies. For instance, electronic giants like Panasonic and Toshiba failed to adjust their strategies in the face of smartphones and new semiconductor technologies, eventually being outpaced by global competitors like Apple and Samsung. At the same time, Japan’s bureaucratic system exacerbated this innovation paralysis, as companies often spent years navigating government approvals, licenses, and compliance processes, rendering many projects sluggish and unresponsive to market changes. In the automotive sector, although Japan maintained competitiveness through the late 20th century, the electric vehicle (EV) revolution allowed newcomers like Tesla to capture market share rapidly. Japanese companies such as Toyota and Nissan were slow to respond, only beginning to roll out EV models in recent years. In 2020, Japan’s market share of electric vehicles was only 1.1% globally, compared to China’s 44% and Europe’s 28%. This slow transition illustrates Japan’s conservative approach to technological shifts, further contributing to its loss of competitiveness during the “Lost Three Decades.” In summary, while Japan historically experienced rapid starts by importing external technologies, transforming these technologies into independent innovation capabilities has faced challenges rooted in culture, systems, and markets. These lessons offer profound insights for the development of Web3 today—if Japan cannot swiftly break free from its conservative culture and bureaucratic constraints, it risks missing out on the next wave of technological revolution. II. The Current State of Japan’s Web3 Development: Quick Response, Slow Implementation? Policy-Driven Quick Response and Strategic Intent In 2023, the Japanese government released the “Japan Web3 White Paper,” detailing its development plans for blockchain and digital assets, aiming to create an environment conducive to Web3 technology through policy support. In 2024, the government passed a bill allowing venture capital and investment funds to hold crypto assets. These policies reflect Japan’s strategic intent to leverage Web3 technologies for its digital economic transformation. The rapid rollout of policies is also driven by the need to compete with other countries, such as Singapore and South Korea, which have made significant strides in blockchain and digital assets. Japan aims to attract global Web3 companies and talent to avoid being marginalized in the new technology race. Mainstream Corporate Participation: Web3 Initiatives from SONY to SBI Several major Japanese companies are actively involved in the Web3 space. For instance, Sony has established a dedicated department focused on blockchain technology and NFTs, leveraging its strong presence in the entertainment industry to explore new business models that combine digital assets with music, film, and more. In August 2024, Sony’s Singapore-based subsidiary, Sony Block Solution Labs Pte. Ltd, launched a second-layer scaling system for Ethereum called Soneium. SBI Holdings (formerly the financial investment division of SoftBank Group) is one of the first Japanese financial institutions to enter the cryptocurrency space, with investments in blockchain payments, digital asset management, and more. SBI Holdings also collaborates with Ripple to enhance cross-border payment systems using blockchain technology. Additionally, SBI has established a dedicated blockchain investment fund to drive innovation in Japan’s blockchain sector. The NTT Group, meanwhile, is focusing on infrastructure, with plans to develop a high-performance communications network to support Web3 applications, ensuring sufficient bandwidth and stability for future blockchain applications. In 2024, NTT announced partnerships with several Web3 projects to explore the use of blockchain in smart cities and IoT solutions. Delayed Regulatory Implementation: Complex Legal Framework and Compliance Challenges Despite the Japanese government’s proactive policies supporting Web3, the complex regulatory and compliance framework presents significant obstacles for many businesses. The Financial Instruments and Exchange Act (FIEA) and the Payment Services Act impose stringent requirements on crypto assets, including strict anti-money laundering (AML) and Know Your Customer (KYC) obligations. This regulatory complexity means companies face high costs and long delays in obtaining licenses and approvals. According to 2024 data, over 70% of Web3 companies cited compliance costs as a major barrier to market entry, with compliance spending averaging over 20% of total costs. These high costs, especially for resource-constrained startups, are a significant burden. Moreover, listing new projects on Japanese exchanges faces rigorous regulatory scrutiny. The Financial Services Agency (FSA) requires exchanges to thoroughly vet each project before listing. According to industry surveys, the average time for listing a new project on a Japanese exchange is 9 to 12 months, whereas in other countries, the process typically takes only 3 to 4 months. Lack of Innovation Capacity: Talent Shortages and Global Competition Japan is facing a significant talent shortage in emerging fields like Web3, especially compared to other countries. According to LinkedIn’s 2023 Global Blockchain Talent Report, Japan has only one-tenth the blockchain talent of the U.S. and less than one-quarter of South Korea’s. This shortage of skilled developers and technical experts is a key bottleneck in Japan’s Web3 industry development. The root of this talent gap lies in Japan’s education system, which has placed insufficient emphasis on emerging technologies. While Japanese universities excel in traditional engineering disciplines, they have been slow to invest in blockchain, smart contracts, and other cutting-edge fields. Additionally, Japan’s conservative corporate culture makes it difficult to foster and retain innovative talent, as many young people lack the courage to take risks and embrace failure. III. How Can Japan Break Free from the “Making a Buddha statue but not putting in the soul” Dilemma? Enhance Policy Execution: Streamline Processes and Improve Interdepartmental Coordination To address the issue of delayed policy execution, the Japanese government needs to take specific measures to enhance its policy enforcement. First, the approval processes should be simplified to reduce unnecessary bureaucratic hurdles, especially in the regulatory treatment of innovative technologies. For example, a dedicated Web3 fast-track approval process could be established to provide accelerated approval services for blockchain and digital asset projects, thus shortening the time from project inception to implementation. Furthermore, improving interdepartmental cooperation is crucial. The government can establish cross-departmental working groups specifically tasked with driving Web3 policy implementation, ensuring smoother collaboration across agencies and reducing friction and delays.At the same time, Japan could draw on successful experiences from regions like Singapore and Hong Kong by introducing a “sandbox” regulatory model. This would allow companies to test new business models and technologies under temporary, relaxed regulatory conditions, enabling more flexible experimentation and fostering innovation. Encouraging Enterprises to Innovate Boldly: Tax Incentives and Government Funding To encourage enterprises to innovate boldly in the Web3 sector, the Japanese government needs to introduce a series of incentive measures. First, tax incentives can be used to encourage companies to increase their investment in research and development. For example, tax deductions for research expenses can be provided to companies investing in blockchain technology, thereby reducing their innovation costs. Additionally, a dedicated innovation fund could be established to provide financial support for small and medium-sized Web3 enterprises, helping to bridge the funding gap these companies face in their early development stages. Similar government funding programs have achieved significant success in the United States and South Korea, where government support and collaboration with businesses have successfully nurtured multiple unicorn companies. Enhancing International Cooperation: Choosing the Right Partners and Models International cooperation is crucial for Japan's breakthroughs in the Web3 sector. To address its shortcomings in blockchain technology, Japan needs to actively seek collaboration with other countries and enterprises. First, Japanese companies can establish strategic partnerships with firms from countries and regions that are leaders in blockchain technology (such as the U.S. and China) to gain the latest industry knowledge and experience through technological exchanges and project collaborations. For example, they could work with regulatory authorities in Hong Kong to jointly promote the implementation of regulatory sandbox projects, or partner with U.S. blockchain companies to explore innovations in mechanisms such as virtual asset user protection and cryptocurrency transaction monitoring. Additionally, strengthening collaborations with overseas universities and research institutions is also very important. Japanese universities can partner with top international institutions (such as Stanford University, the University of California, Berkeley, and the Hong Kong University of Science and Technology) to conduct research on blockchain technology and jointly cultivate high-end talent, thus filling the domestic talent gap in the Web3 field. Conclusion Web3 technology offers Japan the potential for a "digital revival" but whether it can break free from the historical dilemma of "Making a Buddha statue but not putting in the soul" depends on the efficiency of policy execution, the strength of corporate innovation, and the ability to attract global talent. If Japan remains trapped in a conservative culture and a complex bureaucratic system, the Web3 industry may become another lost opportunity in the "lost thirty years." In the global wave of Web3, Japan faces significant challenges and opportunities. Only by truly breaking free from the constraints of conservative cultural norms and bureaucratic limitations, and seizing the opportunities presented by technological transformation, can Japan keep pace with other countries on the road to digital revival and achieve long-term sustainable development. ---------------------- 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 , Satou Introduction PayFi, short for Payment Finance, refers to an innovative technology and application model in the blockchain and cryptocurrency sector that integrates payment functions with financial services.  The essence of PayFi lies in its focus on the processes of sending, receiving, and settling cryptocurrencies, rather than mere transactional activities. This model encompasses not only cryptocurrency payments and trades but also extends to lending, wealth management, and cross-border payments among various financial activities. Utilizing decentralized technology, PayFi enables quicker, more secure financial activities while reducing the frictions and costs associated with traditional financial systems, thus promoting seamless value transfer and financial inclusivity on a global scale. The concept of PayFi was first introduced by Lily Liu, Chair of the Solana Foundation, at the EthCC conference in July 2024. She views PayFi as a novel way of constructing financial markets, centered around the Time Value of Money (TVM) to create financial primitives and product experiences that are challenging, if not impossible, to achieve in traditional and even Web2 finance. The vision of PayFi is to revolutionize payment systems using blockchain technology, enabling more efficient, low-cost transactions and offering a novel financial experience. This, in turn, facilitates the creation of more complex financial products and applications, constructing an integrated value chain that forms a new financial cluster.  The CGV Research team believes that with the advancement of high-performance blockchain technologies, the true value of PayFi will rapidly expand and scale within this ecosystem. This expansion will accelerate the integration of payment and financial services, enhancing the practicality and efficiency of cryptocurrencies in everyday transactions and more complex financial operations. In the future financial ecosystem, PayFi is poised to be a key driving force. PayFi: Inheriting and Expanding Bitcoin’s Payment Vision The inception of Bitcoin was marked by Satoshi Nakamoto's revolutionary white paper "Bitcoin: A Peer-to-Peer Electronic Cash System," which introduced the concept of decentralized payment. This idea not only introduced a new form of currency—Bitcoin—but more importantly, it envisioned a global payment system without intermediaries that could circumvent traditional financial institution constraints, facilitating more efficient and transparent value transfer. Nakamoto’s vision aimed to fundamentally reform the existing payment system by eliminating high transaction fees, lengthy settlement times, and financial exclusivity. However, despite Bitcoin's success in leading the cryptocurrency revolution, its initial purpose as a daily payment medium was not fully realized.  Bitcoin is often regarded more as a store of value rather than a currency for daily transactions. Over time, the emergence of stablecoins filled this gap. By mapping the value of fiat currencies onto the blockchain, stablecoins bridged the gap between the cryptocurrency and the real-world financial systems, promoting the first practical application scenario for blockchain payments. Since 2014, the exponential growth of stablecoins has demonstrated a strong market demand for blockchain payments. Stablecoins allow users to enjoy the transparency and decentralization benefits of blockchain technology while avoiding the risks associated with cryptocurrency price volatility. To date, stablecoins support approximately $2 trillion in payments annually, nearing the annual payment processing volume of Visa. However, while stablecoins have advanced blockchain payment capabilities, several challenges remain, such as poor user experience, transaction delays, high costs, and compliance issues. These challenges restrict the widespread adoption of blockchain payments as a mainstream payment medium. The further expansion of the payment ecosystem, particularly relies on the promotion of financial instruments and financing mechanisms.  In the traditional financial system, tools like credit cards, trade financing, and cross-border payments significantly facilitate global payment applications by providing liquidity and financing options. As an emerging industry, blockchain does not necessarily need to completely rebuild a market but can offer more valuable products and solutions based on existing markets through blockchain technology. It is in this context that PayFi has emerged. By leveraging the high performance and low-cost transaction characteristics of advanced public blockchains, PayFi not only promises to surpass traditional financial mechanisms but also aims to create a more liquid and adaptive global financial market. This evolution represents both a return to Bitcoin’s original intentions and a significant innovation built on Bitcoin’s foundation.  Through PayFi, the blockchain payment system will truly unleash its potential, pushing the global financial system towards a more efficient and inclusive future. Core Concept of PayFi: Time Value of Money (TVM) "Time is more precious than money; you can get more money, but you cannot get more time." The Time Value of Money (TVM) is a fundamental concept in finance, emphasizing the value difference of money at various points in time. The basic principle of TVM is that the value of money in the present is generally higher than that of an equal amount in the future. This is because money held now can be immediately invested to generate returns or used for consumption, providing instant utility. Simply put, the important concept behind the time value of money is "opportunity cost." If the holder of money does not use it immediately, they lose the potential investment opportunity and the possible returns. Therefore, the present value of money must reflect these foregone opportunities. For example: - Loans and Mortgages: In bank loans, interest rates are calculated based on TVM, where the interest paid by borrowers essentially compensates for the use of funds provided by the bank. - Investment Assessment: When evaluating investments such as stocks, bonds, or real estate, investors consider the present value of future earnings to determine the attractiveness of the investment. - Capital Budgeting: When conducting capital budgeting, companies evaluate the future cash flows of different projects and calculate their present value through discounting, aiding management in making the most advantageous investment decisions, among other things. PayFi, through blockchain technology, allows users to realize the time value of money on the chain in an extremely cost-effective and efficient manner. By leveraging smart contracts and decentralized platforms, PayFi enables users to manage and invest funds without intermediaries, thus maximizing the efficiency of fund utilization. This new model not only significantly reduces transaction costs but also shortens transaction times, allowing funds to quickly re-enter the market for reinvestment or other purposes. Furthermore, PayFi's infrastructure enables the development of more complex on-chain financial products, such as on-chain credit markets, installment payment systems, and automated investment strategies based on smart contracts. These innovations are expected to expand into more complex financial products and application scenarios, creating an integrated value chain and forming a new "financial cluster." Gluing RWA + DeFi: Building a New Financial Cluster Centered on PayFi In the financial system, Real-World Assets (RWA) and Decentralized Finance (DeFi) each possess unique advantages and face their own challenges: RWA has a vast market size and stable value but relatively low liquidity, and lacks transparency and transaction efficiency; DeFi boasts efficient transaction mechanisms and global liquidity, but primarily relies on cryptographic assets, lacking a direct connection to the real economy. Contrary to some industry perspectives that suggest "PayFi is a sub-category within the RWA track," CGV Research believes that RWA is a part of the PayFi ecosystem. Beyond RWA, PayFi also encompasses a broader range of cryptographic assets, smart contract-driven financial services, and decentralized payment and settlement systems. The introduction and application of RWA through DeFi are crucial components of realizing PayFi's core functionalities. RWA requires DeFi to enhance liquidity and transaction efficiency, through digitalization and smart contracts on the blockchain for rapid, low-cost global financing, and to increase transparency and security of transactions. Simultaneously, DeFi enriches its asset categories by incorporating RWA, reducing volatility risks, providing stable sources of income, and connecting to the real economy, promoting its practical application and development globally. Through PayFi, RWA and DeFi are no longer independently developing financial systems but are interdependent and complementary wholes, achieving the integration and innovation of real assets with on-chain financial services. - Digitalization and On-Chain Integration: Bringing RWA onto the blockchain. The PayFi platform first digitizes RWA through smart contracts, enabling representation and trading on the blockchain. This process ensures the transparency and security of RWA's value and ownership on-chain. In this way, traditional RWA can be fragmented into smaller units, facilitating global trading and investment. - Smart Contracts and Payment Systems: Enabling efficient transactions and settlements. Once RWA is digitized, the PayFi platform uses smart contracts to automate the trading and settlement processes. This not only speeds up transactions and reduces costs but also ensures the transparency and security of transactions. Moreover, PayFi's on-chain payment system simplifies the transfer and payment of these assets, addressing common issues of settlement delays and high fees in traditional finance. - Liquidity Pools and Financing Channels: Providing financial support for RWA. PayFi's liquidity pools offer ample funding for RWA, enabling these assets to receive financing from global investors. By using RWA as collateral, PayFi allows investors to participate in financing activities on DeFi platforms, providing a stable source of funds for RWA. This model not only increases the liquidity of RWA but also brings diversified investment opportunities to DeFi investors. - Risk Management and Transparency: Enhancing market trust. Through blockchain technology, PayFi ensures the transparency and verifiability of all RWA transactions, reducing information asymmetry and operational risks. The automatic execution of smart contracts reduces the risk of human intervention, while the immutability of the blockchain ensures the security of transaction records. All these enhance market trust, promoting further integration of RWA and DeFi. In the future, PayFi will play an increasingly important role in enhancing global asset liquidity, reducing transaction costs, and enhancing market transparency. In Lily Liu's view, PayFi’s integration of RWA and institutional finance into on-chain liquidity pools, creating an integrated value chain, constitutes a "new financial cluster" and may be the biggest theme in the cryptocurrency market this cycle. Why Is PayFi Flourishing on Solana? Why does PayFi happen on Solana rather than on other Layer 1 (L1) blockchains or Layer 2 (L2) solutions? Lily Liu's answer highlights Solana’s three key advantages: high-performance blockchain capabilities, capital liquidity, and talent mobility, which together form a competitive edge that is difficult for rivals to surpass at this stage. Firstly, high-performance blockchain. Solana’s core technological advantage is its unique Proof of History (PoH) consensus mechanism, which enables it to process over 65,000 transactions per second (TPS) with an average confirmation time of around 400 milliseconds. This performance far exceeds Ethereum’s 10-15 TPS and longer confirmation times, and even L2 solutions on Ethereum, like Optimistic Rollups, struggle to match Solana in terms of latency and throughput. Although Visa claims its servers can handle up to 56,000 TPS, in practice, Visa averages only 1,700 transactions per second. By comparison, Solana is fully capable of meeting the actual payment demands. Secondly, capital liquidity. As of August 30, 2024, the total value locked (TVL) in the Solana ecosystem has surpassed $10 billion, attracting significant investments from top venture capital funds including Andreessen Horowitz (a16z), Polychain Capital, and Alameda Research. This capital liquidity provides strong financial support for the expansion of PayFi. Lastly, talent mobility. The Solana Foundation actively promotes the development of its developer community, organizing over 500 hackathons and global developer education programs. By 2024, there are more than 5,000 active developers within the Solana ecosystem, making it one of the fastest-growing blockchain developer communities in the world. This robust talent pool supports the development of various innovative projects and continues to attract new technology and financial talent to the ecosystem, laying a solid foundation for the development of PayFi. PayFi leverages programmable payments to bridge the traditional and blockchain worlds, making it possible to scale credit finance on-chain through smart contracts. Solana's advantages not only support the development of PayFi but also position it strongly for future competition in the global payment and financial markets. For instance, PayPal chose Solana as the new public blockchain for PYUSD payments, primarily valuing Solana's rapid settlement capabilities, low transaction fees, and robust developer ecosystem. Solana's token extension features, including confidential transfers, transfer hooks, and memo fields, provide the necessary flexibility and commercial utility for PYUSD. As PayPal states, "These features are not just nice to have. If we want PYUSD to play a role in a broader range of commercial domains, they must be provided to merchants." Today, Solana has become the main platform for PYUSD, holding a 64% market share, while Ethereum holds only 36%. Moreover, as early as September 2023, Visa had already expanded USDC settlement functions from Ethereum to Solana. Application Scenarios and Typical Projects of PayFi The essence of PayFi is to reshape and upgrade the traditional financial system using advanced cryptographic technology, making it necessary to reimagine all financial scenarios with PayFi. Cross-border Payments and Trade Traditional cross-border payments face challenges due to the segregated nature of centralized sovereign currency systems, affected by foreign exchange controls and national monetary policies, leading to cumbersome processes, long transaction times, and high costs. Initially, cryptocurrency payments were seen as an excellent solution for traditional cross-border payments, but enterprise-focused solutions still have many shortcomings. Today, the cross-border payment industry still heavily relies on prefunded accounts to achieve same-day settlements. Currently, over $4 trillion is locked in prefunded accounts, representing a significant hidden cost for financial institutions and the global payment industry. PayFi can optimize this by leveraging traditional credit finance to enable cryptographic services. Arf（@arf_one）: The world's first regulated, transparent short-term liquidity solution for supporting cross-border payments, based in Switzerland. By providing operational capital and settlement services based on digital assets, along with local entry and exit capabilities for licensed money service businesses and financial institutions, Arf eliminates the capital-intensive business model institutions in the cross-border payment industry. Arf provides a unified liquidity network for cross-border payments and trade, eliminating the need for prefunding and offering 24x7 transparent and compliant services. As of now, Arf's on-chain transaction volume has recently exceeded $1.6 billion with no defaults, becoming one of the fastest-growing stablecoin use cases. Supply Chain Finance  Supply chain finance combines financial services with supply chain management, based on trade relationships and transactions within the supply chain. It involves managing and controlling the flow of information, logistics, and funds to provide systemic financial products and services to upstream and downstream enterprises. Traditional supply chain finance is hindered by complex contracts and legal work, and the financing process is slow and automated evaluation is difficult, significantly affecting the financing turnover of small and medium-sized enterprises. PayFi greatly simplifies the process of purchasing accounts receivable and other services, easing the financing difficulties of businesses. Isle Finance(@isle_finance)： the first project to offer an RWA PayFi network for supply chain payments, introduces real-time Web3 liquidity into supply chain finance, providing liquidity providers with competitive, high-grade returns. By combining supply chain payments with blockchain technology for real-time settlement and liquidity management, Isle enables supply chain participants to process payments and settlements more swiftly, improving capital efficiency. Meanwhile, on-chain liquidity providers can anchor to the payment stability of high-credit buyers and share in early payment discounts offered by suppliers. Isle's main clients include high-net-worth individuals (HNWIs), crypto-native users, DAO treasuries, asset managers, and family offices. The platform also allows regular users to stake ISLE tokens to earn liquidity mining rewards. Consumer Finance PayFi for end-consumers, which may be of more interest to users, primarily occurs in the consumer finance sector. This was a focus emphasized by Lily Liu in her PayFi discussions, "Buy Now, Pay Never." Users can cover current expenses by pledging future earnings, with enforcement facilitated by on-chain smart contracts. In consumer finance, the key to PayFi is connecting the merchant network's service providers who act as acceptors, enabling consumers to access a sufficiently diverse range of consumption scenarios. Huma Finance (@humafinance): A pioneer in proposing the PayFi Stack, an open stack designed to build compliant payment financing solutions and advocating industry leaders to optimize solutions to meet the unique needs of PayFi. The initial stack includes the following layers: transactions, currency, custody, financing, compliance, and applications. For example, the financing layer includes credit rating, underwriting, and RWA oracles. As a representative project in the financing layer, Huma focuses on common short-term financing in the payment field. As of August 26, 2024, Huma has financed a total of over $280 million, with a default rate of 0%. CrediPay (@Credix_finance): Helps businesses increase sales volumes and improve cash flow efficiency through seamless and risk-free credit services. Sellers offer flexible payment terms to buyers at attractive prices and charge prepayments. We manage and protect customers from any credit and fraud risks, allowing them to focus on what matters most: increasing sales volume and profitability. Currently, CrediPay's services are mainly focused in Latin America, such as accounts receivable factoring. Opportunities and Challenges of PayFi Market Growth Potential The primary aim of PayFi is to bring the time value of money onto the blockchain and restructure the financial system in a more programmable, sub-custodial, and decentralized manner. With the rapid increase in the number of global stablecoins and continuous improvements in cryptocurrency infrastructure, PayFi is poised to be a significant force in transforming traditional finance. According to data from Statista, The total volume of global digital payment transactions in 2023 is expected to reach approximately $9.46 trillion, with projections to continue growing to about $14 trillion by 2027. Additionally, data from Mordor Intelligence estimates that the DeFi market size will be $46.61 billion in 2024, expected to reach $78.47 billion by 2029, with a forecasted compound annual growth rate of 10.98%. Calculations by the CGV Research team suggest that if PayFi can capture 10% of the global digital payment transaction volume (a conservative estimate) by 2030, the PayFi market size (projected at $1.8 trillion) could be 20 times that of the DeFi market size ($87 billion). This indicates that PayFi has tremendous market potential and is likely to play a significant role in the global digital payment sector. Regulatory and Compliance Challenges As the issuance of global stablecoins continues to increase, central banks are gradually easing their stance on stablecoins. Broadly speaking, fiat-pegged stablecoins can be seen as a digital extension of fiat currency. PayFi, mainly involving payment services mediated by stablecoins, is still subject to the regulatory framework of the sovereign currency system. On one hand, current PayFi projects emphasize compliance, typically allowing only licensed institutions to participate, while individual users must undergo strict KYC procedures and scrutiny. On the other hand, many PayFi projects tend to expand business in third-world countries, where local regulations are often less robust and regulatory barriers lower, thereby posing relatively smaller compliance risks. Technological and Security Risks Despite years of DeFi development and many security vulnerabilities being identified and audited, security issues have not been completely eradicated. However, the security of on-chain PayFi has essentially reached parity with traditional DeFi's security after stringent audits. The main technical challenges lie in the off-chain segment. Since PayFi requires extensive integration with real-world assets, ensuring the enforcement of off-chain logic remains an unresolved issue. The current solution often involves an intermediary entity to manage the alignment between on-chain and off-chain operations, but this solution still requires further refinement. Conclusion PayFi, as a new wave in payment finance, is reshaping the global financial ecosystem with its unique charm. It not only inherits Bitcoin's payment vision but also elevates the efficiency and inclusiveness of financial services to new heights through blockchain technology innovations. Supported by high-performance blockchains like Solana, the market size of PayFi is expected to grow exponentially, becoming a major driving force in the future financial market. As Lily Liu envisioned, PayFi tightly integrates RWA and DeFi, constructing an integrated value chain and forming a new financial cluster. This revolutionary innovation is poised to drive the global financial system towards greater efficiency and inclusiveness. ---------------------- 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

Published by: CGV Research Authors: Shigeru & Cynic Today, prediction markets are evolving from a "fringe financial experiment" into a foundational layer of information, capital, and decision-making systems. In 2024–2025, the market witnessed the breakout of platforms such as Polymarket and Kalshi; looking ahead to 2026, what the market may face is the systemic evolution of prediction markets as a new form of information infrastructure.Based on continuous research over the past two years into prediction markets, AI agents, crypto finance, and regulatory trends, the CGV research team presents 26 judgments for the year 2026. I. Structural Trend Judgments 1. Prediction markets will no longer be defined as "gambling" or "derivatives" in 2026 They will be redefined as decentralized information aggregation and pricing systems. By 2025, cumulative trading volume on platforms such as Polymarket and Kalshi had exceeded USD 27 billion. Mainstream media including CNN, Bloomberg, and Google Finance widely integrated probability data from these platforms, citing them as real-time consensus indicators rather than betting odds. Academic research from institutions such as Vanderbilt University and the University of Chicago shows that prediction markets outperform traditional polls in political and macroeconomic forecasting accuracy. By 2026, as traditional financial giants such as ICE invest in Polymarket and distribute its data globally, regulators (e.g., the CFTC) are expected to further recognize prediction markets as information aggregation tools - driving a paradigm shift from a "gambling label" toward decentralized pricing systems. 2. The core value of prediction markets lies not in "being right," but in signals What the market ultimately pays for is the ability to reflect consensus shifts ahead of time. In 2025, probability movements on Polymarket and Kalshi led mainstream economists and polls by one to two weeks in Federal Reserve decisions and major sports events. Reports show their Brier scores significantly outperformed polling benchmarks - achieving 0.0604 versus 0.125 (good) and 0.10 (excellent). Accuracy further improved as trading volume increased. By 2026, with institutional hedging demand surging (e.g., using probability signals to hedge macro risk), platform data will be increasingly embedded in financial terminals. Signal value will far exceed trading returns, becoming a real-time "consensus barometer" for institutions and media. 3. Prediction markets will evolve from "event-level" to "state-level" Not just "who will win," but "what state the world is in." In 2025, platforms launched persistent state markets such as "Bitcoin price ranges in 2026" or "probability of economic recession," with open interest rising from early-year lows to tens of billions of dollars. Kalshi's macro indicator markets grew rapidly as a share of activity. By 2026, long-cycle state markets are expected to dominate liquidity, aggregating structural consensus and providing continuous pricing of world states rather than single-event outcomes. 4. Prediction markets will become the external reality-validation layer for AI systems AI will no longer rely solely on data, but on capital-weighted judgment. In 2025, Prophet Arena benchmarks showed AI models achieving accuracy comparable to prediction markets in real-world forecasting. Kalshi's collaboration with Grok and Polymarket's AI-generated summaries used capital-weighted probabilities to reduce hallucinations. By 2026, as protocols such as RSS3 MCP mature, prediction market probabilities will broadly serve AI world-model updates, forming a closed loop between reality, markets, and models - significantly improving AI output reliability. 5. Information, capital, and judgment will form a closed loop in a single system for the first time This fundamentally differentiates prediction markets from social media and news platforms. In 2025, Polymarket data integrated into Bloomberg and Google Finance created an efficient loop of information input → capital pricing → judgment output. Unlike unincentivized opinions on Twitter, capital mechanisms enforce truthfulness. By 2026, this loop is expected to extend into enterprise risk management and policy evaluation, generating strong externalities and positioning prediction markets as a new decision-making infrastructure rather than mere content platforms. 6. Prediction markets will no longer be a niche within crypto They will be absorbed into the broader AI × Finance × Decision Infrastructure narrative. In 2025, ICE invested USD 2 billion into Polymarket, Kalshi reached a USD 11 billion valuation, and incumbents such as DraftKings and Robinhood launched prediction products. Total trading volume exceeded USD 27 billion, with data embedded in mainstream terminals. By 2026, accelerated institutional adoption and AI integration will push prediction markets from a crypto niche to a core AI–finance–decision narrative, akin to Chainlink's role in the oracle space. II. Product Form Factors 7. Single-event prediction markets will reach maturity in 2026 Innovation will shift from UI to structure. In 2025, total prediction market volume reached roughly USD 27 billion, with Polymarket contributing over USD 20 billion and Kalshi over USD 17 billion. Single-event markets dominated but showed slowing growth post-peak. Innovation increasingly focused on infrastructure, such as Azuro's LiquidityTree model for efficient liquidity and PnL distribution. By 2026, such upgrades are expected to stabilize single-event markets and support larger institutional participation. 8. Multi-event portfolio markets will become the dominant form Prediction will move from single points to joint pricing of correlated variables. In 2025, Kalshi's "combos" multi-leg trading gained traction, enabling portfolios across sports and macro events and attracting institutional hedging. Conditional markets further improved pricing depth. By 2026, with clearer regulation and institutional capital inflows, multi-event portfolios are expected to become mainstream, enabling complex risk management and significantly deeper liquidity. 9. Long-horizon markets will emerge Forecasting outcomes six months, one year, or even three years ahead. In 2025, Polymarket and Kalshi expanded multi-year markets such as Bitcoin price ranges and economic indicators, with open interest rising to tens of billions of dollars. Position lending mechanisms reduced capital lock-up. By 2026, long-horizon markets are expected to dominate portions of liquidity, offering more robust structural consensus and potentially doubling open interest again. 10. Prediction markets will be embedded into non-trading products Research tools, risk systems, and decision backends - not trading frontends. In November 2025, Google Finance deeply integrated Kalshi and Polymarket data, enabling Gemini AI to generate probability analyses and charts. Bloomberg and others followed. By 2026, embedding will accelerate: prediction probabilities will become standard inputs for macro research, enterprise risk management, and decision backends. CNN and CNBC also signed multi-year agreements with Kalshi in December 2025, embedding probabilities into programs such as Squawk Box and Fast Money. 11. B2B prediction market value will surpass B2C for the first time Institutions need consensus pricing more than retail users. In 2025, enterprise applications (e.g., supply chains and project management) consistently outperformed traditional methods. Institutional hedging demand surged. By 2026, B2B value is expected to overtake retail B2C, transforming prediction markets into enterprise-grade infrastructure. The supply chain analytics market alone reached USD 9.62 billion in 2025 and is projected to grow at a 16.5% CAGR through 2035 - prediction markets can embed as consensus-pricing layers in AI-driven forecasting systems. 12. "No-token, low-speculation" prediction markets will outperform Markets will reward restraint in 2026. In 2025, Kalshi achieved monthly peak volumes exceeding USD 500 million without a native token, capturing over 60% market share. Polymarket confirmed a POLY token launch in Q1 2026, but low-speculation operations drove growth. By 2026, restrained design is expected to outperform in regulatory compatibility, real liquidity, and institutional trust - giving low-speculation platforms an edge in long-term valuation and sustainability. III. AI × Prediction Markets 13. AI agents will become major participants Not for speculation, but continuous participation and calibration. By late 2025, RSS3 MCP Server and Olas Predict enabled AI agents to autonomously scan events, acquire data, and trade on platforms such as Polymarket and Gnosis. Prophet Arena tests showed improved market efficiency. By 2026, AI agents are expected to contribute over 30% of volume, acting as persistent liquidity providers rather than short-term speculators. 14. Human prediction will increasingly become training data, not the primary actor Markets will serve models more than humans. In 2025, benchmarks from Prophet Arena and SIGMA Lab showed that human-driven market probabilities significantly improved model training and validation. By 2026, prediction markets will prioritize AI optimization, with human participation serving mainly as signal input. 15. Multi-agent prediction games will become a new source of alpha Prediction markets will evolve into multi-agent competitive arenas. Projects such as Talus Network's Idol.fun and Olas treated prediction markets as collective intelligence battlegrounds. By 2026, multi-agent competition is expected to be a primary alpha source, attracting developers to build specialized agent strategies. 16. Prediction markets will constrain AI hallucinations Judgments that cannot be wagered on will be treated as low-confidence outputs. By 2026, "un-bettable" claims are expected to be automatically down-weighted by AI systems, improving reliability. 17. AI will push prediction markets from probabilities to distributions From single numbers to full outcome curves. By 2026, distributional views will become standard in UI and APIs, significantly improving tail-risk pricing. 18. Prediction markets will become external interfaces for world models Reality → market pricing → model updates. By 2026, prediction markets are expected to serve as standard external inputs for AI world models, closing the loop between reality, markets, and model iteration. IV. Finance & Business Models 19. Trading fees are not the endgame Real value lies in data, signals, and influence. By 2026, data licensing and signal subscriptions are expected to contribute over 50% of platform revenue, shifting valuations from volume to data assets. 20. Prediction signal APIs will become core products Especially in finance, risk, policy, and macro domains. By 2026, signal APIs are expected to reach a USD 10+ billion market, with leading platforms dominating through exclusive licensing. 21. Content and interpretation will become key moats Explaining predictions will matter more than predictions themselves. By 2026, platforms with strong explanatory capabilities will form network effects, monetizing influence beyond trading. 22. Prediction markets will underpin new research institutions They will evolve into research infrastructure, not media. By 2026, prediction markets will function as real-time decision engines for enterprises, governments, and AI systems. V. Regulation & Market Structure 23. Regulation will shift from "can it exist" to "how it is used" Focus will move to use cases, boundaries, and anti-manipulation rules. This mirrors the maturation path of derivatives markets. 24. Compliant platforms will enter via non-financial use cases Policy evaluation, supply chains, and risk alerts will be key entry points. These areas face minimal resistance yet attract institutional and governmental clients. 25. Winners will be defined by citations, not traffic Platforms most referenced by AI, institutions, and research systems will prevail. Network effects will resemble Chainlink's oracle dominance. 26. The ultimate competition is about becoming infrastructure After 2026, prediction markets will either become "utilities" or be marginalized. Those that succeed will be as indispensable as Bloomberg or Chainlink - others will remain transactional and fade. Conclusion Prediction markets no longer need to prove feasibility. The real inflection point lies in whether they are treated as decision signals, not merely trading tools. By 2026, competition will center on signal stability, credibility, and citation frequency - not hype or traffic. Whether prediction markets evolve into long-term information infrastructure or remain cyclical narratives will define the next stage of the industry. ---------------------- 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 investments in over 200 projects. Since 2022, CGV has invested in and incubated the licensed Japanese yen stablecoin JPYW, making an early move in the crypto stablecoin sector. Starting in 2024, CGV has expanded into the tokenized equity and RWA markets, participating in private placements of projects such as Nabate (NA) and Victory Securities (8540.HK). Currently, CGV also has branches in locations such as Hong Kong and Silicon Valley. 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.

Published by: CGV Research Authors: Shigeru & Cynic Beyond the cheers and roars in the stadium, another invisible contest has long begun. It's not on the field, but in the market - betting, trading, price fluctuations, converging the judgments and emotions of millions worldwide. However, traditional sports betting is facing a crisis of trust: odds are set by bookmakers, rules are opaque, and match-fixing and corruption are frequent. Prediction markets are reconstructing the logic of sports gambling through decentralization, transparency, and real-time pricing - when game outcomes can be priced by the crowd, when odds are generated by market consensus, "betting" might be redefined as "prediction." Aside from the 2024 US Presidential Election, sports predictions consistently account for over half of the trading volume on major prediction markets From Wagers to Consensus: The Sporting Evolution of Prediction Markets Key Development Milestones in Sports Prediction Markets (Including Predictions) These nodes illustrate the progression of sports prediction markets from "wagering for entertainment" to "market consensus." In the past, people bet for thrill; now, prices begin to reflect genuine judgment. Prediction markets transform every match from a clash of emotions into a pricing of collective intelligence. When outcomes can be collectively "priced" by the crowd, the meaning of sports extends from entertainment to cognition and participation. The De-bookmakerization of Odds: How Prices Reflect Consensus In traditional betting, odds are set by "bookmakers." Bookmakers are both rule-setters and participants, a structure inherently plagued by information and interest asymmetry. Prediction markets, however, completely overturn this mechanism. On Polymarket, anyone can create a sports event: "Will Manchester City win the Premier League?" The initial price might be 0.5 (i.e., a 50% probability), but as capital flows in, traders judge, and information updates, the price adjusts dynamically. When odds are no longer controlled by bookmakers but are formed collectively by market participants, the price itself becomes the "real-time consensus." The essence of this model is "crowdsourced probability": each trader bets based on information, and the price reflects the market's overall belief; the larger the market and the more information, the closer the price is to the "true probability"; anyone can "bet against the bookmaker" - as long as their information is more accurate. This gives "sports betting" a transparent structure of "consensus-as-price" for the first time. More importantly, unlike traditional sports betting, prediction markets support real-time trading during matches. This means that live game developments are rapidly transmitted to prices through the market's invisible hand. For viewers not watching live, prediction market prices are highly likely to reflect the game situation faster than the broadcast. Case 1: Performance of Prediction Markets during UEFA Euro 2024 During UEFA Euro 2024, Polymarket launched 42 core markets with a total trading volume of $28M. Taking "Will Spain win the championship?" as an example: - Before the tournament, the market price was 0.12, reflecting an initial consensus that undervalued Spain. - After beating Germany in the quarter-finals, the market price rose to 0.55, showing rapid capital inflow after strength was verified. - 24 hours before the final, the price reached 0.72, as the market digested all injury and tactical information. - Finally, at the end of the final, the price reached 1.00, Spain won, and the market paid out. Compared to fixed odds on traditional platforms like Bet365, Polymarket prices reflected key information (e.g., player form, weather, social media buzz) 12–24 hours earlier. Volatility was highest 24 hours before matches, indicating the market's real-time integration of multi-source data. Betting is no longer gambling but a collective information pricing mechanism. Restructuring Incentives: From "Beating the Bookmaker" to "Beating the Information" The key to prediction markets is not betting on luck, but betting on information. In traditional betting, information asymmetry is the bookmaker's moat; in prediction markets, information transparency becomes the player's weapon. This mechanism brings three fundamental changes: 1. Information becomes a tradable asset Training videos, injury reports, Twitter sentiment, weather forecasts - all instantly translate into price signals. Predictors profit from information arbitrage , incentivizing high-quality data sharing. 2. The bookmaker's role dissolves The system automatically matches orders, settles on-chain, and requires no centralized risk control. 3. Community-driven ecosystem formation a. Events proposed by users/AI b. Resolution standards governed by the community (e.g., Kleros dispute resolution) c. Transparent distribution of token rewards Those who provide more accurate information earn more. Sports prediction is evolving from simple gambling into a decentralized information gaming ecosystem. Case 2: On-Chain Resonance in the 2024 NBA MVP Prediction During the 2024 season, Polymarket partnered with Flipside Crypto to launch the "NBA MVP Prediction Market," integrating the following data sources: On-chain: Player NFT trading volume (liquidity and fan traction); Off-chain: Twitter sentiment analysis, ESPN injury reports, schedule strength models. At the start of the season, Nikola Jokić's MVP market price was 0.28, as the three-way competition was fierce and market expectations were dispersed. After the All-Star break, the price rose to 0.65, as Jokić's performance surged and injuries decreased, significantly boosting market confidence. By the end of the regular season, the price further increased to 0.89, as media narratives began clearly favoring Jokić. Ultimately, the price reached 1.00, Jokić successfully won his third MVP, and market expectations were fully realized. The market price locked in the outcome 6 weeks early ahead of traditional media predictions. This validated the synergistic predictive power of "on-chain data + crowd wisdom." From "Watching" to "Participating": The Remaking of the Viewer Economy Another layer of transformation brought by prediction markets is the "financialization of viewer participation." In the past, viewers could only passively consume content; now, they can actively participate in judging outcomes and receive economic returns. This means the "fan economy" is being rewritten: In the traditional sports model, the core logic is "watch + consume," where viewers participate mainly by watching events and buying related products; in the prediction market-style sports model, the core logic shifts to "predict + participate," where viewers simultaneously become market participants. The revenue structure of traditional sports is dominated by platform exclusivity, while prediction market-style sports adopts a shared mechanism, where winners receive profit shares. In terms of interaction forms, traditional sports rely mainly on comments and votes, while prediction market-style sports involve deeper interactions, including betting, market making, and arbitrage. Regarding data feedback, traditional sports depend on passive metrics like viewership ratings, while prediction market-style sports reflect market sentiment and cognitive changes in real-time through price curves and capital flows. 68% of Polymarket sports users identify as "hardcore fans" - prediction becomes a new way to express support. This model brings strong community stickiness and viral spread. The Play-to-Predict era is approaching. Fans are no longer just viewers but "virtual participants" in the form of predictors. For top sports leagues like the NFL, Premier League, and LPL, embracing or even leading prediction markets is not just about following the trend but a business decision with profound strategic value. Firstly, it is an unprecedented user engagement engine, transforming millions of viewers from passive "watchers" into active "stakeholders," significantly enhancing game stickiness and buzz. Secondly, market prices themselves serve as a highly sensitive real-time polling tool, allowing leagues to gain insights into fan sentiment, assess player popularity, and even test the popularity of new rules - their value far exceeds traditional surveys. Finally, it's a brand-new commercialization channel. Through official licensing, data API partnerships, or sharing transaction fees, leagues can tap into a potentially huge digital-native revenue stream independent of broadcasting rights and ticket sales. Case 3: 2025 "League of Legends" S15 World Championship Prediction Market On November 2, 2025, the night of the Shanghai final, Polymarket and Azuro jointly launched the S15 fully on-chain prediction ecosystem. This system marked the first global implementation of multi-layered on-chain prediction trading for esports events. At the macro level, markets like "Will T1 win the championship?" peaked at $18.7M in trading volume and achieved automatic on-chain settlement within 3 seconds. At the micro level, markets like "Who gets the next Dragon?" averaged $420k per wave, updating continuously in real-time rolling fashion. In player prop markets, "Will Faker's KDA exceed 10 this game?" reached $1.2M in volume, with efficient clearing achieved through API. This signifies the deep integration of esports and blockchain prediction markets, forming a real-time, transparent, and globally participatory fully on-chain sports prediction ecosystem. Regulation and Ethics: The "On-Chain Referee" for Sports Similar to the news industry, regulation remains a key challenge for sports prediction. Regulatory Gray Areas: The CFTC and US gambling commissions have not unified the definition of "event contracts." Manipulation Risks: When player actions can influence market prices, could incentives for "fake plays" emerge? Settlement Standards: Ambiguous events (e.g., "Did the player appear?") might trigger oracle disputes. Potential solutions include: Using multi-layered oracle mechanisms (e.g., Chainlink + UMA) to verify results; Introducing reputation staking models to penalize manipulation; Implementing AI anomaly detection to identify suspicious trading and outcome deviations. In summary, the goal of these mechanisms is consistent: to make prediction markets the "on-chain referee" in the sports world - fair, transparent, and verifiable. Within the next three years, we might witness an ecological landscape like this: Media Integration: Mainstream outlets like ESPN and CBS have started embedding on-chain odds, making prediction data a standard element of sports reporting. Platform Transformation: Traditional betting platforms like DraftKings are exploring on-chain settlement mechanisms, signaling a migration of the traditional betting system towards decentralization. AI Market Making Realm: AI Agents can automatically generate and balance markets, providing 24/7 liquidity, making prices more accurately reflect real-time information. League Token Trend: Entities like the NBA and Premier League launch prediction index tokens, gradually forming a decentralized sports ETF ecosystem. By then, sports will no longer be just entertainment, but a financial experiment in collective intelligence. People won't just be betting on outcomes; they'll be trading consensus, trust, and truth. When the game is priced, the truth doesn't end with the whistle; it continues to ferment in the prices of the market. ---------------------- 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 investments in over 200 projects. Since 2022, CGV has invested in and incubated the licensed Japanese yen stablecoin JPYW, making an early move in the crypto stablecoin sector. Starting in 2024, CGV has expanded into the tokenized equity and RWA markets, participating in private placements of projects such as Nabate (NA) and Victory Securities (8540.HK). Currently, CGV also has branches in locations such as Hong Kong and Silicon Valley. 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.

Published by: CGV Research Authors: Shigeru & Cynic In the age of information overload, we're flooded daily with countless pieces of "seemingly important" news. But the real question is - which ones are true? Which ones deserve trust? Journalism once served as the central node of social trust, but it's now mired in the swamp of attention: algorithmic feeds let emotion trump reason, and clicks overshadow truth. Fact-checking sites race to keep up, while AI-generated fake news spreads by the second. A 2024 MIT study found that false news spreads on social media six times faster than true news. When "truth" can't be verified in time, its value collapses. Prediction markets - tools once confined to financial speculation - are being redefined. By aggregating collective intelligence through prices, they provide a real-time, dynamic, quantifiable answer to "what is true." In this logic, news is no longer just something to read - it's a signal to be priced. Collective Intelligence: How Prediction Markets Approach Truth The idea of collective intelligence stems from classic thought experiments and real-world trials showing that group judgment often surpasses individual insight. As early as 1906, British statistician Francis Galton conducted a famous experiment at a country fair: nearly 800 people guessed the weight of an ox. Despite large individual errors, the average guess was off by just one pound - demonstrating the potential of crowd wisdom. Launched in 1988, the Iowa Electronic Markets further validated this: by allowing small-stakes trading on US presidential outcomes, the platform frequently outperformed traditional polls, proving that market mechanisms can effectively aggregate dispersed information. Collective intelligence works through diversity, independence, and information aggregation: diverse participants bring varied perspectives and avoid single-source bias; independent judgments prevent herding; market price mechanisms (bets and trades) quantify and integrate individual insights into consensus that nears the truth. This extends to today's markets like Polymarket and Augur, creating positive externalities - participants share accurate information for profit, prices become public signals, and overall decision quality improves. In news, this reduces misinformation, builds public trust, and incentivizes more accurate reporting, forming a virtuous cycle where social benefits exceed individual costs. Case: Prediction Markets in the 2024 US Election During the 2024 US election, Polymarket listed thousands of related contracts. The probability price for "Trump will win the election?" rose from 0.45 early in the year to 0.62 on the eve of the vote, aggregating the dispersed judgments of millions worldwide. While traditional polls fluctuated due to sampling bias, market prices steadily reflected collective intelligence: diverse traders - analysts, investors, ordinary people - integrated real-time news, social signals, and inside information via independent wagers, ultimately predicting the outcome accurately. This validated crowd wisdom and created positive externalities - mainstream media like the New York Times and CNBC cited these prices as reliable indicators, boosting trust in election coverage and reducing fake news, fostering a more transparent information ecosystem. Where Information Economics Converge: Why News and Prediction Markets Are Natural Fits News aims to disseminate facts; prediction markets aim to forecast factual outcomes. They seem different but mirror each other. News tells us "what may happen"; prediction markets tell us "what people think will happen." If news is "narrative," prediction markets are "the price of consensus." Information-as-Price is the key logic. In prediction markets, each event has a probability price: for example, if "The Fed will cut rates in December" trades at 0.63, the market assigns a 63% chance. Applied to news, this price mechanism forms a feedback loop: News published → market trading → price feedback → newsroom adjustment → truth approached. Information becomes dynamic - a truth-evolution process continuously "bet on" by many. Case: Predictive Signals in the GameStop Frenzy During the 2021 GameStop surge, media debated whether retail traders could keep pushing the stock up. Manifold Markets listed "Will GameStop break $500 next week?" Prices held around 0.25, signaling skepticism about sustainability. Days later, the price fell, aligning with the market's prior. Prediction markets can not only validate news but also offer forward-looking signals on complex events, complementing traditional coverage. "Truth as a Tradable Asset": Marketizing Fact-Checking Imagine CNN breaking: "Bitcoin ETF approval internally confirmed at the SEC." Social media erupts; official confirmation lags. Traditionally, we'd wait for fact-checkers, reporter follow-ups, or official statements. In prediction markets, a contract appears within minutes: "Will the SEC approve a Bitcoin ETF within 48 hours?" Thousands trade. The price jumps from 0.3 to 0.8 - collectively signaling "this is likely true." Indeed, the SEC announced approval the next morning. This was a real Polymarket case in January 2024. When information asymmetry is extreme, prediction markets can detect "truth signals" before the news cycle does. Polymarket and Kalshi: Proportion of News Category Prediction Events Another US politics example: when Biden's health drew scrutiny in 2024, Polymarket listed contracts like "Will Biden resign before 2025?" and "Will Harris run in 2024?" Price swings became a real-time thermometer for the credibility of rumors. Prediction markets are evolving into decentralized fact-checking engines: truth is validated not by a central authority but by dispersed market prices. More importantly - debunking becomes an economic act. People don't just fact-check out of principle; they do it because "getting the truth right" can make money. Case: Information Warfare in the Ukraine Conflict Early in the 2022 Russia-Ukraine war, a report claimed "a Ukrainian city has fallen." Traditional media struggled to verify due to information blackouts, while a Polymarket contract - "Will the city be confirmed captured within 72 hours?" - traded at 0.12, signaling skepticism. Days later, independent reporters confirmed the city hadn't fallen, and the market went to zero. Prediction markets can provide fast, decentralized truth verification in information wars. From Passive Reading to Active Forecasting: The Birth of Predictive News Combining news with prediction markets creates a new profession: the predictive journalist - reporting facts and market signals. For instance, at FT Alphaville, reporters have cited Kalshi price shifts to inform analysis: "Market expectations for a BoE rate cut in November rose from 42% to 59% over the past week, signaling mounting concern over economic slowdown." Bloomberg Beta has tested similar workflows: AI monitors contract prices and feeds shifts into editorial systems. When a market's probability spikes, editors get an alert: "This might be news." News and markets become mutual signals: news triggers trades; trades generate news. This two-way mechanism gives journalism predictive capability - moving beyond post-hoc reporting toward data-driven views of the forming future. Case: Bloomberg × Kalshi Experiment In 2023, Bloomberg piloted a "predictive news" system with Kalshi. When the contract "Apple will release a new chip" jumped from 0.4 to 0.9, the system alerted editors. Reporters then investigated supplier order flows and broke the story early. This improved timeliness and let readers sense probabilities through prices - an early model of predictive journalism. Rewiring Incentives: When Readers Become Participants Traditional news monetizes attention for ads; prediction-market news monetizes judgment for returns. Readers become market participants, not passive consumers. They can bet on events, express views, and gain or lose based on outcomes. This reshapes incentives: clickbait loses appeal because it lacks "verifiable truth"; high-quality reporting gains economic value because it improves forecast accuracy. Platforms like Manifold Markets and Insight Prediction already blend news and forecasting: users can predict directly under articles; AI scores journalists on accuracy based on market outcomes. For the first time, "journalist reputation" becomes quantified and visible. News value depends not on clicks but on whether it moves prices. Case: Manifold Markets' Community Experiment In 2024, Manifold let users create prediction contracts directly under news posts. After an article on "EU to ban a certain cryptocurrency," users listed "Will the EU ban it by year-end?" Price swings drew more readers and incentivized more accurate follow-ups. Platform data showed high-quality articles attracted 3× the trading volume of low-quality ones - evidence the incentive model works. Friction with Reality: Regulation, Manipulation, and Liquidity Of course, behind the ideal, there are still many challenges to overcome. Regulatory ambiguity: In the US, the CFTC has long restricted political/news event contracts as "gambling-like." Kalshi's lawsuit with the CFTC has dragged on nearly two years without resolution. Manipulation risks: If news can move prices, actors may manufacture fake news to sway markets. "News-as-asset" requires AI verification and reputational penalties. Liquidity and scale: Current user bases are limited; prices can reflect "niche consensus." Scaling users and deepening liquidity are key to commercialization. New projects are experimenting - Zeitgeist with reputation-based models; the Foresight Institute with AI "fact arbiters" to deter price manipulation. How to Resolve: The Damocles' Sword of Decentralized Prediction Market Decentralized markets like Polymarket typically rely on oracles or community governance to resolve outcomes - for example, UMA's Optimistic Oracle gathers evidence and allows challenges during a dispute window. This aims for trustless truth verification but exposes flaws: subjectivity and controversy can cause delays or unfairness. Ambiguous events may lack sufficient evidence for consensus, delaying settlement for weeks. For edge cases (vague definitions or unforeseen contingencies), platforms fall back on community votes or external arbitration (e.g., DAO governance), introducing herding or minority capture risks. Truth is essentially "verifiable consensus" - oracles pull from reliable sources (official announcements, on-chain data), but oracles aren't infallible: they can face Sybil attacks or tampered data sources, distorting "truth." To deter manipulation, platforms use economic incentives (staking and slashing for false reports), multi-layer verification (e.g., Chainlink's decentralized oracle networks), and AI anomaly monitoring. Still, none are bulletproof; a successful manipulation threatens the market's core credibility like the Sword of Damocles. Case: Polymarket's 2024 Election Dispute A Polymarket market on "Will election fraud claims be substantiated?" became contentious due to subjective evidence: the oracle referenced media reports and court filings, but community division delayed settlement by two weeks, ultimately resolving "not substantiated." This exposed reliability issues for subjective events. Although slashing deterred large-scale tampering, participants questioned the "truth standard," prompting a shift toward more robust hybrid oracle systems. The Future Fusion of AI, News, and Prediction Markets AI will amplify prediction markets by: Extracting forecastable events from news corpora Tracking outcomes in real time and adjusting prices Detecting influence operations and fake-news spread This turns prediction markets from a "financial tool" into a "social cognition system." Prices reflect not only economic signals but also the dynamics of social trust. Some call this "NewsFi" - news financialization: news becomes a "verifiable information asset." When information is put on-chain, traded, and priced, truth finally gets its own market. Case: Perplexity Integrated with Prediction Markets In 2025, Perplexity launched an AI tool that combines prediction market data with news to generate "event credibility scores." For example, on a breaking "Company X is bankrupt" story, the AI analyzes Polymarket prices and sources to output "75% credibility," aiding user judgment and accelerating NewsFi adoption. Prediction markets push us to reconsider journalism's core question - the "price of truth." In the future information ecosystem, journalists will, like traders, both produce content and interpret prices; readers will be both audience and participants; platforms will be both publishers and marketplaces. This is not just a technological shift in media - it's a revolution in the trust architecture. Prediction markets embody a simple, powerful insight: the wisdom of crowds is not only in opinions, but in prices. When price becomes the language of truth, news no longer depends on authority to convince the 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 investments in over 200 projects. Since 2022, CGV has invested in and incubated the licensed Japanese yen stablecoin JPYW, making an early move in the crypto stablecoin sector. Starting in 2024, CGV has expanded into the tokenized equity and RWA markets, participating in private placements of projects such as Nabate (NA) and Victory Securities (8540.HK). Currently, CGV also has branches in locations such as Hong Kong and Silicon Valley. 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.

Published by: CGV Research Authors: Shigeru Over the past two years, prediction markets have become one of the most controversial yet most promising "real-world applications" in crypto. Inside the crypto space, leading platforms like Polymarket and Kalshi have taken off, with trading volumes climbing rapidly. Outside the space, however, prediction markets are still viewed as gambling, making it difficult for them to enter mainstream investors' asset allocation frameworks. This raises a key question: Can prediction markets, like stablecoins, truly break out of the crypto bubble and become the next cornerstone connecting crypto with the real world - an internet-scale fintech product? Crypto prediction market ecosystem (Messari) I. Current landscape: thriving inside, perception gap outside Why is the same market hot within crypto but barely noticed outside? Prediction markets are a typical case of "hot inside, cold outside." On one hand, enthusiasm within crypto continues to grow. Platforms represented by Polymarket, Kalshi, and Manifold have built relatively stable traffic and narratives in the crypto community. Crypto prediction market share breakdown (Dune, 2025–10–06) Polymarket, with its clean interface and USD stablecoin settlement, has become a key venue for discussing the U.S. election, macroeconomic data, and crypto airdrops. In 2025, Polymarket's cumulative trading volume surpassed 7.5billion, withAugustaloneexceeding7.5 billion, with August alone exceeding 7.5billion, withAugustaloneexceeding618 million, driven mainly by political events and macro forecasts. During the 2024 U.S. election, Polymarket priced Trump's win probability at 99% by 1:30 a.m. ET, while Fox News didn't call it until 1:47 a.m., with other media taking even longer. Persistent arbitrage and rising marginal costs of price deviations from fair value make errors in prediction markets brief and easy to correct. Manifold, with its "social + prediction" light-entertainment model, has attracted over 200,000 participants, becoming a "new voting pool" for users to gather information and express views. However, in 2025 Manifold's daily active users once fell to a historic low of 886, reflecting retention challenges. Meanwhile, Kalshi has surged as a compliant platform. By September 2025, its trading volume reached $1.3 billion, capturing 62.2% of global prediction market activity and dominating sports prediction markets. On the other hand, public understanding remains limited. The general public often equates prediction markets with "gambling," overlooking their value in information aggregation and probability pricing. Even as mainstream U.S. media occasionally cite Polymarket data, social perception still pegs prediction markets as a niche toy. For example, The Economist in 2025 noted that low liquidity deters large investors, undermining credibility. The lack of clear compliance labels and authoritative endorsement keeps prediction markets outside mainstream awareness. Despite Kalshi recording $208 million in trading during March Madness 2025, the public still viewed it as gambling rather than an information tool. II. Cross-audience expansion: multidimensional integration and innovation To truly break out, prediction markets need more than technical upgrades; they need new narratives and entry points. Politics, macroeconomics, entertainment/sports, and even native Web3 ecosystems are potential catalysts. Anchor to real events: traffic gateways in politics, economics, and entertainment Prediction markets are naturally tied to real-world events, making politics, economics, and sports/entertainment ideal wedges to cross the chasm. Politics: Events like U.S. elections, the Brexit referendum, or bill-passage odds are hard for traditional polls to predict accurately. With price-based mechanisms, prediction markets can offer more real-time, truer probability indicators. For example, in 2025, a Polymarket on the Fed's rate decision saw over $50 million in volume, with users hedging risk by betting on a "25 bps hike." Macroeconomics: CPI releases, nonfarm payrolls, and Fed decisions are key for institutions and investors. Prediction markets can serve as a real-time expression of "market expectations." During the 2025 yen carry trade unwind, oracle-based prediction markets anticipated a 15% yen depreciation weeks in advance, while equities reacted more slowly. Entertainment and sports: Oscars, the World Cup, and the Olympics draw mass attention and can naturally funnel non-crypto users to prediction platforms. For instance, on Kalshi in 2025, a market on Taylor Swift and Travis Kelce's engagement saw a trader buy contracts at $0.37 and eventually profit $50,000, gaining broad media coverage and pulling in entertainment fans. Media coordination: from data source to authoritative indicator To cross over, prediction markets must become cited data sources. Poll alternative: Some U.S. media already use Polymarket prices as a complement or even substitute for polls. Unlike polls that rely on questionnaires, prediction market prices reflect "real-money bets," giving them stronger signal value. In 2025, Yale Insights noted rising citation of political prediction markets but cautioned about accuracy. Instant probability indicators: If news reports cite real-time market probabilities - e.g., "Markets show a 72% chance the Fed will hike in September" - it will boost prediction markets' authority and reach. For example, Barron's in 2025 directly used Kalshi data as an expectations indicator for March Madness. Deep Web3 integration: derivatives and social loops DeFi integration: Prediction markets can become part of on-chain derivatives, offering hedges against interest rates, policies, or token listings. In 2025, Polymarket's integrations with DeFi enabled on-chain hedges in a Bitcoin price prediction market, reaching $430 million in volume. SocialFi linkage: KOLs can launch markets for fans to participate in, forming a flywheel of revenue and traffic. In 2025, emerging platform Melee raised $3.5 million and launched "viral prediction markets," allowing frictionless creation of social prediction events. RWA combination: Prediction markets are akin to derivatives and could merge with RWA-linked derivatives to become alternative on-chain trading tools. Kalshi's 2025 RWA integration attempts led its volume to outpace Polymarket's for three consecutive weeks. Tokenizing private companies: Tokenizing private firms is difficult - founder resistance, legal risk, fake "governance" rights, and poor liquidity. Prediction markets can more easily meet similar needs by creating markets on company events (e.g., probability of a financing round), letting users speculate indirectly on private assets without complex tokenization. Product and UX upgrades: user-friendly and lower barriers AMM + NFT-ization: Using AMMs and NFT-ified shares to make "buying a view" more intuitive, lowering comprehension barriers. Manifold's NFT-ified prediction shares in 2025 attracted new users, though overall engagement still needs work. Lightweight entry points: Telegram bots, WeChat mini-programs, etc., can make participation as simple as launching a poll, speeding non-crypto user onboarding. Polymarket's mobile optimization in 2025 boosted user growth by 20%. III. Bottlenecks: regulation, liquidity, and narrative Every boom hits bottlenecks. The problem isn't whether prediction markets have value, but whether they can sustain it. Regulation, liquidity, and narrative are the three hurdles. Regulatory gray zone: the boundary between gambling and derivatives Prediction markets straddle the line between gambling and financial derivatives. In the U.S., CFTC approvals for Kalshi set a precedent, but most platforms still operate in gray areas. In September 2025, the CFTC approved Polymarket's return to the U.S., but Commissioner Kristin Johnson warned of insufficient guardrails and limited visibility into markets. Hong Kong and Singapore may present regulatory openings, but policies remain unclear. Regulatory uncertainty limits institutional participation. For example, in 2025, PrizePicks obtained NFA FCM registration to launch a compliant prediction market, yet the industry still faces legal challenges that may reach the Supreme Court. Liquidity shortfalls: small pools and weak network effects Most liquidity is concentrated in a few hot events; long-tail markets lack depth, making prices less informative. Without large inflows, prediction markets struggle to form the network effects needed for information aggregation. Reports in 2025 show low liquidity prevents fulfillment of large hedging demand, hurting accuracy. For instance, long-tail markets on Manifold have fewer than 1,000 active users - insufficient for complex predictions. Narrative bias: shifting from "gambling" to "information markets" The public still sees prediction markets as "gambling," not "probabilistic information markets." Without authoritative endorsements, that narrative is hard to flip quickly. Media in 2025 emphasized that while volumes are surging, regulatory gaps undermine public trust. IV. Outlook: mainstream integration and long-term positioning Stablecoins solved payments; the next validation of crypto's real-world value may be prediction markets. Maybe not immediately, but the direction is clear. To truly cross over, prediction markets must outgrow the crypto echo chamber and embed in broader narratives. Media datafication: become a standard real-time expectations indicator Prediction markets should become a common probability metric in reporting, gradually acclimating the public to market-implied expectations. In 2025, KPMG reported continued growth in prediction markets' popularity, with media citations up 30% year-over-year. Going forward, Polymarket and Kalshi data will increasingly appear in mainstream news and financial programming. To maintain credibility, reporters covering elections, macro events, or sports will need to reference prediction market probabilities. Regulatory evolution: compliance opens the door to institutions The CFTC's tech upgrades and feedback mechanisms are expected to wrap up by October 2025. Polymarket's U.S. return and Kalshi's regulatory wins signal clearer pathways for event listings, settlement, and institutional participation. This is not just about "legalization" - it's a prerequisite for institutional capital. Institutionalized liquidity: professional capital and trading teams As rules clarify, professional capital will enter first. From the launch of dedicated prediction market funds managing tens of millions, to quant firms creating prediction-market desks (not only market making but directional trading), the trend is visible. SIG's market-making for Kalshi is a clear precedent. Product financialization: derivative-ization and terminal integration The end state may be a new kind of derivatives exchange. Experts project that by 2030, global prediction markets could reach $1 trillion. Meanwhile, prediction market data will interface with professional terminals like Bloomberg and Refinitiv, offering real-time quotes, history, alerts, charts, and native APIs for Excel/Python and newsroom systems. Editors and traders will handle prediction probabilities like stock prices, rates, and FX. In sum, the true value of prediction markets isn't just letting people bet - it's giving information a price. Stablecoins have validated the real-world value of "payments"; the next validation may be "pricing information." Today's prediction markets resemble the early stablecoin era. Those who recognize their potential may secure a foothold on crypto's next foundational pillar. ---------------------- 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 investments in over 200 projects. Since 2022, CGV has invested in and incubated the licensed Japanese yen stablecoin JPYW, making an early move in the crypto stablecoin sector. Starting in 2024, CGV has expanded into the tokenized equity and RWA markets, participating in private placements of projects such as Nabate (NA) and Victory Securities (8540.HK). Currently, CGV also has branches in locations such as Hong Kong and Silicon Valley. 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.

Published by: CGV Research Authors: Cynic Driven by the Trump administration's strategic pivot towards embracing crypto assets, the crypto reserves held by publicly listed companies are poised to surpass the $100 billion mark. This article systematically maps the global landscape of corporate crypto reserves, deeply analyzes the capital operation model centered on MicroStrategy, and explores the differentiated paths and potential risks of altcoin reserve companies. This "digital asset transformation" experiment, led by traditional corporations, is reshaping the future paradigm of corporate financial management. Global Corporate Crypto Reserve Landscape Geographical Distribution of Listed Companies: US-listed companies dominate with 65.2%, followed by Canada (16.9%), Hong Kong (7.9%), Japan (3.4%), and other markets (6.7%). Cryptocurrency Composition: BTC accounts for 78% of reserves. ETH, SOL, and XRP holdings are similar, each around 5–6%. Companies holding other crypto assets make up the remaining 5%. Value Distribution: BTC holds an absolute lead, representing 99% of the total reserve value. All other assets combined account for the remaining 1%. Statistical analysis of the timing of companies' first announcements of strategic crypto reserves reveals distinct peaks and troughs, aligning closely with the cryptocurrency market's own bull and bear cycles. Two Significant Peaks: 2021: 25 companies announced strategic reserves, primarily driven by rising Bitcoin prices and the MicroStrategy demonstration effect. 2025: 28 companies announced, marking a historic peak and showing increased acceptance of crypto as a corporate reserve asset. Trough Characteristics: 2022–2023: Only 3 companies entered, reflecting the impact of the crypto bear market and regulatory uncertainty. Companies continue to announce crypto reserves recently. The number of listed companies with crypto reserves is expected to exceed 200 this year, indicating sustained growth in crypto adoption within traditional industries. Strategic Reserves, Capital Operations & Stock Performance Current capital operation models for digital asset reserve companies can be categorized as follows: Leveraged Accumulation Model: Companies with weak core businesses raise funds through debt or equity financing to buy crypto assets. Rising crypto prices boost net assets, driving up stock prices and enabling further financing, creating a positive feedback flywheel. Essentially, the company's stock becomes leveraged exposure to the crypto asset. If executed well, it can amplify stock price and net asset growth with minimal capital. Examples: MicroStrategy ($MSTR - BTC), SharpLink Gaming ($SBET - ETH), DeFi Development Corp ($DFDV - SOL), Nano Labs ($NA - BNB), Eyenovia ($EYEN - HYPE). Cash Management Model: Companies with strong, non-crypto-related core businesses use surplus cash to purchase quality crypto assets for investment returns. Usually has no significant positive impact on stock price; may even cause declines due to investor concerns about neglecting the core business. *Examples: Tesla ($TSLA - BTC), Boyaa Interactive (HK0403 - BTC), Meitu (HK1357 - BTC+ETH).* Operational Reserve Model: Companies directly or indirectly hold reserves due to crypto-related core operations (e.g., exchange needs, miners holding mined Bitcoin as reserves against business risks). Examples: Coinbase ($COIN - various), Marathon Digital ($MARA - BTC). Among these companies, MicroStrategy stands out. It skillfully leveraged debt, transforming from a long-unprofitable software vendor into a Bitcoin whale with a market cap in the tens of billions. Its operational model warrants deep study. MicroStrategy: The Textbook on Leveraged Crypto Reserve Operations Five Years, Thirtyfold Rise: The Bitcoin Leverage Proxy Since MicroStrategy announced its Bitcoin treasury strategy in 2020, its stock price ($MSTR) has exhibited a strong correlation with Bitcoin's price ($BTC), but with significantly higher volatility, as clearly shown in the chart below. From August 2020 to present, MSTR has risen nearly 30x, while Bitcoin itself has only risen 10x over the same period. Monthly statistical analysis of volatility and correlation between Bitcoin and MSTR shows: MSTR's price correlation with BTC mostly ranges between 0.6–0.8, indicating a strong relationship. MSTR's volatility is consistently multiples higher than Bitcoin's. Effectively, MSTR functions as a leveraged equity proxy for Bitcoin. This leverage attribute is further validated by market pricing: In June 2025, MSTR's 1-month call options implied volatility was 110%, 40 percentage points higher than Bitcoin spot volatility, reflecting a market-assigned leverage premium. A Precision Capital Operation Machine The core of the MicroStrategy model is acquiring funds at a low cost to buy Bitcoin. As long as Bitcoin's expected return exceeds the actual financing cost, the model remains viable. MicroStrategy has created a matrix of capital instruments, transforming Bitcoin's volatility into a structural financing advantage. It employs multiple financing strategies, forming a self-reinforcing capital cycle. VanEck analysts describe it as a "pioneering experiment merging digital currency economics with traditional corporate finance." MicroStrategy's capital operations have two core objectives: Controlling the debt ratio and increasing the Bitcoin per Share. Assuming long-term Bitcoin appreciation, achieving these goals enhances the stock's value. Compared to collateralized loans (which face inefficiencies like 150% over-collateralization requirements, uncontrollable liquidation risks, and size limits), financing tools with embedded options like convertible bonds and preferred stock offer lower costs and less impact on the balance sheet structure. At-The-Market (ATM) common stock sales provide quick, flexible cash access. Furthermore, preferred stock is treated as equity, not debt, in accounting, further reducing the debt ratio compared to convertible bonds. This complex matrix of capital instruments is highly favored by professional investors, enabling arbitrage based on differences in realized volatility, implied volatility, and other option pricing components. This also underpins strong demand for MicroStrategy's financing tools. Analyzing quarterly Bitcoin holdings, debt levels, and major capital events reveals: MicroStrategy combines various financing tools: Issuing convertibles and preferred stock during high BTC volatility/high stock premium bull markets to expand Bitcoin holdings. Using ATM common stock sales during low BTC volatility/negative stock premium bear markets to prevent excessive debt ratios and cascading liquidation risks. Reasons for preferring convertibles/preferred stock during high premium periods: Delayed Dilution Effect: Direct ATM issuance dilutes existing shareholders immediately. Convertibles/preferred stock delay dilution via embedded conversion options. Tax Efficiency: Preferred dividends (e.g., STRK's 8% rate) are 30% tax-deductible, reducing the effective cost to ~5.6%, below comparable corporate bond rates (~7.2%). Common stock financing offers no tax deduction. Avoiding Reflexivity Risk: Large ATM programs signal perceived overvaluation by management, potentially triggering algorithmic selling. Debt Ratio = Total Debt ÷ Total BTC Holdings Value mNAV = Market Cap ÷ Total BTC Holdings Value Due to its unique financing structure, when Bitcoin rises, MSTR rises more sharply, and significant debt gets converted to equity. In fact, since announcing Bitcoin purchases, MicroStrategy's total shares outstanding have increased from 100M to 256M (+156%). Does this massive share dilution harm shareholder equity? Data shows that despite 156% share dilution since Q4 2020, the stock price has risen nearly 30x, meaning shareholder equity increased substantially. To better represent shareholder value, MicroStrategy introduced the Bitcoin per Share (BTC/Share) metric, making its continuous increase a core capital operation goal. The chart shows a long-term rising trend in BTC/Share, increasing tenfold from the initial 0.0002 BTC/Share. Mathematically, when MSTR trades at a high premium to NAV (mNAV > 1), financing via potential equity dilution to buy Bitcoin can continuously increase BTC/Share. mNAV > 1 means each dollar raised buys more BTC than the current BTC/Share. While existing shares are diluted, the post-dilution BTC value per share still increases. The Future Trajectory of MicroStrategy The success of the MicroStrategy model hinges on three key factors: regulatory arbitrage, correctly betting on Bitcoin's rise, and superior capital operation skills. However, risks are embedded within these factors. 1. Legal & Regulatory Changes: Competition from Investment Tools: When MicroStrategy first announced its strategy, Bitcoin spot ETFs were unavailable. Many institutions used MSTR as a proxy for Bitcoin exposure within compliance frameworks. Under the Trump administration's pro-crypto push, numerous compliant crypto investment tools (like spot ETFs) are emerging, narrowing the regulatory arbitrage window. SEC Scrutiny on "Non-Productive Assets": Despite MicroStrategy's sophisticated debt management keeping its debt ratio lower than many peers of similar size, its debt is solely for investment, not business expansion. The SEC might reclassify it as an investment company, increasing capital adequacy requirements by 30%+ and compressing leverage capacity. Capital Gains Tax: Taxing unrealized gains on corporate holdings (as proposed in the OBBB bill) would create massive cash tax liabilities for MicroStrategy. (Current rules tax only upon sale). 2. Bitcoin Market Dependency Risk: Volatility Amplifier: Holding 2.84% of all Bitcoin means MSTR's stock volatility amplifies Bitcoin's volatility during market swings, putting heavy downward pressure on the stock in bear cycles. Irrational Premium: MSTR's market cap has consistently traded at a >70% premium to its Bitcoin NAV, largely driven by irrational market expectations of Bitcoin's rise. 3. Ponzi-like Structural Risk of Debt Leverage: Convertible Bond Refinancing Reliance: The cycle of "issue new debt → buy BTC → boost stock price → issue more debt" exhibits double Ponzi characteristics. If Bitcoin prices don't rise sufficiently to support the stock when large bonds mature, new debt issuance falters, triggering a liquidity crisis (rollover risk). If BTC falls below convertible strike prices, forced cash repayment occurs (conversion price inversion). Lack of Stable Cash Flow: With no stable operational cash flow and reluctance to sell Bitcoin, MicroStrategy relies almost entirely on equity issuance (conversions, ATM) for debt servicing. If the stock or Bitcoin price falls significantly, financing costs soar, potentially closing funding channels or causing severe dilution, jeopardizing continued accumulation or operational cash flow. Long-term, during a risk asset downturn, multiple risks could converge, creating a technical risk transmission mechanism and triggering a death spiral: Another possibility is regulatory intervention, converting MicroStrategy into a Bitcoin ETF or similar product. Its 2.88% Bitcoin holdings pose systemic risk if forced into a fire sale; conversion would be safer. While large, its holdings wouldn't be exceptional among ETFs. Furthermore, the SEC's July 2, 2025, approval of Grayscale's Digital Large Cap Fund conversion into a multi-asset (BTC, ETH, XRP, SOL, ADA) ETF demonstrates the feasibility. The Altcoin Reserve Experiment: $SBET & $DFDV Case Studies Valuation Regression Analysis: Sentiment-Driven to Fundamentals-Based Pricing $SBET's Volatility Path & Stabilization Signals Cause of Surge & Crash: May 2025: $SBET announced a $425M PIPE financing to acquire 176,271 ETH (~$463M at the time), becoming the largest corporate ETH holder. Stock surged 400% intraday. Subsequent SEC filings revealed PIPE investors could immediately resell shares, triggering panic selling over dilution fears. Stock plunged 70%. Ethereum co-founder Joseph Lubin ($SBET Chairman) clarified "no shareholder sales planned," but sentiment was damaged. Valuation Recovery Signs (as of July 2025): Stock stabilized around $10. mNAV ~1.2 (post-PIPE dilution implied mNAV ~2.67). Stabilization drivers: ETH Holding Appreciation: Added $30.6M to buy 12,207 ETH. Total holdings: 188,478 ETH (~$470M), ~80% of market cap. Staking Rewards Realized: Earned 120 ETH via Liquid Staking Derivatives (LSDs). Improved Liquidity: Average daily trading volume reached 12.6M shares; short interest fell to 8.53%. $DFDV's Ecosystem Integration Premium Compared to $SBET, while $DFDV also exhibits high volatility, its stock demonstrates stronger downside support. Despite experiencing a 36% single-day drop, $DFDV remains up 30x from pre-transformation levels. This resilience stems partly from its low pre-transformation market cap and, crucially, its business diversity, particularly infrastructure investments providing additional valuation support. Valuation Support from SOL Reserves: $DFDV holds 621,313 SOL (~$107M), generating three income streams: SOL price appreciation (~90% of holding value). Staking rewards (5%-7% APY). Validator commissions (charged to ecosystem projects like $BONK). PoW vs. PoS: The Impact of Staking Rewards Native staking of PoS cryptocurrencies like ETH and SOL provides annual yields. While this yield might not directly impact traditional valuation models, liquid staking enhances capital operation flexibility. Bitcoin (PoW) has no yield mechanism but is fixed-supply with declining inflation (~1.8%), emphasizing scarcity. PoS tokens generate yield via staking. If staking APY exceeds token inflation, staked assets gain nominal value. Current SOL staking APY is 7–13% vs. inflation ~5%; ETH staking APY is 3–5% vs. inflation <1%. Current ETH/SOL staking provides extra return, but inflation vs. reward dynamics need monitoring. Staking rewards are token-denominated and cannot directly translate into secondary market buying pressure to boost token prices. Liquid staking allows using the liquid staked tokens (e.g., stETH, stSOL) in DeFi (e.g., as collateral for loans), significantly improving capital flexibility (e.g., DFDV issued DFDVSOL). Validation of $MSTR Success Factors for Altcoin Reserve Companies 1. Regulatory Arbitrage: Window Narrowing ETF approvals have accelerated significantly. Multiple institutions are filing for various crypto ETFs; approval is a matter of time. While altcoin reserve company stocks/bonds still meet some investor demand before more complex, token-specific instruments emerge, the regulatory arbitrage window is closing. 2. Token Appreciation Bet: Altcoin Performance Uncertain Bitcoin ("digital gold") enjoys global liquidity consensus as a reserve asset. ETH/SOL lack equivalent status and are primarily viewed as utility assets.Altcoins underperformed Bitcoin significantly in 2024–2025: Bitcoin dominance rose steadily in 2024, reaching ~65%. Historically, "altcoin seasons" followed Bitcoin peaks, but altcoin performance lagged this cycle. When Bitcoin hit new ATHs, ETH and SOL remained below 50% of their own historical highs. 3. Capital Operation Skills: Enhanced Flexibility Compared to Bitcoin reserve companies, altcoin reserve companies can engage more deeply in blockchain ecosystems to generate cash revenue and utilize DeFi for higher capital efficiency. Examples: $SBET (Chaired by Consensys founder) potential in wallet, blockchain, staking services. $DFDV partnered with Solana's largest Meme coin $BONK to acquire validator networks (commissions = 34% of Q2 revenue). $DFDV packaged staking rewards as DeFi-tradable dfdvSOL. $HYPD (ex-Eyenovia $EYEN) staking/lending $HYPE, expanding node ops/affiliate programs. $BTCS (Ethereum node/staking provider) stakes $ETH, uses LSTs and BTC as Aave collateral for low-cost funding. In summary, narrowing regulatory arbitrage and uncertain token appreciation will force altcoin reserve companies to innovate. They must integrate deeply into on-chain ecosystems and build cash flow through ecosystem activities to enhance resilience. While MicroStrategy uses sophisticated capital tools to transform Bitcoin into "volatility leverage," altcoin reserve companies are attempting to solve their valuation dilemma through DeFi-enabled operations. However, the narrowing regulatory arbitrage window, differences in token consensus strength, and inflation concerns inherent in PoS mechanisms ensure this experiment remains fraught with uncertainty. As more traditional companies enter the fray, strategic crypto reserves will likely evolve from aggressive bets towards rational allocation. Their ultimate significance may lie not in short-term arbitrage, but in propelling corporate balance sheets into the programmable era. As Michael Saylor stated: "We're not buying bitcoin, we're building a treasury system for the digital age." The ultimate test of this experiment will be the balance sheet's resilience during a Bitcoin bear market, facing the double squeeze of declining asset values and amplified stock volatility. This is the critical question traditional enterprises must answer before joining the movement. ---------------------- 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 investments in over 200 projects. Since 2022, CGV has invested in and incubated the licensed Japanese yen stablecoin JPYW, making an early move in the crypto stablecoin sector. Starting in 2024, CGV has expanded into the tokenized equity and RWA markets, participating in private placements of projects such as Nabate (NA) and Victory Securities (8540.HK). Currently, CGV also has branches in locations such as Hong Kong and Silicon Valley. 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.

Published by: CGV Research Authors: Satou & Shigeru The convergence of Crypto and AI Agents has become one of the most compelling narratives today. With continuous technological iterations and innovations, AI Agents are expected to become one of the most promising and attention-grabbing tracks in the crypto space by 2025, emerging as a core driver of the current market trend. This article examines the current AI Agent landscape from three perspectives: frameworks, memes, and applications. AI Agent Frameworks: The Layer 1 of AI AI Agent frameworks serve as the core technical foundation layer, laying crucial groundwork for AI Agent development, deployment, and collaboration. The current competition in AI Agent frameworks essentially represents the Layer 1 battle in this field. By market capitalization, G.A.M.E, Eliza, and Swarms form a triumvirate, while Rig and Zerepy still have opportunities to catch up. G.A.M.E Developed by the Virtuals team, G.A.M.E adopts a modular design approach where multiple subsystems work collaboratively to control AI Agent behavior, decision-making, and learning processes. These modules include the "Agent Prompting Interface" as the main entry point for developer-agent interactions, the "Perception Subsystem" for processing input data into suitable formats, and the "Strategic Planning Engine" for generating specific action plans based on input information. Users only need to modify module parameters to participate in Agent design. G.A.M.E's core features include: Modular design: The entire framework is clear and understandable, requiring no additional design Low-code or no-code interface: Significantly reduces technical barriers These features make G.A.M.E particularly suitable for projects requiring quick deployment without complex technical setups. However, it may not be ideal for complex projects requiring deep customization or complete control over various aspects of the Agent. Eliza Eliza is an open-source multi-agent framework developed by ai16z using TypeScript. Built around a system called Agent Runtime, its core features include: Role System: Supports simultaneous deployment and management of multiple personalized AI Agents, backed by model providers Memory Manager: Provides long-term memory and context-aware memory management through Retrieval-Augmented Generation (RAG) Action System: Offers smooth platform integration with reliable connections to social media platforms like X Eliza integrates seamlessly with the role system, memory manager, and action system through its Agent runtime. It also supports a plugin system for modular function extensions, enabling multimodal interactions across voice, text, and media, while being compatible with AI models like Llama, GPT-4, and Claude. Therefore, Eliza is suitable for projects requiring deeply customized solutions and complex cross-platform multi-agent implementations. Swarms Swarms, developed by founder Kye Gomez, is an open-source multi-agent orchestration framework designed to leverage collective intelligence through AI Agent collaboration. Its core features include: Multi-Agent Collaboration: Provides a transparent and traceable environment for multiple agents to work together, improving task execution efficiency Incentive Mechanism: Uses tokens to incentivize agents, dynamically allocating tokens based on task difficulty and final result quality Data Security: Employs distributed storage and Multi-Party Computation (MPC) to ensure privacy and data security during agent interactions These features enable Swarms to excel in complex domains, offering high reliability and scalability according to requirements. Rig Rig is an open-source framework developed by the ARC team using Rust, designed to simplify Large Language Model (LLM) application development. Key features include: Unified Interface: Provides consistent interfaces supporting seamless interaction with multiple LLM providers and vector stores Modular Architecture: Employs modular design with core components enhancing system flexibility and extensibility Type Safety and Performance: Leverages Rust for type safety and optimized concurrent processing Error Handling and Recovery: Built-in error handling mechanisms improve resilience against service or database failures While ideal for developers working with Rust and projects demanding high performance and security, the Rust language itself presents a learning curve. ZerePy ZerePy is a Python-based open-source framework focusing on simplifying the development and deployment of personalized AI Agents, particularly for social media content creation. It enables developers to easily create AI Agents capable of posting, replying, liking, and sharing on social media. ZerePy excels in creative applications like music, memos, NFTs, and digital art, though its application scope is relatively narrow compared to other frameworks. Infrastructure frameworks represent a crucial direction in the AI Agent sector. While current popular frameworks each have their distinct characteristics and application scenarios, their collective goal is to build a comprehensive AI Agents ecosystem, serving as a solid platform for the large-scale implementation of intelligent Agents. As these frameworks continue to improve and upgrade in the future, they will become both a springboard for launching various projects and fertile ground for token value appreciation. AI Memes: AI Agents' First Successful Debut Meme coins have always been an important concept in the crypto market. Unlike traditional meme coins, AI Memes are driven by AI Agents, with the underlying culture or phenomena presented by Agents. With the growing market capitalization of AI Memes like GOAT and FARTCOIN, AI Memes have gained increasing attention, marking AI Agents' first successful debut in the crypto market. GOAT The real breakthrough for AI Memes came with the Goatseus Maximus project. The story began in March 2024 when developer Andy Ayrey launched an experimental system called Infinite Backrooms Escape, which integrated multiple large language models allowing them to converse with each other. The experiment showed that AI interactions without restrictions displayed highly creative dialogues, even spawning a surreal religion called GNOSIS OF GOATSE. Subsequently, Andy and Claude Opus co-authored a research paper analyzing how AI creates memetic religions, with GOATSE as the first case study. These explorations eventually led to the AI Agent "Truth of Terminal" (ToT). In July, a16z co-founder Marc Andreessen discovered ToT's tweets and, after a series of conversations, transferred $50,000 worth of Bitcoin to ToT's wallet. On October 10th, an anonymous user launched the GOAT meme coin, which received public support from ToT, causing its market value to surge within days. Andreessen's donation brought massive exposure to GOAT, becoming a key factor driving its market value, which peaked above $1.3 billion. Fartcoin Fartcoin's creation is closely tied to GOAT, both originating from ToT. During language model conversations, there was mention of Musk's fondness for flatulence sounds, leading to the proposal of creating Fartcoin. Though launched slightly after GOAT, Fartcoin gained attention through its clever timing. On November 16th, Fartcoin's Twitter followers suddenly doubled within hours, with prices rising about 15%. On December 13th, Marc Andreessen retweeted about Fartcoin, though this didn't cause a dramatic price surge. The main driver behind Fartcoin's price growth might be institutional capital, as investment fund Sigil Fund was suspected to be among the earliest buyers. Fartcoin eventually gained widespread social media attention, with its market cap reaching over $1.5 billion at its peak. AI Agent Applications: Agents Can Do More As AI Agents further integrate into the crypto sphere, market focus has expanded from pure AI-driven meme coins like GOAT and Fartcoin to more interactive and creative AI Agent applications. Entertainment Agents Entertainment was AI Agents' first practical application, exemplified by Luna and the previously mentioned ToT. Luna is a virtual idol closely integrated with its native token LUNA, launched as part of the Virtuals platform. Luna livestreams 24/7 on social media and frequently posts tweets. While Luna's streaming and tweet quality are key factors affecting its market value, this model appears to have limited token growth potential. In contrast, ToT focuses on original and humorous content without direct token binding, though it occasionally mentions GOAT tokens. For both these AI Agents, tokens play crucial roles in narrative promotion, though differently - for Luna, the token represents its core purpose, while for ToT, the GOAT token serves as a tool for expanding influence. Investment Research and Analysis Agents Beyond entertainment, AI Agents are being applied to crypto investment research and analysis, with aixbt being the most prominent. Launched on the Virtuals Protocol, aixbt analyzes cryptocurrency market trends and hot topics, particularly from social media platforms like X, helping users quickly grasp market changes and potential investment opportunities. Aixbt maintains the highest CT user attention on Kaito, showing potential to surpass human KOLs in capability. DeFi + AI Agents While Luna and aixbt remain largely at the meme level, the combination of AI Agents with DeFi (known as DeFAI) represents a true practical application. DeFAI development follows two main directions: Agent-assisted users and autonomous Agent trading. Agent-assisting Users: AI Agents simplify DeFi operations' complexity, enabling average users to easily participate in and manage DeFi projects through natural language commands. Projects like Griffain and Neur, both built on Solana, help users with wallet creation, management, token analysis, and trading. Griffain offers more features, while Neur provides fewer but more refined functions with better performance. Future focus in this area will likely center on functionality completeness, user experience, and fees. Autonomous Agent Trading: Unlike previous trading bots limited to preset strategies, AI Agents can gather real-time market information, perform contextual analysis, learn market trends, and adjust strategies accordingly. This enables more precise decision-making in dynamic markets. Projects like Cod3x and Almanak are exploring this space, though still in early stages. The main challenges are trust-related: ensuring operations are genuinely Agent-executed and that trading strategies won't lead to unnecessary losses. Over months of development, crypto AI Agents have evolved from pure memes to entertainment applications and practical uses. Crypto professionals have continuously explored Crypto x AI possibilities, with CGV Research following projects in this space since 2023. Looking ahead, as infrastructure matures and Agent systems become more intelligent and stable, anyone will be able to easily deploy and use Agents through natural language. Agent frameworks will become fundamental infrastructure supporting various applications. Framework valuations are likely to breakthrough further, while some Agent application projects may capture market attention and investment value through superior business capabilities and user experience. ---------------------- 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.

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Produced by: CGV Research Author: Shigeru Introduction: A New Era Driven by Transformation In early December, a16z released its 2025 "Big Ideas" list, which contains rich and forward-looking Web3 content that paints a clear picture of the future for Web3 practitioners. From AI-driven autonomous economies to comprehensive user experience innovation, these ideas will undoubtedly inject new momentum into the crypto industry landscape. The CGV Research team, combining deep insights from multiple a16z experts including Carra Wu, Dan Boneh, and Eddy Lazzarin, explores how AI, trust mechanisms, and infrastructure will shape Web3's future development direction. 1. Autonomous Intelligence: From Tools to Market Players AI Agents: Foundation of the Autonomous Economy Carra Wu points out that AI with crypto wallets will become important participants in the on-chain economy. They can custody assets, sign transactions, and run smart contracts autonomously. This opens up new scenarios for the decentralized economy: Node validation in DePIN: AI operates distributed energy or logistics network nodes, improving efficiency Breakthroughs in gaming: AI could become high-value players or even operate their own blockchains Decentralized Autonomous Chatbots (DAC) Dan Boneh and others further propose the concept of DAC, chatbots running in trusted execution environments (TEE), publishing content through decentralized social platforms to attract followers while managing their own crypto assets. They believe DACs could become the first truly autonomous billion-dollar entities. Key Opportunities for Web3 Practitioners AI and DePIN integration: AI can serve as node validators or operators, optimizing decentralized energy, logistics, and other networks On-chain gaming and AI economy: AI agents' participation could catalyze new business models in on-chain gaming, such as AI vs. human player economies Action Recommendations for Web3 Practitioners Develop AI agent tools: Provide specialized crypto wallets, smart contract services, and secure custody tools supporting AI independent operation Position for AI economy use cases: Explore AI agents' potential in DAO governance, on-chain gaming, and content creation 2. Trust Infrastructure: Human Identity Verification and Privacy Protection Unique Properties: Rebuilding Network Trust Eddy Lazzarin emphasizes that in an era of abundant AI-generated content, "unique properties" become key to protecting privacy and verifying authentic identity. This mechanism proves human identity through privacy-preserving methods while significantly increasing costs for malicious attackers. Tokenization of Non-Traditional Assets Aaron Schnider views asset tokenization as an important extension of trust infrastructure. Medical data, biometric features, and other non-traditional assets can achieve transparency and monetization through blockchain, forming a new data economy. For example: Personal data authorization: Users lease biometric data through smart contracts DeSci applications: Decentralized science enhances transparency and ownership of medical data Key Opportunities for Web3 Practitioners Growing demand for trust and privacy: AI adoption drives development of decentralized identity verification systems Wave of data asset tokenization: From medical data to personal biometrics, tokenized assets will bring new economic models Action Recommendations for Web3 Practitioners Develop Sybil resistance tools: Provide privacy-preserving identity verification systems for secure and trustworthy network participation Advance DeSci project implementation: Combine tokenization technology to give users more control over their data while exploring data authorization and revenue sharing models 3. User Experience: From Complex to Intuitive Rise of Decentralized App Stores Maggie Hsu notes that decentralized app stores are eliminating centralized distribution platform barriers, bringing greater user acquisition potential for crypto applications. She mentions Solana phone's fee-free dApp store and World App marketplace, which have attracted hundreds of thousands of users. Hiding the Wires Chris Lyons believes widespread blockchain adoption requires "hiding the wires" design thinking. This approach abstracts technical complexity to make operations intuitive, like clicking a "send" button. Key Opportunities for Web3 Practitioners Improved distribution efficiency for decentralized applications: Decentralized app stores build direct bridges between developers and users, significantly reducing distribution costs Opportunities for optimizing user experience: Designs hiding blockchain complexity will be key to Web3 killer applications Action Recommendations for Web3 Practitioners Build user-friendly distribution platforms: Learn from traditional App Store models to promote decentralized app store ecosystems Simplify user interaction processes: Design intuitive interfaces and operation logic letting users perceive blockchain value rather than technical complexity 4. DAOsCommunity Governance and Collaboration: Liquid Democracy and DAOs Liquid Democracy: Future of On-chain Governance Andrew Hall suggests liquid democracy combines flexibility of direct voting and delegation, bringing innovation opportunities for on-chain communities and real-world governance. Blockchain technology makes this governance form possible in local governments and community organizations. DUNA: Legal Framework for DAOs Miles Jennings notes that Wyoming's DUNA legal framework provides legitimate status for Decentralized Autonomous Organizations (DAOs). This framework not only protects token holders but also enhances DAO compliance. Key Opportunities for Web3 Practitioners Expanded scenarios for on-chain governance: Liquid democracy provides new paradigms for local governance, corporate decision-making, and community collaboration International trends in DAO legalization: As DUNA framework spreads, more countries may provide legal support for DAOs Action Recommendations for Web3 Practitioners Develop liquid democracy tools: Provide secure, transparent voting and delegation systems to improve on-chain governance efficiency Promote DAO compliance: Learn from DUNA framework to ensure DAOs receive legal and fiscal support 5. Infrastructure and Developer Ecosystem: From Repetition to Reuse Infrastructure Reuse Joachim Neu suggests mature blockchain infrastructure will let developers focus on differentiated services rather than rebuilding underlying technology. This trend reduces technical development costs while accelerating Web3 product innovation. Designing Technology from User Experience Mason Hall points out infrastructure should serve user experience rather than constrain it. Developers need to choose appropriate technical components based on end-user needs. Key Opportunities for Web3 Practitioners Maturation of modular infrastructure: Developers can use ready-made technical components to accelerate product development User experience-driven design philosophy: Infrastructure needs to serve product end-users rather than pursue technical complexity Action Recommendations for Web3 Practitioners Adopt modular development patterns: Use existing tech stacks, avoid reinventing wheels, focus energy on product innovation Optimize infrastructure adaptability: Build flexible, easy-to-use technical components benefiting both developers and user experience Conclusion: Future Builders and Participants A16Z's "2025 Big Ideas" list depicts Web3's ecological landscape in 2025, from AI autonomy to user experience reshaping, showing Web3 at a critical point of rapid development. Whether Carra Wu's AI economy predictions or industry experts like Eddy Lazzarin's insights on trust infrastructure, these views point toward a more open, efficient, and intelligent future. For Web3 practitioners, capturing these trends is not just following the current, but a key step in defining the future. Through connecting technology, building trust, and optimizing user experience, we are approaching a truly decentralized network world step by step. ass user adoption. Web3 mobile operators might be the first to open the prelude to next-generation communications. ---------------------- 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: Shigeru & Satou Mobile communications have become an indispensable infrastructure in modern life. However, traditional operator models are facing growth bottlenecks and innovation stagnation. With the development of Web3 technology, decentralized SIM (DeSIM) has emerged as a new mobile virtual network operation model. This article will analyze the current development and future prospects of DeSIM from the following aspects: Examine the market landscape and pain points of the traditional mobile communications industry, analyzing the development opportunities for DeSIM Analyze the evolution of SIM card technology, interpreting DeSIM's technical principles and implementation methods Explore DeSIM's market positioning and growth path through user profile and business model analysis Compare and analyze project cases like Helium Mobile, Depinsim, and XPIN to summarize industry development experiences Deeply examine the challenges faced by DeSIM in terms of decentralization and tokenomics Envision DeSIM's integration prospects with emerging fields like IoV, satellite communications, and metaverse Background of TON Teleport BTC Origins: Complete Communication Infrastructure and Intense Market Competition Communication is a perpetual human need. As technology evolves, communication methods continue to increase. From images to language to text, information continues to be refined; from printing to telephone to internet, information continues to expand. In 1969, ARPANET laid the foundation for the internet. The 1990s saw the emergence of the World Wide Web, Netscape, and Amazon, bringing the true public internet. Around 2010, the iPhone triggered the smartphone revolution, and 3G/4G became widely available, leading to the rise of mobile internet. Today, mobile internet has become an essential part of ordinary people's lives. By the end of 2023, 5.6 billion people subscribed to mobile services, accounting for 69% of the global population, up from just 1.6 billion eight years ago, with an average annual growth rate of 31.25%. Specifically, mobile user penetration rates reached 88% in Greater China, 89% in North America, and 91% in Europe. Such high penetration rates indicate the completeness and universality of communication infrastructure while suggesting limited room for growth. According to GSMA estimates, the global mobile user count will grow at an average annual rate of about 1.7% from 2023–2030, showing significantly slower growth. For antitrust considerations, each country and region typically has multiple mobile operators providing services, usually maintaining 3–4 operators with a relatively balanced market structure. For example, North America's main operators are AT&T, Verizon, and T-Mobile; Europe has Deutsche Telekom, Vodafone, and Telefonica; while China primarily has a three-way competition between China Mobile, China Unicom, and China Telecom. Although mobile operators between different countries and regions are relatively independent, internal market competition remains intense. As crucial infrastructure and public welfare projects, telecommunications operators are characterized by high industry entry barriers, heavy asset investment, and significant economies of scale and scope. The importance of economies of scale is reflected in the fact that for given physical infrastructure, new service users bring very low marginal costs but high returns, thus operators' core competitiveness usually manifests in user scale. However, for public welfare considerations, countries typically don't allow mobile operators to engage in price wars. Meanwhile, to prevent several operators from forming effective monopolies and stagnating innovation, Mobile Virtual Network Operators (MVNOs) have emerged. MVNOs don't build network infrastructure but directly utilize existing network resources, cooperating with traditional operators to acquire more users through differentiated services and price competition. Using an asset-light operation model to provide flexible services, they also provide additional low marginal cost income for traditional operators and improve network utilization. DeSIM is an application form of MVNO that serves cryptocurrency practitioners while attracting traditional users to contact the Web3 industry through Web3's global payment system, differentiated services, and tokenized multiple gameplay. Evolution: SIM Technology Development and DeSIM Possibilities When we communicate through mobile devices using mobile networks, the complete link goes through numerous network devices working together: Within mobile devices, applications generate data, which is processed by the TCP/IP protocol stack in the Application Processor (AP) and passed to the Baseband Processor (BP) through driver interfaces BP interacts with SIM to read identity information, perform authentication, generate session keys, and establish encrypted channels The Radio Frequency (RF) module performs digital-to-analog conversion and transmits signals to base stations through antennas Base stations receive and process signals, manage resources and mobility, and send to Mobile Switching Centers (MSC) MSC performs routing selection and roaming management, submitting data packets to core networks Core networks communicate through fiber optics, transmitting to the internet through gateways and location registers Among these components, users have almost no choice except for SIM. SIM plays the role of identity authentication and security assurance in mobile communications. The centralized monopoly of SIM leads to centralized risks in identity privacy and information security, hence the need for DeSIM. In the era of physical SIM cards only, there were many obstacles to implementing DeSIM, as operators relied on physical SIM cards to sign long-term contracts with users to bind them. With the emergence of eSIM, vSIM, iSIM, and other technologies, DeSIM has found its opportunity for development. SIM card technology has gone through multiple generations of evolution, developing from traditional physical SIM cards to different technical solutions like eSIM, vSIM, iSIM, and Soft SIM, each with its own characteristics. eSIM, as the most mature new-generation SIM technology, adopts physical chips embedded in devices, equipped with dedicated security units, supporting remote configuration management, and fully complying with GSMA standards. Its architecture includes hardware secure storage, Profile management system, OTA update mechanism, and other components, supporting multiple coexisting Profiles. In terms of security, eSIM implements hardware-level encryption, secure boot, integrity verification, tamper protection, and key isolation mechanisms. Currently, eSIM has gained widespread support from mainstream terminal manufacturers and operators, mainly applied in high-end smartphones, smartwatches, tablets, and other devices. vSIM adopts a completely different technical approach, implementing SIM functions through software virtualization, relying on cloud configuration management and parameter downloads, supporting dynamic identity simulation. Its characteristics include cloud Profile storage and real-time configuration deployment, building security environment at the software level, supporting flexible identity switching. Security mechanisms include software encryption, TEE protection, dynamic keys, and communication encryption. vSIM's standardization level on phone devices still needs improvement, currently mainly applied in IoT devices and shared device scenarios. iSIM represents a higher degree of hardware integration, directly integrating SIM functionality into SOC, sharing hardware security units with processors, using dedicated security zones for data storage. This solution has advantages like ultra-small size, extremely low power consumption, and hardware-level security protection, particularly suitable for ultra-small IoT devices and wearable devices. Its advantages lie in saving PCB space, improving production efficiency, and enhancing system integration. Soft SIM is the most lightweight solution, implementing SIM functions entirely through software, running on general processors, using software-simulated security environments, requiring no dedicated hardware support. This solution has a completely open architecture, highest flexibility, lowest deployment cost, but relatively weakest security, mainly used for experimental projects, specific industry applications, and development testing environments. Due to security concerns and compliance issues, it currently receives limited operator support. Breaking Through: Finding Target Users and Growth Flywheel How can DeSIM leverage Web3 advantages to provide differentiated services in a market filled with operators? Analyzing successful MVNO experiences, we can broadly attribute success to three value propositions: "Audience-driven," "Synergistic Diversification-driven," and "Technology-driven." Audience-driven refers to serving clearly defined target users. DeSIM's following characteristics enable it to compete differentially with other operators: Cryptocurrency unified payment: Supporting global operations Privacy protection: No KYC required, contract cancelable anytime Lower early user acquisition costs: Token incentives attract early users and reduce actual user expenditure Based on these characteristics, DeSIM's user profiles are easily identified: Cryptocurrency practitioners who frequently travel globally, value privacy protection, and have strong payment capabilities Price-sensitive speculators hoping to gain returns or reduce communication expenses through token incentives Synergistic Diversification-driven aims to expand existing businesses into mobile communications. The Web3 industry already has many business expansion cases, essentially better integrating cryptocurrency systems with real businesses. Blockchain platforms, exchanges, social applications, and other businesses can all combine with DeSIM to achieve higher user adoption and business monetization. For example: Solana launched the Saga phone in 2023, with Aptos, Sui, and other public chains following suit Major exchanges have launched their payment cards to facilitate cryptocurrency-to-fiat payments Social applications like Telegram and Line have already introduced various mobile communication service sales Finally, Technology-driven represents businesses built on specific technological characteristics. Just as Cubic Telecom's MVNO is built on IoT business, DeSIM can cooperate with almost all DePIN products to provide mobile network connectivity, a prerequisite for DePIN. DePIN devices are diverse, usable for geography, electricity, computing, storage, and other aspects, but DePIN devices must connect to networks to synchronize data between node-constituted networks. Built-in DeSIM can perfectly solve networking issues, support global device mobility, and cooperation between both parties can provide multiple benefits to users. Case Studies: Mature Applications and Early Opportunities Since the rise of mobile internet, SIM has become a mature application inseparable from daily life. SIM acts like a key - without it, mobile devices cannot prove their identity and cannot access operator networks. It is the foundation of the entire mobile communication security system. SIM is both an entry point for users to access internet data traffic and for businesses to acquire user traffic. Today, this mature application has embraced new development - DeSIM - enhanced by Web3. Since the DePIN concept explosion in 2023, DeSIM projects have appeared in the market, with some successfully operating until now. With the rise of the Telegram ecosystem, entrepreneurs are also trying to combine DeSIM with the Telegram ecosystem to gain higher user traffic. Below we'll introduce some early projects: Helium Mobile Helium started with IoT services, entered the blockchain field in 2017, established Helium Network, and incentivized users to provide node coverage for wireless networks using cryptoeconomics, becoming one of DePIN's early success stories. In August 2023, Helium launched the world's first crypto operator, Helium Mobile, partnering with America's largest 5G network T-Mobile. Combining Helium's network infrastructure and adopting a dynamic coverage model, it combines traditional mobile operator network coverage with people's self-built Helium local hotspot network coverage, providing a more decentralized mobile communication community solution. As more users join Helium Mobile, $Mobile tokens capture value, more users actively provide local network coverage, improving coverage rates and user experience, attracting more users to join the network, building a crypto flywheel, and gradually reducing dependence on traditional mobile operators during the process, increasing decentralization levels. In traditional mobile communications, user data is wirelessly transmitted to signal towers/base stations. To further break free from heavy infrastructure limitations, Helium Mobile launched Hotspot hardware and Carrier Offload programs, where each Hotspot can serve as a mini signal tower for phones. Hotspot deployers receive rewards based on processed traffic volume, while mobile operators can purchase traffic from Hotspots, enabling operators to achieve greater coverage without building signal towers, enhancing their networks. This essentially reduces centralized infrastructure costs through decentralization, using communities to achieve cost reduction and efficiency improvement. In terms of specific usage, Helium Mobile offers a $20 monthly plan with unlimited data, text, and voice services, providing a significant price advantage compared to other carriers' plans at the time. Helium uses the highly standardized eSIM for authentication and provides additional privacy and security layers on top of eSIM, capable of preventing SIM Swap attacks. Helium Mobile captures token value through multiple approaches, promoting the upward momentum of its flywheel: Mining: Users can earn $Mobile rewards by using the Mobile network Tasks: $Mobile can be earned through Mapping tasks Marketplace: Users can use $Mobile in the app's built-in marketplace to purchase plans, hotspots, and phones Beyond the $20 monthly plan for the U.S. domestic market, Helium Mobile launched global roaming services for international travel needs, offering 1GB of data, 60 minutes of voice calls, and 100 text messages for $15. After more than a year of development, Helium Mobile has achieved over 120,000 users, 27,000 hotspots, and transmitted more than 4PB of mobile data. Depinsim Depinsim is a decentralized mobile communication project launched in 2024, built on TON blockchain, providing global roaming services to users through Telegram. To solve traditional telecom networks' and digital identity systems' shortcomings, the Depinsim protocol introduces a powerful, scalable, and user-centric framework. The protocol includes three roles: Data consumers: Enjoy free data traffic, gas-free crypto payment services, and secure encrypted communication services Data providers: Operator networks selling data traffic through blockchain quotes Data sponsors: Purchase data traffic and distribute it to consumers through tasks or advertisements To support large network interactions, Depinsim adopts DPoS consensus mechanism, ensuring highly scalable, low-latency efficient network operations. Through migrating traditional data service contracts, digital identity management, and payment functions to blockchain, communication business achieves decentralization and automation. To achieve flexible communication network switching, Depinsim adopts eSIM (embedded-SIM) technology. Unlike physical SIM cards that are configured at manufacturing, eSIM supports remote configuration management, offering greater flexibility. eSIM technology has now been widely adopted by mainstream device manufacturers, gained support from operators in most global regions, and achieved high standardization with a mature ecosystem. Using Depinsim's decentralized eSIM technology, users can download operators' eSIM configuration files and security parameters through decentralized blockchain networks and complete network registration. During communication, Depinsim employs complete end-to-end encryption, giving users full control over their data and interactions. Even mobile operators cannot access specific data content, minimizing the risk of privacy leaks and asset theft. For individual users (C-end), Depinsim integrates eSIM with DID, wallet, and mining capabilities, securing the gateway to the crypto world. For business users (B-end), Depinsim provides reliable and flexible communication solutions, achieving global scalability and offering traffic acquisition channels through its task system. In terms of specific services, DePINSIM covers over 200 countries and regions, adopting a pay-as-you-go model with rates as low as $2/GB. Users can choose between eSIM or physical SIM cards, both supporting all Web3 functions of the project. To enhance user stickiness, the project designed diverse revenue models: users can sell idle traffic in P2P markets, earn income by providing connectivity services to nearby IoT devices, or earn tokens by completing location-based tasks and viewing geo-targeted advertisements. Regarding tokenomics, the project maintains ecosystem balance through a "consume-stake-burn" mechanism: user data consumption generates continuous demand; unused traffic can be staked to earn points; and transaction fees are regularly burned to control inflation. Additionally, the project launched Premium membership services, providing more exclusive benefits for users. Another distinctive feature of Depinsim is its fixed number mechanism, ensuring stability in user identity verification across various platforms and effectively avoiding security risks associated with traditional number expiration. This design makes Depinsim not just a communication tool but also a carrier of users' digital identity. XPIN XPIN is dedicated to building a multi-level, comprehensive IoT platform, consisting of XPIN cloud infrastructure service system and XPIN decentralized protocol. XPIN cloud infrastructure service system provides innovative vSIM solutions where users can complete mobile network communications through completely software-implemented virtual SIM cards without physical SIM cards. vSIM configuration management is implemented through cloud, downloading security parameters in real-time, performing dynamic identity management, thus enabling flexible identity switching. vSIM has extremely low deployment costs and has great application scenarios in IoT and shared device fields. Cloud configuration management is implemented by the XPIN cloud system, providing network access services. All IoT devices compliant with XPIN communication protocol standards can achieve efficient data management and application through the XPIN cloud platform for data access, collection, processing, and analysis. XPIN's smart vSIM and subnets, being completely software-implemented without hardware limitations, offer maximum flexibility and support various network communications, including 4G/5G, SDWAN, WiFi, LPWAN, and satellite networks, providing users with the highest connectivity assurance. The XPIN decentralized protocol establishes a consensus mechanism between IoT devices, providing a secure, transparent, and efficient unified data interaction platform. Each IoT device in the XPIN network implements communication between blockchain nodes through vSIM services. Each device has a unique on-chain DID, capable of local identity verification, enabling trusted and traceable data exchange between devices, achieving data sharing. In product design, XPIN adopts a phased development strategy. The first phase launches global eSIM services, covering 200+ countries and regions, supporting automatic switching between multiple operators. The second phase will release XPIN smart power banks integrating WiFi hotspot and mining functions, while simultaneously deploying XPIN Box home routers and base station equipment to form a complete hardware ecosystem. The project ensures sustainable development through diversified revenue streams, including vSIM package sales, hardware sales, and gaming items. For user incentives, it designed a "connect-to-mine" mechanism where users can earn token rewards by providing network services. Tokens can be used in multiple scenarios such as paying service fees, stake mining, and participating in governance. XPIN's target users include global travelers, digital nomads, and Web3 project teams. Through decentralized infrastructure and blockchain-driven economic models, the project redefines the future form of mobile communications. TonSIM TonSim is a Web3 IoT infrastructure project built on the TON ecosystem, aiming to create the world’s first Web3 IoE (Internet of Everything) ecosystem. To address traditional IoT issues such as data security, privacy protection, and interoperability, TonSim designed a complete technical architecture. Core technical components include: STP protocol, DID system, privacy engine, and smart SIM card. The STP protocol is a communication protocol independently developed by TonSim. As the ecosystem’s core component, it achieves three key functions: IoT Device Translation Layer: Provides modular, layered translation API interfaces, supporting direct network access for devices from different manufacturers and technical standards Encrypted Data Transmission Center: Uses P2P methods and cryptographic technologies like zero-knowledge proofs to ensure data privacy in device-to-device communications Resource Allocation Center: Users provide resources like computing power, bandwidth, and storage through DePIN clients, receiving incentives based on consensus mechanisms Through the STP protocol, TonSim can support unified connection and data transmission of IoT devices, build consensus between network nodes, and allocate incentives. The DID system is built according to W3C’s DID standards, supporting cross-platform and cross-chain identity authentication. Users and devices can independently create and manage DIDs without relying on centralized institutions. Combined with zero-knowledge proof technology in the privacy engine, the DID system achieves secure, private, decentralized, and interoperable digital identity management functions, protecting users’ personal privacy and information security. The privacy engine adopts a hybrid solution of ZK-SNARKs and ZK-STARKs, utilizing ZK algorithms’ scalability to meet efficient verification needs of numerous small devices while using zero-knowledge properties to ensure high security and scalability requirements of large ecosystems. Privacy protection is implemented in identity verification, data transmission, smart contract execution, and other aspects. Smart SIM cards support multiple SIM forms including standard physical cards, vSIM, and eSIM, allowing users to freely choose between usability, flexibility, and reliability. Cardholders receive unique DID accounts, becoming distributed physical nodes, collectively building a permissionless trusted communication network alliance, capable of associating and using multiple operator network services with a single DID. Meanwhile, TonSIM integrates MVNO functionality, supports fiat and cryptocurrency top-ups, and provides global roaming services. TonSim plans to deploy smart contracts using zkEVM solutions to protect transaction details and participant privacy. Future plans include introducing cryptographic solutions like MPC and FHE to support more IoE scenarios. For users, TonSim not only meets basic communication needs but also provides rich network application scenarios, including IoE device interconnection, remote work, Web3 communities, smart homes, and smart cities. Through DID and crypto wallet functions, TonSim cards become hubs connecting users with multiple service providers (SPs) and content providers (CPs). Regarding incentive mechanisms, TonSim uses TST tokens for ecosystem governance, with a total supply of 1 billion, of which 70% is used for mining output (PoW+PoS). Users holding DID physical nodes can receive ecosystem network revenue sharing, including network service fees and SIM card fees. A major feature of TonSim is its complete IoT solution. Through the STP protocol, it enables direct access for devices from different manufacturers and technical standards. Combined with the DID system and privacy engine, it ensures both device-to-device communication and data privacy security, providing fundamental support for application scenarios such as smart homes, industrial IoT, and smart cities. Challenges: Decentralization and Tokenomics Despite being named DeSIM, current Web3 mobile operators still face significant challenges in decentralization. The initial investment cost of network infrastructure is extremely high, making it almost impossible to build from scratch through decentralization. This means DeSIM projects must inevitably utilize existing network infrastructure, which is the solution adopted by most current projects. On this foundation, how can we increase the level of decentralization? Returning to first principles, why do we need decentralization? The reasons can be roughly divided into the following points: Improve fault tolerance Reduce usage costs Protect user privacy Increase network efficiency When DeSIM can support automatic switching between different operators and even different network types, the conditions for decentralization seem to be met: DeSIM can automatically switch to other networks when a single operator’s signal is abnormal, improving fault tolerance Large settlement data can obtain price advantages among operators, reducing user costs Network switching prevents single operators from obtaining all data, protecting user privacy, while SIM-end encryption can further protect communication content Automatic detection of base station signal strength and nearby access reduces network latency, significantly improving network efficiency Compared to decentralization, tokenomics design seems to trouble DeSIM entrepreneurs more. Based on extensive project experience, the following suggestions are provided for reference: Token Utility Design: Diversify as much as possible Can be used for service fee payments Node operation deposits Trading medium in traffic markets Inflation Control: Set traffic mining caps and unlock methods Incentivize long-term staking to lock circulation Incentive Model: Basic returns from traffic mining as subsidies Progressive staking returns to increase staking rates To avoid falling into the mine-withdraw-sell death spiral, the key is to balance token value storage, circulation, and governance functions to form a positive token economic loop. Outlook: Internet of Vehicles, Starlink, and Metaverse The transformation of human communication forms is gradually accelerating. While DeSIM projects are substantively improving service experiences, they can also explore upcoming possibilities. Through deep integration with IoV, satellite communications, and next-generation communication technologies, DeSIM has the potential to redefine the future form of global communication networks. In the IoV field, DeSIM is poised to play a core infrastructure role. As autonomous driving technology matures, vehicles’ demand for real-time, reliable data transmission is increasing dramatically. Traditional centralized communication networks may face bandwidth bottlenecks and latency issues when dealing with massive IoV data. DeSIM’s decentralized architecture can well address these challenges. Moving vehicles are no longer just network users but participate in network construction as mobile base stations, building a dynamically expanding mesh network. This “vehicle-network synergy” model not only provides better network coverage but also encourages vehicle owners to contribute bandwidth resources through token incentives. Meanwhile, DeSIM can deeply integrate with charging pile networks, providing high-speed network services during electric vehicle charging while achieving automated charging payments through smart contracts. In space communications, the combination of DeSIM with satellite networks like Starlink will open new possibilities. Low-orbit satellite communication networks are reshaping global internet infrastructure, and DeSIM can become a key link connecting ground networks and satellite networks. Through smart routing technology, user devices can automatically select optimal network links based on actual conditions, whether ground base stations or satellite signals. This integrated ground-space communication network can not only cover Earth’s most remote corners but also provide reliable emergency communication in extreme situations like natural disasters. Low-orbit satellites are expected to be incorporated into DeSIM’s token economic system, where satellite operators can receive token rewards by providing communication services. This economic model helps promote the continuous development of space communication infrastructure. In the metaverse field, DeSIM can not only provide high-speed, low-latency data transmission but also solve key issues like digital identity authentication and virtual asset confirmation through customized SIM and DID. In AR/VR applications, DeSIM’s distributed content delivery network can significantly reduce data transmission latency, providing smoother immersive experiences. Meanwhile, DeSIM can promote interoperability between different virtual worlds, laying the foundation for metaverse openness. CGV Research believes that DeSIM, as a new generation of decentralized communication infrastructure, stands at a critical junction of multiple cutting-edge technologies. With the recent rise of DePIN sector tokens in the secondary market, the DeSIM track is expected to receive more market attention, further promoting mass user adoption. Web3 mobile operators might be the first to open the prelude to next-generation communications. ---------------------- 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.

On August 27, from 2 PM to 5 PM Tokyo time, the WebX side event titled ‘Bridging Real & Virtual: Global Meets Local in WebX,’ co-hosted by CGV, XStar, and Starbase and co-sponsored by mizu, Aylab, and LayerPixel, successfully concluded. The event brought together top Japanese enterprises, projects, and communities, along with leading industry institutions and projects, to explore the Japanese Web3 market and share insights on how to achieve growth in the Japanese market. Here is a review of the event. Host Speech | CGV、XStar、Starbase CGV (Cryptogram Venture) is a cryptocurrency investment firm headquartered in Tokyo, Japan. Partner YZ provided an overview of CGV’s overall development background and investment activities: since 2017, its funds and predecessor funds have invested in over 200 projects, including the investment and incubation of the licensed yen stablecoin JPYW. Additionally, CGV FoF is a limited partner in several globally renowned cryptocurrency funds. CGV is also actively focused on the development of Japanese Web3 startup projects, and since 2022, it has successfully hosted two editions of the Japan Web3 Hackathon (TWSH), which have received joint support from institutions and experts such as the Japanese Ministry of Education, Culture, Sports, Science and Technology, Keio University, and NTT Docomo. Recently, CGV invested in and incubated the ML KOL Club and RONA. ML KOL Club is a service organization that brings together outstanding global opinion leaders and boasts a large community. The team members come from regions such as Japan, Hong Kong, Singapore, and Vietnam, and have extensive project experience and a wide network of KOL resources in areas such as cryptocurrency investment and research, community management, brand development, and marketing. RONA is a high-performance Web3 gaming ecosystem dedicated to combining advanced hardware with blockchain technology to offer players an immersive gaming experience and opportunities to earn income through gameplay. By integrating gameplay, cryptocurrency mining, and AI computing power sharing, RONA creates a new ecosystem where players can enjoy the fun of gaming while also achieving economic gains. Currently, CGV has branches in Hong Kong, Singapore, New York, and Toronto, and is also a founding member of the Tokyo-based Bitcoin Tokyo Club. XStar is an omnichain identity protocol for proof of humanity. Founder and CEO Ervin introduced how XStar’s decentralized identity system (DID) combines with proof of humanity to counter sybil attacks. Starbase is a Web 3.0 accelerator focused on GameFi and AI. Founder Vivian introduced Starbase’s core operational model, including project investment, incubation, and acceleration. Starbase has invested in over 100 projects across various trending sectors and provides funding support for startups. Keynote | Aylab: Web3 User Acquisition At Scale Aylab CEO Robert Zhang mentioned that Aylab is building the Aylab Traffic Loop (ATL), an innovative Web3 advertising engine designed to help Web3 projects acquire a large number of mobile users from both Web2 and Web3. Panel Panel 1: Navigating Japan’s Web3 Market Japan’s proactive Web3 policies, unique market atmosphere, and the influence of KOLs and vibrant community culture are gradually making it an important market. An increasing number of emerging companies are actively expanding, seeking opportunities in this market. Panel 1 was a Japanese-language session hosted by Anome’s Japan Ambassador, Kaori, and featured guests from well-known Japanese companies, projects, and communities: Hara, CEO of JANCTION and CFO of JASMY; Kab, Director of ACG Worlds; Mack Suzuki, CEO and Founder of LEGENDARY HUMANITY; and Keisuke Horiguchi, Founder of GuildQB. The panelists shared their perspectives on the development of Web3 in Japan and insights on how overseas projects can enter the Japanese market. Panel 2: AI Meets Crypto: Beyond the Hype, Into Real-World Application AIxCrypto has quickly become a significant narrative in the current market. As this trend develops, related applications, protocols, and infrastructure are continuously emerging. Panel 2 was moderated by XStar’s Strategy Lead, Alex, and featured guests from renowned VC firms and projects: Kobby Chen, Investment Director at Fenbushi Capital; Kevin Qi, Investment Director at Mask Network; Jane, Director at CGV; and Sam, Co-founder of mizu. The panelists engaged in an in-depth discussion on the current landscape of the AIxCrypto sector, its broad application areas, and the potential and prospects for future development. Special thanks to all the following partners for their support of this event. About Cryptogram Venture (CGV): CGV (Cryptogram Venture) is a crypto investment firm headquartered in Tokyo, Japan. CGV and it’s predecessors invested more than 200 crypto projects since 2017. CGV also incubated a licensed Japanese yen stablecoin JPYW. Additionally, CGV FoF is a limited partner in several globally renowned cryptocurrency funds. Since 2022, CGV has successfully held two Japan Web3 Hackathon (TWSH) and gained joint support from institutions and experts such as Keio University, Sony and NTT Docomo. Currently CGV has branches in Hong Kong, Singapore, New York, and Toronto.Furthermore, CGV is one of the founding members of the Bitcoin Tokyo Club, based in Tokyo, Japan.