I saw a piece of news this morning that the blockchain storage protocol Walrus completed a financing round of $140 million, with the main investor being Standard Crypto, and notable co-investors including A16Z and Franklin Templeton's digital asset division.
The apparent financing method is very classical, which is Walrus selling tokens ($WAL), with a total supply valuation of approximately $2 billion. Many might not have this concept. The blockchain storage protocol Walrus is a protocol project built on the Sui public chain; at the time of Sui's financing, its valuation was also $2 billion.
Walrus, who exactly is going to take over? To be honest, since this year, I’ve developed a kind of physiological aversion to assessing new projects. This aversion comes from the disparity between valuations and market values—what kind of thing can just open its mouth and have such a high market value? Do you deserve it? I wonder what everyone thinks; I personally feel it doesn’t deserve it.
Previously, when I discussed the cycles in the crypto space, I particularly mentioned a point called 'concept cycles'. Given the current situation and user numbers in the crypto space, it is destined that there will be no large-scale applications based on usability emerging in a short period.
Therefore, the entire cycle of the altcoin season is the emergence of innovative concepts, leading to excessive technical investment and the bursting of bubbles that do not meet expectations, repeating this cycle. The emergence of innovative concepts brings in incremental funds from outside the circle; excessive technical investment leads to enormous valuations and wealth effects, while bubbles that do not meet expectations result in passive stagnation of incoming funds.
The past altcoin cycles have always existed because innovative concepts continue to emerge.
Here, we need to explain what innovative concepts are. ICO, DeFi, GameFi, and NFT are all examples. Their characteristic is the creation of new profit-sharing mechanisms. Think about it carefully, isn't that the case? ICO pioneered a new form of financing, changing the profit-sharing mechanism in the primary market; DeFi created AMM, changing the profit-sharing mechanism for market makers; NFT/GameFi changed the profit-sharing mechanism for gaming collectibles; airdrops are also a new profit-sharing mechanism, a new mechanism for project parties and retail investors to deceive investors' money.
But the problem here is that we need 'fresh water', especially from external venture capital and large funds. MEME has brought a significant amount of incremental value, but it is all retail investors, dispersed and fragmented, unable to form a massive push.
External venture capital and large funds need a concept that can create a 'new profit-sharing mechanism'. But this concept does not exist at the moment. Current VCs are just money that has accumulated in the crypto space from the past.
Whether it’s top venture capital firms like A16Z, Polychain, Coinbase, Binance Labs, or next-tier firms like Standard Crypto, their money cannot be considered incremental; the whole market will only get smaller.
Ultimately, it has turned into what we see now, where any project casually gets a valuation of billions or even tens of billions. When you take a closer look, it’s all bubbles and utterly useless.
For example, this Walrus, which operates in the blockchain storage sector. It is essentially a similar type of sector as Fil and AR.
At this stage, no commercial model has been successfully run, and there are no users. They can only play with token economics, attracting attention through airdrops and managing the currency value through low liquidity in the secondary market.
To put it bluntly, the big players are just setting up a scheme. Just look at their entire set of investors; the leading investor, Standard Crypto, is a Series A investor in Sui, A16Z has invested in Sui's Series A and B rounds, Electric Capital invested in Series A, and Franklin Templeton in Series B.
You see many analytical articles stating that 'this further reflects the alignment of interests between Walrus and long-term supporters of the Sui ecosystem', which simply means they are teaming up to raise money.
Are outsiders able to participate, dare to participate, and want to participate? A sub-protocol on Sui is valued at $2 billion, would you invest? This also touches on what Walrus is actually preparing to 'do', as well as the 'airdrop' that everyone is most concerned about. I know the latter is what everyone cares about the most; the former is not really important, but it still needs to be mentioned.
According to investors, Walrus was born because previous decentralized storage projects faced challenges in scalability, flexibility, and security, and were also very slow and expensive. From this logic, if Walrus can become faster and cheaper, it indeed solves the issues.
But is the issue with decentralized storage really that? The biggest problem is that no one is using it. Is there a real demand? Is there a creation of real demand? Why would users pay to have their data stored on your cloud? I haven't seen any relevant introductions addressing that.
What I see is that the project parties emphasize the governance of tokens, the distribution of tokens, and how cheap they are. When a product does not emphasize how good it is, I feel there’s not much future for it—this is also why I am reluctant to assess current projects; none of them can bring me the kind of excitement that NFT and DeFi did.
Now that we've poured cold water on it, let's talk about hope. I believe the altcoin season in the crypto space will eventually come, but it won't always be a big one every cycle. Bitcoin was born in 2008, but it wasn't until 2017 that we saw ICOs and the first forms of DeFi, and it only started to explode in 2020. After pausing on conceptual innovation, airdrop models relying on layer2 emerged, and the new launch mechanism for MEME also came out.
Any subsequent micro-innovations in technology or models could lead to a continuous influx of funds. What we need to do is not to find those inflated players in this extremely overvalued altcoin season, but to carefully mold a comprehensive understanding of the industry, sectors, and projects. We need to identify such opportunities in the early stages.
What's wrong with waiting? Waiting doesn’t lose money.
