MuseLabs

This week, we focus on the latest developments in the Bitcoin trading market and ETFs because:
Last week, Bitcoin ETF became the exchange product with the largest capital inflow in the world +2.27 billion US dollars. The total market value reached 69% of GLD. The contract market OI was close to the all-time high. Cryptocurrency concept stocks surged, and network difficulty reached a new high.
These phenomena signal the growing prominence of cryptocurrencies, and Bitcoin in particular, on Wall Street.
We will also discuss some hot topics such as:
With the halving approaching, can the price hit a new high like last time? Bitcoin ETFs account for more than gold in terms of total market capitalization. Have ETF inflows come to an end? Is there still room for ETH ETF hype? Need to worry about a Genesis sell-off? What are the hidden worries in Coinbase’s better-than-expected earnings report? Which cryptocurrencies are riding the AI ​​boom? Will inflation and the AI ​​craze, the biggest headwinds in the market at present, test investor confidence again? Is there still room for growth in the valuation of AI leader Nvidia?

The S&P 500 rose for five consecutive trading days last week and recorded its best weekly gain since November 2022 (+5.9%). The Nasdaq rose 6.5% last week, its best weekly gain this year. Graphically, it is expected to break the adjustment channel of the past three months. Market participants reacted to a combination of benign economic data (employment, inflation, manufacturing) and policy-friendly (FOMC + BOJ were dovish and the Treasury Department's bond issuance was less than expected), a backdrop that is reminiscent of the goldilock time. Judging from positioning and sentiment data, this rebound is more like short covering, and high volatility will continue.

Cover Image Aptos cofounders Avery Ching (left) and Mo Shaikh

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Intro

Top investment, star team, and successor to Diem, Aptos has attracted a lot of attention; but can it lead a new round of high-performance public blockchain narratives and take a place in the fierce public blockchain competition?

In brief

The main highlights of Aptos are: 1. Adopt the Move language to improve the security of on-blockchain assets and improve the development efficiency; 2. Set up the node reputation system and improve the communication method between the leader node and the ordinary node to improve the network stability under the premise of high TPS. The shortcomings are as follows: 1. The centralization problem caused by the team holding a large number of tokens; 2. There is a lack of high-quality projects on the blockchain, and the ecology is insufficient.

As the first public blockchain using the Move language, Aptos has technological innovation advantages over established high-performance public blockchains, and first-mover advantages over latecomers such as Sui and Linera. Aptos has the potential to lead the next round of high-performance public blockchain narratives, but the threat to Aptos from later public blockchains such as Sui cannot be ignored.

With the continuous upgrade of Ethereum towards higher TPS, the Layer 2 multi-blockchain network based on the ecologically sound Ethereum in the future may have a dimensionality reduction attack on high-performance public blockchains. The living space of high-performance public blockchains with only high TPS and lack of other differentiation will be squeezed.

1. Introduction to Aptos:There are many improvements but lack of revolutionary innovation

1.1. Aptos Highlights - Security and Stability Improvements

The founder of Aptos is a member of the previous Meta Libra project team and has strong development capabilities. Aptos has received investment from a16z, FTX, Softbank, and Samsung, with a total financing amount of 350 million (the strategic investment amount of Binance and Dragonfly is not disclosed), and the A round valuation is 2.75 billion US dollars. The most significant advantage of Aptos compared to other public blockchains is the security improvement brought by the Move language and the on-blockchain stability enhancement brought by the improvement of the leader node mechanism.

The Move language brings increased financial security to Aptos. Move is an evolution of Rust, emphasizing security and flexibility, and is known as the most suitable programming language for blockchain. In the Move language, the token is defined as a resource type, which can only be transferred (Move), stored but not copied, which fundamentally eliminates hacking incidents such as unlimited Token issuance. This is also the biggest advantage of Move over Solidity and Rust, which is why the Move language is named. In addition, the Move language also has the advantages of simple syntax, lower learning barriers, and higher development efficiency.

Aptos improves the leader node rotation and node communication mechanism, which maintains the stability of the system while ensuring high performance on the blockchain. At present, the trilemma of decentralization, security and scalability is still restricting the development of public blockchains. For mainstream high-performance public blockchains, they often put scalability in the first place at the expense of decentralization. For example, Solana, known as the Ethereum killer, chose to set up a leader node to be responsible for producing blocks in order to improve TPS to reduce the communication redundancy of the system, but This makes the stability of the system greatly depend on the leader node. When the network is active and concurrency is high, the leader node is prone to paralysis, which will lead to the downtime of the entire blockchain network. Aptos adds a node reputation system, which records the activity and effectiveness of nodes, and selects leader nodes from qualified nodes. When the leader node is interrupted, the reputation system will also quickly find a new leader node to avoid the entire network downtime caused by the leader node's own problems to the greatest extent. At the same time, the leader node of the Aptos network only needs to package the transaction sequence for broadcasting and does not need to record all transaction information. The detailed transaction information is grabbed from the memory pool by the execution node according to the transaction order, which greatly reduces the workload of the leader node and avoids the need for a network At high concurrency, the leader node is overloaded and prone to failure.

1.2. Current shortcomings of Aptos - centralization and incomplete ecology

Regarding the centralization of public blockchains, Changpeng Zhao once expressed his opinion that decentralization is a means rather than a goal, and the real goal of human beings is freedom, security and ease of use. Centralization and decentralization are not binary issues. In the context of current technology, economy, and ideas, decentralization should be a step-by-step process rather than an overnight success. Centralization has advantages in terms of efficiency, security, economy, etc. In the past development of the Web3 world, there are many examples of centralization defeating decentralization, such as ETH and ETC, CEX and DEX. But for Aptos:

The centralization problem is still what Aptos criticizes for the community. Currently, Aptos only has 102 network nodes, which is much lower than other mainstream public blockchains, and all of them need to be licensed by Aptos Labs or Aptos Foundation, and there are no license-free validators. At the same time, Aptos Labs and Aptos Foundation currently hold a total of 73.5% of APT (community hosting share is included), which distorts the Nakamoto coefficient of Aptos network, and the entire network is currently under the control of Aptos Labs and Aptos Foundation. After the gradual release of 51% of the community's share, the degree of decentralization of the Aptos network will gradually increase, but whether the verification nodes can release permission-free access remains to be seen in the future.

Aptos currently lacks ecological development and lacks high-quality projects. About 200 dApps have been deployed on the Aptos testnet, but since the Aptos mainnet was launched, the deployment of ecological projects has slowed down, and the Rug phenomenon of early Defi projects (such as Mojito and Arco Protocol) has further dampened user confidence. The current online NFT projects are seriously hyped, prices have skyrocketed and plummeted, and there is a lack of continuous build. From the perspective of TVL, the current TVL on the Aptos blockchain is only 35.75 million US dollars, which is a huge gap compared to the old high-performance public blockchain. Aptos currently needs to speed up the framework of the mature Defi ecological basic disk, complement stablecoins, exchanges, lending, derivatives, liquidity pledges and other ecological niches, and at the same time incubate high-quality blockbuster projects to drain traffic to the public blockchain, increase user interest and attention.

1.3. Aptos Token Economic Model - 51% of the community quota, which will be unlocked linearly within ten years

Aptos community allocation is 51.02%, and the early circulation ratio is 13.00%. The initial issuance of APT is about 1 billion, of which the community accounts for 51.02%, core developers account for 19.00%, foundations account for 16.50%, and investors account for 13.48%. The 51.02% token share allocated by the community is designed to stimulate the sustainable development of the Aptos blockchain ecosystem, of which 41.02% is hosted by Aptos Foundation and 10% is hosted by Aptos Labs. Aptos Foundation is mainly responsible for the ecological development on the blockchain, and Aptos Labs is mainly responsible for the construction of the infrastructure on the blockchain. At present, two products, Petra wallet and ANS domain name, have been launched.

The initial circulation of Aptos is 130 million, accounting for 13% of the initial total, consisting of 125 million issued by some early incentives from the community and 5 million unlocked by the Aptos Foundation. The remaining community and foundation shares are unlocked linearly over ten years on a monthly basis. The share of core developers and investors will not be unlocked from January to December, 1/16 of each month from 13 to 18, and 1/48 of each month from 19 to 48, for a total of four years. APT is additionally issued through block rewards and destroyed through on-blockchain fees. The block reward is determined by the pledged APY. The current network pledge yield is 7%, and it will decrease by 1.5% every year in the future, and finally drop to 3.25%. On-blockchain fees are determined by on-blockchain activities. The current APT inflation rate is about 5.6%.

2. Can Aptos lead the next round of high-performance public blockchain narrative?

Compared with the previous high-performance public blockchains, Aptos wins in technological innovation and upgrades but temporarily lags behind in ecological development; compared with latecomers such as Sui and Linera, Aptos has a first-mover advantage as the first public blockchain to use the Move language. Once a network effect is formed among developers, users, and investors, it is difficult for latecomers to pose a sufficient threat to Aptos without major innovations.

The Move language is not exclusive to Aptos, but at present, Sui and other latecomers are less differentiated than Aptos. Sui and Aptos are highly similar in terms of team, capital and technical routes. Aptos has the fastest development progress, and it has attracted a large number of developers and has enough market attention. It is extremely difficult for Sui and other Move-based public blockchains to achieve post-production control.

The centralization problem faced by Aptos is not uncommon. Solana, BSC, Cosmos, etc. all face this problem. This is the inevitable result of the public blockchain trilemma. Ecological development on Aptos takes time to nurture. From the perspective of token distribution, the 51% ecological incentive quota is much higher than previous high-performance public blockchains such as Solana.

Overall, Aptos has a good position. As the first public blockchain of the Move series, its technical advantages are remarkable. Compared with Sui and other latecomers, the first-mover advantage has also been initially established, and its future development is worthy of attention. But the threat of Sui and Linera to Aptos cannot be ignored either.

3. Can high-performance public blockchains have an impact on the status of Ethereum?

From the perspective of on-blockchain ecology, the king of public blockchains is still Ethereum. From the perspective of TVL, the development of Ethereum Layer 2 such as Optimism and Arbitrum is no longer inferior to that of high-performance public blockchains such as Solana. With the transformation of Ethereum POS, the current development focus of Ethereum has been switched to expansion led by Layer 2. Layer 2 network technologies such as zkSync, Starknet, Arbitrum, Optimism, and Arbitrum have been continuously upgraded, and the ecology has been continuously improved. Vitalik has publicly stated that Ethereum will reach 100,000 TPS after five upgrades are completed. At present, the rapid development of Ethereum Layer 2 is beyond expectations, and the technological upgrade of Ethereum itself is also steadily advancing. In the future, the Layer 2 multi-blockchain network based on the ecologically sound Ethereum will form a dimensionality reduction attack on high-performance public blockchains.

From the perspective of the economic model, Ethereum is based on the rich on-blockchain ecology, reducing the supply through POS upgrades and combining the destruction of EIP-1559 to achieve a dynamic balance of the total supply of ETH. However, high inflation is still a problem faced by high-performance public blockchains. The high inflation of high-performance public blockchains is essentially because the fee income of the network is not enough to cover the security cost of the network, so it is necessary to issue additional tokens to network nodes in the form of block rewards to attract pledges to ensure a high margin of safety pledge rate. If the Byzantine fault-tolerant consensus Aptos is used, the security of the network can be guaranteed when the normal nodes are larger than 2/3.Therefore, if the current pledge rate is higher than 66%, it is not enough for malicious nodes to collect all secondary market liquidity to attack the public blockchain, and it is necessary to "reverse" the current pledge nodes, which is undoubtedly extremely costly. So the pledge rate is an important indicator to measure the security of the POS public blockchain, and the method to ensure a high pledge rate is to provide high pledge income, but it is usually difficult for high-performance public blockchains to achieve this goal through the on-blockchain fee income, and the insufficient reward It can only be achieved through additional issuance, which leads to high inflation of public blockchain tokens. The high inflation of tokens is usually accompanied by the instability of the currency value, and it will also hurt the development of the ecosystem on the blockchain. The paradox of security and high inflation is one of the pain points in the long-term development of high-performance public blockchains. At present, the only public blockchain that can solve this problem is Ethereum.

From the above two perspectives, in the short and medium term, the current high-performance public blockchain still has a window period for development. But in the long run, with the continuous upgrading and improvement of Ethereum, the living space of high-performance public blockchains with only high TPS and lack of other differentiated high-performance public blockchains will be threatened. In such a market environment, by holding an investment portfolio of APT and other high-performance public blockchain tokens in the opposite position to hedge the beta risk from the track and macro, to gain the alpha return of Aptos itself may become a strategy worth studying. (No investment advice)

Cover image created by AI illustrates tool Stable Diffusion, key word: Space Opera House Rembrandt Harmenszoon van Rijn and Hajime Sorayama mix painting style

Intro

AIGC dropped ripples to the depressed crypto market, what is AIGC? Why does it suddenly arise? What impact will it make on Web 3?

1. The new hotspot in the primary market——AIGC

AIGC's full name is Artificial Intelligence Generated Content, which refers to AI's technology to create new content through massive existing data (such as text, audios, or images). In fact, there is no unified normative definition of the AIGC concept. A similar concept internationally is Synthetic Media, which is defined as a technology for producing, manipulating, and modifying data or media through artificial intelligence algorithms, including text, code, images, audio, video, and 3D content, etc.

2. User-needs drive the development of AIGC technology

AIGC focuses on the production of content, and the development of the content ecosystem can be divided into four stages: Professionally-Generated Content (PGC), User-Generated Content (UGC), AI-assisted Generated Content and AI-Generated Content (AIGC), currently we mainly stay in the first and second stages, and the third stage plays as a supporting role.

PGC generally refers to content that is created by a professional team, carries a high production criterion and a long working cycle. It will ultimately be used for commercial realization, such as TV, movies, and games. In order to ensure the quality of the generated content, PGC needs to invest tons of technical and labor costs. Under the PGC model, the rights of content production and realization are in the hands of a few people, with a higher degree of concentration and a stronger monopoly effect. However, it is difficult for PGC to meet the needs of large-scale content production, due to the limited human resources on the supply side.

On the other hand, UGC blurs the boundaries between consumers and producers. The platform will provide creation tools, and producers can be users themselves, which lowers the production barrier and improves the prosperity of content ecology, such as short videos. The UGC model reduces the production cost and degree of centralization to a certain extent, meets personalized or diversified user needs, and increases the capacity ceiling. Although the production scale of content has been greatly enhanced, the quality has inevitably suffered a backlash because there are no restrictions on producers, generation tools, and content topics.

PGC and UGC are constrained by production capacity and quality, respectively. It is tough for them to meet the rapidly growing content demand, while AIGC may be a new round of paradigm shift in the development process of content ecology. In the background of increasing user demand, the low efficiency of manual creation has become a bottleneck restricting the scale of content production. From the perspective of demand, as young people become the mainstream of content consumption, their demand for the production capacity and quality of content production has exploded. In addition, although the popularity of the Internet has accelerated the speed of content dissemination, it has also enlarged the gap in user demand. Under the high demand of users, the traditional mode of content production has exposed serious shortcomings in terms of production capacity and quality. Although UGC improves the problem of limited production scale of PGC, its content quality is uneven, which leads to higher retrieval costs for users to access high-quality content. In the final analysis, UGC still cannot meet the user's demand for high-quality content.

There is no ceiling for the growth of the content ecology, and it is highly necessary to introduce AIGC. The procedures of content creation are the steps of information screening, filtering, processing, and integrating by producers. A series of processes are based on the creators' long-term independent study, which spends plenty of time and brainpower. In the long run, the ability of artificial creation is limited after all. When the production potential of PGC and UGC is exhausted, AIGC may be able to make up for the gap in the content ecology.

The content ecology has entered the stage of AI-assisted production, and AIGC is expected to be realized in the future. At present, content production is still limited to the creation framework based on PGC and UGC. The platform assists users in creating through open AI tools. Anyone can become a creator and issue commands to make AI automatically generate content, instructing AI to complete complex tasks, such as coding, drawing, and modeling, which further lowers the production standard and improves production efficiency.

However, due to the development of technology, AI only plays an auxiliary role in the above work. Humans still need to create content or input instructions in key links. AI does not have the ability to become an independent creator. However, with the continuous upgrading and iteration of core elements such as data and algorithms, AIGC may be the general direction of future development. It may break through the artificial limitations and upgrade to the level of independent creation, creating richer and more diverse content. In theory, AIGC will realize the unlimited supply of content ecology, and the content quality will surpass PGC, considering production efficiency and professionalism.

3. AIGC will shine in Web 3

In Web 2, AIGC has started extensive exploration in various fields. Currently, Web 3 is a decentralized version of Web 2 mapping. By extension, AIGC will naturally have many applied directions in Web 3.

A breakthrough has been made in AI tools related to text generation. Applications of AIGC in text creation include coding, translation, and writing. Text creation is essentially the use of language. since programming languages ​​are relatively more structured and easier to learn for AI, but human languages ​​need to combine context, semantics, etc., therefore, the most mature applied scenario of text generation is coding, representative works such as Github Copilot produced by Microsoft. Users input code logic in text, it can be quickly understood, and sub-modules will be generated based on massive open-source code for developers to use. Nowadays, nearly 40% of the code generated by GitHub Copilot is written by AI. Although modular plug-ins such as SDK in Web 3 have improved the programming speed of developers, the development efficiency of crypto protocols may be further promoted with the popularization of AIGC technology in the future. Ideally, AIGC can automatically detect market needs or vacancies, and then independently program and to generate new protocols.

In terms of content creation in human language, AIGC has also made considerable progress. At present, the development of translation has achieved a great lead. Roblox automatically translated games developed in English into other eight languages ​​through machine learning, including Chinese, German, and French; the Dreamwriter news writing system developed by Tencent can be used in the 22 regulated writing scenarios, and the average posting speed is as fast as 0.46 seconds; in Sequoia Capital's article of "Generative AI: A Creative New World", part of the content is written by the GPT-3 natural language model, but the reading experience is not obscure and blunt, but also takes into account the writing requirements of fluency, clarity, and logic.

AIGC will also contribute greatly to text creation for Web 3. News media and research institutions in Web 3 are facing the bilateral dilemma of content ecology. For example, although the output quality of CoinDesk and Messari is high, it is hard to expand the scale of production. Moreover, content dissemination will be further reduced, limited by the writing language, the efficiency and accuracy of translation.

On the other side, although the content on Twitter is huge, the quality of perspectives cannot be guaranteed. Since the info is not categorized by importance and timeliness, etc., thus the presentation form is messy, ungrouped, unsorted, or de-duplicated. Apparently, user needs are not fulfilled in a targeted manner. Simultaneously, users will face the problem of information overload, bringing about wasting much time on invalid content. As a result, Web 3 organizations lag significantly behind their Web 2 counterparts, both in terms of average production scale and average content quality.

However, the scale and quality of Web 2 organizations are often based on crowd-sourced tactics, which require a large amount of initial investment. In order to ensure the quality of the content, qualified analysts usually need to go through long-term precipitation and intensive training, and the companies must invest time and training costs. At the same time, in order to maintain the output scale, the companies must pay extremely high labor costs for large-scale recruitment. There are two obvious shortcomings in this type of mode. One is the overloaded cost, and the another is the risk of talent loss in the later phase, resulting in the costs fully sunk. With the advancement of subsequent technologies, analysts can save the time of summarizing titles and abstracts at least, and AI is able to directly generate TL; DR by understanding the full text. In the long run, "qualified analysts" will be quickly produced, after deep machine learning of AI. Web 3 institutions will substantially reduce costs while improving the scale and quality of content generation, thereby promoting the development of the entire market segment and the entire industry. The information protocols, news protocols, or research protocols may even appear in Web 3.

AIGC is likely to trigger a new round of innovation in Web 3 music. AIGC opens applications in song production, lyrics generation, etc., and the interactivity and real-time performance are further enhanced. As an illustration, the adaptive music platform LifeScore dynamically arranges music in real-time. Once the user feeds a series of musical material, AI ​​will change, morph and remix it, leading to an instant concert. In May 2020, LifeScore delivered an adaptive soundtrack for the Twitch interactive TV series "Artificial", which can affect the soundtrack based on the viewer's emotional state as the story unfolds.

In the short run, AIGC can help creators to adapt, recreate, or directly assist the creation of music, vastly cutting their workload and boosting work efficiency. In the long run, some music platforms have emerged in Web 3, along with the introduction of AIGC technology, the protocols may be able to generate customized songs according to the personal preferences of the listeners. Not only can the platform enormously slash the expense of copyrights, but users can also decrease the payments for songs. In addition, users may also be able to publish exclusive songs created by AIGC to earn income for themselves, thereby enhancing the creator economy of the Web 3 music market.

In addition to the above three frontier directions, AIGC also has great potential in other Web 3 market segments. For example,

1) The main body of NFT is images or artworks. At present, many AI models have collected data of the entire art history and popular culture. Any user can generate their own favorite NFT at will. Different NFTs need to have different faces, clothing, and emotional characteristics. The traditional generation method undertakes high costs and low efficiency. Creators need to carry out prototype design, multiple modeling, and rendering, etc., but AIGC can help creators to try sketches more efficiently in the early stage, and save the manpower to complete the details of the screen in the later stage. In the future, AIGC may be possible to achieve low-cost mass production of NFTs. Besides, UGC creation is easy to copy and spread, and infringement problems frequently occur. Nevertheless, NFTs are unique, indivisible, and tradable, which can overcome the problems of asset anti-counterfeiting, right confirmation, and traceability to strengthen copyright protection; 

2) AIGC is also improving the generation of transmembrane states, such as text-generating images/animations, and vice versa;

3) The progress of AIGC will also promote the development of the Web 3 social market segment. Real people will inevitably have some shortcomings, but AI can create users' favorite virtual characters since the virtual characters generated by AIGC will be completely customized according to user needs. Users are allowed to customize or utilize templates to define the properties, like family, occupation, age, etc., of the characters. AI will help the virtual characters perform more likely to real people in appearance and actions under specific scenes, and endow them with the functions of language expression and interaction to reflect a certain empathy ability. In addition, the virtual characters, accompanied by more abundant knowledge reserves and faster update frequency than humans, do not need to rest. Hence, it is expected that the entertainment and services provided by virtual characters in some certain fields will be comparable to or even surpass real people. For example, virtual characters will continue learning through communication with users and realize emotional companionship. Referring to the ACGN groups and social software heavy users in Web 2, the social market of Web 3 will undoubtedly become larger under the support of AIGC; 

4）The use of AIGC in Web 3 education may produce unexpected results. Since the learning mode of AI is relatively structured and organized, the textbooks and lectures produced by AIGC may be able to lower the understanding barrier and assist the audience to absorb knowledge more easily. In summary, AIGC's future journey is quite broad in Web 3.