The Evolution of Speculation

Author: 0xkyle Translator: Shan Ouba, Jinse Finance

The term "Internet Capital Market" can have multiple meanings. In the current context, it typically refers to the "alchemical" results brought about by blockchain technology: financial technology that transcends geographical boundaries. You can use "magical internet currency" for collateralized lending, tokenized government bonds and private credit, and the widespread use of stablecoins—in today's world where traditional finance and digital assets are merging, all of this is collectively referred to as the "Internet Capital Market."

But for traders who have been active on the blockchain for the past few years, its meaning goes far beyond that. The internet capital market is not just "on-chain government bonds" — it also encompasses various speculative tools such as NFTs, DeFi, and ICOs, along with the tradable tokens that have emerged alongside them. This all started with the deployment of the first smart contract on Ethereum in 2015.

In this article, I want to delve into this aspect of the internet capital market: focusing on tokens, this round of narratives, 10x, 100x, airdrops—those mechanisms that support the original narratives of the internet capital market.

I believe we are about to enter the "new narrative" that veteran players in the crypto space talk about. To analyze this, we first need to review these capital formation mechanisms and their respective differences:

Evolution of Financing Mechanisms in Different Cycles

We have seen how the market has changed its financing methods through several rounds of bull and bear cycles. From ICOs to centralized exchange altcoins (CEX Alts), and then back to memecoins, etc. I have listed the specific evolution in the chart, simply put as follows:

1. The Initial ICO (2017)

This is an investment mechanism based on "promises", where the hope of investors buying in is just to sell it to a "bigger fool". The technology is often not real, and even if it is, it usually cannot be used or has no value accumulation. Most of the time, this is just a game of "passing the parcel". For example, Bitconnect, Dentacoin, etc.

2. The Paradise of Venture Capital

The bubble in 2021 also brought in a large amount of institutional capital - in hindsight, this had a devastating impact on the industry. Extremely high valuations and poor incentive designs (who is willing to work hard after receiving 100 million dollars in advance?)

But this wave has also brought many truly valuable products. Therefore, we cannot generalize and say that the model of "low circulation, high fully diluted valuation (FDV)" is inherently bad. Although these tokens are overvalued, they have also given rise to the important protocols that we know and use today.

Taking Ethena as an example - I really like this project, but it is undeniable that their mechanism of "giving too much, too early" has harmed its early "token appreciation" ability. However, they are undoubtedly one of the best products in the crypto world. There are many such "double-edged sword" projects.

This period also gave birth to projects like Solana and Uniswap. Although their governance models today may be debatable, it is undeniable that there are merits to all of this. Is there a way to avoid such situations? Maybe there is. But ultimately, these are all "growing pains" in the industry's development process — even after four years, we are still bearing the aftershocks they bring.

3. Extreme Coexistence: Returning to "Extreme" Speculation

After the FTX collapse, the crypto industry has fallen into a kind of "existential crisis," which is particularly evident. Many people have started to believe that "all projects are scams," and most crypto projects are just "means to get rich quickly." I used to have this perspective as well, but understanding the subtle differences is crucial.

Although it looks like a casino, that doesn't mean the entire industry is a casino. Stablecoins and tokenization are proving to have significant real-world use cases today - far beyond just being used to issue memecoins or to create dollar trading pairs for long-tail assets.

At this stage, the projects entering the market are essentially divided into two categories: pure memecoins (such as dogwifhat, pepe) and projects with more narrative logic (such as AI agents). Although valuations have significantly retraced, you might feel that "this is all a joke," but don't forget—"being a memecoin" does not mean "always being a memecoin."

This is also the slow maturation process of the industry. Some projects have already made the leap from "meme" to "serious projects", such as REI.

The last point: Continuing to hold the mindset of "everything is a memecoin" will lead to huge losses in the coming years. Because:

4. The Combination of Legality and the Digital Market

We are entering the "age of adulthood." Institutions have truly arrived and are very excited. But perhaps because we are too close to the "sausage factory" and understand too well how sausages are made - we often come to some incomprehensible conclusions. For example, many in the crypto community show pessimism towards Circle IPO simply because they "understand too well" the bearish logic.

Knowing too much can sometimes be a curse. That's why the cynical mindset of "everything is a meme" ultimately brings great harm - because when you easily dismiss everything, you also lose the ability to truly believe.

Take Ethereum as an example again. It was one of the worst-performing assets for two years - many large holders chose to capitulate. It was given various derogatory names, and for a time, we almost sincerely believed that decentralization had failed, and that Ethereum would never rise again.

You can see what it looks like now. Do you think Tom Lee would care (or be aware) of the embarrassing video of the Ethereum Foundation leadership singing and dancing on stage? Do you think institutions like BlackRock—who even launched a tokenized fund on Ethereum—would care about the Ethereum Foundation's "tofu-hearted little white boy" image?

Of course not. This is something you must truly understand. The entire crypto space seems to have forgotten how to "dream," while the traditional finance sector is learning to "dream" again. As digital assets become increasingly mainstream, we will also welcome more opportunities — and attract more truly excellent builders.

This is what I mean by the "internet capital market." We are entering an unprecedented era of potential in the past five years — an era where regulation, technological strength, and capital perfectly merge. Part of this will inevitably go on-chain. I am not exaggerating at all when I say that some of the most valuable companies in the coming years will be born through the issuance of tokens on-chain.

In fact, this has become a reality. Hyperliquid is the pinnacle representative of the concept of "internet capital markets." They have no venture capital funding (as far as I know), nor do they have a traditional equity structure—only a token on the blockchain, and initially, they didn't even launch on an exchange.

Let me repeat that one more time:

Hyperliquid is a business with a scale of 40 billion dollars, without a financing PPT or the burden of a cap table. It is a purely on-chain behemoth that has emerged to dominate the market and is now moving towards the goal of an annual revenue of 1 billion dollars—a complete leap from 0 to 1. **This is the purest embodiment of the internet capital market.

However, before you think this is an article promoting Hyperliquid, let me take a step back: I don't believe the story ends with Hyperliquid. I believe that in the coming years, we will see more similar projects continuously emerging.

Isn't this exciting? We are about to enter a prosperous era—don't let the cynicism in your heart destroy the dreams you once had. But what pains me the most is: all of this has long been clear to those with vision, yet we are still addicted to chasing that 50% return on some random shitcoin, because that's how we've been trained for the past four years. It's time to dream bigger— and the "manual" has actually been laid out right in front of us.

This is a huge opportunity for investors to work alongside the project team as operating partners.

We no longer need those old chains that bind us. For too long, people have been tied down by old structures - but in the era of the "internet capital market", holding 5-10% of your own tokens and transforming it into a product worth one hundred million or one billion dollars brings returns far beyond what you originally imagined.

Yes, financing is still necessary; yes, conducting an ICO is not wrong. But—look at the path that Hyperliquid has taken if you have enough confidence in your product. Look at how wealthy their founders are now. They have no VCs, no cap table burdens, just a significant share of their own product, and then they go public directly in the "Internet capital market." If the market recognizes you, it—the only value arbitrator—will give you the returns you deserve.

Do you know what the biggest problem with capitalism is? It's that most participants have too short-sighted a perspective. Capitalism does drive innovation, but it doesn't push it far enough. Many people are willing to give up huge potential for the future for a little quick money in the present — and this is precisely against the core power of "compound interest."

Of course, you can cash out 10 million in the short term and then give up the product; but you can also continue and eventually earn 300 million. That is true compound interest.

Finally, I want to talk about the speculative nature of the market. Indeed, in the short term, the market acts as a voting machine. We will certainly see many "worthless" assets experiencing skyrocketing prices, and we will also see some "quality assets" priced far beyond their fundamentals. Moreover, we might even witness old scenarios repeating themselves—project teams dumping their tokens and running away, etc.

But the key point is: this upcoming wave of digitization will attract more truly "reliable" founders into this field - I believe this is a critical trend change that will bring a wave of genuinely valuable on-chain products.

Such projects will not go to zero. But they also do not need to go to zero. Look at Hyperliquid, Ethena, Aave - typical cases with annual revenues of 1 billion dollars, stablecoin TVL of 10 billion dollars, and net deposits of 60 billion dollars. Look at Pengu and Rekt - they have collectively received 197 trillion views, sold over 2 million toys worldwide, and have a beverage brand that is sold in 7-11 stores across the United States - they all started by issuing tokens on-chain.

Of course, we can argue about whether they are overvalued or undervalued. But I would rather have such discussions than go back to a time when we were forced to buy assets that relied on promises but had no ability to deliver. I would prefer to own a part of something real rather than continue playing the "hot potato" scam.

If you always hold the view that "every coin is a meme"—that is really very negative. And it's not an exaggeration that people at the level of Jeff from Hyperliquid are launching token projects nowadays. The next Steve Jobs could very well be someone who issues coins on the blockchain. Among these assets, there will definitely be some that become pillars of future finance. And all of us—now have the opportunity to participate in this. If you easily treat all of these as "pure memes", then you are destroying an opportunity for a thousandfold return.

This is what I mean by "the evolution of speculation": we have moved from speculating on a bunch of worthless air coins to an era of truly hardcore, sustainable, and on-chain assets—these assets will define the landscape of the future world.

Now is the time to believe. Believe in the possibilities of the future, not in the shadows of the past. Let go of the old chains and completely burn away the bear within you. For the future is bright, my friends.

This, ladies and gentlemen, is what the "internet capital market" looks like in my eyes.