Token2049 sheds light on the driving forces behind blockchain development: regulation, institutions, and technology.

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The Token2049 conference in 2023 has just ended, and industry insiders have shared their "thoughts on attending" the event. Numerous articles have covered this grand industry event in 2023.

Except for some surprises like TON, the overall tone from many sources is pessimistic. People feel that Web3 is still blindly hyped without innovation, and the fundamentals have not changed. They believe that behind the hype of this conference lies disappointment.

Of course, these views have their own logic, but in the industry based on the theory of cycles, the reason why a bear market is called a bear market is because one has nothing. There are not only cryptocurrencies on earth. If you take a closer look at other industries, I believe you will find that the now unparalleled AI has also experienced a few years of darkness.

As a non-industry technical conference, the most intuitive feeling of this event is of course the large number of people. Singapore is still the core of Asia in terms of the number of conference guests and attendees, completely overwhelming the lively Hong Kong a few months ago. This is hope in itself.

Aside from the main venue, the surrounding side events were also noteworthy. One event that left a deep impression was the activity organized by Yunjiu Capital and ZetaChain at a bar, where people were still networking until midnight. As a project with attributes such as public chain, cross-chain, Cosmos, and top VC support, ZetaChain is sure to attract attention in such a market environment. Speaking with some VCs, public chains are still a sector worth paying attention to in the next round of market trends. The competition and collaboration between Cosmos and Ethereum have led to more discussions about projects like ZetaChain and Celestia. Everyone is envisioning using Celestia's shared layer and using ZetaChain for better heterogeneous cross-chain solutions.

For example, the activity of ChainBase, which does data API, is also very interesting. Retail investors may have never heard of it, but in the eyes of developers, ChainBase has already taken a considerable market share in this field, and the user experience is also better than The Graph and so on.

These are all part of hope. We believe that everyone has seen a lot of pessimism, but BlockBeats still wants everyone to see some hope. We sat in the main venue for two days and almost live-streamed the entire main event for the Chinese Internet. We sorted out 6 major sections and organized the wonderful speeches of important guests, including what we heard and what we talked about. We hope that after reading these, everyone can be less anxious.

Regulatory Policies

Gemini CEO: "The company may be affected by misleading the public, and may get into big trouble, but the SEC doesn't seem to care. They actually don't have a vision for how to regulate in the future, so they're just trying to slow down or stop future development through enforcement. So you have to ask yourself, why aren't they creating rules and regulations? I think it's because they actually don't know, they don't have a vision or concept of what the cryptocurrency market should be, and they can't keep up with the pace of cryptocurrency and artificial intelligence. They will soon become irrelevant."

Wintermute Co-founder Evgeny Gaevoy: "To some extent, the approval of a Bitcoin ETF in the spot market is inevitable and will happen sooner or later. I think what people may misjudge is the timing, because even if the SEC ultimately approves all of these products, they still need some time to be listed, approved, and then some time for managers to allocate. Therefore, we need at least six months to start seeing funds flowing into these products, but it is more realistic to expect one to two years. But as I said, it is inevitable in the end, so I guess it is destined to happen. From this perspective, it is difficult to say how much the price will be affected, but I think once we see real funds flowing in, that is when we will return to the substantive development track."

Temasek Managing Director Pradyumna Agrawal: "There are common themes in retail investor and retail investor protection across different markets. I think because a lot of regulatory action happens in the US and a lot of people are actually focused on the US. In this region, the very clear theme is institutional participation is very key. It really depends on each institution, how they will formulate policies, how they will deal with this issue. There has been progress in formulating regulatory policies. You can see Singapore has come out with some of the most advanced regulatory policies. There is work going on in the Middle East. There is work going on in Hong Kong, which is very positive for the industry. I think the focus that we see in this region is whether you can formulate clear regulations to prevent these participants from being unregulated. You have clear rules and guidelines to operate on. I think it has to do with demographics. The focus is also on non-institutional use cases, like gaming and entertainment. Many people may have participated in the Korean Blockchain Week here. We see a lot of activity and attention on these areas. This actually means that we see a very balanced approach in Asia, where there are no clear rules and regulations. A clear sign is when you can get these rules so that you can operate accordingly. Of course, everyone is focused on the US, now Europe has MICA and the UK is also formulating regulations."

Binance Founder CZ: "In my opinion, the key is the OTC channel for legal currency exchange of cryptocurrencies. Everyone's focus is different, and that's the key to how we see the problem. Earlier this year, due to the strengthening of regulatory policies, we saw many traditional institutions exit the OTC market. But at the same time, we also saw some new institutions enter the market. This industry already has tens of millions of users. I believe that doubling the number of users could bring the entire industry to a billion users. For most banks, if they only provide services for one country, they will have very few users. If they get 1 billion users, it's already very large for a bank. We can bring tens of millions or even hundreds of millions of users to these traditional financial institutions and benefit greatly from it. Therefore, we see that many traditional financial institutions hope to seize this opportunity. So, although people's attention to the higher-level use cases of cryptocurrencies is very important, in order to attract more people to join cryptocurrencies, we must convert legal currency into cryptocurrencies, and vice versa."

Institutional Investment

Temasek Managing Director Pradyumna Agrawal: "Now we are talking about spot and spot-based ETFs. From an institutional perspective, I think there is a common theory that in every crypto bull market, you will touch different market effects. So you start with those who were involved earliest, then you move on to those who benefit from cryptocurrencies, then high net worth individuals, family offices, and the prediction is that in the next wave, there will naturally be a large-scale phenomenon of institutional participation. Many institutional participants are involved in the context of traditional infrastructure. In this context, it is not only traditional infrastructure, but also more transparent assets. So in my opinion, what is really needed here is some kind of bridge between these two worlds, that is to say, if you want broad institutional participation, you need to have key infrastructure. This infrastructure can be used for risk management and deployment of other asset classes. Digitize all infrastructure, and tokenize all these asset classes in some form. Can you gain efficiency advantages? Can you gain liquidity advantages? There are still many things that need to happen to achieve broader institutional participation. I emphasize again that I separate this from the issue of whether institutions buy ETFs or buy and hold Bitcoin. I am talking about longer-term issues. This is a very long and painful digital workflow, tokenizing asset classes, can I cross-collateralize certain assets across capital? I think this infrastructure is being validated in different contexts, whether on platforms or in cryptocurrencies."

Galaxy CEO Chris Rhine: "There are currently some differences between the East and the West, largely due to the more hostile regulatory approach taken by the United States. Of course, there are also some countries that work closely with the United States, and they are concerned that some regulatory pressures may seep into other regions. Therefore, institutional capital has always been very cautious, especially when it comes to reputation and regulatory risks. As mentioned earlier about family offices, high net worth individuals may only have one or a few sponsors, and the decision-making process is relatively simple. If it doesn't work, you're not a listed company, and you don't have a large number of customers, so it will be hidden in a broader investment portfolio. But they believe that the risk of large institutions making mistakes is still too great. So what we need to see is further development and progress in the regulatory and even political framework in the United States. With this progress, I believe even America's allies will begin to ease their own concerns and consider incorporating these views into their own frameworks."

Chris Rhine also said: "When communicating with many institutions, they believe that approving Bitcoin and Ethereum ETFs for spot trading is a huge regulatory milestone. This almost helps to view cryptocurrencies as an asset class, rather than just a potential unregulated investment tool. So most of the feedback I heard was positive. I think from another perspective, the involvement of large institutions in capital investment will involve time factors. But to be honest, I have worked at BlackRock for more than ten years, and they are a powerful marketing machine. An entirely undeveloped area in the US market is a wealth channel. It has always been very difficult to obtain product approval for wealth channels in many large banks. Now, there will finally be new wealth management models that will allow investors and interested parties to obtain investment exposure to cryptocurrencies in a very simple and accessible way, as well as at a lower cost."

Wintermute Co-founder Evgeny Gaevoy: "Six years ago, cryptocurrency was almost an unpopular term, and most people were skeptical about it. But now, on the one hand, we see Bitcoin on large trading platforms in Sydney, and we see a large number of Bitcoin applications launched by almost all major asset management companies. On the other hand, the technology itself has also been widely accepted. For example, you can see PayPal launching stablecoins. You will see many people see it as a possible alternative to existing financial infrastructure. And on our side, we used to mainly trade with local institutions, and possibly with some family offices, but now we see more and more counterparties coming from traditional financial institutions, traditional family offices, funds, and so on. This is definitely a clear shift in the perception of cryptocurrency as a legitimate thing. I think we have now legalized Bitcoin and Ethereum, and DeFi tokens and many other things may follow suit."

Bitcoin

Stacks co-founder Muneeb Ali: "2023 is a very important year for Bitcoin. The period from 2017 to 2022, when the Bitcoin block size war occurred, was a dark age for Bitcoin because there wasn't much development work done during that time. I used to joke that when I attend events, people would introduce me as Muneeb, the only person developing on Bitcoin. In 2023, I believe there will be a turning point, partly due to the emergence of Ordinals. Bitcoin transaction fees will increase significantly, by more than 50 times, attracting capital and developer interest, which will also have a positive impact on L2 solutions like Stacks. Stacks will serve as a Bitcoin L2 extension and play an important role in the future."

Franklin Templeton CEO Jenny Johnson: "We have just applied for a Bitcoin ETF. Why do we need an ETF or fund? Because if you have an ETF today, even though it trades all day on an exchange, it actually only prices twice a day. So imagine a token that can trade 24/7 and secondly, smart contracts can ensure that you have an accurate understanding of the underlying asset's pricing when you trade. So, we believe this will open up new investment opportunities while also reducing costs. But I have to tell you, Bitcoin is the biggest disruption and interference in financial services and the biggest interference in blockchain. This does not mean that I do not like Bitcoin, but there is more to it. I once talked to a governor of a state in the United States who was very opposed to anything related to digital assets. In the end, he said that what bothered him the most was that every time there was a cybercrime, they would demand payment in Bitcoin because you cannot trace it. This troubled him - and the reason I say this is that I think Bitcoin may be difficult to invest in. This is a good point of debate because governments will always control their currencies. A pressure point in the European Union is that they have shared currency and unlimited spending at the country level, which creates pressure. So if Bitcoin threatens currency, it will be seen as regulated and banned. But if regulation requires wallets to do KYC, like banks, know your customer, this may improve, but as long as Bitcoin has value, crime will happen, and there will always be obstacles. I don't know how to stop this because participants don't have to be in a regulated environment."

Selini Capital CIO Jordi Alexander: "Bitcoin and Ethereum, despite occasional government sales, still seem very cheap in the long run compared to gold or other large-scale assets if you consider them as global macro assets. However, if certain institutions were to sell $50 million worth of crypto assets at once, the market liquidity would be very weak. I always consider FDV and market capitalization as a reference for fundamental investors. I often want to know what the observed value of a project is currently, especially in cases where it may be manipulated in the order book. This does not necessarily mean that I will short a project because shorting is very dangerous. But if I think the FDV of a project is already high, I won't get involved. So from a macro perspective, I will continue to accumulate and look for potential opportunities. Whether it's governments or other entities, they will sell some assets that are very suitable for long-term holding. I think in two years, these assets will be very cheap."

10T Holdings CEO Dan Tapiero: "Bitcoin and Ethereum are the core assets in the blockchain industry and have established network effects, rapidly developing in the past year. Bitcoin and Ethereum differ from other assets, while other asset classes are still in the venture capital stage. The bear market has ended, and opportunities need to be seized during market panic. Despite the impact on market sentiment during the FTX crash, Ethereum's price did not hit a new low, which is a positive sign. He also stated that now is the opportunity to invest in crypto assets, Web3, and blockchain enterprises, as the valuation discounts in these markets are as high as 60% to 80%. Some traditional private equity investors are withdrawing from this field, which is a good investment opportunity, as many mature companies are raising funds, with financing amounts of $50 million, $100 million, or more. The blockchain industry has a survival bias, providing opportunities for investors."

Bitcoin evangelist Dan Hled: "Bitcoin's main adoption comes from users who speculate and trade in the Asian and Western European markets during the speculative cycles of 2013, 2017, and 2021. Speculation is what initially attracted and drove people to trade. Even before Bitcoin was worth anything, Satoshi Nakamoto proposed this hypothesis. Those speculators and hodlers who truly understand and have been educated about Bitcoin become holders. This is why there is a bottom line in bear markets, because there are true believers. Speculation is their way into the market, and then they hold and make money. Currently, there are very few speculative games in Bitcoin, and most of it is spot trading. I noticed at NFT NYC that many users buy NFTs for 0.1 ETH and then resell them for 0.3 ETH. They know nothing about how ETH works or about monetary policy. But this is how they get to know ETH. I realized that this is the same mechanism by which people introduce Bitcoin through spot trading. Therefore, through more and more applications such as Ordinals, NFTs, options, futures, and DeFi on top of Bitcoin, this is the next milestone for Bitcoin, bringing greater adoption and the next bull market."

The father of smart contracts, Nic Carter: "I hope more countries adopt Bitcoin, and implementing ZK Rollup operation code software on Bitcoin is one of the most critical things right now. This is a relatively easy goal to achieve and should not cause too much controversy. This will help us open up broad development areas, and this technological innovation has already been validated on Ethereum. If the Bitcoin community sticks to their original vision of drawing innovation from other blockchain fields, then they will take action. Therefore, I believe this will prove that Bitcoin can continuously upgrade itself, which is one of the most important things."

Layer 2

Offchain Labs co-founder Ed Felten: "There are trillions of dollars in liquidity on Ethereum, a small portion of which has already been bridged to various Layer2 networks. However, on Layer2, activity is higher compared to the TVL. This is because transactions are cheaper and GAS fees are lower on Layer2. But there is another interesting thing happening, besides the bridged value from Ethereum's largest amounts on Arbitrum, we are also seeing growth in tokens launched directly on Arbitrum. Currently, the value of native tokens on Arbitrum is more than bridged ETH or tokens. I think this is an increasingly clear trend, that the cost of minting and managing tokens is also lower on Layer2. EIP-4844 will be launched in the coming months, which is the first step in this direction. But I think over time, the cost of data on Ethereum will decrease, making it not far above the cost of general commercial data storage. People still want to operate at lower costs, but I think the advantages of these external data availability solutions will decrease as Ethereum enters a phase where data availability becomes the most important part of its protocol. Therefore, in the long run, I am optimistic that these costs will decrease. At the same time, we offer external data options for those who are willing to balance and willing to make trade-offs between availability and lower costs."

Polygon co-founder Sandeep Nailwal: "Usually we talk about B2B and B2C models for businesses, but for Ethereum, until today it has been more like a U2C model, meaning users to chain. Now we see Ethereum moving towards a chain-to-chain model. This means that in the next 2-4 years, you will see Ethereum become the foundational settlement layer, providing security, settlement guarantees, and security features to these chains. But I see user activity on Ethereum declining because users want to interact on Layer2, especially now that advanced technologies like ZK rollups and optimistic rollups, like what Arbitrum is doing, are available, using permissionless fraud proofs or ZK rollups, permissionless validity proofs, and so on. Ethereum has become the source of security and settlement, so it has become a chain-to-chain model rather than a user-to-chain model."

Matter Labs CEO Alex Gluchowski: "Vitalik Buterin has established a vision centered around Rollup upgrades. He compares Ethereum to an island that can only build small houses due to spatial limitations. Rollup upgrades, on the other hand, are like skyscrapers that allow for more activity on the same surface. However, even with this upgrade, its capacity still cannot meet the demand. Therefore, there is a need for the ability to go beyond Rollup upgrades, just like reclaiming land from the sea, which will open a new chapter for Ethereum. EIP-4844 and sharding cannot solve Ethereum's key challenge in development, which is data availability. Data availability is currently the most expensive and scarce component, which affects transaction prices, execution, and storage. zkSync addresses this issue in two ways: using state differences instead of calling data, and extending data availability to off-chain locations and seamlessly interoperating with Rollup accounts. These methods are expected to improve Ethereum's performance and scalability issues."

Near co-founder Illia Polosukhin: "Different types of users want to participate in this economic system. Hundreds of millions of people are using centralized trading platforms instead of DeFi. The biggest application in DeFi may be Stargate, where robots are probably digging empty. But what we actually need are applications that can match the experience and financial tools of centralized trading platforms, and we are just beginning to have such applications. For example, Orderly Network provides a trading experience that matches centralized trading platforms, because they run order books in a way that is almost like Rollup off-chain, and settle in just one second, which no centralized trading platform can match. This is the type of product we actually need to push to the market and provide to consumers, because they don't want to spend a lot of time figuring out all the complexities of the DeFi ecosystem, which is left to robots and potential professional traders. We are moving towards this goal, and I think there will be more users coming from this field. But again, this is more about attracting customers and consumers, rather than subnets, sidechains, or sharding. We call them different, but in the end, they are all parallel ways of running. How to achieve this is not important to users, and that's the problem."

Stablecoin

Justin Sun: "I believe that in the next 10 years, the biggest daily use case for cryptocurrency and blockchain will still be stablecoin payment transactions. Recently, we have seen that the market capitalization of stablecoins has exceeded $30 billion. Currently, the total market capitalization of stablecoins is about $50 billion, with a daily trading volume of over $12 billion. Therefore, I believe that in the next 10 years, we may have 100 times more trading volume than we have now. That's why I believe that eventually, most people will use stablecoins and blockchain, without even needing to understand all the technical details."

Circle Co-founder and CEO Jeremy Allaire: "Families, businesses, and financial institutions need to know that these digital currencies are actually part of the financial system. This is happening. By mid-next year, in almost every major market, we will have legal certainty on compliant, regulated stablecoins. This will be a very big deal. I'm a product person, with a background in technology. So I think the most important thing here is to solve the technical problems. In this regard, I think there are good reasons to be optimistic. We are now seeing the development of blockchain infrastructure in multiple areas. First, there is the scalable, cost-effective, and more accessible blockchain layer. There is a lot of innovation happening there, involving ZK rollups and Layer 1 blockchain innovation. This is key because we need to support applications that can scale to hundreds of millions or billions of users. So I think this is ahead of us. Solving the user experience problem is the most important thing for me. For ordinary people to enter this world, they should not need to understand private keys or mnemonic phrases. They should not be afraid of losing devices and money. Similarly, users should not need to buy cryptographic commodity tokens to pay gas fees, or even know what gas fees are. This is not normal for people. So I have always said that cryptography needs to be talked about behind the scenes, with currency and user experience at the forefront. I think that when I see the technological innovations that are being triggered by things like gasless transactions and smart account wallets, the user interface abstractions will make people feel very comfortable. What is emerging now, I think, is that leading Web 2 companies with hundreds of millions of users are actually connecting to Web 3 infrastructure, but adopting very simple, easy-to-use, but also secure user experiences, and can still integrate locally with the blockchain. So the shift in user experience paradigms and the adoption of this paradigm by Web 2 companies will be a breakthrough. So the convergence of all these factors will make me think that 2024 will be an extraordinary year for the adoption of cryptography. I think we will see a significant increase in the number of users, but not yet."

Wintermute Co-founder Evgeny Gaevoy: "I have been a market maker in traditional markets for 10 years, especially in cash trading, various settlement modes, and sending cash overseas for payment. Although the efficiency is already high, it is far less efficient compared to putting it on the blockchain. We started with stablecoins, which can be a huge catalyst for improving settlement. Because you can actually eliminate the dependence on banks in settlement, which is obviously an improvement. For me, the second aspect is the democratization of how ordinary people can access certain opportunities. For example, if I want to get US Treasury bonds, currently I need to open an account with a bank, transfer dollars, instruct them to buy bonds for me, and rely on them to execute in a secure and isolated manner. Again, this is a lot of steps, many of which are ultimately quite inefficient, and asset tokenization theoretically allows people to invest directly in these tokenized assets, greatly improving efficiency."

The father of smart contracts, Nic Carter: "Currently, the US dollar is the accounting unit for 99% of stablecoins. Obviously, this is much more than the share of the US dollar in foreign exchange reserves or international trade. The dollarization of stablecoins is quite remarkable, and I predict that this situation will continue, with stablecoins denominated in dollars maintaining at least 95% of market share. I believe that the lack of interest payments on stablecoins has led to the contraction of the stablecoin industry. With the introduction of stablecoins that pay interest, existing markets will be forced to start paying some interest to holders. This is not technically difficult to achieve, and they have no reason not to do so. However, for regulatory reasons, stablecoins that pay interest cannot be issued in the United States, which will accelerate the trend of offshore stablecoins. Subsequently, we will see the rise of crypto-collateralized USD stablecoins. I think this is a good thing because it will position crypto assets as a store of value and stablecoins as a medium of exchange. Therefore, this is something that is very consistent with the native properties of crypto, and it unifies our goals. So I think that within about two years, 25% of USD stablecoins will be issued with crypto assets as collateral, rather than USD assets. Today, this ratio is less than 5%."

NFT Market

Pudgy Penguins CEO Luca Netz: "I believe that people's emotional attachment and utility towards characters are the core reasons why NFTs can thrive in the market. If I buy a 'Pudgy Penguin' toy for my niece and also own a Pudgy Penguin NFT, it's not because of the price, but because of the emotional connection I have as a member of this community. I think NFT or PFP projects with unfriendly appearances will fail."

Founder of Tangent, a crypto venture capital club, Darryl Wang: "If we look back at the development of the NFT market in the past 12 months, we will find that even the most steadfast holders have surrendered. I think the perfect example is Basis, which was the golden project of the last cycle, but now it has returned to reality. I do believe that NFT is a category of assets. What we see in 2021 is the first step in iterating how we create more liquid assets. I think there are many smart builders working hard to develop the infrastructure needed to facilitate more transactions of this type. Therefore, the concept of NFT is quite easy for most people to understand. Most people trade watches, cars, and so on, which is a behavior deeply rooted in human culture. If we look at the prices of NFTs today, or the NFT protocols with liquid tokens, their current prices are quite low, and there may be good reasons from a fundamental perspective. But when speculative enthusiasm returns, we do expect some recovery next year, and I think this asset class is worth paying attention to."

Yuga Labs CEO Daniel Alegre: "I am passionate about what Yuga Labs is doing and we have a very strong and passionate community. When I became CEO six months ago, the first thing I did was announce our next APE Fest event, which is our global annual community event, planned for November in Hong Kong. My experience in the Asia-Pacific region dates back decades, from the early days of Google to now at Yuga Labs. Here, I see not only entrepreneurial spirit, but also foresight and a level of reshaping. Investment and foresight in the Asia-Pacific region are unparalleled globally. Some game companies in Korea are considering using Web 2.0 to create flagship IPs and bring them into the Web 3.0 environment, which is not happening in the United States. We must start thinking from scratch about how to truly attract players in Web 3.0, starting with the game's infrastructure. Web 2.0 players can see through it if you only connect a Web 3.0 component for the sake of making money. But if you fundamentally consider Web 3.0 as the core gameplay, it will create a truly unique experience. In the United States, the regulatory environment is not as friendly as it is in other parts of the world, but it is beginning to change. One obvious reason is that they see that this is actually beneficial, and if done correctly, investment and potential employment will help economic growth."

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