The macro logic of investing in cryptocurrency

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From the birth of Bitcoin to the present, the development of digital currency has been more than 11 years. Although it is not long, this field has been iterated for several rounds, and a large number of new tracks have emerged (such as the first-generation digital currency, smart contract public chain, DeFi, etc.). Countless stars have emerged in these new tracks. Some of these stars have always stood at the forefront of the stage (such as Bitcoin, Ethereum), and some are like meteors in the sky, and disappear quickly after a bright light in the sky.

Why is there such a big difference between these projects? Will the reasons behind this appear in new projects and new tracks? I think that as investors, we should always review these projects, draw experience and lessons from them, and quickly iterate our knowledge and thinking, so that we can better guide our future investments. Find your treasure in the new track.

My own investment in digital currency is not long compared to many senior predecessors, but fortunately, I have gone through at least one complete bull and bear market, and have seen the ups and downs of many projects with my own eyes. I have accumulated some feelings and feelings from it. Experience.

I think the most important thing to invest in this field is to not make mistakes in direction and strategy when selecting projects. To avoid this kind of mistakes, we need a set of macro logic suitable for this field.

Next, I will share some experience in this regard with you from time to time.

In the early days of Bitcoin, many hackers and volunteers selflessly and enthusiastically promoted it. Their slogan was: Do you know Bitcoin? It is a new currency that will not spam, resist censorship, and privacy. The most intuitive feeling revealed by this slogan is its decentralization, resistance to censorship, and the holders’ desire for freedom and privacy from the heart. Coupled with the mystery of Satoshi Nakamoto’s coming and going without a trace, this adds a layer of mystery to Bitcoin.

Since Bitcoin is the first digital currency based on the blockchain, and now it is the digital currency with the largest market value, all the imprints on it will not only be itself, but also the entire digital currency. It can be said that this brand has become the inherent gene of digital currency to some extent.

What an ecology will develop into and in which direction it will develop are closely related to its inherent genes. If the new things that appear in this ecology do not possess this gene, then it is destined to not exist in this ecology for a long time.

My strongest experience of the entire digital currency field is decentralization and freedom.

The decentralization here does not mean no people, no teams, no management, but a kind of extreme tolerance displayed by the project team, an extreme anti-monopoly displayed by the project structure, and a kind of project development. Extreme grassroots power, these elements combined together will let us see a kind of bottom-up revolution, a kind of powerful vitality that a single spark can start a prairie fire.

It is this vitality that makes Bitcoin change from a kind of fire to a raging flame, from a humble experimental product to the Holy Grail of the new world.

On the contrary, some projects do not have these characteristics in my opinion, so they can only gradually dim and dissipate after leaving a momentary halo on the world like a meteor.

EOS is an example in established projects. The biggest selling point of this project in financing is high TPS and strong performance. It has indeed achieved the project since its development. But what’s the problem with it? In my opinion, it has lost the tolerance and antitrust that the original blockchain project should have, which is what we often call decentralization.

In my opinion, this system that can control the entire network with 21 nodes is essentially the same as a platform built by a company with 21 servers.

It cannot let an unknown user buy a mining machine and join the system silently in an unknown corner like Bitcoin and Ethereum, so it loses its grass-roots nature; it cannot be like Bitcoin and Ethereum. Ten thousand nodes maintain and participate together, so it loses decentralization; it does not communicate with everyone in various media and communities like V God, or even accept everyone’s collision, and therefore loses tolerance.

NXM in the DeFi insurance field in the new project is a typical example.

The most eclipsed part of this project is KYC and strict entry barriers. KYC led to very few people who can participate in this project, so it lost its grass-roots nature.

Strict entry barriers for projects have resulted in projects that are currently participating are all established and low-risk projects. As insurance in the blockchain field, it must be open to all projects, tolerant and free. Established, low-risk projects have been tested by time, and the risks have been much smaller. What is the point of insurance for such projects?

This is why I am not optimistic about this project at all and think it is only a temporary leader.

I believe that decentralization, anti-censorship, and grassroots are not only the fundamental characteristics of past projects, but also that future projects must have.

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