Original text: Peter Yuan Pan, 1kx Partner

Translation: Yuliya, PANews

This research was initially presented by 1kx Network to its limited partners, elaborating on the significant strategic value and development prospects of the consumer cryptocurrency market. The following content provides the latest market observations.

Evolution Patterns of New Platforms

In the history of technological development, whenever a new platform emerges, new leaders in the market inevitably arise. Existing market leaders often lose their market position due to misjudgment of new opportunities, slow responses, or ineffective execution. The fundamental reason for this phenomenon is that new technological paradigms require entirely new ways of thinking and business strategies. This pattern has been fully validated in the gaming and video sectors over the past decade.

Disruptive Evolution of the Mobile Gaming Market

In the 2000s, the traditional gaming market was dominated by hardcore games, with players generally pursuing high-fidelity graphics and deeply immersive experiences. At that time, mobile devices, characterized by small screens, limited performance, and a lack of quality content, were completely at odds with the demands of the mainstream gaming market. Traditional gamers showed little interest in mobile games, and mainstream game publishers thus overlooked this emerging market.

However, the potential of mobile gaming platforms was evident. They ultimately realized the vision of allowing users to connect and compete with global players anytime and anywhere, creating an entirely new category of mobile free-to-play games. This not only created an unprecedented emerging player market but also gave rise to a new wave of gaming companies. These successful entities were entirely based on game types that were fundamentally different from traditional games, targeting users who did not even identify with the traditional gamer label.

Despite the industry's general belief at the time that "these are not real games, and these are not real gamers," mobile gaming ultimately achieved the astonishing feat of generating revenue scales that exceeded traditional gaming by twofold.

Market Transformation in the Video Sector

The online video sector has also exhibited a similar disruptive development model. In an era when television networks dominated global media consumption, the limitations of this traditional model became increasingly apparent: high barriers to entry, expensive production costs, and distribution limited to local or regional markets. Even so, executives in the traditional entertainment industry still underestimated the development potential of online video.

However, forward-thinking market observers recognized the revolutionary characteristics of online video platforms: decentralization, low barriers to entry, and inherent globalization. These features brought about disruptive changes in content creation and dissemination.

The result of market transformation is that the traditional entertainment industry has been restructured, and new media companies have emerged. Similar to the mobile gaming sector, the content of these emerging platforms is fundamentally different from that of traditional platforms. A new generation of entertainment stars and brands (such as Mr. Beast, Bella Poarch, etc.) has rapidly risen, simultaneously giving birth to innovative business models reliant on online video distribution channels (such as Shein). Online video ultimately surpassed traditional television and maintained a continuous growth trend.

Blockchain: A New Generation Consumer Platform

Blockchain technology is pioneering a new platform paradigm aimed at consumers. This technology enables developers to build application ecosystems from scratch in a decentralized, global environment, featuring digital ownership and programmable incentive mechanisms.

Market analysis indicates that this will bring revolutionary innovations to fields such as gaming, social media, and the creator economy, giving rise to entirely new market forms. Similar to the trajectories of mobile gaming and online video, this market transformation will be realized through content forms that are completely different from traditional platforms, creating new user groups and market spaces.

Advantages of Vertical Integration

Market leaders in the consumer cryptocurrency space will gain unprecedented growth potential, thanks to their unique advantages in achieving vertical integration in a decentralized environment. In traditional markets, the most successful companies are often those that can achieve vertical integration. For example, Amazon, which initially started as an e-commerce platform, now sees its cloud service division, AWS, contributing 70-80% of the group's operating profit (despite accounting for only 15-17% of total revenue).

Companies in traditional consumer sectors generally pursue vertical integration but are often constrained by technological costs. The open-source nature of the Web3 ecosystem allows market leaders to achieve vertical integration naturally as their business grows, enabling them to more effectively control various aspects of the value chain, gain economies of scale, and realize flexible business monetization. This allows leading companies in the consumer cryptocurrency space to achieve faster growth rates and larger business scales than their Web2 competitors.

Market Practice Validation

This vertical integration strategy has been validated in several cases:

• Coinbase started from a centralized exchange business and subsequently launched the Base chain network.
• Axie Infinity developed the Ronin Network based on its large user base.
• Pudgy Penguins built the Abstract Chain utilizing existing distribution channels.
• LINE and Kakao launched the Kaia Chain leveraging their user advantages.

Consumer-grade cryptographic technology is considered the ultimate form of consumer internet development. As blockchain and cryptographic technologies continue to advance, their application potential in the consumer sector becomes increasingly significant, potentially reshaping the way consumers interact with the internet and becoming a crucial driving force in the future digital economy.

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