The Evolution of the Cryptonarrative Cycle and the Long-term Value Creation of DeFi

Author: Kyrian Alex; Source: Medium; Translation: Lynn, MarsBit

In the field of blockchain, storytelling has always proven to be a powerful driver of attention, investment, and growth. The ever-changing landscape has witnessed the rise and fall of various topics such as ICOs, DeFi, and NFTs, leaving important lessons for investors, founders, and enthusiasts.

The evolution of storytelling can be observed through the transition from Initial Coin Offerings (ICOs) to launchpads. The ICO frenzy in 2017 heralded a revolution in venture capital, but many projects failed to maintain their momentum. As the industry matured, attention shifted towards more sophisticated investment mechanisms, with exchanges leading the trend of launchpads. These shifts in narrative highlight the dynamic nature of the Web3 space, where trends emerge, peak, and fade quickly.

Storytelling has swept through the cryptocurrency space like a tide, pushing once obscure concepts to the forefront of attention. Let’s take a look at some recent cases to illustrate this phenomenon.

First, we experienced the Bitcoin DeFi moment. Bitcoin is not typically associated with experimentation, but it introduced ordinals, representing Bitcoin through unique identifiers, opening the door to complex DeFi applications. BRC-20 tokens built on Ordinals aim to mimic the interchangeability of ERC-20 tokens, with unique features that may pave the way for Bitcoin DeFi platforms with partial ownership, smart contracts, decentralized exchanges, lending platforms, and insurance platforms. But as they say, CT has the brain of a goldfish. The attention span didn’t even last two months. Only the early adopters/builders truly profited from it.

Then we had the LSD frenzy. With Ethereum’s transition to proof of stake, LSD dominated DeFi. It provided users with staking rewards without the need to lock up assets, and LSDfi protocols such as Lybra Finance and Pendle Finance built upon this concept, expanding the ecosystem with advantages like increased liquidity and reduced risk. The annual interest rates were high. But guess what? After the initial decline, the annual interest rates dropped sharply, and as they dropped, speculation followed.

We also saw the same thing during the Memecoin craze. With the popularity of social media, NFTs, and the desire for quick profits, token prices like $PEPE and $BEN skyrocketed. Although people knew that these tokens were risky and highly volatile, they just wanted to generate 100x returns in the shortest time possible. The speculation there was relatively easy to buy into, coupled with the potential to earn substantial profits in a stagnant market. Well, just like all meme seasons known to mankind, the speculation suddenly ended with a flood of scandals, rug pulls, hacks, and scams.

Oh, how could we forget the recent hype of Chatgpt, which is popular in the field of artificial intelligence? What drives the speculation? Speculation based on progress? Potential for transformation? Speculative rebranding?

Or can we forget the so-called virtual reality revolution? Rumors about Apple’s VR headset and Meta’s rebranding have sparked interest and speculation in the virtual universe. Tokens like Decentraland (MANA), The Sandbox (SAND), Axie Infinity (AXS), and Render Network (RNDR) have skyrocketed due to these rumors. Old entrants benefit, new entrants suffer. Why not?

Narratives have their limitations.

They can push a theme to the forefront, but they cannot guarantee long-term success. Therefore, founders often find themselves in a dilemma: the challenge of timing the startup correctly in an unstable narrative cycle.

Please note that most of the projects I mentioned earlier are very good projects, but in the long run, narratives that drive up their prices and popularity will eventually harm them. Therefore, founders try to accept the fact that they have enough revenue/profit to manage operational costs during market downturns. Because even a bear market can expose vulnerabilities in those highly anticipated projects, leading to a decrease in user base and dim market prospects.

The Web3 investment field is like an unknown territory, and pioneers must rely on foresight and a combination of thoughtful risk-taking.

For founders exploring the Web3 field, several survival strategies have emerged:

1. Understand the narrative: It is crucial to differentiate between investor-driven narratives and themes with deep-rooted potential. Founders should determine whether they are entering a narrative early or following the trend of an existing narrative.

2. Act early: First-mover advantage often translates into months of investor education and persuasion. For founders seeking support and investment, this double-edged sword is both a blessing and a challenge.

3. Flexible survival: Survival itself is a remarkable achievement in situations where many peers may give up halfway. Prudent financial management aimed at weathering the storm may be the key to long-term success.

4. Consumer focus before capital: Prioritizing user engagement and iterating the product based on consumer feedback is a wise strategy before seeking investor capital. Meeting consumer needs can promote more sustainable organic growth.

5. Recognize the right timing: Timing is crucial; entering a collapsing theme or mistaking short-term price increases for real consumer demand can pose challenges in obtaining subsequent funding.

The Dichotomy of DeFi

DeFi, once hailed as an innovative beacon, has shifted from exaggerated expectations to a more pragmatic enlightenment. Despite a decrease in attention and usage, the underlying user base remains relatively stable, indicating that many users are still actively participating in this category.

This dichotomy raises a crucial question: can DeFi maintain its relevance beyond market narrative fluctuations?

The answer depends on the DeFi ecosystem’s ability to address the evident challenges that emerged during the initial hype phase. This includes tackling high transaction fees, network congestion, and security vulnerabilities.

Then, we must shift our focus to tangible utility and real-world use cases.

DeFi projects that can demonstrate concrete value propositions, solve actual problems, and provide sustainable financial products may find a more stable footing. There needs to be a balance between innovation and compliance. We must move away from speculative token trading towards products that offer genuine financial services.

Currently, the emphasis on ownership and exclusivity in the Web3 ecosystem stands in stark contrast to the prevalence of free-access content in the early days of the internet. The shift towards ownership comes at a cost, both in terms of monetary investment and user engagement.

Emerging topics such as DeFi, NFTs, and Web3 games are still evolving, each with its unique development trajectory. The transition from relying solely on investor capital to facilitating consumer participation is a critical shift that founders must embrace. Merely riding the wave is no longer enough; effort is required. Founders must build products that meet real-world needs and provide tangible value.

As the field strives to retain user attention while creating value, a model that combines the “free” experience with ownership, as seen on platforms like Reddit, offers a potential path forward.

A new paradigm is emerging in the Web3 investment space, one that emphasizes sustainability, user engagement, and meaningful differentiation. Unlike the frenzy of the ICO era, investors are now carefully examining a project’s long-term viability and its ability to withstand market fluctuations (such as rising interest rates and liquidity droughts). The concept of “survival of the fittest” applies not only to the projects themselves but also to investors and entrepreneurs who adapt and evolve with the trends.

As the Web3 investment landscape continues to evolve, the challenge lies in striking a delicate balance between risk and reward. Grasping investment opportunities within the narrative cycle, understanding the intrinsic value of projects beyond speculative hype, and fostering user participation are the cornerstones of success. Investors, founders, and enthusiasts must navigate this intricate field with an eye on long-term potential, guided by past lessons learned and a commitment to a more sustainable future.


The Web3 investment landscape is a complex tapestry woven together by narratives, attention, capital, and survival. In this scenario, trends can rise and fall, speculation can either propel projects forward or eliminate them, and success depends on a combination of foresight and adaptability. As the industry matures, the focus should shift from short-term price behavior to long-term value creation. The path forward requires strategic guidance. Therefore, builders, creators, and users should all understand the ever-changing dynamics and remain steadfast in their commitment to innovative solutions that withstand the test of time.

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