Rational VS Absurd We always encounter these two types of products in our usual research, the rational good kids and the absurd bad kids.

Rational good boy

Companies that solve an existing need, have a clear PMF (product-market-fit) and business model, and also have a clear moat, which everyone likes; they are Coinbase, Opensea, Nansen, Chainlink, the darlings of VCs, the talk of data analysts, and the shining stars.

Ridiculous bad boys

Seemingly not addressing a particular immediate need, the only clear income is transfer fees, or income from arbitrage speculation. Their crude approach to attracting users makes it seem like they will collapse at any moment. They are often the category definer; they are PFP NFT, Meme Coin, Algorithmic Stablecoin, x-to-earn, etc. They are the hot spots of controversy, the jokes of the absurd, and the trends that make people's eyes water.

We find absurd bad boys more interesting and their externalities underestimated.

Try to think: externalities Any economic action has: externalities

In economics, the effect on social welfare of a private economic action is called an externality. Whether this private action is a kind of consumption or a kind of production, it is possible to generate externalities.

What is externality

As seen in the figure above, the magnitude of the externality can be calculated in the region between the two Pareto Equilibrium. The externality can be negative (loss) or positive (gain).

For example.

Negative externalities of technology

Factories: environmental pollution, noise

Robots: bring unemployment

Internet: information overload, deprivation of privacy and security

Positive externalities of technology

Factories: drive up rent in surrounding neighborhoods

Robots: allows humans to focus on creative work

Internet: drives free creativity and allows monitoring of power and lawlessness

Within a closed market, market participants are poorly linked, information and capital flows are impeded, externalities cannot be dissipated, and generally intervene by regulators.

In an open market, the degree of connectivity of market participants is high, information and capital flows are efficient, and therefore the externalities of each economic behavior are more significant, creating a rippling effect of externalities.

However, Web3 is one of the most aggressive open markets in history, and also has more externalities.

Bitcoin is a ridiculous bad boy

Go back in time to 2008 and you see Bitcoin, a product who is not a product with PMF, slow payments and no credit backing; the early users were niche computer enthusiasts, underground traders and speculators. He was a pretty bad "payments company" compared to Paypal, and a bad boy who was not only ridiculous but dangerous.

But over the next 14 years, as inflation was high and financial freedom was restricted, the externalities of Bitcoin were reinforced and transformed into a huge industry chain. With 81 million users and a daily liquidity of about $18 billion, he is a digital asset that facilitates storage and preservation of value and may replace gold in the future. It is not the official Bitcoin organization that maintains these values and beliefs, but all the externalities of economic activity.

Bitcoin's negative externalities.

Consumes electricity

Difficult to regulate

Bitcoin Positive Externalities.

Boosts the mining industry (Bitmain, etc.)

Boosts the trading industry (Coinbase, etc.)

Adds a new asset class to the financial market

Stimulated the development and application of blockchain technology

Used by some small government countries

Rational VS Absurd We always encounter these two types of products in our usual research, the rational good kids and the absurd bad kids.

Rational good boy

Companies that solve an existing need, have a clear PMF (product-market-fit) and business model, and also have a clear moat, which everyone likes; they are Coinbase, Opensea, Nansen, Chainlink, the darlings of VCs, the talk of data analysts, and the shining stars.

Ridiculous bad boys

Seemingly not addressing a particular immediate need, the only clear income is transfer fees, or income from arbitrage speculation. Their crude approach to attracting users makes it seem like they will collapse at any moment. They are often the category definer; they are PFP NFT, Meme Coin, Algorithmic Stablecoin, x-to-earn, etc. They are the hot spots of controversy, the jokes of the absurd, and the trends that make people's eyes water.

We find absurd bad boys more interesting and their externalities underestimated.

Try to think: externalities Any economic action has: externalities

In economics, the effect on social welfare of a private economic action is called an externality. Whether this private action is a kind of consumption or a kind of production, it is possible to generate externalities.

What is externality

As seen in the figure above, the magnitude of the externality can be calculated in the region between the two Pareto Equilibrium. The externality can be negative (loss) or positive (gain).

For example.

Negative externalities of technology

Factories: environmental pollution, noise

Robots: bring unemployment

Internet: information overload, deprivation of privacy and security

Positive externalities of technology

Factories: drive up rent in surrounding neighborhoods

Robots: allows humans to focus on creative work

Internet: drives free creativity and allows monitoring of power and lawlessness

Within a closed market, market participants are poorly linked, information and capital flows are impeded, externalities cannot be dissipated, and generally intervene by regulators.

In an open market, the degree of connectivity of market participants is high, information and capital flows are efficient, and therefore the externalities of each economic behavior are more significant, creating a rippling effect of externalities.

However, Web3 is one of the most aggressive open markets in history, and also has more externalities.

Bitcoin is a ridiculous bad boy

Go back in time to 2008 and you see Bitcoin, a product who is not a product with PMF, slow payments and no credit backing; the early users were niche computer enthusiasts, underground traders and speculators. He was a pretty bad "payments company" compared to Paypal, and a bad boy who was not only ridiculous but dangerous.

But over the next 14 years, as inflation was high and financial freedom was restricted, the externalities of Bitcoin were reinforced and transformed into a huge industry chain. With 81 million users and a daily liquidity of about $18 billion, he is a digital asset that facilitates storage and preservation of value and may replace gold in the future. It is not the official Bitcoin organization that maintains these values and beliefs, but all the externalities of economic activity.

Bitcoin's negative externalities.

Consumes electricity

Difficult to regulate

Bitcoin Positive Externalities.

Boosts the mining industry (Bitmain, etc.)

Boosts the trading industry (Coinbase, etc.)

Adds a new asset class to the financial market

Stimulated the development and application of blockchain technology

Used by some small government countries