OP Research

المؤلف: جام

المحرر: فينسيرو، YL، CloudY

المراجع: ياسمين

يشهد سوق NFT، باعتباره سوقًا رقميًا ناشئًا، توسعًا وتقدمًا هائلين في الوقت الحالي. تعمل NFTs كأصول رقمية مميزة قادرة على تمثيل الأعمال الفنية الرقمية، والصور الرمزية، والأراضي الافتراضية، والعديد من السلع الرقمية الأخرى.

ملخص

إن تفرد الأصول الرقمية يجعلها قادرة على العمل كدليل على الملكية والندرة بالنسبة للقطع الأثرية الرقمية، وبالتالي خلق سبل جديدة للدخل للفنانين والمبدعين الرقميين.



Author: CloudY, Jam

Editor: Vincero, YL

Reviewer: Yasmine

In late November 2022, OpenAI launched ChatGPT, an intelligent conversational system, garnering global attention and stimulating extensive discourse.

Equities within the AI sector experienced a notable surge across the A-share market, the U.S. stock market, and the realm of cryptocurrencies. As ChatGPT gained widespread adoption, its profound impact on the global landscape became apparent, leading to the emergence of novel application scenarios and iterative products of similar nature.

Even Microsoft's acquisition of OpenAI and the subsequent integration of ChatGPT into the Bing and Office ecosystem generated soaring investor expectations, reflected in a significant increase in stock price. However, the introduction of ChatGPT4, showcasing superhuman artificial intelligence capabilities, tempered initial excitement and prompted individuals to contemplate the transformative effects of AI on their respective industries and the potential risks associated with further AI advancement.

Against this backdrop, this article aims to explore and address these inquiries by undertaking comprehensive research of both the AI and Blockchain industries, seeking to provide insights and solutions.

Current Development Status of the AI Industry

Productivity Tools

AI can be regarded as a transformative productivity tool, akin to the impact of historical technological advancements such as stone tools, steam engines, internal combustion engines, electric motors, computers, and the internet on human society. By minimizing the barriers to human-computer interaction and augmenting the efficiency of repetitive production tasks, AI can induce substantial shifts in productivity and production relationships. Consequently, AI's influence extends to improving the overall quality of human existence and mitigating impediments to human progress.

AI technology has significantly influenced diverse sectors, including intelligent manufacturing, healthcare, finance, transportation, education, etc. By enabling machines to acquire knowledge and autonomously execute non-creative tasks, AI contributes to enhanced productivity and cost reduction in specific industries. Notably, in pharmaceutical research, AI finds application in protein structure prediction. The ESMFold model was developed by the Meta AI team, which effectively predicted protein structures from a vast dataset comprising over 600 million macro genomes. This remarkable achievement unveils the extensive scope and variety of natural proteins, surpassing previous bounds of the imagination.

In practical terms, AI technology enables the processing complex programs through natural language. It obviates the necessity of comprehending intricate programming or possessing coding proficiency. Instead, users can express their desired outcome to the AI system, which autonomously executes the requisite intermediate steps to attain the intended result. This augmented productivity stems from AI's capability to bridge the divergence between human intentions and task execution, negating the requirement for extensive programming expertise or comprehension of intricate algorithms.

(From Goldman Sachs Global Investment Research)

The AIGC technology holds vast potential for applications in various domains, including intelligent customer service, virtual agents, and gaming. By leveraging existing language datasets, ChatGPT enables a seamless and natural conversational experience in virtual agent systems and gaming platforms, enhancing user satisfaction and product competitiveness. Additionally, ChatGPT effectively replaces humans in repetitive content generation tasks, such as generating reports, gathering and summarizing information, translating, and producing conditional illustrations. This AI augmentation liberates human productivity, allowing individuals to focus on providing essential instructions and engaging in creative pursuits, relieving them from mundane task execution.

Technology Trends Guide

The prevailing core applications of AI encompass general Artificial Intelligence, Knowledge Graphs, Data Analysis and Synthesis, Autonomous Driving, and AI-Generated Content (AIGC).

Knowledge graphs: Graphical representations of diverse entities, relationships, and attributes in knowledge graphs support intelligent search, recommendation, and question-answering applications.

Synthetic data: Generated through machine learning and other AI techniques, synthetic data is used to train and evaluate AI models, overcoming challenges related to privacy and security when obtaining or sharing real data.

AIGC: AIGC technology, utilizing deep learning and generative models, is widely discussed and applied in domains such as text generation, audio generation, image generation, video generation, and more.

(From Guohai Securities Research Institute)

In 2022, AIGC experienced a significant breakthrough in market financing and media attention. However, it is essential to note that AIGC is still a nascent technology and is in the early stages of exploration and development.

Specifically, the development stages of AIGC can be categorized as follows:

Research stage: This phase primarily focuses on elucidating the fundamental principles and algorithms of AIGC, investigating methodologies for model training and optimization, and establishing comprehensive databases.

Application stage: AIGC initiates its deployment in diverse real-world scenarios, exploring effective integration of AIGC technology into specific domains.

Industrialization stage: AIGC undergoes widespread adoption across multiple industries and fields, giving rise to its distinct industry chain and complementary ecosystem.

In summary, we have recently transitioned from the research stage to the application stage, indicating that the development of AIGC is still in its nascent phase.

(From Guohai Securities Research Institute)

Key Components

Data, algorithms, and computing power are the three pivotal factors propelling the advancement of AI.

In the data domain, the increasing significance of data quality and diversity accompanies the ongoing evolution of AI technology. Besides abundant domain-specific data, effective data cleaning, preprocessing, and labeling are imperative for improving algorithm training accuracy. Furthermore, cross-modal and cross-domain data fusion is critical in extracting enhanced value and intelligence.

Concerning algorithms, the current state of AI technology exhibits iterative advancements and continuous refinement. Future trends center around deep learning algorithms encompassing multi-modal and large-scale models alongside innovations in autonomous learning, knowledge transfer, and incremental learning. These developments will elevate the intelligence level and expand the application scope of AI algorithms, facilitating the widespread adoption of AI technology.

Regarding computing power, the acceleration and optimization of AI computations drive ongoing hardware upgrades and enhancements. Specialized chips like GPUs and TPUs have emerged as crucial contributors, significantly amplifying the efficiency and speed of AI computations. Additionally, cloud and edge computing advancements offer more flexible and diverse computational environments for AI processing.

(From Goldman Sachs Global Investment Research)

The Current Stage of Blockchain Industry

Distributed Ledger

Blockchain is a decentralized distributed ledger.

Blockchain is a decentralized and distributed ledger with the crucial immutability property derived from its underlying consensus mechanism. On-chain data is recorded in blocks and validated by miners/validators, forming a continuous chain. Once data is recorded in a block, whether generated by smart contracts or accounts, it becomes unalterable.

The difficulty and cost of disrupting consensus increase with the number of nodes, geographic distribution, computational power, or the value of staked tokens. As a result, altering the recorded content becomes a formidable task for centralized entities.

Moreover, in an unalterable setting, smart contracts, constructed through code, empower users to engage with them without relying on any third party for trust. These intelligent contracts execute predetermined code paths to facilitate relevant operations, ultimately enabling the realization of trustless transactions on the blockchain.

Furthermore, assets within the smart contract can only be accessed by the associated account, preventing other accounts from transferring assets from the original account through the smart contract. Each operation of the original account requires a signature to confirm identity, and even the initial transfer interaction requires prior Approve for the smart contract to access the account's assets. This design positions the user's wallet account as the ideal vehicle for their identity (DID) and assets.

Within the framework of consensus mechanisms and smart contracts, all on-chain assets and actions can be recorded and attributed accurately, facilitating the automatic aggregation of related benefits into the rightful owner's account. This effectively resolves the problems of counterfeit assets and impersonation, as it prevents unauthorized individuals from copying and pasting to steal assets or usurp the interests of the rightful owner.

Specifically, digital assets can be uniquely defined using tokenized smart contract addresses. For example, non-fungible tokens (NFTs) can represent digital artworks. Additionally, individuals' actions can be authenticated using non-transferable tokens (SBTs), providing proof of their work or presence in a specific time and space (Proof of Work/Proof of Attendance).

Technology Trends Guide

The layered structure of the Blockchain technology architecture is characterized by Layer 0-2, with consortium chains and private chains representing distinct types of Blockchain application scenarios.

Layer 0 refers to the physical infrastructure and network architecture of the Blockchain, encompassing hardware devices, network protocols, and transmission media. It serves as a foundational component enabling cross-chain communication and addressing asset-related issues. Notably, leading technologies such as Cosmos, Polkadot, and LayerZero are prominent representatives within this domain.

Layer 1, also known as the base layer or public chain, plays a fundamental role in the Blockchain ecosystem. Prominent examples of Layer 1 include widely recognized platforms like Bitcoin and Ethereum. The protocols' design and technological implementation at Layer 1 have a significant influence on the core performance and functionalities of the Blockchain system. Furthermore, Layer 1 can be further categorized into distinct types, such as EVM (Ethereum Virtual Machine) and non-EVM-based systems, based on their specific characteristics.

Layer 2 refers to the protocols and solutions built on top of Layer 1, aiming to enhance the performance and expand the application scenarios of the Blockchain. There are currently six types of Layer 2 protocols, with ZK Rollup and Optimistic Rollup being the mainstream ones. These protocols enable the Blockchain to process a greater number of transactions, improve TPS, and reduce Gas fees.

A Consortium Chain is a collaborative blockchain network governed by multiple organizations or institutions with shared interests, such as banks, insurance companies, and supply chain companies. It differs from public chains as it has a restricted number of participants and nodes, leading to enhanced transaction speed and security.

A Private Chain is a permissioned blockchain network belonging to a single organization or institution, usually allowing only internal personnel to participate.



Key Components

Distributed nodes, cryptography, consensus algorithms, smart contracts, and cryptocurrencies constitute the foundational elements propelling the advancement of Blockchain technology.

Distributed nodes constitute the foundational essence of Blockchain technology, facilitating decentralized storage and transmission of data. Cryptography serves as an essential theoretical instrument, ensuring the security and privacy of the Blockchain. Furthermore, consensus algorithms play a pivotal role in establishing distributed consensus within the Blockchain network. Smart contracts, being self-executing computer programs, enable the execution of diverse logical instructions on the Blockchain. Lastly, cryptocurrencies, empowered by encryption techniques, ensure the security and anonymity of transactions.

Through the utilization of distributed nodes, all participants are able to maintain a comprehensive replica of the data, thereby ensuring both transparency and security. The essential technologies within Blockchain, including hash functions, digital signatures, and asymmetric encryption, are cryptographic applications. These technologies play a crucial role in safeguarding data integrity and verifying identities, all while upholding user privacy.

Through the implementation of consensus algorithms including Proof of Work (PoW) and Proof of Stake (PoS), all nodes can achieve unanimous agreement, ensuring data consistency and immutability. Smart contracts facilitate trustless transactions, eliminating the need for intermediaries and thereby enhancing transaction efficiency and security to a certain degree. The emergence of cryptocurrencies like Bitcoin and Ethereum has propelled the widespread adoption and advancement of blockchain technology.

The Intersection of Blockchain and AI

Amidst the AI revolution, it is imperative to reflect on the extent to which AI has transformed Blockchain, as well as the impact of Blockchain's decentralization and trust capabilities on AI.

Firstly, AI, functioning as a productivity tool, possesses the potential to diminish technical barriers, consequently reducing the hurdles within the blockchain industry and enhancing its overall efficiency.

Secondly, AI-powered games and metaverses will liberate themselves from predetermined settings, ushering in fresh narratives and gaming experiences within the blockchain realm.

Blockchain's smart contracts can establish the domains and boundaries within which AI operates or impose limitations on AI's permissions, thereby preventing its unwarranted proliferation.

Furthermore, the decentralization of blockchain can facilitate the sharing and allocation of resources, including the fundamental data and computational power indispensable for training AI models.

Moreover, the authentication capabilities of blockchain can furnish evidence regarding data integrity, identity validation, and ownership rights, thus mitigating conflicts of interest that may emerge from AI applications.

The Significance of AI for Blockchain

Firstly, AI, as a tool, has the potential to lower the barriers to content creation, allowing individuals without technical expertise to express their creativity and produce high-quality content. This encompasses various domains such as NFT creation, game asset development, metaverse modeling, and code generation.

However, the current utilization of AIGC in the NFT field is predominantly limited to generating simple images, lacking fundamental distinctions from traditional Generative Art. To fully leverage the potential of AIGC in the NFT space, further exploration is required to expand the characteristics of NFTs, akin to how Mirror World employs AI to imbue NFTs with a distinct essence.

(From A16Z Research)

Secondly, there is a significant reduction in technical barriers related to code development. Code writing encompasses smart contract deployment and hacking or white-hat activities, representing opposite ends of the spectrum. AI can facilitate the deployment of smart contracts through natural language programming, while adversaries can employ AI to analyze contract code and launch attacks. By leveraging AI, it becomes possible to iterate on deployed contract code, fostering internal competition and establishing a more robust and reliable codebase industry-wide. This foundation allows stakeholders to prioritize optimizing blockchain architecture, designing comprehensive projects, and enhancing gameplay, thus fostering innovation at the business level.

Similarly, the simplification of technical barriers by AI enables the widespread application of previously complex operations. Examples include flash loans, optimal mining strategies, and automated yield acquisition, the Judgment of Head Miner Exit Time, all of which can be accomplished by AI. AI possesses the ability to autonomously program, select paths, and directly execute these operations. This parallels the usage of skill cards in the game Yu-Gi-Oh!, where skill cards activate and take effect automatically. This accessibility empowers ordinary users to engage in operations that were previously limited to those with high technical expertise. For instance, capturing MEV typically requires programming an MEV bot. However, when such tasks become achievable by ordinary individuals, profit margins diminish as participation becomes widespread. Consequently, a gas race ensues, where elevated gas fees erode the value of MEV due to the principles of game theory. Ultimately, this leads to reduced profitability and diminished impact of MEV. This phenomenon exemplifies a form of technological development that stimulates industry optimization.

AI will facilitate the widespread adoption of blockchain technology. Currently, there are fewer than 320,000 active Ethereum users, representing a small fraction of total internet users, according to data from Footprint Analytics. The primary challenge lies in the lack of user demand and the complexities of on-chain interactions. Previously, integrating data into the blockchain or using blockchain-based tickets and credentials required establishing a blockchain system or incurring high gas fees, resulting in significant costs. However, leveraging AI technology now allows for low-cost blockchain construction and optimization of on-chain data usage, leading to reduced gas fees. As a result, blockchain technology can be applied and smart contracts deployed in various domains requiring authentication and transparency. Ultimately, an AI-driven simplified interaction system will attract a significant number of users to the blockchain industry.

The impact of AI in the blockchain context is primarily limited to the application layer. Users can leverage AI to bypass the complexities of writing smart contracts and directly deploy applications tailored to their needs. Consequently, project development emphasis will shift from issuance to innovation and operations. The application layer is expected to undergo substantial transformative changes in the future. However, AI's influence does not extend to the underlying layers, including the execution, consensus, and data layers, which necessitate fundamental advancements. Mere automation of repetitive tasks is insufficient to drive qualitative transformations in these areas. For example, the implementation of EIP1559 in the Ethereum London upgrade has bolstered Ethereum's progress, while the completion of the Shanghai upgrade is crucial for increasing ETH staking volume, reinforcing Ethereum's security, and revitalizing the LSD sector's growth.

（From Crypto.com）

The Role of Blockchain in AI

The inherent disparity between the decentralization of blockchain and the centralized AI technology paradoxically provides an opportunity to address the challenges encountered in AI.

The predominant centralization of modern AI and big data technologies under the control of a limited number of powerful entities with significant technological capabilities and resources confers influence over market trends and user behavior. Consequently, individuals are compelled to trust AI's faithful execution of instructions, leading to inherent risks such as privacy breaches, algorithmic biases, and data misuse.

The distributed and decentralized nature of blockchain provides a practical solution to these challenges. Through smart contracts, data accessibility and operational boundaries can be limited, thus alleviating the risk of malicious behavior. Deploying monitoring nodes enables penalizing misconduct by confiscating AI's computational resources. This framework ensures AI's directed focus on human development, preventing excessive utilization and unauthorized actions.

Blockchain empowers anonymous users to decide whether to contribute underlying necessary data for AI model training. Zero-knowledge (zk) technology enables the disclosure of user data while preserving personal privacy. The entire process of data collection, storage, and sharing operates on decentralized nodes, ensuring data security, availability, and source verification. Consequently, a proportionate share of the profit generated by AI model can be distributed as dividends to data owners. A suitable incentive mechanism can leverage the decentralized nature of blockchain with high data security.

Likewise, users prompting AI models can also receive partial profits based on their ownership of the prompts when utilized. This arrangement safeguards the interests of both AI data owners and prompt providers.

Computational mining is a crucial consideration due to the substantial data and adequate computational power requirements. However, the current global supply of computational resources falls short of demand. To address this, decentralized cloud computing mining pools can aggregate resources and provide subsidies to contributors. Subsequently, the auctioning of computational power for AI model training ensures efficient utilization of limited resources with computational security and reliability. Furthermore, the integration of data, algorithms, and computational power enables the development of an AI-as-a-Service protocol. Leveraging decentralization and reusability, this protocol offers AI model construction services to users in need, covering data acquisition, processing, algorithm selection, and computational resource allocation. This ecosystem-based approach mitigates centralization risks while preserving supply chain benefits.

In the realm of AI application, blockchain effectively addresses issues like piracy, plagiarism, and virtual identities that arise from AI's remarkable learning capabilities. By recording artworks as on-chain NFTs, unique smart contract addresses validate their authenticity. The value of artworks, besides their inherent artistic qualities, also depends on the identity of their creators, just as imitations of Van Gogh's Sunflower hold little value. While blockchain can prove which sunflower painting is truly crafted by Van Gogh's hand. Also, blockchain can be employed to build distributed knowledge graphs, ensuring data integrity, permanence, and availability.

To address the construction of virtual identities using personal data by AI, Owner Attested Tokens (OATs) or Self-sovereign Biometric Tokens (SBTs) can be utilized. Each blockchain action is logged, and the corresponding OAT or SBT created is distinct, enabling identity verification based on these tokens. Blockchain's tamper-proof nature guarantees the impossibility of fabricating non-existent events.

In summary, AI serves as a productivity tool, propelling the adoption of blockchain and introducing novel narratives for metaverse. However, AI is limited to replacing repetitive tasks and reducing technical barriers, unable to drive innovation in critical technologies. Consequently, AI's impact on the blockchain industry remains confined to the application layer.

On the other hand, blockchain functions as a risk controller and resource optimizer in the AI industry. It curbs excessive AI development and unauthorized operations, safeguards data and asset ownership rights, and optimizes the integration of data and computational resources required by AI. Nonetheless, its purview is primarily concerned with promoting transparency, decentralization, and data ownership within AI.

Reference

[1]"Bitcoin: A Peer-to-Peer Electronic Cash System" by Satoshi Nakamoto (2009.03)

[2]"Mastering Bitcoin" by Andreas Antonopoulos (2016.03)

[3] "Challenges and Recent Advances in Blockchain-Based Payment Channel Networks" (2021.07)

[4] "Beyond Web3: The Fantastic Drift of AIGC, the New Darling of Capital" by 0xmin (2022.10)

[5] "The Dilemma of AIGC and the Way to Break Barriers in Web3" by wheart.eth (2022.11)

[6] "AIGC: The Revolution of Content Productivity" by Yang Renwen (2022.12)

[7] "Emergence and Evolutionary Information of Large Language Models: Accelerating Protein Structure Prediction" by Zeming Lin (2023.03)

[8] "How AI Can Help Build Web3" from crypto.com (2023.03)

[9] "Reflections: The Impact of AI Breakthroughs on Creators and NFTs" by Sleepy (2023.04)

[10] "Ethereum White Paper" by Vitalik Buterin (2023.05)

#OpenAI #chatGPT-4 #crypto2023 #Binance

المؤلف: CloudY،

المحرر: فينسيرو، YL

المراجع: ناتاليا

كانت الطبقة 2، باعتبارها مخططًا محسنًا لسلسلة الكتل العامة لإيثريوم، نقطة جذب ساخنة للاهتمام والمناقشة والبحث والتطوير. على سبيل المثال، بذلت فرق البحث والتطوير محاولات نشطة للحلول التقنية للطبقة 2، مثل Ronin حيث توجد Axie، وStarknet وArbitrum وOptimism وZKSync التي تستخدمها DYDX. إذن ما هي الطبقة 2؟ تسمى سلسلة الكتل العامة لإيثريوم نفسها الطبقة 1 أو الشبكة الرئيسية أو طبقة سلسلة الكتل الرئيسية، وتعني الطبقة 2 نقل المعاملات من طبقة سلسلة الكتل الرئيسية إلى طبقة منفصلة يمكنها التواصل مع السلسلة الرئيسية لتحقيق معاملات أسرع برسوم غاز أقل. كما هو موضح أدناه، فإن الطبقة 2 تشبه نوعًا من الطريق السريع الذي تم إنشاؤه على شبكة إيثريوم الرئيسية لتحويل حجم المعاملات وتخفيف ازدحام المعاملات على طبقة سلسلة الكتل الرئيسية لإيثريوم. حاليًا، كانت هناك العديد من الحلول التقنية للطبقة بما في ذلك قنوات الحالة والسلاسل الجانبية والبلازما والتجميعات وما إلى ذلك. السلاسل الجانبية والتجميعات، هما حلان شائعان للناس، يختلفان على النحو التالي: الأول يحتاج إلى التحقق من خلال العقد المستقلة الخاصة به، مع اعتماد سلامته بشكل أساسي على نفسه (Polygen هي إحدى حالات السلسلة الجانبية)، بينما تعالج الأخيرة المعاملات على دفعات وبطريقة مركزية تحت السلسلة استنادًا مباشرة إلى الطبقة 1، وتصدر التحديثات إلى blockchain الرئيسية جنبًا إلى جنب مع بيانات المعاملات على سلسلتها، ولا تزال سلامتها تعتمد على الطبقة 1.

Author: CloudY, Sihan

Editor: Vincero, YL

Reviewer: Crystal

The sizzle of non-fungible tokens (NFT) has been surging since 2020. Cyptopunk comes first and PFP NFT projects spring up such as BAYC, Doodle, Azuki, etc. NFT becomes visible and known to the public at a breakneck rate. BAYC recently has launched APE tokens and Otherside Land, bringing record-high popularity to PFP NFT. The rise and fall of GameFi projects, such as Axie, Farmerland, Radio Caca, Crabada, Mobox, Mines of Dalarnia and StepN, has attracted a high level of interest. That tide also enables users to know what is NFT and attracts a flood of traders, especially outsiders, to the NFT market. Thus the market is wondering why NFT can be so buzz-worthy in a big and enduring way. Since the enduring popularity of NFT is the result influenced by many factors, we put our focus on how many funds NFT can raise. This paper will elaborate on how NFT develops an emerging market as a new form of fund-raising, and what makes NFT stand out. Before coming to the point, we’ll first untangle and introduce the way crypto raises funds and how it evolves to make the paper accessible.

I. How the way Crypto raises funds evolves

The way crypto raises funds evolves frequently from the shambolic market at early days to a sizable market. At infancy, cyrpto raises funds in a similar way to traditional finance. That can be revealed from the initial coin offering (initial ICO), private sales ( including angels, seed round, series A, series B, etc.), and the evolved initial exchange offering (IEO), initial dex offering (IDO), initial farm offering (IFO) and other forms of launch, and even grant&private forms such as gitcoin and hackathon. Project providers hence have more choices to acquire funds in the most suitable ways.

ICO

ICO in the crypto industry has a likeness to IPO in traditional finance. IPO is the process where companies issue private shares to the public by offering new shares and acquire funds by issuing shares in the primary market. However, companies as IPO candidates must meet the requirements of the Exchange and the Securities and Exchange Commission (SEC) before launching an IPO. Also, companies generally engage investment banks to launch marketing campaigns, evaluate demands, price IPO, and set dates. On contrary, ICO set fewer restrictions. When using ICO to raise funds, companies directly issue their tokens which will be purchased by the public with BTC, ETH or stable tokens (such as USDT, USDC, DAI, etc.). Free of review by exchanges and promotion by investment banks, fundraisers usually publish a white paper among investors to introduce projects. Because it is made directly available to the public, the entire cycle is shorter than private placement, which avoids the rehashing of values to investors. ICO is a favorite for start-ups because its costs are lower and its smart contracts can speed up the process. The reality that investors have to spend tons of time and effort to know the projects undergoing ICO on white papers and smart contracts undoubtedly increases risks, consumes time, and also results in potential fraud, thus requiring extremely high credibility. This is exactly what the chaos during ICO shows.

A security token offering (STO) is a special fund-raising form designed based on ICO. STO combines traditional IPO and ICO by collateralizing certain assets to issue securitized virtual tokens. Similar to IPO, this process is regulated by security law, which makes STO highly credible, but the issuance has to go through complicated procedures and regulatory restrictions. The strict restrictions force most projects to abandon the use of STO, and then STO is out of the spotlight.

Private Sale

Experiencing unregulated ICO, investors and project providers switch to choosing private fund-raising. Crypto also shares or directly copies the similar way of private financing as traditional finance, including angel, seed round, series A, and series B, to name a few. In each round of financing, a single big sum is raised only from a small portion of institutional investors or individual investors at all stages of projects. The advantage of the private placement is that project providers can raise funds several times by convincing investors of the quality and value of projects with prospects. Investors may inject different resources other than capital. Although private placement can offer a big sum, it lasts for a longer cycle and attracts small investors in the single series, and project providers need to lobby investors repeatedly. Even if investors are asserted to support the projects, the investment has slim contributions to valuation, especially when projects begin to raise funds.

Lanuch

Following the private sale, IEO, IDO and IFO evolve from ICO but address the issue of trust, save time in project screening, and are open to more investors. The main difference is whether fund-raising activities are based on the centralized exchange (IEO) or decentralized exchange (IDO). The exchange acts as an intermediary between investors and project providers to promote projects for money-raisers and screen projects for investors - that is also named Launch by the exchanges. As a variation of IDO, IFO changes the subscription of project tokens. Instead, investors need to pledge the quantity and times of mining to subscribe for project tokens. IFO, on the one hand, avoids unrestricted token issuance which could happen in ICO, and, on the other hand, raise the costs of project providers who must pay the launch fee to the exchange. In addition, since tokens issued by the exchange are required for subscription, investors have to consider the pressure of token price swings. The possibility of inside-trading also concerns investors.

Grant & Prize

Grant & prize such as gitcoin or hackathon donations or bonuses are simpler and more direct. When project providers only need to sign up for the current activities, investors give donations or votes if they like. Despite a long process, project providers neither bear costs nor provide certain tokens. Quality projects will get more grants & prizes and attention than other projects and more importantly, attract a fresh batch of highly active early adopters, which is conducive to financing. Therefore, more projects choose gitcoin or hackathon to build up resources since the beginning of the launch.

In general, different forms of fundraising have their positives and negatives:

ICO can help raise fund fast without restrictions on the amount and process, but it leads to high costs to building trusts and necessitates experience and efforts to screen and determine projects.

Private sale help solicits a single big sum and non-monetary support from investors, but it is an inefficient and demanding job. Generally speaking, it will be difficult to acquire funds equal to valuation unless it is an extraordinary project.

In IEO, IDO, and IFO, intermediaries can maintain project quality somehow but also increase fundraising costs. In addition, the credibility of intermediaries is the key.

Grant&prize is the least efficient with a long cycle and small amount, but the nearly-zero cost, early resources, and active crypto communities are big draws to project providers.

II. Types and Evolution of NFT Fund-Raising Forms

Unlike traditional forms such as ICO, IEO and IDO in the crypto sector, the initial NFT offering (INO) means that project providers issue NFT to raise funds. INO is mostly used in PFP NFT projects, GameFi, metaverse, SocialFi and financial NFT, but seldom used in infrastructure, public chain and DeFi - which largely depends on whether NFT has use cases in specific projects. INO can be mainly divided into three main categories:

Asset INO (Asset NFT):

This type of INO resembles the traditional ICO and IEO in the crypto industry, but the fund-raising model has shifted from traditional FT to NFT. Asset NFT is mainly used in GameFi, metaverse, SocialFi and financial NFT, such as pets in Axie Infinity, Metamon in RACA, and lands in the sandbox. There are defined rules about how to use funds and also defined profit-making expectations and mechanisms for investors. For example, holding NFT will be rewarded with FT in the game and with income in the metaverse.

Profile Picture INO (Avatar NFT/PFP-NFT):

Beginning with Cryptopunk, PFP NFT brings about a terrific amount of impressive projects, such as BAYC, Azuki, Doodles, etc. PFP NFT is issued under the form of a combined public offering with a white list. Different from asset NFT, this type of NFT is mostly profile pictures whose investment motives are decided by the community consensus and project background, and thus community is an essential ingredient to the PFP NFT project.

PFP projects at an early stage often offer INO at a lower price and free airdrop, such as Cryptopunks, and are dominated by the community later. This type of NFT changes from a community-led one to a project-provider-led one as the NFT industry prospers. The project providers pursue more professionalism and capitalization. As the price of INO keeps rising, the investment motives also focus more on profits rather than memes and mementos. As PFP NFT project providers become increasingly powerful, bars are rising much higher, investment rules are more transparent, and the profit-making mechanism is clearer, investors are more able to anticipate their returns and understand the mechanism behind them.

Ⅲ. INO（Initial NFT Offering）

1. Forms, Scale and Efficiency of Fund-Raising

Different from conventional financial routes, NFT fundraising targets a wider range of the population in a faster and more efficient manner. INO can better meet the diversified needs of capital raising among project providers than other forms of fundraising such as ICO and IEO in the crypto industry.

Traditional financial routes adopt a form of top-down fund-raising where the project providers or developers directly reach investors for targeted fund-raising or allow IEO, IDO and IFO through intermediaries whereas NFT fundraising is freer and more diversified. In the most frequently-used form, the financing quota of a project includes the white-listing quota and the public offering quota. The white-listing promises a certain predictable amount while the public offer maximizes the financing through public engagement. Project providers can set their criteria for white-listed investors. Besides, Dutch auction targeted airdrop, and other fund-raising approaches can be combined. INO fund-raising is safer because NFT itself is non-fungible and less liquid. FTs can be laundered by mixing them with tornado cash after being stolen, but NFTs are less stolen because there are many ways to mark the stolen NFT, which makes it difficult for the thief to monetize them.

INO is also continuously improving scale and efficiency of its financing. In April 2021, BAYC raised 800ETH only in nine days, and in April 2022, the newly-emerged blue chip MoonBird shortly acquired nearly 20000ETH with a higher profile. As the public becomes more accustomed to and accepts such a form, PFP INO quickly becomes larger and more efficient thanks to the endorsement by project providers and the overall advancement of the fund-raising environment.

Table - Financing of mainstream PFP NFT projects:

2. Sense of community and social component

As stated above, private fund-raising is relatively closed because it is directly initiated by project providers or developers towards only a few investors or investment institutions. NFT financing naturally pays more attention to the community and is more open than other forms of fundraising such as ICO and IEO. Project providers attach importance to communication and interaction with community members.

First of all, in terms of RoadMap, the proposal mechanism, and events, NFT project has its own culture and identity, so in a more active community, members are more ready to voice their opinions in the project proposal and social media. The interaction between community members and project providers increases stickiness between the community and NFT and enhances the sense of community. For example, RoadMap provides a variety of unique benefits to holders, making them feel more satisfied and reinforcing their sense of identity in the community. Another example is the proposal mechanism, where community members can introduce their proposals to co-build the future development of projects, delivering a sense of ownership as project providers to users. Also, the community will regularly hold online and offline activities to maintain and expand itself. Most of the currently issued NFT projects have official Discourses, and appoint personnel to chat with community members and issue announcements on Discourses to keep it hot. Unlike ICO and IEO, discussions in NFT project are deeper, including not only how price rises and falls, but also how to plan projects in the next step, how to understand projects and their fundamental cultural meanings, or their passions for NFT, which is a feature of NFT project itself.

Before the NFT project casting, most projects will require users to obtain the white list. To do so, users need to complete tasks and procedures as required. In this process, time and energy devoted by users to those tasks and procedures will drive them to pay more attention to the follow-up development and planning of NFT projects, in the hope of gains for previous pains, and thus the stickiness between users and projects will be enhanced; in addition, when users manage to qualify themselves for the white list, their moves will promote the projects and encourage a flood of outsiders who have little knowledge over the projects to have a try and join the community as new users. The community is initially formed at the stage of becoming whitelisted.

NFT project itself and the community building and maintenance ensure stable communities to project providers, which can boost the development of projects. Almost all blue-chip NFT projects are equipped with super-high-quality communities. In addition to marketing components, those communities continue to send the NFT price higher, increase NFT trading volume, and secure project providers the royalties. More than that, communities give back to projects in all aspects, including but not limited to formulating or optimizing project routes, enabling NFT, giving NFT new consensus or meanings, and extending benefits into real life. In addition, project providers can continue to promote projects and finance on current users and scale in the subsequent fund-raising, so as to make it more continuous.

3. Consensus and narrative

Traditional financing has defined mechanisms and rules around profit-making. For example, funds are distributed and used under clear and transparent mechanisms and rules. Although raising funds by issuing NFT is essentially for making profit, there are distinctive differences in how to realize it. Traditional projects seek to finance mainly for better prospects, optimized projects, and larger market share and profits. However, for some reasons, such as the MEME component, limited real profitability, and weaker long-term project planning, PFP NFT projects prefer an ALPHA community with the strong consensus after fund-raising, so the consensus is a vital and even cardinal part of PFP NFT project. For most PFP NFT projects, they will establish a strong community-wide consensus in the early stage, through which the community and project providers work together to make common profits for investors and project providers. This means that NFT fund-raising becomes an effective measure to build a high-quality consensus community. For example, Bored Ape Yacht Club, known as the club of the nobleman, has a priced-higher NFT and lacks defined profit-making logic and other elements in the infant age, which has become good criteria to join the club, find like-minded friends and build consensus.

Moreover, NFT has a totally different consensus from FT. People buy NFT and FT for different reasons, perhaps because they are optimistic about the future of the project, or because fomo comes into fashion, but NFT investors will accept the loss from investment more peacefully than FT investors. As PFPs and artworks themselves in NFT can form a basic consensus or value, NFT investors can change their consensus from investment to a collection when NFT prices continue to fall, which is impossible for FT.

Apart from the transferability of consensus, NFT also has great extendibility and extensive versatility, which promises huge potential and allows project providers to create ambitious narratives. Solv Protocol, for instance, casts NFT into an automatically-performed vesting voucher, so users can deposit ERC-20 tokens into it and flexibly set the approach and rate of releasing ERC-20 tokens. The tradable and negotiable vesting voucher can be split in due time - which means not only expanding the financial functions but also transferring the original power of the blockchain. NFT also has unique cases of use: such as the domain name, unleash liquidity from locked position, and separation of rights to own and use. Project providers can tell gorgeous stories to attract users and investors, and this brings more appealing envisions after they implement the original plan step by step. Another obvious direction for NFT is the metaverse. Almost all INO project providers will eventually shape a story that they will usher into the metaverse. The NFT they are issuing now is the ticket to the metaverse. They will also promise airdrops or white lists after the metaverse is launched. Therefore, as NFT goes further, NFT-based innovation can create more possibilities for the entire industry and inspire the public to give greater expectations to the NFT projects. In other words, it is widely believed that NFT projects will have larger prospects and more phenomenal growth.

4. Extensible to tangibles

Different from traditional FT, NFT can be turned into tangibles. On such a basis, NFT can be greatly extended to the real world, and therefore, project providers have diversified options to build brand and IP, and bring more benefits and new experiences to investors.

NFT financing can be expanded to physical objects, mainly in the following aspects:

 (1) Project providers can build a proprietary IP to extend its influence in the cultural industry - for example, creating a label, shooting movies for IP, and even establishing a theme park;

 (2) NFT re-creation by followers - for example, animating NFT, creating generative music, or building we-media;

 (3) Widely used in the retail and service sector - this also holds true for project providers and holders, such as NFT bars, NFT designer toy shops, NFT fashion, etc;

 (4) Social groups and activities - offline gathering for fans, NFT player club, etc.

If NFT is born to change the game and break boundaries, Bored Ape Yacht Club may be the Trojan horse that breaks through the wall. Being only a year old though, BAYC has set an example in breaking the boundaries between crypto and the real world: BAYC grants its holder full copyright, which means that holders can create their own brand and start business activities based on BAYC, including but not limited to NFT merchandise, movies, games, and even bands, and all incomes from that are owned by holders. This strategy is undoubtedly a great success. Devolving icopyright and rights to re-create comes to be an important component for standard and model NFT financing.

Here are examples of how BAYC is extended into the real world:

APE-IN products, co-founded by Grammy winner Timbaland and BAYC members, will expand, launch and promote Bored Apes as a top musician in the virtual world; besides, Myth Division produces anime for BAYC; Apesthetics is one of the first streetwear brands to combine the tangible product with BAYC. Its owner can use the unique smart contract sewn on the fabric to verify whether the products are authentic, so it becomes as a real NFT; by the way, Greenland Group also buys BAYC as its digital strategic NFT image, and Li-Ning has BAYC4102 under its belt to issue brand derivatives around the NFT.

In addition to BAYC, it is not uncommon to extend NFT into physical ones: Azuki permits holders to re-create and will launch Azuki stores in the real world to sell streetwear, toys, and statues. Azuki will also hold meetings, exhibitions, music festivals and other on-site activities; besides, Doodles plans to apply its IP to music, animation and other fields, and allow holders’ business activities worth less than $100,000 dollars; CloneX and Nike jointly launch physical clothing in hope of enabling holders to use NFT in different digital platforms, even their own games, and VR/AR virtual worlds.

This broader application in the real world as a result of features of NFT creates more value for NFT investment than traditional channels of investment, which is undoubtedly extremely attractive to investors. Meanwhile, this new paradigm of financing has served many useful purposes.

5. Compliance-compatible

Another advantage of NFT financing is that it is quite compatible with current laws and regulations. Of course, seeing in another way, that is because both counties temporarily have no specific laws and regulations, which help formulate specific rules for NFT financing. As the NFT industry keeps progressing, and NFT financing takes off, countries will further improve laws and regulations for the NFT industry and financing to protect investors' income. That progress will also expand and standardize NFT financing.

According to the full account and analysis above, INO has manifold features and advantages: highly efficient fund-raising, strong communities for project providers to facilitate financing, accessible consensus, and expectations, and easily extendable to the physical world and compliance-compatible. However, as a new form of raising funds, there are some problems for INO:

First, its fundraising is not tremendously sustainable. For project providers, raising funds via PFP NFT is less sustainable because the issuance of multiple rounds of NFT faces headwinds and threatens consensus. Therefore, the fundraising is concentrated in the first round of NFT issuance.

Secondly, the benefits of INO investors are nebulous and less protected. Unlike traditional financial fundraising forms and traditional ICO or IEO in the crypto sector, the concepts of fundraising for most PFP NFT projects are in between sales and conventional fundraising. Project providers neither promise nor guarantee any benefits to investors. Rules on how to use funds are either absent or undefined. What most projects can provide is only a rough RoadMap. Project development and management are not transparent. The high centralization will easily result in the issuance of additional NFT/FT and dilute investors. Furthermore, investors don't know much about the basic facts about the NFT projects during fundraising, so they can't predict the next route and risks. For instance, derivative NFT or FT issued by some projects after the initial public offering of NFT may dilute investors who enjoy benefits in name only.

At last, financially speaking, NFT is less liquid and lacks the same stable value-adding measures as Staking and LP Farming to mitigate sell-off. In addition, the vague rules make it difficult to assure the benefits of investors.

New things come for reason and also come with limitations. As a new form of fundraising, INO can satisfy the diverse demands of project providers for fundraising. It boasts manifold qualities rather than simply issuing assets to collect funds. The advancement in industry and technology will optimize and address current problems. We dare say INO will be a better form of fundraising.

المؤلف: كلاود واي، سيهان

المحرر: فينسيرو، واي إل، دكتور سترينج

المراجع: كريستال

أنا تاريخ الوصول إلى حركة المرور

لا يزال Web3 ككل في مراحله الأولى وعادةً ما يكتسب حركة المرور بشكل أكثر جموحًا وبدائية من Web2 التقليدي. مع تطور صناعة Web3، يمر اكتساب حركة المرور تقريبًا بثلاث مراحل بارزة مع تغير احتياجات المستخدم.

المرحلة المبكرة

يتداول المستخدمون إلى حد كبير بالعملات المشفرة في المرحلة المبكرة من صناعة العملات المشفرة. يبحث معظم المستخدمين غالبًا عن وظائف مختلفة في البورصات المركزية (CEXs) من خلال مواقع الويب أو التطبيقات، مثل Mt Gox وBittrex. تنتشر مجموعة كبيرة من بورصات CEX باعتبارها وسيلة الوصول الرئيسية لحركة المرور، بما في ذلك Binance وHuobi وOKEX وKuCoin وMEXC وGate.io. إلى جانب تداول العملات المشفرة، تتيح CEXs الإيداع/السحب من الإقراض من نظير إلى نظير لمزيد من التحكم في الوصول إلى حركة المرور، حيث أن لدى المستخدمين أيضًا طلبات للإيداع/السحب بالعملات المشفرة. نظرًا لحصتها الكبيرة في السوق، فإن حدوث خطأ ما في عمليات تبادل الأوراق المالية سيؤثر سلبًا على السوق. ومن الأمثلة على ذلك انهيار بورصة Mt.Gox اليابانية بعد سرقة معظم عملات البيتكوين التي كانت بحوزتها.

Introduction:

DID and DeSoc have emerged as trendy topics which everyone is talking about. Whether Monaco or Lens Protocol, they are exploring what the social ecology at Web3.0 will be. Also, DeepDAO and CyberConnect are trying to create a decentralized network, while domain name service providers such as ENS are building identity systems on the wallet addresses. But between social ecology/network and identity system is an intermediate layer - the interaction record of wallet address dedicated to creating user profiles. To some extent, exhaustive and elaborate user profiles are what companies on Web 2.0 are dying for even at the price of user privacy since perfect user profiles can help them accurately locate user behaviors and provide the most efficient products or services at the least cost. However, the limited business scope and anti-monopoly only lead to less wide and deep data, companies on Web 2.0 only dream of that user profiles. On the contrary, all user data on Web 3.0 is published on the chain, and they are accessible to anyone to analyze. It causes a huge impact on Web 2.0. The problem is that unprocessed data just means a string of characters. Therefore, we need to analyze the data release credentials (such as SBT) which stand for a series of behaviors, and on which on-chain user profiles are created to increase the value of on-chain data.

Since blockchain technology is widely limited and the industry is still in its infancy, we are just collecting and analyzing the interaction record of wallet addresses. The wallet is currently used to stock assets - not an identity carrier on Web3.0 to represent user reputation on the chain. Most interactions are neglected. With the rise of DeSoc, project providers realize the need for a large amount of data to build user identity and define their influence and reputation. The ENS domain name service also reminds users that the wallet is a key to the metaverse. Especially when Vitalik Buterin mentioned soulbonding token (SBT) and user identity system on Web3.0 or social credit system on Web3.0 in Decentralized Society: Finding Web3's Soul, the DID re-emerges as a hot field drawing the most attention.

This article takes a deeper dive into the empowerment of on-chain user behavior records in the context of DID, that is, creating user profiles on the chain. Then we point out the problems caused by the lack of on-chain user behavior records and summarize and evaluate the existing solutions. And we envision possible mature solutions and their functions in this field.

1.Introduction/analysis of on-chain user profile project:

The analysis of on-chain behaviors and user profiles is still in the initial trial-and-error phase. There are neither mature solutions for on-chain user profiles nor broader use cases for both businesses and consumers. We list some mature projects for on-chain user profiles popular in the current market and analyze their fundamental elements, the pain points, and the starting points with the aim to inspire more study in development trends of on-chain user profiles.

(1) Project Galaxy

Project Galaxy is a universal underlying protocol for on-chain profiles which collects on-chain data through sub-graph search and wallet snapshot and off-chain data through off-chain data sources to establish a user interaction database. The interactive data on the user chain is collected by subgraph query or wallet snapshot. Project Galaxy uses OAT (On chain Achievement Token), NFT, and Credentials to record users’ interactive behaviors. OAT is an internal tool in the Project Galaxy protocol while Credentials centrally write down data on the Project Galaxy. The latter allows the activity initiators to distribute interactive credentials (OAT/NFT) for qualified users on its database as specific needs are required. Credentials also provide OAT oracle and API in the way the initiators can reward all users holding target credentials with air drops or voting rights. Users choose and participate in activities that interest them on their "Campaign" page for credentials. In the future, Project Galaxy will allow open APIs to connect to other projects.

Positioning analysis:

Project Galaxy, the universal underlying protocol of the on-chain user profiles, has built a Web3 DID (Decentralized ID) system.

The partners of Project Galaxy can access the syndicated user data sources both from on-chain channels and off-chain channels. They can submit parameters and badge designs to create activities and credentials. In this way, activities can encourage users to act as required on the chain, and the created credentials (such as OAT) are the rewards to users for those behaviors. The data dimensions and standards to issue such credentials are independently defined by the project providers.

For developers, Project Galaxy can provide them with application modules, credential oracle engines, and credential APIs. Developers can build and issue NFT badges (OATs) by using Project Galaxy's NFT infrastructure and on-chain credential data networks.

In addition, Project Galaxy sets a Galaxy ID or a common user name for each user. A Galaxy ID is generated after the users tie their wallet to the website. Project Galaxy uses the Galaxy ID to connect all those credentials and form a credential data network. Through Galaxy ID, users can display their credentials collected in Web3.0, such as NFT badges, to highlight their past achievements. On the website of Project Galaxy, users can view the details and rewards provided by each project initiator who is the partner of project galaxy to freely participate in any of them.

It can be concluded that Project Galaxy, as the top on-chain profile project, prefers the business-oriented on-chain profile solutions, that is, to offer on-chain and off-chain user profile syndication agreements to serve project providers, while partners and such activities further attract customers. As a universal underlying protocol, Project Galaxy, of course, actually includes a three-tier protocol, respectively for users, partners, and project developers. Users can search their data of on-chain and off-chain behaviors in Web3.0 on the website. Project Galaxy enables open APIs and provides more underlying services for project developers. In a word,  Project Galaxy has extremely bright prospects.

(2) Rabbit Hole

Rabbit Hole is a mature self-contained on-chain behavior recording protocol. It depicts user capabilities through its skills NFT, narrows down the list of target users according to user skills in the tasks, and develops tasks to help project providers who publish tasks to screen users. Rabbit Hole regards NFT deployed in the ETH under the non-transferable ERC721 standard as credentials to record user data. Rabbit Hole also adds new functions - allowing users to transfer the Soulbonding NFT to the destruction address (0x00...); one NFT credential for one address; upgrading the credential contract through the standard proxy contract. Although Rabbit hole aims to become the core component of the Web3.0 ecosystem, its protocol is developed in a centralized way, rather than directly on the basis of the universal underlying protocol. Therefore, its system currently provides two types of NFT approaches: unlicensed integration and partnership. The unlicensed integrated credential can be used with Guild, Collab.Land and other tools. The credential for partnership is customized for the project providers.

Rabbit Hole focuses on the collection and proof of on-chain data. It uses verifiable data on the chain to the proof them in terms of Skills and Quests.

Rabbit Hole classifies Quests into DeFi, NFT and DAO, and sets Topic, Level, and Season for NFT in those three directions to represent the senior level of skills. But only the introductory level and season 0 are available. To obtain the skill credential NFT in a different direction, users need to finish the interactive tasks on the chain specified by Rabit hole, such as "Mint an NFT on the Zore chain", "Join a Party in the PartyBit" and "Publish an Entry in the Mirror".

Besides, in the Quests, Rabbit Hole will release the on-chain interactive tasks prescribed by other project providers. To engage in those activities, users must have certain skills or Bright ID  and will be rewarded with a certain amount of designated tokens or NFT after completion.

Positioning analysis:

Rabbit Hole is currently the task distribution protocol for the project providers. The partners pay for their tasks, which encourages users to complete specific steps on the chain while users finish the interactions through the protocol for the protocol points or the incentives granted by the project providers. This positive interaction helps users learn new skills or methods about encryption and earn bonuses while attracting a large number of new users for the DAPP protocol.

However, the user profile on the Rabbit Hole is limited to the users’ behaviors on its websites and excludes all the behaviors on or off the entire address chain. No developers are joining for the time being. It is obvious that Rabbit Hole focuses on the business market and the consumer market and the underlying protocol functions remain to be improved.

(3) DegenScore

DegenScore aspires to build a Metaverse based on on-chain data. The research by a16z defines DegenScore as a system that can summarize and simplify the data on the address chain to make them readable and comparable, and measure users' obsession with cryptocurrency.

DegenScore has established a perfect ecosystem for the addresses on the chain, including:

① Perfect on-chain behavior scoring: including highlight moment display, tagged address, ranking system, etc.

② Partnership with other project providers: CAFE displays cooperative activities with other project providers, such as airdrop, interactions, etc.

③ DegenScore provides an easy-access interface for other projects. Any DAPP can access the scoring service provided by DegenScore in its ecosystem, which becomes one of the bases to screen and judge users.

DegenScore has a multidimensional and complete behavior scoring dimension. In V1, DegenScore develops the Degen score through a series of on-chain behaviors, including but not limited to holding specific tokens, interacting with specific smart contract protocols, and adding the dimension of time, such as early DeFi farmer. In the latest updated V2 this year, DegenScore further refined the scoring system into three sectors: DeFi, NFT, and Others. In the DeFi section, the scoring dimension includes whether it is an early agreement participant, the number of transactions and the number of transactions of DeFi tokens, the number of pools in the farm, time nodes, duration, etc; in the NFT sector, the important scoring dimensions are whether the user have participated in a series of blue chip NFT MINT such as BAYC AZUKI, or whether the user holds blue chip NFT.

Positioning analysis:

DegenScore has established a complete on-chain resume in Web 3.0 with a unified standard, and confidential scoring dimensions and standards. Users and project providers cannot freely choose the dimensions of the on-chain user profile; they only access the scores provided by DegenScore. Although this approach reduces the freedom of choice for project providers and users, it makes data more credible with the reference value. The  DegenScore can be used by both the business and the consumers. The concept of an on-chain resume has been largely expanded in the business. For example, some start-up teams of Web3.0 are using this on-chain resume as a way to find job seekers.

(4) Noox

Noox is a decentralized on-chain achievement proof platform, which allows users to publish, proof and mint on-chain achievements without permission. Therefore, it is essentially a programmable data validation infrastructure on the chain. Noox mints the user's Web3.0 achievements as Soulbound NFT (Noox Badge), which is a non-transferable ERC-1155 programmable NFT (Non-transferable ERC-1155 Token). The Noox badge contains a string of metadata, qualification criteria, and verification logic for each badge for on-chain operations. Everyone can program any rule into the badge standard to use EventLogs, Transactions, and other data to collect transaction information on the user chain (for example, the currency of the transaction, the number of transactions, the value of the transaction, the type of interaction, etc.).

Positioning analysis:

Currently, through the Noox protocol, all users can claim badges issued under the rules established by Noox, so at this stage, the Noox is more like a tool to record on-chain interactive behaviors which are independently developed by the protocol. In other words, Noox uses smart contracts and verification oracle machines to verify composable badges and the on-chain data built into the protocol to create a more collaborative and elite-managed network. Noox envisions that this network is fundamental, transparent, and open. Therefore, the mature Noox protocol is a community-driven, contribution-preferred, and blockchain-based system. It can establish a Web3.0 user profile, record how users interact on the chain and build applications and protocols to understand the structure of users' interaction behavior, which makes it also work well in the field of businesses and consumers.

(5) ARCx

ARCx is a decentralized liquidity market on ETH and Polygon. It provides the safest and most capital-efficient lending experience in DeFi by using DeFi credit scores. The main objective of ARCx is to improve the capital efficiency of the DeFi lending market by measuring and rewarding high-value lending behavior. ARCx uses the DeFi credit scores to continuously analyze on-chain behavior and evaluate the credit risk of a single wallet address in DeFi. DeFi credit scores are a numerical value between 0 and 999, which describes the credit risk of a single address based on its on-chain lending activities. The score is calculated based on the historical data and operational experience of each borrower in managing risk and avoiding liquidation over a period of time. Scores are calculated off the chain and then released on the chain through ARCx's customized oracle infrastructure. The DeFi credit score will be updated on the chain 48 hours later. The score consists of three main parts - daily score reward, survival score reward and liquidation penalty, whose combination equals to DeFi credit score.

Positioning analysis:

The starting point of ARCx is like the on-chain standardized scoring system on DengenScore, but the former is more focused on DeFi, similar to the sesame credit score in DeFi. From this point of view, the biggest challenge for ARCx is how to make this kind of scoring system more acceptable to DeFi projects to establish the reliability of their reputation system - it deserves more continuous exploration.

(6) lvl protocol

The lvl protocol is produced by indie DAO for the different types and needs of each DAO and even Web 3.0 organizations and links different Web 3.0 communities. The lvl protocol uses an interoperable Soulbound NFT to record data. The lvl token is a dynamic NFT that shows the skills acquired by users in each community and combines data from multiple sources (data from major social networking sites are stored in IPFS), which is verified by the community, and then stored on the chain. Therefore, any smart contract can interact with each other on the user's lvl protocol. It connects data from each DAO and ecosystem in the form of SBT, while maintaining interoperability on the chain so that anyone can mint lvl NFT.

Positioning analysis:

The lvl is an encrypted resume, as well as an on-chain reputation and skills Web3.0 resume, highlighting all data, experience and contributions of users in the community, DAO and Web3.0 nodes. Users can mint lvlNFT to track the contributions, skills and reputation on the chain - which changes dynamically. Community administrators can combine the lvl protocol with community data, customize the community-related data or resumes acquired by members, and summarize all off-chain data from the community, DAO, game or metaverse into the member's on-chain lvl token.

The lvl protocol is mainly used in the DAO. Any community can connect its existing data sources to the lvl rollback API. Community managers can customize their data sources and types, such as SourceCred, Coodinape, Discard, Twitter, Figma, Github, etc.

(7) Sismo

Sismo is a modular proof protocol that focuses on decentralization, privacy, and availability. The protocol is deployed in Polygon. Sismo releases SBT as a non-transferable token (ERC1155) - a badge in the ecosystem of Sismo. On Sismo, users can generate a wide range of on-chain data and proofs, such as donations to Gitcoin, voting twice in ENS DAO, or sending more than 100 transactions on Ethereum. Since Sismo is a modular data protocol, the on-chain data can be freely selected by the creator. Through identification, users can access the advanced functions in the Sismo ecosystem, or prove their reputation in the applications and protocols using the above proof. The Sismo protocol is based on several modular concepts: accounts, creator proof, registries, and badges. The open-source and modular Sismo protocol allows the coexistence of multiple proofs so that creators can work together to build, modify and update protocols together for different needs.

Positioning analysis:

On the one hand, Sismo is an underlying modular proof protocol and hence, Sismo protocol can be easily applied and compatible with other protocols. The project providers can freely select modules to meet the needs of the project providers and users. In addition, Sismo focuses on ZK badges - zero-knowledge proof badges. Currently, Sismo hasn’t published how those badges were created or used. The generation of ZK badge relies on a zero-knowledge proof mechanism and ensures the user's and data privacy. The ZK badge protects privacy by creating no links between the source account used to prove eligibility and the target account receiving the badge. This means that the project providers can screen user behaviors to issue qualification certificate SBT or some kind of reward while fully guaranteeing the privacy of user addresses.

It is clear that Project Galaxy, Sismo and even Noox are establishing themselves as the fundamental protocols applied to businesses and consumers, while DengenScore and ARCx are more inclined to establish an on-chain scoring and credit system based on their standards. In a more specific segment with definite demands, Rabbit Hole prefers to serve the business by using the established rules to educate DAPP users and attract new users and traffic; whereas the lvl protocol focuses on the on-chain and off-chain data behavior scoring system in DAO. We can have a glimpse of future trends in on-chain user profiles and gain insights from these selected projects.

2.Possible vision and use cases of on-chain user profiles:

First of all, the premise is users have the right to choose which certificates stand for them or even reject unwanted certificates, rather than being passively labeled by the protocol. Secondly, we think that the final form of the on-chain user profiles should be an open source, protocol-level, modular user behavior record ecosystem based on the sub-graph of the graph, API, and other data acquisition approaches to prevent some protocols from centrally monopolizing free user data. In this system, as the issuer of the certificates representing the user's reputation, the protocol's qualification also needs to be reviewed and selected by the users. Otherwise, a centralized institution might monopolize the credit on the chain. As a result, the protocol can be evil without cost and control the user's certificate at will. Therefore, on the basis of the choice by both parties, users and project providers can find the interaction records about the target behavior in a modular way, and cast certificates to represent the existence of this behavior, thus creating their reputation/profiles. Besides, these certificates should be interoperable among the chain or even across chains, especially between public chains that support EVM by using the same address through a private key - which is also the same identity carrier - so that the behaviors on the chain can produce comprehensive user profiles to maximize its value. For example, in the middle of development, a leading project, together with other top projects, establish a set of general ERC standards or form a certificate organization composed of DAO based on its existing certificates to standardize the identity system on the chain, and build a user profile system recognized by most projects and users. That eventually become the token standard in the on-chain social credit system as widely used as the ERC20 standard.

Only in such an environment can the on-chain user profiles be formed, the on-chain credit/reputation system be established, and the value of the interaction record in each address be evaluated and utilized. Based on the features of on-chain user profiles, we have built several use cases: 1. DeSoc; 2. On-chain resume protocol; 3. Launchpad, AMA, and other distribution protocols; 4. Unsecured financial system; 5. A comprehensive social credit system combined with the offline authentication system.

(1) DeSoc

DeSoc, a social protocol built on users’ influence, needs on-chain user behavior and their interactions with other users, which naturally fits the definition of on-chain profiles. Among the DeSoc projects, protocol-level products such as Lens Protocol and Cyber Connect aim to build an interoperable on-chain social network. Although the underlying user social graph in each protocol can be commonly used in any project supporting the protocol, the user social graph between different protocols is incompatible or even mutually exclusive. Projects have to choose a single protocol, and inevitably lose potential users outside the chosen protocol. But user profiles can deal with that. A unified user interaction record system can directly provide cross-protocol data sources that can be modularized for different projects, so projects can adjust the weight for interaction behaviors according to their positioning, and produce the most well-tailed user profiles.

(2) On-chain resume protocol

The resume protocol is the most intuitive user profile. Users process their interaction logs into proof that mirrors their capabilities and records. DeepDAO mainly scores each individual in a centralized manner and showcases information, such as DAOs which he’s in, proposals he initiated, and votes he cast. That is just a function under the sub-sector. Similarly, user profiles can work as proof of skills to code, leverage financial derivatives, and issue NFT. Furthermore, it is also a resume proof such as how many votes he has given on key proposals of famous projects, whether his several lending is liquidated or not and whether he is responsible for certain hack events, and return all funds. Formed by these tamper-proof and intrinsically valuable records, the user profile constitutes a simple and feasible resume for the user. In addition, the on-chain record in a DAO organization or project can be their resume on the chain too. To determine the quality and credibility of projects, many indicators can be referred to, including TVL, AUM, the partnership with other organizations or projects, profitability, whether they have been hacked, or other major events - such as whether the stablecoin issued has been terminated. All in all, the on-chain resume protocol can give birth to the capability evaluation system for individual users and organizations or projects, and matchmake or rank them by different needs.

(3) Launchpad, AMA and other distribution protocols

The distribution protocol is another appropriate use case for user profiles. The project providers can accurately locate and reach real potential users, and attract them with more inspiring incentives. Distribution protocol leaders like Launchpad. AMA and task releases such as TrustPad and Project Galaxy are indiscriminately addressed to all users, which will undoubtedly increase the costs and reduce efficiency because coupon clippers will just take the free ride throughout the process. But if the user profiles are created on the chain, the project providers set up a mechanism to screen interaction behaviors. In this way, they can locate more real target users at the same or lower cost. Users can also search for appropriate projects based on their own profiles, and make a difference in the infant project to maximize their earnings. This scenario is also how the resume protocol is applied to some extent.

(4) On-chain credit financial system

The on-chain user profiles embody the user's reputation and credit on the chain. Credit can’t be found in the current blockchain, so all financial behaviors are conducted on the excessive mortgage, or the operational scope of lenders must be limited by smart contracts. For instance, Aave and BendDAO run on excessive mortgage loans while Alpaca and Gearbox operate on leveraged loans. There is no exception. Those practices greatly reduce the efficiency of on-chain capital. As mentioned above, all on-chain user interactions have their intrinsic value on which a credit system can be produced for unsecured lending. In fact, this kind of loan is not necessarily completely unsecured. It can be a loan without collateral where only a certain amount is assigned based on the past behavior and existing status of the address; it can be a load with a slight adjustment to its original mortgage rate, or interest rate cuts; and it can also the loan with installment payment and the practice of buy now, pay later ( BNPL), etc; it can even be the guarantee loans for other addresses.

(5) Sound social credit system

The sound social credit system is exactly the final outcome that Vitalik Buterin expects to be generated by SBT. First, offline certification, such as an ID card, academic degree, or property certificate, can endorse the on-chain identity, and then the on-chain interactions build up the reputation. Thus, a sound social credit system combining the off-chain and on-chain elements comes into being to blend blockchain with real-world credit. Even though this system is a mature online identity solution, how to tie real-world identity to on-chain roles is still in the capacity of Web3.0 and it is not so crypto. It is a part of the final solutions though, and we believe that this system is a possible option for the on-chain credit system, and users can still choose the pure on-chain solution.

3.Conclusion:

In the era of the digital economy, it is said that user data on the Internet is a gold mine, and the dot-com process data to s add value. In the era of Web 2.0, user data is fragmented and companies hardly see the bigger picture. Besides, the data are owned by the platform, so the individual user has no access to the value increased by data processing. However, in the Web3.0 era, due to the nature of blockchain, footprints on the chain are owned by users, fundamentally destructing the data ownership structures. What’s more, to improve the reputation of their addresses, users are also willing to create their profiles on the chain. For protocol providers, wider user profiles can augment user growth and capture more value than the information island in the era of Web 2.0. Hopefully, the on-chain user profile promises the potential we are looking for in this field.

Source：

https://wrenchinthegears.com/wp-content/uploads/2022/05/Vitalek-Buterin-Soulbound-Token-Paper-May-2022.pdf

https://deepdao.io/people

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https://docs.galaxy.eco/

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https://docs.noox.world/

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https://docs.rabbithole.gg/rabbithole-docs/welcome-to-rabbithole/our-mission

https://mirror.xyz/cryptolich.eth/o9-KJ4dzsWszGTqKMWcsF5Zb3BE0lCDdyrPx-zEoVHo

https://rabbithole.mirror.xyz/CYsaX0fT-IOV5OO3JiDcXpLFdcnhocVOO5pTZ52hsLE

degenscore.com

arcx.money

https://wiki.arcx.money/welcome/arcx-credit-introduction

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https://indiedao.gitbook.io/indiedao/products/lvl-protocol

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