AI x Crypto, SocialFi, BTC programmable crypto narratives and projects

Author: Stacy Muur, Web3 researcher; Translation: Jinse Finance xiaozou

The main narratives brought to us by Messari’s latest crypto research report are: AI, SocialFi, and Bitcoin’s programmable layer.

Below, let’s take a look at the key insights into these areas, the noteworthy players, and the relevant investment considerations.

1. AI x Crypto

The three main layers that AI x Crypto development currently focuses on are:

• Infrastructure layer (such as Akash Network, The Render Network, etc. for computing training AI models)

• AI model layer (such as Allora, bittensor, Ritual, etc.)

• Application layer (such as MyShell)

The infrastructure layer is now complete, and the next generation of AI x Crypto protocol waves is expected to rise at the model layer. Spectral Token (SPEC) is one of the only liquidity tokens in the category with a circulation level of about 11%.

Given the traditional financing of most model-layer protocols, Messari analysts expect that the circulation level of tokens issued by these protocols should generally be around 10-20%, which will lead to a large-scale oversupply in the coming months and even years.

Favorable factors:

• Growing interest from institutions and retail investors.

• Synergistic development with the field of generative AI.

• Potential for integration with the SocialFi protocol.

Disadvantages:

• Clear demand is needed to avoid market fatigue.

• Challenges brought by demonstrating short-term utility and integration.

2. SocialFi (DeSoc)

Main Trends:

• Incentive structure: Changing the monetization method of traditional social media by introducing speculation.

• Attracting creators: Incentivizing creators to bring users, generating a speculative value cycle.

Investment Considerations:

• Oversupply: Prices are generally lower as creators and users receive higher allocations.

• Impact and Probability of Success: Moderate impact, with varying degrees of success probability.

• Market Consensus: Mixed, with both high and low valuation views.

Farcaster has 50,000 DAUs and recently raised funding from Paradigm and a16z at $1 billion FDV (fully diluted valuation).

SocialFi, on the other hand, has a lower consensus. Degen is valued at $600 million, while friend.tech is valued much lower at $80 million.

Pros:

• Incentive flywheel encourages creators and fans to participate.

• A larger pool of monetizable creators due to early tokenization.

Cons:

• The speculative value cycle may be interrupted, bringing instability to the market.

• It may be exploited by profiteers or attackers.

3. Bitcoin Programmability

Main Trends:

• Functionality Addition: Emphasis on adding programmability and modular support to Bitcoin.

• Soft Forks and Upgrades: Exploring soft forks for new opcodes and script overhauls.

Investment Considerations:

• Oversupply: Future protocols may face severe oversupply.

• Technical Limitations: There are currently limitations in rollup capabilities and DA.

• Market Acceptance: Uncertainty in market demand for a programmable Bitcoin layer.

Favorable Factors:

• The huge liquidity potential brought by unlocking Bitcoin's value.

• Early success in the NFT space shows strong market interest.

Disadvantages:

• Technological advances are needed to achieve true rollups.

• Balancing the needs between network and asset expansion.