Since Unipeg, innovations based on Uniswap V4 Hook have sparked a small wave of excitement.

Besides the examples I introduced in previous articles, new cases have been emerging these days, such as Hook-based perpetual contract markets and randomly changing punk NFTs.

No matter how these projects develop in the future, I am very pleased with the state of this innovation.

However, while I am pleased, I still hope that some of these projects can ultimately bear fruit, truly grow into projects with use cases, business models, and the ability to generate continuous cash flow. Because only such projects are worth real investment from investors, rather than being reduced to zero-sum games among participants.

From this perspective, I think it is necessary to review some of the lessons learned from the development of the crypto ecosystem to date.

Frankly speaking, in today's development of the crypto ecosystem, there are only DeFi projects that truly have use cases, business models, and the ability to generate continuous cash flow in the application domain (excluding public chains).

Among DeFi, the most well-known and classic projects include a few top-tier projects:

Uniswap, AAVE, MakerDAO (Spark), and OpenSea.

These projects have pioneered their respective niches:

Uniswap started the long-tail exchange market based on AMM;

AAVE started the lending market;

MakerDAO (Spark) launched decentralized stablecoins on Ethereum;

OpenSea initiated the NFT trading market.

Compared to today's round of Hook-based innovations, when I look back at these applications, I find that they share several prominent common features:

- They created a truly grounded application scenario;

- Their emergence could immediately serve existing crypto assets in the market. Even in the absence of new assets, they met some of the market's needs at that time.

People at the time might have had their doubts about them.

But the doubts were solely centered around how big the market they served really could be?

And whether those seemingly insignificant markets could grow into essential application scenarios later on?

These two common features, in my view (though it may be hindsight), are the key to their eventual emergence as the core of the crypto ecosystem applications.

This is not to say that having these two points guarantees their success in the future; but without these two points, I think they could not have become the pillars of today’s crypto ecosystem.

Why do I pay special attention to these two characteristics now?

Because in reflecting on both the explosion of inscriptions in the past and the current batch of Hook-based innovations, I find that these two features are almost missing from them:

A significant portion of these new projects (such as inscriptions and the current Hook innovations) have not served existing crypto assets and have not better explored whether there are any unsatisfied but real demands for these assets.

Instead, they continuously create new assets out of thin air without the support of application scenarios, and create new models based on these new assets.

For example, various inscription protocols created new assets, and then created new gameplay based on the inscription assets; Unipeg and Slonks created new tokens and new "NFTs," and then established new token conversion models; SATO created new tokens, then generated new buy-sell curves; ...

Do these created inscription assets, Unipeg and Slonks NFTs, and SATO tokens have the support of application scenarios?

It seems not.

There is nothing wrong with creating new assets.

However, past experiences seem to prove that attempts to create new assets and new models solely on the basis of new asset creation without the support of application scenarios are very difficult to sustain, and are more likely to evolve into zero-sum games among participants.

I think this point is worth taking caution and observing.

The easiest thing in the crypto ecosystem is to create new assets, and creating new models based on new assets is not difficult. It merely involves adding new models, new logic, and new concepts in smart contracts — this is precisely where Hook excels, as well as its convenience and efficiency.

That said, I do not deny this type of innovation; rather, compared to such innovations, I am more eager to see innovative models from those classic DeFi projects — creating a new business model and new application scenario that can serve existing crypto assets, or even if creating new assets, the new assets must have the support of application scenarios.

I believe such innovations will be more meaningful, easier to generate value, and more likely to produce continuous cash flow in the end.

And I want to emphasize once again the earlier model lacking the support of application scenarios purely relying on asset innovation:

With the slightest misstep, it could fall into a zero-sum game among participants.

Therefore, moving forward, although I will still keep an eye on various innovations, I will focus more on business innovations and application innovations that can serve existing crypto assets and asset innovations based on supported application scenarios.

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