Gate Ventures Research Insights: ReFi Innovation Opens a New Era of Consumer Applications

Web3 uses blockchain technology to build an economic paradigm and cultural system that is completely different from the off-chain world. This paradigm shift shows its unlimited potential, but it also brings about compatibility issues with Web2. For Mass Adoption, Web2 users often have completely different production materials and properties. We imagine that if the assets currently owned by Web2 users can be re-onlined. Not only can it inject more power into the economic ecology on the chain, but it can also allow users to obtain greater economic value. At the same time, this also brings richer off-chain asset classes to on-chain applications and promotes the diversified development of the on-chain ecology.

In this regard, WiFi Master Key is a typical case. WiFi Master Key was founded in 2012. At this time, China was in the transition period from 3G to 4G, and Internet traffic charges were high. At this time, the WiFi master key is shared through the network, solving the user pain points of lack of public networks and expensive private networks. Its main business model is to open up users’ home WiFi and create a shared WiFi ecosystem. At the peak, the number of users of WIFI Master Key reached 900 m, and the MAU was 370 m. The WIFI master key has stepped on the trend, and has also declined due to the changes of the times. On the one hand, China's traffic costs have also dropped rapidly. Many operators have begun to launch low-cost home WIFI and unlimited mobile data. At the same time, public WIFI facilities are gradually being built and improved. On the other hand, its products relied on cracking other people's WiFi passwords to achieve sharing, which would lead to higher traffic charges and network lags. This model gradually aroused user resentment and eventually caused it to lose its market advantage.

Through this example, we can see that WIFI Master Key has built a reusable shared network through the existing huge WIFI infrastructure, and has reached nearly 1 billion users through nearly free network infrastructure. Web2 users have some already owned and large-scale assets, but due to the natural incompatibility of Web3's asset attributes, these huge assets cannot exert more value.

We also realize that many existing infrastructures in Web2 can further unleash their potential through Web3’s global liquidity, shared open economy, verifiable consensus blockchain, DeFi and other features. We call this model ReFi (Repurpose Fi).

ReFi is fundamentally different from the current DePIN project. Depin equipment often requires the purchase of hardware, but in fact the scalability of these hardware is poor. To achieve real success, it is necessary to establish a sales network and supply chain in various places. However, for products that meet rigid demand scenarios, it is not enough to just "make money". The product itself must be competitive enough to meet user needs. However, many teams lack both funds and the ability to build a complete ecosystem. Instead, they tend to rely on large sales agents such as KOLs to promote mining machines, and eventually become a simple "Ponzi game."

In contrast, ReFi significantly lowers the entry barrier by repurposing the existing 8 billion user market in the world without requiring additional hardware production and sales.

We will enumerate some of the significant gains that may be brought about by Web2 assets on the chain, and provide the community with some entrepreneurial thoughts. This model directly avoids the current "show-style" business model of DePIN that relies on hardware production and sales, and directly expands the existing on board Web2 assets help entrepreneurs succeed.

Case

WiFi

When Tokenomics is combined with WiFi, we find that if the existing large-scale WiFi infrastructure can be directly opened to third-party users, users can gain income through WiFi rental and sharing, and projects can be incentivized by issuing Tokenomics.

This model is mainly aimed at users who want to get free and fast outdoor WiFi, and they usually need to stay in a certain place for a long time. Free WIFI is provided to thousands of households with existing WiFi infrastructure. With the sharp decline in traffic costs, slow network speeds and lags, providing free networks often no longer motivates them. However, the introduction of Tokenomics can Significantly incentivize these users to reopen network resources and realize value exchange and revenue sharing.

The global Wi-Fi market size will be worth US$14.5 billion in 2023 and is expected to reach US$39.4 billion by 2028, with a compound annual growth rate of 22.2%. The mobile data market is expected to reach $0.6 trillion in revenue by 2024. It is expected to grow at an annual growth rate (CAGR) of 4.30% from 2024 to 2029, reaching a market size of US$0.8 trillion by 2029. These data indicate that the WiFi sharing model combined with Tokenomics is expected to occupy a place in this rapidly growing market.

Bandwidth

Grass is a successful ReFi example. Grass's goal is to directly contribute unused Internet bandwidth and receive corresponding rewards. In fact, in the current market, large companies use residential proxy networks to proxy access through the local bandwidth of tens of millions of users, so the server will identify it as a real user's access and avoid DDOS on a single node of the large company. reject. Residential agents are widely used in crawler and data analysis, market research, social media management, electronic ticketing and other fields.

In the past, companies that had a need for residential proxies might purchase services from residential proxy service providers. Service providers would obtain residential IP through three major channels: luring users to install plug-ins, purchasing from ISP providers, and IP leasing companies. But it did not pay users of its important proxy sources. Grass hopes to contribute Internet bandwidth that is not fully used by users and become a large company agent for Internet resource requesters to help them access the network to make this market open and transparent.

For the consumer group, this market is currently small, with global residential agency services market sales of approximately US$620 million in 2023 and expected to increase to US$840 million by 2030, with a compound annual growth rate (CAGR) of 4.6%.

Data

The data contribution of Web2 users is also a track with game-breaking potential, especially now that LLM and AI Agent are facing problems of computing power and high-quality data. Scale AI is particularly prominent in this area, with its slogan “Enpower AI with your data.”

Scale AI Business Model, source: Scale AI

Scale AI's main business model is to connect users' data. The task platform connects cost-effective data workers in Southeast Asia. These data workers then label the data uploaded by users and then input the data into large models. At the same time, the large models Score the results. Data is extremely valuable as a training LLM or Specific Model. Some people liken Scale AI to a shovel seller. The average hourly wage for data annotators is US$1-2. This low-cost labor model helps Scale AI achieve efficient and large-scale operations.

For the Web3 project, we can incentivize workers through tokens, which can significantly increase workers' hourly wages. We noticed that Vana invested by Paradigm is similar to this Data DAO model. Although it has a complete business model, it may face certain challenges in the environment of attention investment such as Web3. The reason is that the reach is too small and it is connected to Data DAO, so users have low awareness of the product, which may lead to a lack of buying in the currency price.

A more positive example is Aggregate, which directly targets Retailer and uploads ChatGPT conversation content to Aggregata for secondary training by other models. Aggregate currently has investment support from Binance Labs. We believe that through token distribution incentives, data providers and data annotators can be well incentivized, and most of the profits will flow to business participants, not just the platform.

Currently, the data annotation market size is US$838.2 million in 2024, and is further expected to reach US$10.3462 billion by 2033, with a compound annual growth rate of 32.2%.

Energy

Daylight is another successful example with the slogan repurpose your surplus energy becoming a new revenue. The company received two rounds of funding from A16Z and Lattice Fund Lead, totaling $13.2 million. Daylight chooses to manage and generate the power grid at the edge of the network, and uses tokenization to encourage people to install various electronic devices in their homes, such as solar panels, water heaters, etc., and control these devices through mobile phones while receiving token incentives. Daylight uses token incentives to promote the widespread application of clean energy and balance the transmission load of the centralized power grid.

This model is closer to DePin, but if we can improve the existing clean energy equipment without purchasing electronic equipment and achieve the improvement goal through tokenization, then this matter will be easier, because in essence Daylight is selling clean energy equipment, but the core of ReFi is to reuse the existing broad asset base. If we cooperate with existing manufacturers to build a system or any specification interface standard, for example, manufacturers who use clean energy equipment can directly go to the chain to obtain token incentives, then it may also be a feasible business model. We look forward to teams innovating in this field.

According to the report, the global power generation equipment market is valued at US$110.4 billion in 2022 and is expected to reach US$173.1 billion by 2032, growing at a compound annual growth rate of 4.8% from 2023 to 2032.

Summarize

In this article, we discovered that Web3 has a natural incompatibility with Web2 users, especially on the Web2 asset side. To this end, we have proposed a new direction, ReFi (Repurpose Finance), which uses the existing huge existing infrastructure and user assets of Web2 to guide these assets to the chain through blockchain technology and token economics, thereby repurposing develop its potential.

The core of ReFi is to mine all resources that are widely used in the world, including home graphics cards, WIFI networks, secondary utilization of bandwidth, data, energy, etc., and they can all be upgraded based on the huge existing scale. The concept of ReFi has been around for a long time. The biggest difference from Depin is that there is no need to repurchase hardware. It only requires adding token economics to the existing large-scale stock market to find new directions for secondary utilization.

However, real demand and efficiency need to be taken into consideration at the same time. Some repurpose directions may not be ideal. For example, Grass bandwidth is used for residential proxy networks. Its market size is small, but the demand itself does not require high efficiency. In contrast, it is unrealistic to contribute bandwidth to transmit data to help AI data transmission, and to contribute GPU for LLM training, because these scenarios that require extremely high bandwidth and GPU and are efficiency-oriented are often difficult to achieve under current technical conditions. It is difficult to achieve real commercialization.

We look forward to seeing more ReFi application scenarios, which will help entrepreneurs directly utilize the existing assets of the world's eight billion Web2 users through the blockchain's global liquidity, distributed state storage, token economics and other advantages. , integrating Web2 assets into the Web3 world, opening a new era of value creation and resource utilization.