The Great Bull Run of Alt Coins
Market Summary – a historic Bull Run of alt coins
In the past month, the value of all crypto currencies has doubled from about $400B to about $800B. They are now worth about 5.5% of the M2 dollar supply.
Bitcoin’s share of value of all crypto currencies has fallen from 60% to 35%, this despite its price being up slightingly, from $16.5k to $17k.
This tells you what an unbelievable bull run the alt-coins have experienced. It’s largely uncelebrated, and unknown, but holy smokes. This has to have been one of the great bull runs of history.
Looking for opportunities.
My plan had been to look at the top 100 crypto currencies in some organized, methodical way and share my knowledge, but quite frankly, I’m overwhelmed. There’s so much information and the market changes so fast. So instead I’ll post a chaotic, unorganized collection of snippets of information about different coins.
Hopefully, they’ll provide some insight into the market as a whole and starting points to look for more information. I’ll pay special attention to Cardano, which I’m EXTREMELY impressed with. It may be the one.
How does one look for crypto opportunities?
Go to http://coinmarketcap.com/ a for a list of crypto currencies, including tokens, ranked by market caps. (There are over a thousand.)
Reminder: tokens are digital currencies that sit on top of other crypto currencies. The first and most famous such platform is Ethereum.
Coinmarketcap offers a price chart for each coin which includes volume.
From there, visit the website of an individual coin. Read the white paper. Maybe look for Youtube interviews with the founders.
Next, look to communities for latest news. I personally use two. For most coins, you can go to reddit.com/r/<nameofcoin>. And then there’s the good old Bitcointalk.org. Most coins have an announcement thread followed by pages and pages of forum discussions and updates.
Lastly, if you really want to get into it, many coins have some chat — often on the Telegram chat application. You can sometimes speak directly with key people there.
In my opinion, Cardano may have more potential than any other coin. It’s extremely early. Not much is working yet. A bet on Cardano today is a bet on the team and their vision.
Cardano’s co-founder Charles Hoskinson also co-founded Ethereum, and served as their organization’s CEO. I was move my interviews with the founder, including this one.
They are engineering Cardano the slow, painstaking way that one might engineer a space shuttle. Ideas get peer reviewed. He’s more interested in recruiting scientists, game theorists, and mathematicians than programmers. Appropriately, a big part of the interview was him discussing the incentives of scientists, and why they want to work on Cardano (because they get to 1. publish research instead of keeping work secret 2. change the world and 3. get paid – the Cardano project is funded into 2020).
Some impressive ideas behind Cardano:
1. Why can’t a crypto currency get better at scale instead of worse? Charles Hoskinson uses file sharing as an example. The more people sharing files, the better the system works. He doesn’t come out and say it, but it’s possible that Ethereum has some insurmountable scaling issues.
2. Philosophy of scientific peer review. There may be a trade off here between building carefully and building quickly. A bet on Cardano is a bet that sound engineering will overcome first mover advantage.
3. Governance built into the system. Cardano has a system inside of it to vote on not only prioritizing development (like Dash), but funding it.
4. Block chain agnostic. Much of the discussion was about Cardano working as an intermediary and letting you do work between other crypto currencies. Here, I’m at the limit of my understanding.
5. Proof of stake. Controversially, Cardano uses proof of stake instead of proof of work as it’s decentralized consensus mechanism. In short: no mining. You don’t solve a math problem to add transactions to the system. Instead, the holders of coins get a change of adding transactions.
Amazingly, Cardano, which doesn’t have much infrastructure at all, already exploded into the #5 most valuable crypto currency with a total market cap of $26.5B.
Monero vs Bytecoin
I’ve written previously that Monero seems to be the most anonymous crypto currency, having the ingominious endorsement of hackers. Monero has been in the top ten, and is currency #13 in total valuation.
Recently Bytecoin skyrocketted from obscurity into the #22 slot. Bytecoin is Monero’s predecessor. It developed the anonymous algorithms back in 2014, but by the time people discovered it, 80% of the coins were already mined. The distribution of coins was very centralized which is generally frowned upon by the crypto community. Monero cloned Bytecoin and did a lot of their own research and development. I don’t know what resurrected Bytecoin in recent weeks.
Fairer distribution of coins.
Original developers of the anonymous “ring” transactions which create anonymity.
Personally, I still like Monero.
Ripple vs Stellar Lumens
As I’ve written before, Ripple is centralized and pre-mined. Users of Ripple can be suddenly denied access by a central authority. The coins were not fairly distributed. 60% of them are reserved by Ripple’s founding organization. Worse, the organizations behind Ripple seem to be the sorts of banks and deeply entrenched businesses against which the crypto revolution is rebelling. For these and other reasons, Ripple comes under enormous suspicion. It is supposedly a system of transferring debts back and forth. Ripple is how banking would work if we still needed banking. I’m in the school of thought that think crypto currencies are our liberation.
Anyway, one of Ripple’s founding engineers went rogue and created Stellar Lumens. It’s also pre-mined and centralized.
Both have seen impressive price action in recent weeks, but with a majority of both coins centrally controlled, we can’t be sure that they’re not painting the tape.
Also, Ripple benefits from a “unit price bias.” It’s only $3.36 compared to Bitcoin’s $16k. But there are 100 Billion in circulation (60% of which are centrally owned). Compare this to Bitcoin which will have a maximum of 21 Million.
The IOTA Experiment
Since I described IOTA in newsletter #2 as a super-fast, free crypto currency designed to power the internet of things (hence the IOT), it has quadrupled in price. The quadrupling was bolstered by announcements from Microsoft and Samsung.
Here’s the thing though. IOTA is still an experiment. It has no blockchain. It uses something called a “tangle” where new transactions confirm older transactions.
AND . . . . it still has “training wheels” because of open security questions. IOTA uses a centralized module called a controller to avoid apparent security questions. They plan to end this soon, but holy smokes. We don’t know if IOTA engineers are putting the final touches on a proven system, or if they’re horrified, staring at a fundamental theoretical flow in their design.
Yes, the Internet of Things is a huge market. Yes, interest by Microsoft and Samsung are a great positive sign. But there’s a risk of the whole IOTA project blowing up — together with it’s $11.5B market cap (#9).
The Mediums of Exchange – Dash, Litecoin, and Bitcoin Cash
I particularly love Dash (community and focus on governance) and Litecoin (the perrenial silver to Bitcoin’s gold). But I have doubts about their value proposition, at least the “medium of exchange” part.
People still want to use fiat for everyday purchases, and there’s no guarantee that Bitcoin won’t eventually launch the “lightning network” which would make it fine for everyday purchases.
I’m not sure why Verge is so hot. They seem to be another privacy coin whose developers are tired of hearing the concerns of Monero fans.
Apparently, they obfuscate IP addresses and integrate with the TOR network, but many people consider TOR network fundamentally insecure anyway.
Feathercoin, Litecoins little brother
Feathercoin was one of the early first generation coins.
The had a great, friendly team, but didn’t seem to have enough of a value proposition to go anywhere. It was just a lighter version of Litecoin.
Anyway, people seem to have remembered that it existed. It tripled in value in the past month and a half, thus breaking into the top 100. Perhaps investors decided it was under appreciated after looking to its historic ratio with Litecoin, just as they look at Litecoin’s historic ration with Bitcoin.
Like Cardano, Icon promises to be an intermediary between other blockchains. Unlike Cardo, this is Icon’s core value proposition (if I understand correctly).
Tron is arguably THE HOTTEST coin right now. It claims to be content delivery network that helps both content creators and consumers. If I understand correctly, Tron is a substitute for the world wide web. (Holy smokes!)
I love the value proposition, though their white paper seems a little vague.
It’s possible that the vagueness come from things being lost in translation from Chinese.
They apparently benefit from extremely high level Chinese business contacts.
Tron has made it into the top ten, displacing Dash.
This crypto currency claims to offer properties of a bank, including, if I understand correctly, interest bearing deposit accounts.
It’s the #43 coin.
Waves – platforms for applications
Waves, the #29 coin with a $1.2B market cap has high volume and a lot of hype. It claims to be a platform for applications. I don’t know how (or if) this relates to smart contract platforms.
This seems like a crypto currency launched by either Disney or Disney executives. It says that it’s a platform for businesses. They want to compete with Ethereum, but who is going to trust Disney?
HUGE potential here. VeChain is a Chinese project trying to take over supply chain management. They want to record things like item authenticity, logistic checkpoints, temperature controls (read directly from sensors) and create non-counterfeiter checkpoints in the supply chain.
Apparently, they’re partnering with prominent consulting companies as a means of channel sales.
I can imagine FedEx using this or something like it.
The smart contract platforms – Ethereum, NEO, NEM, Qtum, NULS, Omni
Ethereum is king. On many exchanges use BTC and ETH are the only currencies in which you can buy others. So, for example, if you want to change A into B, you’d first convert it into BTC or ETH. A LOT is being built on Ethereum. Tens of billions of dollars worth of infrastructure. Keep on eye on their scaling problems.
The only ICOs I’ve encountered that weren’t on Ethereum were on NEO and NEM.
Qtum presumes to be an Ethereum compatible smart contract platform designed for business. QTUM recently joined NEO and NEM in the top 15.
NULS presumes to be an enterprise smart contract platform that is new and under appreciated. NULS are also a token sitting atop Ethereum. So it’s a platform atop a platform.
There are dozens of these. I am not able to keep up.
Omni also exists.
An Ethereum token focused on lending.
Great value proposition! The terms of the loan are baked into the code.
SaiCoin and Storj
This seems to be emerging as the most prominent of a handful of projects chasing the holy grail of distributed file storage. Instead of using something like google drive, or dropbox, you scatter your files over thousands of computers in such a way that none of them can see the content of your files.
The currency of this system will be Saicoin.
The team comes from MIT.
Storj token is also working on this.
Oyster Pearls have been very hot. The project tries to solve two unrelated problems. The first is decentralized file sharing (the same as SaiCoin).
The second problem is monetizing content. As an alternative to advertising, websites will be able to post Oyster Pearl scripts on their site. Then the computers of their visitors will be burdened with doing a little bit of math. The owner of the site will be compensated for thus burdening his visitors.
There is a market for computing power, and several other tokens are addressing it as well.
Golem and Sonm
These are both Ethereum tokens. They are trying to create a system for sharing computer processing power. By far, today’s most common existing use case for sharing processing power is to mine crypto currencies.
But other uses existed over the years, including analyzing space signals in the (SETI) Search for Extraterrestrial Intelligence project.
“Poets” are an ethereum token for registering copyrights. This is technically possible with ANY crypto currency. Just transform a hash of your work into an address and burn a minimal transaction by sending to that address.
Still, there’s value in making this simple, I suppose.
Addendum: Holy smokes! I can’t believe it has a $400M valuation. I suspect new money (stupid money) is looking for coins that do anything real and tangible.
This Ethereum token did a 20x in the last month. It’s the most prominent of several project that will store items from video games in a secure way. This sort of protects players from video game companies because they get real ownership of their fancy swords, shields, pets, vehicles, or anything else. Presumable, these items can then create a real market. Awesome idea if you ask me.
TAAS (Token As A Service) is an Ethereum token that seems to act like stock in a hedge fund. It’s based in Kyiv, and it periodically pays dividends. CIS business people are well aware of their reputation of corruption. I assume these guys invest through TAAS in other cryptos, and so dividends are all locked into the rules of their coins.
This demonstrates a a popular motif of smart contract platforms: programmers and code replacing lawyers and laws.
It’s hard to believe, but the current #27 coin, and one of the hottest new arrivals of late is a coin which promises to securely store customer reviews of dentists. (?) I think they have some follow-on value propositions related to dental industry.
In my mind, this is an extremely specious $2B valuation.
DentaCoin is a token built atop Ethereum.
Tether is a token build on the Omni platform. Really interesting project. They claim to backed by a huge amount of dollar, and every Tether is redeemable for one dollar. The idea is to take dollars into the crypto space. I assume the purpose is a vehicle for price stability on exchanges that don’t allow dollars. It’s a way for investors to temporarily pull out of crypto altogether and trust Tether (a dubious proposition, if you ask me).
A small Polish team is trying to build an digital advertising network like Google AdWords that’s cheaper and more honest. Their AdShares tokens will be the currency of this network.
Awesome idea. I’m a little wary of small teams.
They’re either about to launch a product and make a lot of noise, or they’re on the beach enjoying the $4M they raised in their ICO. 🙂
Pretty much the same as AdShares, but a more ambitious white paper. Also, a team of UC Irvine PhDs, and what seems like a very positive buzz.
They have a later start than the aforementioned AdShares Team.
Basic Attention Tokens
Another advertising token. Let’s start by discussing the founder, Brendan Eich.
He co-founded Mozilla. After being chased out as Mozilla CEO because of a political contribution he made supporting traditional marriage, he invented a new browser called Brave.
This guy is a visionary. He’s probably one of the top ten people who influenced what today’s internet looks like.
Now he has another vision. Advertisers will PAY YOU for the privilege of showing you advertising. If he has his way, they’ll pay you in Basic Attention Tokens.
The Brave browser will be the first platform to implement this.
I feel like I’ve just scratched the surface. I hope this overview is useful to you. Do not rely on my for investment advice. Past performance is no guarantee of future returns. Merry Christmas and Happy New Year. 🙂