The “Early Majority” is getting ready to move
I think we are here:
Yes, there will be panics, rallies, profit taking, emotion, etc. but in the long run, Bitcoin will follow a technology adoption curve, not an asset bubble curve. In the next three years, the number of crypto currency users will soar from 30 million to a billion.
A lot of the headlines of late can be interpreted as infrastructure preparing the move of the early majority:
NYSE files to list bitcoin ETFs, bringing cryptocurrency a step closer to mainstream
North Korea Is Looking At Bitcoin To Escape Its Crippling Economic Sanctions
CME Group starts trading bitcoin futures
‘Bitcoin Question’ Should Be At G20, Says France Finance Minister
Tax Bill Calls for Digital Currency Exemptions Under $600
Bitcoin vs Bitcoin Cash
In the past two days, Bitcoin is way down, from $1900 to $16100. Bitcoin Cash (BCH) is way up, from $2000 to $3500. This seems to have been precipitated by the co-founder of Bitcoin.com announcing he was selling his BTC and going all in on Bitcoin Cash.
Bitcoin Cash was the first fork of Bitcoin. I consider it one of three currencies Dash and Litecoin being the others, competing to be a medium of exchange for retail purchases.
In newsletter #2, I wrote:
It achieved prominence in November when the Bitcoin team once again broke a promise to increase the block size for faster transactions.
A lot of the hype was a rebellion against Bitcoin. I think the anger will fade and so will Bitcoin Cash. Cash doesn’t have the infrastructure of Bitcoin, and it isn’t as useful for retail as Dash, imo.
Maybe I was wrong. Maybe I underestimated the name recognition Bitcoin Cash inherited. When neophyte crypto investors say to themselve “the price of BTC is very high, what else should I invest in?” They find Bitcoin Cash.
Also, Cash inherited a lot of infra structure because it seems to have been easy for facilities supporting Bitcoin to also support Bitcoin Cash.
Dash does seem bettered governed than BCH, as does Litecoin. They’re also both up dramatically since that newsletter.
Dash – 100%
Litecoin – 215%
Cash – 170% (after the rally of the past two days)
Bitcoin – 50% 🙁
Only 50%! People would kill for these kinds of problems.
Anyway, Cash seems to be doing fine. I would NOT go all in, and I would not go all out of Bitcoin. A single technological innovation, like “Lightning transactions” could solve all the frustrations with Bitcoin (slow transactions and high fees).
Does Bitcoin Violate Mises’s Regression Theorem?
Would you like to hear Bitcoin discussed from an Austrian economic perspective? Here is my interview from Monday with a good old pal, Andy Duncan of the Ludwig Von Mises Center.
The Smart Platform Coins
Ethereum was the first smart contract platform. Like Bitcoin among crypto currencies, Ethereum had a significant head start among smart contract platforms.
The reason I consider Ethereum a “maybe” is because
– Ethereum’s head start and name recognition is not as significant as Bitcoin’s.
– The name recognition isn’t as significant because few people even know what smart contracts can do. By contrast, people may not understand how Bitcoin works, but they get what it presumes to be: money.
– The value proposition of smart contracts seems significantly more complex and nuanced than the value proposition of crypto-money.
– It has competitors.
Last week, I had planned to again name the coins that I’d listed as the significant competitors in this space:
NEO (China’s Ethereum)
NEM (a simpler to use Ethereum)
Cardano (Japan’s Ethereum)
But there’s such rapid development here, that I’m not even sure I can name the major players. My “need to learn” list includes:
There’s a lot of value in identifying potential winners early. And there are many services forming, corrupt and honest, presuming to help.
Crypto Advertising Costs a Fortune
An acquaintance of mine who helps companies raise funds through ICOs says “don’t bother if you’re not able to spend a half million on advertising.”
Well, it seems to me that half the people in they crypto space are entrepreneurs. So you have half of them, marketing to the other half. 🙂
Content has a lot of potential, and it’s springing up everywhere.
What Are ICOs?
About Initial Coin Offerings
From the NY Times: “Initial coin offerings have come out of nowhere in 2017 to become the talk of Silicon Valley and Wall Street. Programmers have raised over $3.2 billion this year by selling their own virtual currencies to investors. That is 3,000 percent more than the amount raised using coin offerings in 2016.”
Initial coin offerings are way for teams of software developers and entrepreneurs to bypassing gigantic investment infrastructres (and legal requirements!)
Generally, entrepreneurs make some new coin, and then sell a percentage of them in exchange for a well established crypto currency (like Ethereum). They then either convert some of their Ethereum or Bitcoin to cash to pay their expenses. Usually salaries are paid directly in Ethereum and individual employees implement their own conversion strategies.
The ICO eco system is the Wild West. In many cases, the laws are not yet written.
Some companies hire specialized compliance companies (like CoinList.com) which takes the most conservative compliance approach, including vetting every single initial purchaser.
Brock Pierce, founder of Blockchain Capital, advices companies doing ICOs to exclude American citizens because “they are 90% of your legal liability, and 15% of your investment.” Zerion, a company that helps others do ICOs, excludes Americans.
Other companies operate with complete anonymity, which is rightly considered a huge warning sign.
Type of Coins:
Generally, the digital tokens sold in ICOs fall into two categories. Utility tokens, and Equity tokens. Utility tokens are used as token money in the system that the company is building. Equity tokens are a promise by the company creating them to disburse dividends to the holders of the tokens.
Both utility tokens, and equity tokens get traded on the many crypto currency exchanges.
AdShares are both a utility token and an equity token. Payments in their system will be made with AdShares, and a small percentage of every payment will be made to everyone who owns AdShares. Basically, if you don’t use your AdShares, they’ll grow in number in proportion to the amount of payments in the network — and if a lot of them go out of circulation, then presumably their price will go up, and the cost of advertising (expressed in adshared) will plummet as the monetary supply contracts. (The definition of deflation.)
An unproven concept:
The most successful ICO is Ethereum, which is the leading platform for other ICOs. In other words, outside of their use as money (Bitcoin) the only major use case of digital tokens is in the system that generates other digital tokens. Some traditional Scilicon Valley investors (Jason Calacanis) have used this as evidence that the concept is completely unproven.
The counter argument is that this industry is less than a year old. The winners have not had time to emerge. And for the first time, entrepreneurs are able to work on protocols. Typically protocols (like TCP/IP) are the work of governments and research conglomerates. And not only are entrepreneurs able to work on them, but they’re able to profit from their success. Profiting from the success of your invention is a relatively new phenomenon.
An Austrian School Economist might consider the arrival of entrepreneurial innovation to protocols an extension of the Hayekian Triangle (http://wiki.mises.org/wiki/Hayekian_triangle). Ie- adding one more step to the efficiency with which we build the tool, to build the tool, to build the tool, to build the tool . . . . to build a consumer good.
ICO Fraud Alert
Tezos Founders Face Second Class Action Lawsuit Over $232 Million ICO
“Notwithstanding Defendants’ attempts to avoid governmental and private scrutiny, it is clear that the financiers were indeed profit-seeking investors in a security and that Defendants promoted and conducted an unregistered offering of securities, not a charitable fundraiser,” the suit reads.
Want to see what a scam look likes?
Look at this twitter account for Bitcoin Diamond: https://twitter.com/BitcoinDlamond_
Notice that the second letter in Diamond is actually an “L”. They encourage people to visit a website an upload their bitcoin private keys to claim their Bitcoin Diamond. Don’t do it.