With a rather tumultuous bearmarket looking to draw to a close we have seen a lot of lay-offs and delistings for rather large cryptocurrencies. A culling of sorts has taken place and a more healthy environment is the result — but more needs to be done.
Previously you have read that there is a huge disconnect between token usage and product usage within the current cryptocurrency market. Today’s market is a speculative affair and (still) a breeding ground for vaporware. And frankly this is all our fault because we chose to invest in these projects. Disclosure: Yes, I contributed to this as well.
Culling: culling is the process of segregating organisms from a group according to desired or undesired characteristics. (Wikipedia)
Back in august 2018 you may have read that a blockchain study revealed that 60% of the cryptocurrencies in the top 100 by marketcap have no working product. Thus a mere 40% was expected to provide real value to the public. Take into account that generally speaking about 90% of all startups fail and we are left with only a handful of promising products. And yet we still invest in “whitepaper projects” with no indication at all they are going to deliver. Why? Because of course we want to make a quick buck. But so do they!
Vaporware thrives, despite today’s bearmarket
The result of our short-term thinking is we have fostered an environment where nobody cares about the tech, roadmap, team or other meaningful developments and we just dump our money in the most advertised sham. The consequence is that most projects were never built for the long haul. Sustainability is taking a backseat and it only took one bear market to wipe out a LOT of projects. Which is actually a good thing. Let’s name a few:
▪️ Bitmain laid off their entire Copernicus team (Bcash GO client)
▪️ NEM blockchain laying off staff, wasted money on advertising an unfinished product.
▪️ Nebulas laying off 60% of their staff
▪️ ETCDEV, STEEM, Civil & SpankChain laying off staff or abandoning project
These are only a few examples and I personally experienced a lot of other projects having trouble due to the current market as well.
Investors are often lured with “potential” use cases, “strategic” partnerships, faked github activity, bought twitter followers and telegram members.
The current cryptocurrency market is valued at $121 billion(!), but what have all these projects done to make it worth that much? In essence, we need to ask ourselves when looking at projects like Tron (valued at over $1,6 billion) or NEM ($ 380 million) and what they have solved, enhanced or delivered that made daily life for companies or citizens a better or more efficient affair.
On the road to responsible investing
Now I don’t know about you but I have grown pretty weary of projects being abandoned or “CEO’s” running away with my money. Today’s bear market cost me a lot of money as well. So for the long-term I am setting myself up to invest only in legitimate projects. Those that are actually mostly done buidling and are creating ACTUAL revenue. So how do you spot these rare projects?
Coindesk summed the most important questions we should ask ourselves pretty well and so on our quest to invest more responsibly we should ask ourselves the following questions:
1. What features, products or platforms did the project build that a consumer is using or benefiting from?
2. Which enterprise solutions went live and how much new revenue or efficiencies did it create?
3. How much did they improve the infrastructure and stack by in terms of scalability, privacy, confidentiality and other such nice things?
4. What original business models and technologies were created?
5. For each of these, what’re the odds that we will see the invention used by a real person or enterprise over time?
That sounds like a lot of tough questions to ask ourselves and luckily we don’t have to. Any legitimate project looking to set itself up for the long term should have these answers ready. Any who don’t have an answer to these should be apprehended with the utmost care.
A call to action
Before we move on, I have the following challenge for you. Lately there have been two successful ICO’s that have caught my attention. LTO and BTT. I dare you to ask these questions to both projects and then pick out the one whose success is legitimate and tangible.
A comparison between two recently successful ICO’s: BTT and LTO
On a fundamental basis these two projects could not have been further apart, but they do share one similar characteristic. Each had a tremendously successful ICO and drew in a lot of investors. So, where does this success come from and which token is most likely adopted?
In the next section I attempt to answer each of the previously mentioned questions based on desk research I have done for both BTT and LTO. In order to avoid bias, I invite you to do the same. For both I have visited their respective telegram channels to get the following questions answered. My experience in both telegram channels (which traditionally act as hubs for all investor-related talk) vastly differed however. I will leave these up to you to find out: LTO Telegram | BTT Telegram.
1.Is there a finished product or solution?
LTO: Yes, LTO Network main product is something called Live Contracts. These essentially make it possible to automate a lot of procedures and agreements between businesses in a decentralized workflow. It is aimed to reduce administrative work substantially without changing the legacy systems they rely on. More on product focus in 2019 can be found here.
BTT: No, scheduled launch for BTT takes place in Q2. For now the only implementation is being able to use BTT in Tronbet — a gambling dapp. In Q2 one should be able to enjoy higher download speeds using BitTorrent when having the BTT token. This feature is called Bittorrent Speed and should be one of many dapps to be developed for the ‘Bittorrent ecosystem’. What this ecosystem will consist of remains unclear as these decentralized apps are not build yet.
2. Is this product or solution used? If yes, by who? If no, what are the odds it will be used over time?
LTO: LTO currently has dozens of real-world clients and partners, including Heineken, Deloitte, the Dutch Ministry of Justice and many more. LTO’s solution called Live Contracts is also a frictionless, scalable solution which makes implementation for future real-world clients an easy affair.
BTT: As there is no solution yet, the product is not being used yet. BTT can however be used for Tronbet. Tronbet is a gambling Dapp which has around 6.2k users at the time of writing (source: dappradar). An estimation of the odds that BTT will be used for its intended purpose is tough to estimate. Multiple inquiries in their telegram channel remain unanswered.
We can make an educated guess however about their first dapp called BitTorrent Speed. In essence by paying for prioritized access to seeders, the amount of seeders should increase — because this behavior is incentivized. The problem however is that most people who torrent files do so because they don’t want to pay for a certain product. Hence, paying for access to downloading a specific file seems counter intuitive. Often the affair is also illegal in certain countries. Popular providers like ThePiratebay have been prosecuted repeatedly in the past.
3. Which improvements did the product or solution bring?
LTO: trustless and secure audit trails, a reduction of costs on paperwork and administration. Automated supply chain processes, third-party data handling etc. LTO also improved the utility of a cryptocurrency token by succesfully integrating and combining their token, product,solution users and token holder community.
BTT: As there is no working product, no improvements have been made so far. The premise is that when torrenting files there is often a lack of incentive to keep “seeding” (the process of uploading bytes of a certain file). In order to incentivize this process BTT enables payment with their token to gain prioritized access to seeders. One would thus agree to pay for downloads made for torrenting. This would in theory make it more attractive to keep seeding files, provided that people pay for it.
4. Did the solution bring new revenue?
LTO: LTO’s decentralized workflows already made it possible to cut back on costs and decision processes significantly and has real societal impact. For example, the Dutch ministry of Justice leverages LTO by digitizing part of the Dutch criminal code for petty crimes through LTO’s Live Contracts solution. The solution significantly cuts back time spent on these cases by judges, district attorneys and police officers alike.
BTT: As there is no working product, none so far.
Speculation versus Product usage — which is more important?
The previous paragraphs are not meant as a promotion for either project. In fact, a comparison would be foolish due to the vastly different fundamentals. Each project has a very different usecase and draws in a very different type of investor. The only thing the two have in common is the success of their launch. What is especially impressive is the fact that the token of BitTorrent has a daily volume of $71 million! And yet none use the token yet and it is also unclear how this token will be used in practice in conjunction with BitTorrent the app.
BitTorrent the app meanwhile draws in 100 million users and is about two decades old. The question is if these will use the token or not. On the other hands we have LTO, which started as a registered tech startup back in 2014and is thus way younger. However, their product is already finished and integrated with their token. Actual clients are now using it.
Apparently today’s market has room for two types of investors, those who value speculation and those that value product usage. One a higher investment risk than the other.
And so we conclude this article and we need to ask ourselves, which type of projects do we want to see more of? Which type of project should be incentivized? Should startups be able to draw in millions of dollars based on an idea alone or should startups only be able to obtain such a large amount of money if they have a proven solution?
While developers have impact in today’s market, we should remind ourselves that so do we. Because at the end of the day it is your money which goes towards the development of these projects. Our actions have tangible consequences for the cryptocurrency market.
So which of the above projects would you support? Should startups be able to flourish on speculation alone or should the gospel of BUIDL be spread further?
Disclosure: Steven currently holds LTO tokens.