Friday, February 9, 2018

Feb 18 Crypto Thoughts

I gotta say, Tama from Stansberry Churchouse writes a pretty good overview and recap on the recent crypto crash.

You didn't see it coming? Well, I did, pretty much exactly what he said in his article. I had significantly slowed down my crypto purchases.

Let me show you my historical purchases.


Don't you worry about GMGH. Notice the date of this post? 19 Dec. When ETH was $789, pretty much the current price today. Portfolio returns have dropped due to fresh capital being injected in and bringing down the number, but we're still rolling in the triple digit percentage profts. Oh yes, triple digits. Admittedly, closer to 100% than 999%, but hopefully that changes soon, HAHA.

Stacks and stacks and stacks of ETH sub 300, then changing gears to alts with good long term potential (XRB, BNB), then haitus for 2 weeks (7th Jan - 22th Jan) watching the market go irrational and parabolic, then catching knives buy buying stuff well off their all time highs and chasing the market down to fill my bags as its craters.

Skeptical? Check the charts. Check my posts about ETH/AION/SNM and XRB. I didn't create fake data just for this post. This is only my journal for Fiat-Crypto purchases though. My internal shuffling of crypto-crypto doesn't appear here.

The insane rise of cryptos through December and January was just stupid. It was ridiculous and I knew it would be unsustainable. Oh DGX, why were you not available yet? Hopefully DGX is live before the next correction.

I only bought back into ETH after it had shaved off 35% from ATH and I have been progressively buying it as it goes lower. I have not bought any BTCs recently that weren't immediately traded for something else (XRB, BNB). Although based on the Mayer Multiple, BTC is looking like a really good buy. But that is if you believe the fundamental case of Bitcoin, which I am not a strong believer of.

I'm actually happy that we have crashed from those valuations. Now, that was a bubble. And now we're back in business.

As the market continues to grow and matures, a few of my views since last time has changed and a few more needs updating. I'd just like to share my thoughts on this for people to think about.

Bitcoin continues to lose its dominance because people are beginning to realize that it is old, clunky technology. Is it hardy and resistant to a lot of shit? Yes. Is it useful and convenient? Not so much.

Ethereum continues to grow and will dwarf many other platforms for the time being. "There is enough room for competitors". What's the competitor to Facebook? Nothing. There won't always be competitors in every industry and I think that the network effect of Ethereum is becoming so strong that its developer mindshare and community mass has the gravity to suck in attention, money and development.

Why use another platform, like NEO, LISK, WAVES? Where the core dev team has to maintain the core while also build out all the auxiliary infrastructure? In the Ethereum ecosystem, 3rd party services and infrastructure are being built by the market. Being built by people who want to use it.

Other platforms are reminding me of Chinese ghost cities. Where everything is rushed and built together in a centrally planned grand fashion - but nobody lives there and nobody wants to live there. The only possible contender (still slim) is NEO with their NEP-5 tokens. Still, I doubt it is enough. Is NEO a good bet as an investment punt over ETH? Probably not too bad. Will NEO overtake or rival ETH in terms of actual usage, market cap or development? I have serious doubts. In fact, enough doubts that I have 0 NEO and no intentions to accumulate in the future.

The interesting alternatives, if you like underdog picks, are Ethereum related platforms, such as Qtum, ADA, WAN and AION. These projects use a lot of Ethereum ideas and if I'm not wrong, can run Solidity code on their VMs. That is a big deal, especially if they are planning to challenge the system viability of Ethereum, and not the dapps and their use cases which are building on top of it. Getting projects to "upgrade" from Ethereum to one of these new blockchains would be easy since their code can just be redeployed with minor changes.

Newer platforms like ADA, ICX, AION, WAN, AELF that are the gen 3 blockchains sound really, really promising. Actually, their functionalities are greatly overlapping, so then you need to think about it... if they are are trying to do the same thing, who can actually get it done and will create a platform that people want to use?

The race is on for these gen 3 blockchains to intelligently design how blockchains can communicate with each other and what are the unique selling points of their gen 3 chains. You want something slightly more centralised but also have a voice? ADA sounds good. You want a chain that is an Ethereum fork and can synergize off Ethereum development? That could be WAN.

I focus a lot on the platforms because I have a few beliefs.

One of them is that only a few main large public blockchains will survive and only a handful of platforms.

The future to me is almost painfully clear to have the interopability alliance chains as the main chains, while major blockchains like Ethereum, Bitcoin and NEO are connected to these chains.

Cross chain atomic swaps on the same level? So 2017. Using a gen 3 chain to trustlessly facilitate the cross chain transfer is the more elegant and easier way, rather than forcing 2 lower gen blockchains to try and communciate with each other to perform such a function. Can BTC and ETH do atomic swaps directly with each other? Yeah. Should they? Probably not. Having a gen 3 chain as the custodian and facilitator makes so much more sense, in my humble opinion.

In that vein of thought, the projects focusing on atomic swaps might be better off focusing on how to be linked to gen 3 blockchains that can facilitate value transfer ACROSS blockchains, and multiple ones at that.

Also clear to me are that platforms with Proof of Work, will likely fade out of existence.

Look at the IA.

ICX is delegated Proof of Stake
AION is delegated Proof of Stake + Proof of Intelligence
WAN is using Ethereum's Proof of Stake

Ethereum is moving to Proof of Stake.
AELF is dPoS. ADA is PoS.

Which new blockchains are adopting PoW?

Unfortunately, I think that in the medium run (2-5 years), almost every single PoW chain will be abandoned, value greatly diminished, or have forked over to a PoS model.

This means hybrid chains as well. Decred, I'm looking at you.

WHY we are moving away from PoW and the technical and economical benefits of the consensus models are of minor importance. What is more important for the long term investor is that we WILL. So we can talk and debate about why PoW is better, safer and fairer, but unfortunately, the world might not give a shit about it.

And that is my bet. My bet is that PoS, BFT and their delegated versions will be the main consensus methods moving forward and we are past the days where different PoW algorithms mean anything anymore.

But don't be fooled because not all PoS consensus is built the same way. Some are terrible and some are not too bad. PoS just by itself isn't the Holy Grail.

The only PoW coins that I hold onto are BTC and XMR. You can count ETH too, for now, I suppose. Is there any PoS coin that rivals the privacy of XMR? To my knowledge, there is none.

With Segwit adoption about to blow through the roof, batching become industry standard for exchange withdrawals and lightning network on the way, transaction fees on the Bitcoin network has dropped like a rock. What's the point of Bcash, LTC or all the other shittier Bitcoin forks right now? I would say that their utility and value is correlated to Bitcoin's uselessness, and Bitcoin is slowly gaining utility back with its much lower fees. It's tough to be a shitcoin with no niche.

Now, ICOs.

ICOs are total shit. Almost everything is retarded, garbage or trash. There's like 10 different projects in each segment trying to do data exchanges, blockchain IDs, content streaming and medical records. Dafuq? It's all bullshit in my opinion.

So many ICOs are garbage that I'm being really selective in my picks right now. Even the "low cap, high hype" ones are being taken off my short list. A lot of people think that the only way to juice up returns and make more money is to gamble in ICOs and do quick flips. Hello. That's what 95% of the other participants are thinking too. 5% are just dumb and don't even know what they are doing.

There are only a handful of projects that have crushed it with regards to having returns over just simply holding your ETH. Many are only marginally outperforming ETH while plenty would have been better off just holding ETH in the first place. The graveyard of underperforming ICOs compared to ETH is very large. I predict many of ICO projects will continue to produce weak tokenholder returns.

And that's just about tokenholder returns. Taking part in ICOs is a complex process with many, many treacherous paths to cross along the way. For the blockchain unsavvy, it is almost suicide to do ICOs without any help or guidance. There's many ways to screw up and just one way to get it right. Many people don't get it right the first time. Even people I know who are "veterans" can screw up the simpler things, like gas limits and price. And that's just user screw up. You need to navigate through all the scams and phishing attempts along the way. So if you manage to properly and safely navigate yourself through all these issues, you still have to worry about your eventual tokenholder returns.

And note I say tokenholder returns, not investor returns. Because in 99% of the cases of recent ICOs, you are merely a token holder. No equity. No rights. No voice. No say. And guess what, they are being PURPOSELY structured to be worthless. Because something that is worthless will definitely not be able to be seen as a security.

What is your token for? A pre-paid credit for a FUTURE product or service? Good luck to you. Go to the mirror and say hello to the bagholder that you see.

95% of utility tokens are stupid as shit. And as quickly as the market is realizing that FORKING EVERYTHINGGGGG is becoming a stupid idea, I believe that soon the market will also realize that utility tokens are a terrible idea.

I believe that the structure of many utility tokens are so weak that many of them are almost worthless or have almost no reason to hold any value.

The utility tokens I hold are punts and I have strong doubts that they will be worth billions anytime soon. They do have decent roadmaps and news along the way, and those good announcements and pumps would be when I slowly exit my positions.

Mass adoption is still far away. Too many ICOs are focusing on too narrow niches with zero addressable market. It's just like the China ghost towns. Build it and people will come? Hmmm... I think not. A lot of these projects will fail, not because they are bad ideas, but because it is a bad time to have such an idea.

I guess many are hoping for first mover advantage. But in a world where 99% of people can barely grasp the concepts of blockchain technology, I think they are off to a rough start. Well, I guess they should be fine since they are collecting tens of millions from "contributors", which should give them a lot of money to last until things gets adopted, hopefully?

Hopefully with 2018 shaping up to be the year of regulations, awareness and playful testing, we can actually see legal crypto securities that trade on a global scale, instead of silos on national exchanges. Now to me, that is interesting.

Anyway, my thoughts are quite messy and all over the place.

This crash is healthy and was expected.
Gen 3 blockchains will be the next big thing.
PoW will be replaced with PoS.
ICOs are mostly garbage.
Utility tokens are still terrible ideas.
Crypto-assets / securities will be huge once regulated and legal.

I continue to read a lot and learn everyday. This market is changing and evolving so rapidly that information from a month ago gets outdated already.

But yeah.

Crypto is still all wild speculation and monkeys throwing darts right?
No heads, no tails and no way to evaluate this strange thing right?

You can tell that these luddites have not even scratched the surface of cryptos if all they talk about is Bitcoin.

Old people. SMH.

6 comments:

  1. Toldcha govt have been studying & experimenting & will need to come in for this asset class to have critical mass viability.

    Else the landscape is basically gangs & individuals trying to screw each other.

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    1. Actually, I disagree because I do not think that governments coming in leads to critical mass viability.

      The market simply is not ready for the mass market yet, still. There are no live dapps yet with a compelling use case. Everything you can do in cryptoworld, you can pretty much do it the traditional way, albeit slower and more expensively.

      To be honest, there are no reason for regular people to start using cryptos, yet. The critical infrastructures are still not fully and properly built and the network CANNOT support mass adoption in its current state.

      Govt regulators are being forced to take a stand now, so that they can try to dip their hands and tax anything that moves. The only reason why crypto is on their radars is because of the massive amount of money involved, not because they want to drive adoption to forms of decentralization, which weakens their own powers as centralized institutions.

      In the decentralized world, there will always be gangs and individuals screwing other people, with or without the government. Perhaps just less if the government is involved. The wild wild west is a feature of the system, not a bug.

      Delete
  2. I think you will have to be more specific with what you mean with icos, ETH was an ico also at one point.

    Please update your 2018 coin list when you start to change, many of those picks were ICOs. Will you still hold your position in TenX for example? And in DGX? which is kind of a utility token, they even explicitly said in their latest blog post about not expecting rewards and such (a vibe similar to TenX), holder could buy dgx discounted, what that now means, lol.

    I sure hope you are not right with your ETH - Facebook theory, how decentralized would such a world be :P, i really hope many platform tokens will succeed.

    Hopefully, regulators wont try to fit crypto assets in the current box and let them grow into their own regulatory space. When stocks came the first time, they also had to change regulations, so it is not impossible. But now is the first time in history we really can enforce certain rules, such as TenX was intended, having a system pay out rewards instantly with no one person deciding so. DGX would have been even cooler, a similar payout as TenX original one, and also a voting feature to decide on DGXs strategy.

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    Replies
    1. Hi Max

      To elaborate, I specifically mean the current slew of ICOs. Many are total trash in the sense that (1) the token is not needed and adds complexity and (2) is merely a fund raising tool and (3) the value of the token is not tied to the success of the company.

      ICOs of now are purposely structured for their tokens to be worthless or pre-paid credits, as opposed to the utility in the older ICOs. Like ETH, REP and DGD. And yes, while TenX PAY token was initially structured to almost seem like a security, I believe that they are making significant changes to it to make it to avoid that classification and still allow the tokens to be valuable. I have not reduced my position in TenX and have no intention to do so within the next few months.

      I do not think that ETH will be the only platform. But I think that ETH will end up being the main platform for a significant time and the only other surviving ones will be those that can interoperate with ETH. Many of the gen 2 smart contract platforms will not be able to do it without an intermediary chain, which in that case, why not use that new chain itself? That is why I see value in the gen 3 chains which are interoperable with ETH.

      Of course, your own thesis of how the future will play out should be the basis of your investment choices. I'm re-structuring my portfolio to take advantage of how I see things playing out.

      Until cryptos are allowed to also be packaged as securities, we will not see that happening any time soon, except by projects which don't give a crap about governments and are straight up securities / funds that pay out dividends, of which there are a handful.

      I feel that DGD's change in their rewards structure is actually a smart one on their part and I have been increasing my position in them.

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  3. All of those three currently applies to the PAY token ;P. I hold a lot of PAY mainly because i base my investments on the people involved, but i am afraid that they will be slaughtered trying to please each countries regulation. The regulations arent really in place yet and will probably change a lot in the coming years. This will eat a lot of resources trying to fit these ever changing regulations, which relates to what you said "A lot of these projects will fail, not because they are bad ideas, but because it is a bad time to have such an idea.", unfortunately..... Imagine how much money/time tenx spends on being compliant with the US when they probably never can be without making PAY really really useless. If you saw the US hearing regarding crypto, Jay Clayton (SEC chairman) was quiet firm in his beliefs that all ICOs are securities, sounded like he even thought ETH was a security, how that would even be possible, but basically every investment which is tied to a company (or in this case, a system :S) is a security. However i believe they will change the current Security Laws to better make crypto assets fit, but until then, PAY is really playing a cat and mouse game. Even with all this FUD, im still holding all my PAY, haha, says something on how much i believe in Julian (even though he has many question marks and FUD related to him as well).

    With all the FUD regarding ICOs, BTC have grown more and more in my eyes, and currently i only have 5% in BTC :(. Never really been a big believer, such as your self, until last few weeks. But mostly i outsource my investment choices as much as i can, not following my own future thesis that much. Taking inspiration from many sources i find trustworthy, before making an investment, even if it might contradict with how i believe the future will play out.

    Me too, still holding all my DGD, cant wait for DGX, really curious if one will be able to store it in a MEW or if only within DGDs exchange. A collaboration with TenX would be awesome as well, having DGX in their TenX wallet = 100% win.

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  4. isn't eth an utility token itself?

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