It’s been a slow trading week for cryptocurrencies in general, with the prices of most cryptocurrencies hovering around their recent-day means, and general price consolidation. However, some interesting events unfolding in the space as usual.
Ethereum: Spooning with the (Hard) Fork
It’s official now - Ethereum has hard-forked to avoid the DAO-disaster. There is no way to please everyone in this outcome. Was this a colossal mistake or a genius move? Only time will tell. Let’s be clear though - like it or not, the Ethereum team has chosen a path, and the community will have to live with the consequences, both good and bad. Let’s wish the team well for the future. With this hard-fork, Ethereum has forever changed the debate on the idea of ‘immutability’ of blockchains.
Also, who will answer the question - will there be a hard fork if my smart contract is hacked? If they do this multiple times, it reduces trust in the system. If they refuse to do it a second time, it will give an appearance of favoritism to the DAO, in which many Ethereum foundation members were themselves investors.
What does the Bitcoin community think of this? This joke BIP says it all.
ICOs and ICO of ICOs = ICOO
So just another friendly reminder that I am holding awards for the most innovative ICO this year, and in my completely unbiased opinion, the award goes to HEAT :) Seriously, check out the project, you’ll like what you read. Or you won’t, in which case all you can do is stay away. After all, you can’t really short an ICO. Not yet at least.
But another interesting ICO at the moment is that of ICOO. They are the same guys that use Bitshares at their backend to essentially bring you ICO token trading in near-real time. In the future, I see a lot of potential for such an idea, where new project developers will just piggyback off of the technology provided by ICOO to launch their ICO tokens, instead of trying to manage the whole process in-house. It frees up a lot of developer time that can be used to develop the projects. Plus they have some other features, like advertising (which personally I never recommend but hey, what do I know) that may appeal to these projects.
A Word on Innovation and Market Cycles
Crypto is a fast-moving space. There are thousands of cryptocurrencies, but only a handful, say 25-30 really matter and can get investors excited. The rise and fall of cryptocurrencies can be a cautionary tale. Auroracoin anyone? Some cryptocurrencies rise just based on a trend or market cycle. Be careful of such coins as long-term investments.
So how important is innovation, really? Take something like Litecoin, the ‘silver to Bitcoin’s gold’. How innovative is it really, and how innovative has it been in the last few years? Even something as well-established as Litecoin risks obsolescence.
Dear Banks: We need to talk
For the banks and financial institutions, it is all about ‘blockchain technology’. Lots of marketing hype, lots of dollars at work, but no results is how I’d describe their efforts so far. In fact, no one even seems to be asking the obvious question, “Do you need a blockchain to do X, Y, and Z”? This does get a little ridiculous.
Here’s Matt Levine from Bloomberg on central banks potentially using ‘blockchains’ for central bank money. For those who don’t know, Levine is a widely followed voice on the Street (Wall Street).
And what about upper management pushing for blockchains? Well, don’t miss this Dilbert gem.
And for those people and financial institutions who want to really know whether to use a blockchain or not, here’s a handy guide:
So be careful of the blockchain hype. Cryptocurrencies don’t compete with these private blockchains. The history of technology has shown that open, innovative protocols usually beat closed, proprietary ones. We’ll see if this time is indeed different, as the banks claim.
From ‘Digitization’ to ‘Assetization’?
We discussed the trend of digitization last week,and how cryptocurrencies like FIMK and HEAT (wink, wink) are pioneering this trend, especially with an in-built order book. Digitization is an important trend, and when the online tokenization of assets meets with the offline world of finance, sparks could fly. That’s what platforms like HEAT, WAVES, Counterparty, NXT, etc. are counting on.
However, what if we take this one step further? What if the trend is not only towards tokenization and digitization of existing assets, but the ‘assetization’ of cryptocurrencies themselves by the mainstream financial industry? What if cryptocurrencies themselves can emerge as an asset class, similar to precious metals, or developing country bonds?
This is not just another crypto-wet-dream, but kinda confirmed by the CME group, one of the largest derivatives trading groups in the world. If cryptocurrency indeed becomes an asset class in and of itself, then the usual caveats around diversification will apply. This means it may not be just Bitcoin, but a host of others that will catch the attention of serious players in the financial industry. We’ll have to wait and see how this trend evolves. May the best cryptos win!