Growth, Tribalism, Utility and Cryptocurrency:

Growth:

You  know the biggest benefit of decentralization is the introduction of  automated, verifiable trustlessness into processes where a trusted 3rd  party was previously required.

The whole point is that in removing  the administrative need for a third party, you save time (via automated  verification) and expense (to compensate the third party for their  time).

Perhaps a bigger idea, an expansion of this is that  governance can be decentralized and the layers that exist between  decision makers from decisions being made is narrowed.

Yet it is  funny that we are so tribalistic when it comes to the promotion of our  and strategies and platforms that can achieve these aims.

One  great irony of the cryptocurrency universe is that because the value of  our speculative investments (our cryptocurrency tokens) is in so many  ways dependent on adoption, we often think and conclude that this must  come at the expense of success or growth in other projects including  seemingly direct competitors in our space.

We often intrinsically  feel or act or behave in a manner to suggest that cryptocurrency is a  closed loop system; a narrow universe, a small box where there is no  growth only shuffling of money from one asset to another.

And yet a  quick glance at the marketcap for all cryptocurrencies combined shows  that this is not the case. That cryptocurrency market cap has grown  considerably; I'd argue at an exponential rate.

For example, the  price of Bitcoin and it's associated market cap has grown massively  through 2016 and 2017 even though it's total share of crypto-market cap  has fallen considerably.

The market cap of Bitcoin in January 2016 was $6.5 billion. As of July 2017 the market cap is $45 billion!

Meanwhile in this time the total market cap of all cryptocurrency has grown from $7 billion to $90 billion

And to make this important the share of market cap of Bitcoin has fallen from 90% to 47%!

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So what's the point of this?

  • It means there is money flowing into cryptocurrencies driving their speculative growth.
  • It means that crypto is not a closed box with a set number of participants changing hands.
  • It means that this is not a zero-sum game over a longer view stretching over months and years, so  our strategies both trading and investing wise don't have to pretend to  be in these time frames either.
  • It means that just  because one cryptocurrency has grown massively in value over a short  space of time, that the growth in surrounding cryptocurrencies does not  have to eat into it's market cap or long term growth either.
  • It means that given Gold with a market cap of $7.6 trillion is worth 84 times more than the total market cap of all cryptocurrencies we know that cryptocurrency is both economically and technologically still a very young market!
  • It  means that even if the dominance of one product or technology in a  given field may come to an end, it does not mean that product cannot  continue to enjoy considerable growth moving forward. Bitcoin rose 750% in 1.5 years even though it's overall market cap dominance almost halved!

Given  that accessibility to cryptocurrencies is constantly improving and is  the major bottleneck to new waves of investors and traders coming on  board I would argue that we have a lot of growth still to come.

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Tribalism:

And yet when I browse the dailies on r/ethtrader, r/bitcoinmarkets, r/btc,  why do I see so many posters slagging off other crypto projects, even  one's that may contribute or benefit the ecosystem of technologies they  have holdings in?

Granted a lot of the times I see genuine  criticism of projects or technologies that are highlighted, often  genuine scams are brought to my attention and legitimate causes for  concern in some tokens are raised with eloquently delivered and balanced  arguments to defend the posters point of view.

Often though I  simply see down vote brigades or nasty comments for posters who mention  their tokens (likewise I often see people post their predictions of  which tokens will pump without explaining why).

The worst instance  though is when I see the board and development teams of other projects  actively spread misinformation and promote and actively perpetuate a  climate of mistrust or harbor an openly derogatory attitude towards  other projects.

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For example very recently I received an  unsolicited direct message into my reddit account from a user I've had  no previous communications with asking me to donate my Ether to a  particular ICO whose project I won't name. Suffice to say I found it  very insulting that this message and the articles it had linked to were  saying derogatory and deliberately mis-informative things about projects  that represent potential competitors in their field of product  services.

Similarly I've read accusations that the teams actively  devote resources to paying people to troll and discredit promoters of  potential rival projects (that's just sad people) and top level  representatives of large established cryptocurrencies openly speak lies  or attempt to spread fear, uncertainty and doubt about projects they may  see as rivals.

Unfortunately all these actions are in bad faith  and speak to the poor integrity of these individuals and depending on  their level of involvement may reflect poorly on their preferred project  as well.

When I consider the amount of growth that has occurred  in and been the dominant theme of cryptocurrency these last 4 years, I  realize that this level of tribalism speaks to the small mindedness of  others, to the intellectual laziness of others and to the total  ignorance of the macro-economic factors and historic contexts that have  taught us that with any paradigm shifting idea (in this case distributed  ledger technology and it's role in furthering the decentralization of  services) that there will be many winners and that it is the projects that bring utility and adoption to these ideas that will be the biggest winners.

Adopting  a holistic, synergistic, utilitarian approach to cryptocurrencies in  the end is what will lead to mass adoption, mass growth and genuine  non-speculative use of distributed ledger technology which will benefit  the majority of early adopters maximally.

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Taking  a maximalist approach or the idea that there can be only one  distributed ledger technology or blockchain to rule them all is a  fallacy.Believing that a given niche of applications (currency,  smart contracts, marketplaces, DSN's etc) can only be occupied  appropriately and adequately by only one product is the fallacy of  maximalism. As we have seen historically for any given field of  governance or technology, where money is to be made there is always at  least 2 or 3 distinct competitors each occupying their own sub-niche and  serving their own dedicated audience.

Tribalism is fine if it doesn't stop you thinking about the bigger picture or assessing it broadly. Tribalism can give you a sense of worth, a sense of belonging,  community, accomplishment and standing the more respected and  representative you are of the tribe you associate to. It should not  however get in the way of an objective assessment or commentary of other  tribes and the technologies, cultures and ideas they represent.

In  the worst instance tribalism represents the self interested and  preservative behavior of an individual to protect their own assets and  tribe to the detriment of the ecosystem as a whole. I see that all too  often in cryptocurrency and even though it is an understandable part of  human nature, in investments I see it as a red flag when such attitudes  and behaviors are directed by top level executives or marketing managers  for specific products, industries or technologies.

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To me  such behavior reeks of insecurity when the criticisms relayed are done  emotionally not rationally, when the critique lacks substance and is  delivered in a manner designed to intentionally divide and denigrate.  For such a young ecosystem as cryptocurrency, such behavior is short  sighted. It demonstrates a complete lack of macroeconomic insight from  these sorts of preachers.

In reality cryptocurrencies can grow  synergistically (i.e. together in a manner that is helpful towards each  other) and they can grow both independently and interdependently of each  other.

A look back at growth in detail confirms this. Now lets  look at how encouraging utility can be both harmonious with tribalism  and diversity whilst encouraging growth.

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Utility:

We  want the technologies we are invested in to be successful because we  know if they are, their value will grow as will the value of our  proportionate stake in this. To this end I encourage you to talk about  your holdings. There is nothing wrong with being tribalistic about your  own holdings as long as you are respectful, inquisitive, objective and  appropriately critical of alternatives. I discuss various things to look  for in my ongoing intelligent investors guide to cryptocurrency series  but among them I value non-speculative utility highly.

I believe  if your holdings bring non-speculative utility to this field and ideally  encourages non-speculative fiat spending (i.e. people spending their  dollars, pounds etc for services provided by blockchain technologies)  then they will have the road map to long term success potentially laid  out for them.

Furthermore sometimes having several iterations of a  technology type is actually beneficial to the technology itself and the  ecosystem as a whole.

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For example open fund asset management platforms such Melonport, Iconomi and TaaS should not be thought of as competing  with each other. They should be thought of as three different projects  with three different resource pools, three separate marketing budgets  with three separate ways of promoting their product to the same global audience. If anything even though they provide the same end-point of  service (index funds and managed portfolios for cryptocurrencies and  tokenized assets) they are effectively acting as fail safes for each  other; should one not succeed the competitors will have an opportunity to study why and adapt accordingly and hopefully for future success.

Conversely  the success of one fund management platform will bring more fiat into  the cryptocurrency ecosystem which will should then cause an average  rise of the price of individual cryptocurrency tokens which means the  value of other fund management platforms should also rise in value. Thus several iterations of the service can be beneficial to the ecosystem both in failure and success.

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Another example is decentralized marketplaces. There are 3 major projects can come to mind; Particl (PART), Syscoin  (Sys) and OpenBazaar. They all aim to bring utility to cryptocurrency by  providing a means through which real world physical goods and services  can be purchased and distributed solely through the use of  cryptocurrency tokens. OpenBazaar currently accepts Bitcoin, Syscoin  conducts it's transactions via it's native SYS token but also accepts  Bitcoin (BTC) and Zcash (ZEC), whilst Particl will use integrated  shapeshift to automatically convert all shapeshift compatible tokens  (currently 67 as of writing) into the native PART token for transacting  on the network.

  • As a speculator I have a preference towards  Particl because I believe their use of integrated shapeshift to convert  all cryptocurrencies via the shapeshift coin exchange network into PART  prior to use will create organic buy pressure, absolute necessity and  and intrinsic value for the Particl token whose value can logically be  expected to increase provided organic demand for the use of it's  proposed marketplace grows.

I also believe the inbuilt  anonymity features of the PART token (CT, Ring CT enabling optional  anonymisation of public transactions) and it's marketplace (availability  of private listings which can only be accessed through knowledge of the  private key, a trustless 3rd party free escrow system referred to as  "MAD escrow") will provide additional incentives to transact  specifically through the Particl network. I also believe that since  PARTICL is verified through proof of stake with a percentage of  transaction fee's going towards those verifying the Particl via staking  will provide community driven incentives to promote the network which do  not exist in OpenBazaar or exist as strongly in Syscoin (whose token  appreciation correlation to increasing use effect I feel is diluted  through the option to avoid transacting via the SYS token altogether).

That  said OpenBazaar is already established and has a working decentralized  marketplace where you can actively trade. Similarly Syscoin has already  released it's public beta in 2016 and includes anonymity via zcash  payments. In contrast Particl has yet to release their proposed platform  in Beta and this is where the main point of criticism lays; that it  won't be done. Acknowledging that Syscoin has a polished presentation, a  history of development and is forming corporate partnerships (e.g.  Microsoft Azure for deployment of the Syscoin API) and representation  are strengths that bring legitimacy to the cryptocurrency ecosystem  which will ease the minds of potential consumers both corporate and  private.

I  believe that marketplaces that accept multiple cryptocurrencies will  bring utility and important, non-speculative intrinsic value to the  cryptocurrencies they utilize. This non-speculative instrinsic value is  essential and vital to the long term growth and acceptance of those  supported cryptocurrencies.

Decentralized marketplaces  (particularly those with anonymity) can further democratize trade and  make the exchange of goods more accessible to people regardless of  regional restrictions due to local governance. This is an additional  benefit of such projects in the (still largely unexplored)  cryptocurrency ecosystem which will help drive growth of the entire  cryptocurrency market cap as a whole.

Systems like those in  Particl and Syscoin can provide significant value to BTC, ZEC and a host  of other cryptocurrencies indirectly and as such if you have any  interest in seeing cryptocurrency as a whole succeed in replacing or  sitting aside traditional fiat mechanisms you should be supportive of  them.

Each decentralised marketplace will cater to different  demographics of the global community, have different promotional  strategies, different partnerships and ultimately different areas of  reach and adoption. Their very existence and development is good for the  cryptocurrency ecosystem and helps us to remain tribalistic (which is  really a way of preserving mental focus) and supportive of the  cryptocurrencies and token technologies we are interested in whilst  giving them grounds to indirectly grow.

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The third example I want to look at today is smart switch/contract platforms: The rapid success of Ethereum (ETH) has inspired the development of  multiple other distributed ledgers aiming improve or solve problems  identified in current solutions (namely speed, scalability and  governance). Some of these technologies provide a unique approach to  smart switch/contract execution or network verification e.g. IOTA, LISK,  ANS and EoS whilst some aim to fix existing problems from the ground up  e.g. NEM and TEZOS. Although the cynic in me is inclined to say that  some of these projects represent cash grabs rather than genuinely  intentioned attempts to improve on an existing product or idea, they  ultimately bring greater attention to this space.

I suspect that  although there will be one large player the the smart contract field and  that although presently it appears to be Ethereum, this does not mean  that several other systems will not find their audience, niche or  adoption. To this end their is room for organic growth and adoption in  these technologies; even though rabid fans and corporate/technical  representatives of their platform will be inclined to say their platform  is the best or the only one that matters, on a global outlook that will  simply not be true; solutions will continue to evolve and the  demographic, adoption and consumption patterns will continue to change  leading to periodic shifts in dominance.

Perhaps more importantly  each product will have different teams composed of different  individuals; each individual will have their own composite psyche and  thus their own unique approach to the same underlying common problems  concerning product growth, development, promotion and adoption. These  individuals will also have their own limitations and depending on the  overall team skill set and the interpersonal factors that favor success  will hopefully override the limitations on an individual level that can  err towards failure. What is important though is that each team attracts  people and provided the organization is there to utilize their skills  and experience properly, then the product they work on will gain  traction, advocacy and adoption with resultant growth and success. Ultimately  it is these interpersonal factors and ability to understand and attract  an audience that determine the success of a project in the long term.

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Conclusions:

Different  products providing the same type of service can reach different  demographics in different parts of the world and even if only one  succeeds, it still means that access to the entire cryptocurrency market  has been improved which means more money flowing in which means the  price of assets you hold is likely to go up. Why? Because the increased number of new entrants means someone is more likely to buy something you hold.

And  remember if one fails, the others can still succeed. Selective,  intelligent diversification within a product type is a useful strategy  to hedge for maximal gains whilst minimizing risks.

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References:

1. Market capitalizations of all cryptocurrencies: https://coinmarketcap.com/charts/

2. Market capitalization of gold: http://onlygold.com/Info/All-The-Gold-In-The-World.asp

3. Open Bazaar (website): https://www.openbazaar.org/

4. Syscoin (website): http://syscoin.org/

5. Syscoin whitepaper: http://whitepaper.syscoin.org/

6. Particl (website): https://particl.io/

7. Particl whitepaper: https://github.com/particl/whitepaper/blob/master/decentralized-private-marketplace-draft-0.1.pdf

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Further articles in this series:

Part 1-

Part 2 -

Part 3a -

Part 3b -

Part 4 -

Part 5 -

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Full disclosure/Disclaimer: I am long Particl (PART), Ethereum (ETH), Wetrust (TRST), Augur (REP),  Factom (FCT) and Iconomi (ICN). All the opinions expressed are my own. I  cannot guarantee gains; losses are sustainable; do your own financial  research and make your decisions responsibly. All prices and values  given are as of time of writing (Midday 26-July-2017).

Original appeared on Reddit:

https://www.reddit.com/r/Particl/comments/6pmqpw/the_intelligent_investors_guide_to_cryptocurrency/

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