0xNIL — Experimenting the Perception of Value in the Internet of Money
The recent years will be remembered for the amount of multimillionaire Initial Coin Offerings (ICO).
In 2017, there has been >100 ICOs which collectively have raised ~$1.25 billion. The first ICO was held by Karmacoin in April 2014 for its Karmashares project. After few months, Ethereum sold its ether with a similar process, exchanging initially 2000 ether for 1 bitcoin. At the time, a bitcoin was ~$600. That means that ether’s price was ~¢30. At today, ether is up more than 1000x on the dollar, ~200x on the bitcoin.
The great innovations brought by Ethereum is a successful implementation of smart contracts, computer protocols intended to facilitate, verify, or enforce the negotiation or performance of a contract [Wikipedia].
One of the possible uses of a smart contract is the creation of a new coin. With this powerful tool at their disposal, hundreds of projects started creating their tokens and selling them in an ICO.
Is there a real value behind those tokens?
According to Coindesk, the two top performing cryptocurrencies from Q1 2017 were Decred (DCR) and Golem (GNT), which gained 2,410.6% and 835.5%, respectively.
Decred is a regular cryptocurrency, with its own blockchain, its own policies, its own community.
Golem is, instead, a token in the Ethereum Virtual Machine (EVM). Since Golem wants to create a world supercomputer, to handle the transactions inside its world, introduced its own currency, the GNT. As you can guess, it could have worked well enough just using ether, but in that case there was no excuse for a crowd sale. Regardless, at the time of the ICO you could have bought 1000 GNT with 1 ETH (~$8), and sold your 1000 GNT in June for ~$600. Not a bad deal, even if, to put it in context, you have to consider that one ether in June was ~$400.
What about all the other tokens?
For a few lucky coins, there are many others that, despite the enormous amount of money collected during their ICOs, are struggling. An emblematic example is Bancor. Their ICO set a record raising $153M. In spite of this, the BNT has caused losses to the investors because it never acquired a significant value on the market.
And there are many other examples.
CoinMarketCap, listed 229 tokens at the end of August.
In the list, they miss a few dozens of satirical and/or “honest” tokens which are out there to criticize the crazy ICOs we are watching, being ironically part of the ICO madness — like the Useless Ethereum Token, which raised about $100K, and went up 450% and more, performing much better than many useful tokens.
All that said, the doubt about where is the value of a token is a legit question.
🍏 Golem Vs. Bancor 🍎
Both projects received the money they were looking for (Golem $8.6M in 30 minutes, Bank $153M in 3 hours) and both sold a standard Ethereum ERC20 token.
Though, while the GNT became soon a very priceable token, the BNT mostly failed. It could grow in the future, but for now, it is struggling.
My takeaway is that the value perceived by the investors is other than the value seen by the markets. And it is so because the investors think of the product in the long term, while the market often follows what is called Market Sentiment, with short term speculative strategies and logics that are difficult to understand.
At least, one would assume that the GNT is doing so well because of the fast and vigorous advancement in the Golem technology and its large adoption.
I don’t think so. Golem recently released the Brass Golem Alpha2 0.8, but this is still an alpha version with much still to be proved. Don’t get me wrong, I am sure that there is much value in the Golem project, but right now we don’t have enough elements to judge.
Everyone asks for money
Despite whether a token crowd sale come from a promising business or a joke, someone asks for payment.
Let’s try something different, starting from this hypothesis:
The value a token pretends to have is irrelevant for the market.
If this is true, even a free token will eventually have a price, i.e., will have a value.
I had those thoughts running in my mind for weeks until in July I realized that the only way to demonstrate the thesis was to build such a token and see what happens. So, I left my job at Yahoo and started a new trip in the age of the cryptocurrencies. 0xNIL is the first stop.
Introducing the NIL
A NIL is an token whose price is zero.
Does it mean that it has no value?
No. Price and value are two very different concepts. Let me show an example that a good friend shared with me when I told him about this project.
Someone gives you a bicycle for free.
If you like to ride a bicycle, the present is useful, it you don’t know how to ride it, it is useless. In the second case, though, eventually, you will learn how to ride the bicycle and will start using it. In both cases you could sell it and make good money, because whatever will be the price, your earning will be the 100% of the selling price.
Wait a moment, a token is an intangible good.
Yes, but I would argue that the dynamic is basically the same. In fact, the value will be determined by the market. If the market will adopt the NIL and trade it, it will eventually have a good value because any possible selling price means a 100% capital gain. In any case, nobody is risking anything because the price is zero.
That said, let’s reformulate the definition:
A NIL is a possibly-eventually-valuable token, initially priced at zero.
How will it be distributed?
In the last quarter of this year, there will be an Initial Free Offering (IFO) and a certain number of NIL will be taken in exchange of zero ether. The process will be very similar to an ICO, including bonuses for early participants and a pre-IFO.
More details on the 0xNIL website.
A better future for cryptos
0xNIL’s goal is to verify the following thesis:
Token’s prices are arbitrary and depend on a perception of their value which has little to do with their declared value.
If this is true, the NIL will acquire a value, will be traded, and eventually be used for normal transactions.
If this is false, the NIL won’t be traded anywhere.
Why is this important?
The inequality that we see now in the cryptocurrencies world is way worse than in the fiat currencies world (I will write a post about this later).
Do you know that 100 wallets own the 17% of all the bitcoins out there? This is much worse than the 1% owning the 80% of the world resources. In a world where the only currencies are cryptos, there could be a 0.01% of the people owning that 80%. I don’t like it and I hope, in some way, that the current cryptocurrencies will go down, sooner or later, substituted by new cryptocurrencies that are distributed with equality.
In a similar way to what happened when the most of the web services became free, naïvely, I dream of a not-so-far future, when there will be coins given for free to the people, let them creating an economy on top of them. I have no idea of if and how this can be implemented, but, if so, I think that 0xNIL would be an important precedent.
Finally, 0xNIL prepares an alternative to ICOs which solves all the issues that the ICOs have shown (I will talk about it in a future post).
Final thoughts
The project, to reach its goal, must be supported by numbers big enough to be statistically relevant. So, it’s imperative that it reaches as many people are possible, and any help in this direction is really appreciated.
Please vote and share this post 🙏
The code for the IFO is auditable on Github. As soon as everything is ready and it is clear that there aren’t vulnerabilities, I will announce the IFO, which will probably last 30,000 blocks in the Ethereum blockchain (about one week).
In the meantime visit 0xNIL, and stay in tune.
PS > IMO, any NIL is like a seed that will hopefully produce a plant. This is why the illustrations here are all photos of plants (taken in my building backyard, and filtered using the amazing Prisma app).
PS2 > I am talking explicitly of tokens. I think that projects like Tezos and Filecoin, which also raised a lot of money, make sense because they are developing entire new platforms.
