CoinJanitor, Forks and Value to Investors!
Unless you’ve been living under a rock for the past year you’ve probably heard of the term ‘fork’. Fork’s came to fame in 2017 with it sparking great controversy throughout the crypto community and actually dividing many into separate camps. Ethereum faced a philosophical dilemma in early 2017 proceeding the infamous DAO hack that parted 50 million dollars from their investors. The dilemma was simple: roll back the chain until before the hack occurred and go on as if nothing had happened or continue the (then) main Ethereum blockchain and uphold the tenet of immutability. Eventually the decision was made to opt for the former choice, but at much contention and the cost of many memebers of the Ethereum community leaving; a sizable number of the old Ethereum community have kept the original chain operating to this day, called Ethereum Classic.
Now, we can argue back and fore as to whether network forks are a good thing because there are strong arguments for both sides; but the fact of the matter is that they exist and will continue to exist going into 2018 and beyond. The question is then, what does it mean now that we are living in a world where entire networks can be forked for the first time in history at virtually next to no cost?
To show the extent of the implications of this we’ll take the legacy payment network, VISA, as an example. VISA is a multinational payment network that facilitates electronic currency transfers throughout the world and extracts a total revenue from its customers of $18 billion dollars annually. The $18 billion dollars is a consequence of VISA taking a tax on its customers for the luxury of being able to use its service. This revenue might be good for VISA shareholders but definitely not for the average local retailer who now must pay an additional 3% to be able make a sale. 3% doesn’t sound a lot but when a business is operating at 5%/10%/15% profit margins, the 3% charge on every credit card sale can make a big difference.
Now let’s imagine the VISA network is now running on an open blockchain, where payments and money transfers are settled on an open-source, distributed ledger. If the current VISA scenario was to become reality, i.e. the blockchain was arbitrarily extracting 3% fees for every transaction, then there is a strong incentive for users to fork the network. Somebody can come along, copy the source code, duplicate the state of the ledger and start mining on a new chain. Users would happily migrate over to the new blockchain which may only be charging 0.5% fees (enough to cover the cost of running the network) because they are getting a more favourable service. As more people use the new network and leave the old one, the value of the new, lower fee network, increases. The increased network value will result in the higher market price of its respective token over the old network, making it more profitable for miners through block rewards to mine on the new network, making it more secure and become the new dominant network. Everything else remains the same so merchants using the old network can, at virtually no cost, migrate over to the new network. This is unlike VISA where they control a monopoly over the payment network and have extremely high barriers to entry that inhibit any cheaper network trying to compete with them.
What does this mean for investors? Unfortunately, it means that the ability for these cryptocurrency network to ‘extract rent’ or ‘capture value’ from its users and put it in the hands of investors will be greatly inhibited. Companies are profitable because they extract a certain percentage of rent from the total value they add to society, this is called their revenue. Cryptocurrency networks don’t have the same revenue models and therefore potential investor profits are likely to be ‘forked away’ in many cases.
The consequence of this is that users will get to enjoy the benefits of very cheap service, like the 0.5% payment fees mentioned above, which will benefit the whole of society immensely (especially in developing countries where using such services are too costly or even not accessible at all). It also means that investors seeking high returns in cryptocurrencies must consider the difference between ‘value add’ to society and ‘value capture’ for token holders of the networks they are investing in.
CoinJanitor is one such project that is a hybrid between the two, which can be shown as a great example of a project that offers the benefits of open-source by not extract exorbitant fees at the cost of the consumer but retain the ability to accrue value to token holders like a traditional business. Because CoinJanitor exists beyond just what can be seen on a blockchain i.e the value of its service is derived from the strong community work and economic incentives for projects rather than its technology. CoinJanitor, above all else, is a community of driven individuals that have a shared mission to help clean up crypto and support the sustainability of cryptocurrency projects by recycling value. A large part of CoinJanitor’s service is ‘off-chain’, such as communicating with failed coin projects, negotiating the buyout terms, burning tokens and recycling code etc. This means that CoinJanitor can operate more similar to that of a non-profit foundation in its mission to clean up digital space, whilst still enabling value to accrue to token holders. JAN tokens exist as an ERC-20 token in its entirety and forking the token serves little to no purpose in that there is no unique value there. The value of JAN token comes from the 1000’s of hours of research that has been put in by the CoinJanitor team to research and document all the failed projects and their subsequent work alongside the community to clean it up.
Another team could be set up to do something similar to CoinJanitor, but they would have to compete on grounds more similar to traditional business competition. If someone else launches a similar service, it would affect our purchasing power in the market and our ability to negotiate by virtue of holding a scarce resource. We believe that our first mover advantage combined with CoinJanitor giving very little incentive for competition by offering the most beneficial community service possible by our dedicated team should allow us to be one of the few projects that will sustain long term value for token holders.
Until next time,
The CoinJanitor Team!
Join our community today: https://t.me/CoinJanitor
Contribute to our ICO today: https://www.coinjanitor.io
