Synth Builds the Bull Case for Skycoin
This is a follow-up to “Synth on Skycoin and the State of Crypto in 2018”. This article summarizes Synth’s recent opinions on evolution of crypto markets moving forward and why Skycoin is well positioned. The full voice message can be found here.
Skycoin has one of the most colorful figureheads of any project in the crypto space. There are few other core developers who readily give their unfiltered, honest opinion on a range of topics as does Synth. This is incredibly valuable because he is a pure software developer with 8 years building blockchains and clearly has an unparalleled insight into the inner workings of the whole space.
This is a condensed, abridged commentary of some of Synth’s recent predictions for the future of the crypto markets and the potential role that Skycoin might play. Here are the factors that Synth believes will characterize the next crypto bull run:
The Shape of the Next Bull Run
Quantity of investors
‘The next bull run, when the market starts moving, is going to have 8–20 times as many people coming into the market as the previous bull run..… it will be the biggest bull run ever in terms of population buying crypto.’
This statement is self-evident. Every successive bull run in Bitcoin has attracted a larger number of investors, eager to carve themselves a slice of the profits. As economic conditions around the world deteriorate and wealth inequality accelerates, it’s likely that more people will looking for investment (or speculation) opportunities that offer the prospect of large gains.
Type of investors
‘…Institutional pension funds, Zurich investors, New York investors… more big money is coming in the market…the guys that own the railroads, the power plants, the shipping companies, the bauxite mines, the aluminum refineries…’
While previous booms in crypto have been driven by technologically-competent and internet-literate retail investors, Synth believes that more ‘sophisticated’ investors are poised to enter the market. This includes private high-net worth individuals as well as institutional investors like pension funds, sovereign wealth funds and other large players.
The investment criteria for these investors is very stringent and dictated by rigorous laws, guidelines and regulations. They require a higher degree of financialization of cryptocurrencies before they can invest — infrastructure like the Bitcoin ETF and institutional custodian solutions must be in place.
One thing is for sure — they are coming, because these investors will not want to miss the potential returns that Bitcoin and cryptocurrencies offer. This flows into the next two points:
Amount per investment
‘You’re seeing a lot more $1 million, $5 million, $20 million buys. Higher net worth individuals that we didn’t see too much in the last run up. Those buyers are going to have decisions made by a small number of people, which are going to have a disproportionate effect on price in the next bull run.’
The interesting point here is the disproportionate influence that certain money managers have on the entire market. When one investment manager makes the call to allocate a certain percentage of his ultra-high net worth family office portfolio to a particular coin, the market will move quickly indeed.
Accessibility of investment
‘We’re seeing pension funds, institutional investors are going to be able to buy at least Bitcoin in their brokerage account as an index. That's going to come in the next year, and allow another flood of money to come into the market …Bitcoin will go up and a lot of assets will go up.’
With the approval of the Bitcoin ETF and other financial instruments, Bitcoin suddenly becomes accessible to an immense pool capital that previously had no means to access it. The owners of this capital have abdicated the responsibility of buying, keeping and protecting their money to professional investors — they don’t want the trouble of keeping their own private keys. Again, the key is custody solutions that allow safe and accountable storage for billions of dollars worth of cryptocurrencies.
‘The number of people coming in is much larger, the amount of money per person invested is going to be larger, crypto is going to be much more accessible to the public in the next bull run compared to previous bull run.’
The fiat onramps for retail investment are being built to facilitate orders-of-magnitude greater investment than last boom. Many exchanges now have mobile apps that interface with bank accounts and traditional finance tools that let people buy crypto at the push of a button.
Evolution of the markets
‘Another macro factor is that money is going into a much smaller number of coins… All the money is going to be flowing into a very small number of assets that are considered safe.’
Higher standards of investing due diligence equates to fewer coins meeting threshold of investment for institutional investors. The reality is that that very few projects have any substantial development, so the projects with a history of ongoing development will receive this investment. These are the coins and projects that are committed to building blockchain technology that adds value to the world.
‘There’s not going to be new coins, new ICOs… people are going to be wary because during the last market ICO phase 95% of the companies failed at doing what they said they would do…Most of these coins don’t have developers. … In the next bull market all the money will go to platforms that have a history of delivering, a history of having a good development team.’
The ICO phase of the market has well and truly ended. There is no doubt that the wild speculation of that phase will return, but it is likely that it will be concentrated into the few legitimate coins that are working on blockchain solutions for real-world problems.
Why Skycoin is well positioned
Synth then describes how Skycoin is well positioned to capture much of this new investment and become one of the leading coins in the next bull market.
Depth of development
‘Skycoin has a consensus algorithm [Obelisk], a new blockchain, the ability for people to launch their own blockchains [Fiber]. We have a mobile wallet for iOS, for Android, a desktop wallet, a thin wallet and 3 different hardware wallets in development currently. We have a scripting language called CX and an entire blockchain platform……we have the only alternative to the existing paradigm that works.’
Many of Skycoin’s core components are still under construction, with the Skywire mainnet, Obelisk consensus algorithm and the final versions of CX still to be finalized. However, the project keeps delivering throughout fluctuations in the Bitcoin and Skycoin price, pointing to the depth of development resources at its disposal.
‘When [Skycoin] ran up to $50 a coin our community size was only 1000 people in Telegram. Today our main channel is just under 10 000 people…We have one of the most engaged, active communities and we are still growing in this market when all other coins are losing their user-base.’
Skycoin is showing real community engagement credentials on hard outcomes such as number of Skywire VPN nodes on the network and number of international meetups. This type of participation is evidence of true commitment to the vision of the project by people all over the world, and bodes very well for the continued growth of the project.
‘In the last run up Skycoin didn’t have a marketing team, we didn’t have influencers, we didn’t have social media like Twitter. Now we have Twitter, influencers like McAfee has a Skycoin tattoo and he is a Skycoin supporter. He is actually the biggest influencer in crypto. And McAfee is running for president on the Libertarian ticket, he will be the nominee on the Libertarian party which is 5% of the US voting public…’
John McAfee made a splash as a new Skycoin ambassador. Whether or not he continues to be affiliated with the project into the future remains to be seen. However, the fact that he supports the vision of Skywire and has a Skycoin tattoo hints towards a long term partnership. With the rollout of the wireless mesh network, Skywire and Skycoin will receive new interest from a new, non-blockchain audience.
Skycoin’s role as the next coin platform
‘A lot of developers are looking for other platforms, there is not a lot of choice and one of them is Skycoin. So we actually have a lot of people right now who are forking Ethereum, launching their own coin on their own chain and contacting us trying to move to Skycoin. There is some huge gaming company who did poker apps for Ethereum and also built a DEX but it can’t run on Ethereum because the Gas cost would be $150.
If you look at which platforms can replace Ethereum, there are several hard requirements that must be made. There has to be a consensus algorithm that isn’t Proof-of-Work and isn’t Proof-of-Stake, that gets rid of the inflationary mechanism, particularly that allows transactions to be executed in less that 1 second, that is immune to 51% attack, etc. It has to be a new blockchain, it can’t be a coin on someone else platform.
The platform has to allow people to be develop and launch their own blockchain for their application, because some of these applications have so many users that each application needs its own blockchain just for the transaction rate and the developers don’t want to pay gas costs — they don’t want to be on 3rd party platforms. There has to be a scripting language, a programming language for blockchain that allows developers to build their application…’
The expense of Gas on the Ethereum network has been problematic for the dApps that are built on top — no users will use the dApp if the cost of use is prohibitive. Building blockchain application companies layers start-up risk on top of protocol risk. These developers need the most amount of stability, surety and support possible. Skycoin’s Fiber differs from Ethereum because it gives developers control over their own blockchain — their applications cannot be slowed down or negatively affected by other users (as was the case with Ethereum’s CryptoKitties).
Lack of competition
‘The only platforms that will be participating in the next run up will be existing platforms. If you raise money to build a new platform in the next cycle, that platform is not going to be ready technologically in 5–6 years, it takes years worth of developer work…
…if you really look at what Skycoin is doing and the state of the market and you look at the competition and you understand the what the cycle will be and that new coins are going to suddenly arise out of the ether, I think Skycoin is the only coin right now, currently, that has any potential of displacing Ethereum and possibly Bitcoin.’
The final statement is one that your humble author is unable comment on. However, it makes sense to the layman that new coin platforms are unlikely to arise suddenly. Post-ICO phase, investors will be extremely wary in investing large sums into projects on the promise of future deliverables.
If Skycoin is able to execute even part of their Blueprint for Universal Adoption, then it is likely that significant value will accrue to the coin based on the widespread roll-out of the wireless mesh network Skywire. This could feasibly be active in almost every country of the world and require millions of people to own and hold Skycoins to pay for bandwidth on the network.
The future potential market cap of SKY
‘ I think realistically if someone buys $1 million worth of Skycoins and sits on it they could have $50 million, $200 million even $500 million in assets within 2 years. And that’s just what I saw in the last 3 bull runs.
We’re going to see Bitcoin at $800 billion to $2 trillion and during that period it wouldn’t be unrealistic for the Skycoin market cap to be $10 to $40 billion dollars based upon the increase in the numbers… it seems like a lot of money but as a percentage of the total crypto market cap and crypto assets its actually very small, relative to our development status, relative to the other projects in the market.
Even if Skycoin only catches 0.4% of the total market cap that sets Skycoin at $40 billion. Basically Skycoin would be going from $15 million to $1 billion, $2 billion, $10, $20, $40 billion…’
These figures do seem large, but in a market that seems to not yet have realized or valued fundamental factors, Skycoin could be the coin that bursts into the top 50, top 20, top 10 with rapid, sustained price growth.
Remember folks, this is Synth commenting on his own project. His opinions cannot be unbiased. Always do your own research and critically appraise every comment in these articles — this is definitely not investment advice. Skycoin has a non-zero probability of being worth the exact same amount (or less) in 2 years time.
I will leave you to all make your own minds up on the quality of the analysis and whether you personally believe the conclusions presented here are valid. Nobody is responsible if you lose money but you. It’s a jungle out there so be careful.