IOTA vs. Shimmer — the great analysis from an investors´s view

TL;DR:

Shimmer has received a lot of attention since its launch. IOTA, on the other hand, recently caused some disgruntlement when the Stardust upgrade inflated supply. Nevertheless, IOTA remains the first choice and is also likely to continue to outperform SMR in the long term. This is because, despite numerous similarities, there are some crucial differences that will bring massive advantages to IOTA. According to the author’s estimates, the IOTA — SMR ratio will drift apart from the current level of just over 3 to between 10 and 20.

Since the IOTA foundation released the Shimmer network and distributed the corresponding token to the IOTA owners, some Shimmi-Maxis have found themselves exchanging all or most of their main network tokens into Shimmer (SMR).

There are quite weighty reasons for this, as all innovations of the IOTA Foundation are always implemented in this “staging network” first. Savvy crypto transactors can thus participate in the super low-cost DeFi market of the Tangle ecosystem and earn money. The network has proven to be fast and solid and also manages with minimal fees in L2 (Shimmer EVM).

Most recently, the money supply has also been the subject of, well, let’s say “discussion”:

While the supply at SMR remains unchanged at around 1.8 billion SMR (and will remain so — I’ll come to the reasoning later), a fork was carried out in the course of the “Stardust upgrade” and probably the last opportunity before full decentralisation was used to rectify old mistakes, namely to design the money issue in such a way that the Foundation is sufficiently financed. A supply-booster was built in, which will lead to a 12% inflation of the money supply for a limited period of time.

Understandably, some see this as a serious breach of trust. But on sober reflection, the Foundation must be congratulated (even I) for this courageous step. Anything else would have catapulted IOTA into oblivion for good and robbed the already beleaguered investors of their last few coins. The price of IOTA was correspondingly pragmatic, even unimpressed.

So all in in SMR because IOTA is inflationary and offers less utility, the coordicide for which will be implemented in SMR first?

If it were that simple…

After the introduction of SMR, there were always doubts as to whether the Foundation was at all interested in having 2 tokens on the market, perhaps even in letting the IOTAtoken die, but with the publication of the latest blogposts, AMAs etc. one thing should be quite clear to everyone: IOTA is #1 and SMR is the sidekick:

All the new players, especially the new colleagues and partners from UAE are fixated on IOTA. The funding is also in IOTA.

Those who now argue that SMR has a certain scarcity, especially vis-à-vis IOTA, are only partly correct. This misconception, which I have noticed again and again in discussions, was also my main motivation to focus your attention on the REALLY price-relevant factors:

These are mainly:

Money supply
Tradability
Tokenomics
Additional benefits
Reputation

You think I said everything about point 1 with the previous comments on inflation (IOTA) and the fixed supply (SMR)? Not at all.

Even before the Chrysalis update, I pointed out that increasing utility will lead to a “de facto” increase in the money supply, according to money supply theory: When the Fed or the ECB, for example, make interest rate decisions, they always have the money supply in mind, which is not only increased by “moneyprinter brrrrrrr”. Other factors are:

Growth of potential output
velocity of circulation
Price increases
Changes in the degree of utilisation (here: of the network)

What does this mean, e.g. in terms of SMR?

The answer is much simpler than you think:

Let’s say you hold 100,000 fictitious ABC tokens in your wallet. The network is still under construction and there is no utility yet. Then ALL investors have only 2 options:

Sell or Hold.

A new entrant is relying on a HODLer being willing to part with their holdings. It is the only way to get ABC tokens at this point. The seller knows this and will therefore only sell at a high (higher) price, knowing that if he wants to buy again, he will have to beg another holder to transfer his tokens to him. The prices will therefore rise disproportionately when the news is good, which further increases the FOMO and vice versa. We saw such a scenario in the run-up to the “Chrysalis” update, for example, when the price went up 15x in a few weeks.

However, the introduction of an ecosystem does not only increase the attractiveness of the token. New tokens are added that compete with the main token. In the case of SMR, this was first $SOON and later $APEIN, $FUEL and $LUM, to name but a few.

Anyone who wants to use the SMR ecosystem, for example, to earn money on a DEX as a liquidity provider $LUM — $APEIN will exchange their SMR for these tokens (or sell SMR).

SMR will then only be used for very low transaction fees or as a “storage deposit”. And of course also as a currency to buy NFTs. Of course, he can also choose SMR as a pool currency. But the bottom line is that SMR competes with other pool currencies. You get the point?

So the many ways to play in the SMR network de facto lead to more ways to get SMR in the ecosystem, it “flows”, simply put, a constant flow of SMR. Simply put, there is a constant flow of SMR and those who need tokens — to use the metaphor — can access them in many ways.

Another determining factor is likely to be network utilisation. Increased gas charges in L2 could, in turn, increase demand for SMR. In turn, this could increase demand for SMR. Since SMRs are not “produced” but have a fixed supply, new exchange listings should also have a significant price-increasing effect.

I have already written my fingers to the bone on X about the importance of CEX listings for increasing market capitalisation (i.e. price increases for tokens) (because IF obviously doesn’t understand it) and will therefore only go into it briefly, also because even beginners know the equation:

New CEX = New gateway to new investors = New investors = New capital in the ecosystem = BULLISH = MOON.

In summary, while a growing ecosystem makes it more attractive to buy the base token to “get in on the action”, at the same time many new products and tokens are vying for you to exchange your shimmis for something else, which is a SALE.

Basically, the essentials of SMR price determination have already been explained here. I would like to mention the keyword “reputation”.

When SMR was released, some posts made the rounds saying that SMR could overtake IOTA because there were too many mishaps, drama and problems in the development phase of IOTA. The name IOTA was “burnt”. With Shimmer, a kind of new beginning would be possible, true to the motto: If I name my child Lisa instead of Laura, everyone will love it… You notice, I don’t follow this line of argument. Those who disagree may underestimate the intelligence of investors. Of course, everyone knows where SMR comes from and who created this network. The IOTA foundation. It can also be read in every description that has been written about SMR. So forget it.

Now let’s move on to IOTA….

“What more do you want to write about IOTA, green friend? IOTA is like SMR, except inflation significantly inflates the amount available, plus all the cool new features come to the Shimmer network first.”

Really? Well, follow me down the rabbit hole. Let’s see if your opinion holds up despite what I say below.

Because there are some weighty reasons to decide FOR IOTA. First, let’s look at it from the Foundation’s point of view:

All innovations in IOTA are doubly secure because they are first tested in SMR. So SMR has de facto a higher network risk.

IOTA is the international flagship: not only the EU/EBSI are fixated on IOTA, but the whole world will see IOTA as the Main trust layer in the IOTA ecosystem. The branding and narrative of the highly trusted decentralised network has been decided pro IOTA at the latest with the Stardust releases.

SMR is the test network. Item.

Dominik Schiener’s secret roadshow, while the work for the realignment was going on in the background, was exclusively fixed on IOTA. More or less (un-) clever diversionary manoeuvres were launched with bullish shimmer posts, although the talks with sheikhs and builders, also and especially in the UAE, were and are exclusively about IOTA.

Dom himself also gave himself away in one of his AMA’s by literally saying :

“All my money is in IOTA…. And SMR.” The latter of course, if only for the airdrop. But the dominant thought in Dom’s brain is: IOTA.

The validators who replaced the coordinator since “stardust” were chosen by Schiener and are likely to be among the crème de la crème: Universities and maybe even officials from the UAE. Not to give control out of hand in the transition phase, but big players already showing what IOTA can do is typical of Schiener’s control compulsion, but if I’m honest with myself — and I always am — I think the strategy is right until the final decentralisation, because if the validators were completely independent, this could result in renewed problems or even total failure in case of doubt.

That’s so far from the Foundation’s point of view. Now let’s take a look at potential token buyers:

What do I want as a major investor?

1. Liquidity, Liquidity, Liquidity
2. Full dev concentration on my investment
3. Passive income
4. Maximum usability

1–3 is not a typo. My point was: liquidity is king. Try buying Shimmer worth — say USD 1 MILLION… What do you think the price would do? Right. Explode. It would be a very expensive purchase. Or they would have to buy smaller portions in the market for a very long time.
Do you think a sheikh buys “small portions” (emoji with halo haha).?

Although IOTA’s volume is nowhere near that of the top 20 coins (yet), I think there is hope.

Let’s stay briefly with the investors and large investors, especially their mentality:

Sheikhs, for example, buy the most expensive car, the most expensive painting, the most expensive piece of jewellery. In short, they like to be №1. This is likely to be similar in their choice of investment products. As much as it may bother some, I am convinced that SMR immediately falls through the cracks when it comes to screening, for the aforementioned reasons.

But now we come to what I would call the “killer feature” of IOTA: MANA.

Unique selling point

With Mana, IOTA has a USP (unique selling point) within the crypto world for the first time. It is a brilliant move that is probably primarily due to the chief developer Hans Moog.

MANA overcomes regulatory concerns because you don’t need to own tokens to participate in the IOTA network. Mana thus solves a core problem on the way to the global use of cryptocurrencies:
In countries where regulators exclude or restrict the acquisition of crypto, they render the other networks de facto useless.

MANA can be produced in various ways and sold to network users on demand.

If you want to learn more about Mana, please read the IOTA foundation blog posts. Work is already being done on a good mana supply infrastructure, for example by BUILD5: https://build5.com/mana/

It can be assumed that the interest in Mana will become enormous in the long term: Being able to use the IOTA network free of charge as part of the development of the digital (perhaps European or even global) infrastructure will, in my opinion, be the main argument for a rising IOTA price in view of the exemption from regulations.

And here we come full circle: you need to HODL IOTA to get MANA. So while SMR will be a “heavy rotation” sandbox, quite attractive from the utility but less from the price, IOTA will be a HODL currency. This is a crucial point if we look back at the previous comments on monetary theory:

SMR’s velocity of circulation is likely to be significantly higher than IOTA’s.
Thus, despite temporary inflation, IOTA is the scarcer commodity.
At the same time, inflation and the current strategic orientation allow investors to (still) enter at a low price and to support the expansion of the IOTA ecosystem (which has been difficult and limited so far). Since the generation of MANA is designed in such a way that early investors can collect higher mana amounts (to make the network attractive even though the utilisation is not yet so high), it is already worthwhile for large investors to enter.

Speculative insertion on my part: these investors are likely to already have insider knowledge that we do not yet have, for example the EBSI — outcome and what will really remain of the UAE and other, earlier large-scale and pilot projects.

Conclusion:

Compared to IOTA, SMR is clearly inferior, despite or even because of lower supply.
Investors, especially big capital, will always prefer №1 to №2.
With the Stardust release, the Iota Foundation has credibly declared IOTA the (future) №1. They are willing to subordinate everything else to this success.
The creation of MANA will make IOTA a HODL cryptocurrency. In the long term, this will lead to great scarcity according to the quantity theory of money and thus to price increases.
IOTA is the safer network, as releases are always tried out in SMR beforehand.
IOTA has significantly more CEX listings and is therefore more tradable and liquid.

Expectations for the future

The SMR — IOTA price ratio currently fluctuates between 2.5 and 4.

Based on the above, I my price models shows IOTA to significantly outperform SMR.

In the long term, I expect a ratio of 10 to 20. An IOTA price of 2 USD would then mean a shimmer price of 0.10–0.20$.

THIS IS MY PERSONAL ASSESSMENT. PLEASE DO YOUR OWN RESEARCH AND DRAW YOUR OWN CONCLUSIONS.

THIS ARTICLE IS NOT A RECOMMENDATION TO BUY OR SELL ANY OF THE TOKENS, BUT ONLY TO SUGGEST NEW POSSIBLE PERSPECTIVES.
CRYPTO ASSETS ARE HIGHLY SPECULATIVE AND GENERALLY INVOLVE THE RISK OF TOTAL LOSS. #DYOR

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