99% of tokens that exist today won’t meaningfully exist in 10 years
At MoatFund, we had indepthly analyzed hundreds of crypto currencies. Read their whitepaper. Used their market ready product (if any). Interacted with their team. Did peer analysis. Compared project growth vs market value.
Here’s the bitter truth we came over:
99% of use cases of blockchain technology do not require their own tokens.
I had been involved in many crypto projects, none of them actually need tokens (Utility Tokens, most leveraged type in ICOs). It’s fun to see how people are building the future and a good way to give back but I’m bit cautious about…
The growth of crypto valuation is much higher than the market adoptation of the project.
Ethereum, EOS, Cardano, Stellar and Tron are smart contract platforms and remaining are — more or less — store of values and medium of payment.
EOS and Tron just switched to their seperate mainnet blockchain, considering themselves the competitor of Ethereum. EOS is 1/5 of Ethereum market cap and Tron is 1/15 with not even more than 1% market adoptation of Ethereum.
Either Ethereum is undervalued or EOS, Tron is overvalued. You decide. Cardano and Steller are here for a while and have much better market adaptation compared to EOS and Tron but market irrationality has no heights.
I’m not trying to say, there are flaws in their protocol. Just want to point out that the current progress doesn’t match their valuation. In the words of legendary investor Warren Buffet:
Price is what to pay. Value is what you get.
Even popular, well appreciated coins today may not have any value in future and only a few handful of coins with Moat advantage will sustain in long run.
ICOs are weapon of mass destruction.
Companies which can’t even raise $5 million from VCs are raising $50 million from ICOs and raising 100x more funds than what they need. Market is really hot. You can easily get wallet out ready to invest investors. Related read: Top 50 Big Companies that Started with Little or No Money.
It’s real hard to predict the actual value of a token.
Most of the crypto currencies are not governed by fundamentals. Please ask yourself a question before investing in any ICOs — Are customers using your product because they like it (and thus are willing to pay) or because they hope that everyone else will use it and their tokens will become valuable?
Requiring customers purchase your tokens in order to use your services is a huge barrier to mainstream adoption. That’s the reason why barter system is not a desirable economy. It’s practically inconvenient to hold different tokens to use different decentralised services.
The real use case of coin offering is ownership tokens where you have proportionate rights and can claim your profits. Tokenize the equity, real estate, commodity etc but not the utility.
Most of the tokens are centralised in nature. Issuing tokens on blockchain doesn’t make you decentralised. The project must be driven by the community.
Protocol or Not?
Governments struggle to ban technologies like Tor, encryption and dark web, it seems impossible to imagine them gaining the ability to truly impact cyrpto currencies in a way that could delay its progress.
If governments could effectively stop a peer to peer network, they would’ve shut down the illegal practices of torrent websites over a decade ago. But they can’t. The files are shared in a decentralised manner.
BAT and ZRX are tokens build on ethereum blockchain. If the government wants to take down BAT token, they will simply take down Brave browser or its related extensions. If the government wants to to take down ZRX token, they have to take down the whole ethereum network.
To take down the whole ethereum network, government has to take down most of the super computers (nodes) situated globally which is practically impossible.
I can use 0x (ZRX) protocol on MyEtherWallet, Mist Wallet, MyCrypto and can even setup my own Ethereum node to interact with smart contract protocol of 0x. But to use BAT, I have to install their centralised products or services.
ZRX is a protocol and BAT is not a protocol.
Invest in protocol, not centralised services issuing tokens. Protocol based tokens will survive in long run.
Our MoatFund portfolio is mostly concentrated with protocol based tokens (ZRX, KNC, OMG, RCN, RDN, MANA, REQ etc).
And I agree, even most of the coins in our portfolio will disappear but the big ones would have delivered those +100 baggers. If you did this a few years ago you’d be retired or at least have the down payment on a house. Everyone must invest a tiny amount in cryptos, only the money they can afford to lose.
I’m sure, there are a few handful of cryptocurrencies which will survive the bubble with exponentially high returns and we are highly determined to find those cryptos and add them in MoatFund.
