If the so-called Bitcoin bubble burst after the world’s leading cryptocurrency famously hit $20,000 last December (as of Oct 3, it’s now $6.464.63) the marketing hype surrounding blockchain projects is still going from strength to strength. A whole industry inhabited by Internet hustlers, masters in the dark arts of PR and marketing wizards seemingly sprung up in 2017 to give the big sell to a wave of alt-coins and Initial Coin Offering (ICO) projects. Social media platforms such as Facebook, Instagram, Telegram and Twitter are being deployed with gusto by digital marketing specialists in an attempt to make the uninitiated believe that the coin being pumped is the way to quick riches.
In fact, research this year by Boston College Carroll School of Management found a correlation between the market capitalization of cryptocurrencies and the number of twitter followers. Separate research by data specialists has also found a correlation between cryptocurrency price movements and search engine traffic. For example, a Google trend search graph on Bitcoin shows a similar picture to the performance of the Bitcoin price this year.
Internet hustlers operating at the fringes of the blockchain industry attempt to boost the price of a cryptocurrency using tactics that bolster the Search Engine Optimization (SEO) status of the coin. Furthermore, the nascent blockchain space is inhabited by a crypto media that has a culture of paid-for content, bolstered by fierce completion among publicity hungry alt-coin platforms. Looking beyond the huge marketing buzz surrounding blockchain and weighing up the relative strengths of each project is vital. We set out to do a little research in order to look behind the marketing curtain and gauge the true development power of some exemplary coins.
A well-balanced team and a clear vision counts for a lot more than a glitzy event or social media hype. Vitalik Buterin, co-founder of Ethereum, recently stated in a Bloomberg News report that the days of explosive 1,000-digit growth in the blockchain industry are gone. While crypto growth in the past six or seven years was catapulted by a marketing drive pushing for wider adoption, the next stage is the development of applications that demonstrate real use cases, according to Buterin. “That strategy is getting close to hitting a dead end,” he said.
The next stage in crypto growth will be getting people who are already interested in cryptocurrencies to be involved in a more in-depth way, he said.
“Go from just people being interested to real applications of real economic activity,”
said Buterin. Blockchain projects developing financial applications and project teams made up of specialists with a high level of technological proficiency are most likely to succeed in finding genuine use cases. Doing this takes developer manpower — not marketing buzz.
GitHub, which provides open-source code hosting services, is a valuable resource for obtaining an accurate picture of the strength of the ecosystem surrounding a blockchain project. When a substantial developer base is working on a project it is more likely to have a genuine use case for blockchain technology, with long-term prospects of success. Services are available that attempt to assess the frequency with which the code governing a cryptocurrency is updated, thereby quantifying developer activity within an alt-coin’s ecosystem (caveat: the metrics used by websites that track developer activity and compare projects should be closely scrutinised). Even though Bitcoin and Ethereum’s developer activity varies according to which rating service you use, the world’s two leading cryptocurrencies clearly have strong ecosystems.
When looking at the correlation between the price of a coin and its number of twitter followers, one finds little developer activity for certain coins such as Bitcoin Cash. This may be a surprise to many, given the efforts of Bitcoin Cash evangelist Roger Ver on social media. Bucking this trend is Merit which is ignoring the blockchain hype machine. It is instead focussing on building a developer community. Founder and CEO Adil Wali has a proven track record as an entrepreneur, building creative and innovative virtual teams across different global jurisdictions. Rather than making outlandish claims about the technology and promising quick riches, Merit believes that a digital currency should stand on the pillars of simplicity, safety, and community. To that end, Merit has not hired marketing executives and instead has a core team of 16 full-time developers working on the currency.
Some see parallels between the current state of blockchain and the Dot-Com bubble, pointing to a polarization between projects driven by marketing hype and those seeking to find a genuine use case for the new technology. While Dot-Coms in the late nineties promised game-changing services, most failed and fell into insolvency. Bad actors operating on the fringes of the blockchain industry in search of a quick buck are now starting to struggle in this year’s bear market. The huge drop in prices across alt-coins that we’ve witnessed this year may accelerate still further if the bulk of coins have few developers working on projects that address user needs. Surely only the strong will survive.