By Edward W. Mandel
At BQT, our curated list of asset pairs is and will perpetually remain a work in progress. Now that we have entered cryptocurrency’s second decade, it’s critical that we look forward to the assets with the greatest growth potential. While not counting anything out, there are an even dozen which have attracted our attention. In this new series, we examine them, listed here in no particular order: Bitcoin SV, Tron, Cardano, Monero, Iota, Dash, Tezos, Chainlink, Luna, Neo, Seele and, per this installment, Matic.
Market cap
If you never heard of Matic, which trades as MATIC to keep it simple, you can be forgiven. As of this writing, its market cap is $37.9 million, according to CoinMarketCap. That’s a fraction of a percent of all the digital assets out there, and it’s currently only the 90th most highly valued. Matic doesn’t seem to have a problem with liquidity, with daily volume accounting for about 40% of its market cap, but that in itself isn’t a reason to buy or hold it.
So what put it on our radar?
That’s the story of how speculators can get their facts very, very wrong. And it’s one thing to be flagrantly erroneous about traditional securities or college basketball tournaments or true cryptocurrencies, but when you’re making your mistakes about a utility token that does nothing except make the Ethereum blockchain more scalable and thus more likely to be widely adopted, you’re not just losing money for yourself. You’re losing money for all of us.
Here’s that story.
History
Last year saw the advent of the initial exchange offerings. An IEO is an ICO run by an exchange rather than by the project team itself, providing a curator who’ll filter away the scams. The growing IEO market attracted interest not only from crypto investors but from the exchanges themselves. Binance, Bitfinex, OKEx and other major centralized players now have IEO-specific platforms.
Reuters’ Gertrude Chavez-Dreyfuss estimates that, in the first half of 2019, IEOs raised $1.5 billion — roughly twice the amount raised through traditional ICOs. Andrey Sergeenkov’s HackerNoon article about the rise of IEOs provides an instructive ICO/IEO comparison chart toward the end.
IEOs turned out not to be the blockbuster they expected to be. BitTorrent Token (BTT), one of the first IEOs on Binance and certainly the highest-profile, raised $127.8 million when it launched in March 2019, spiked up to $361.8 million in June, and has since settled into a disappointing steady state around $65 million. Other IEOs followed this script.
Matic, according to Cryptovest, “is among the rare exceptions.” Writing in December 2019, Christine Masters, points out that Matic’s $7.0 million IEO in May 2019 quickly shot to $80.3 million, eroded over the course of the next several months, but still managed to hold onto $35.7 million by end-of-year. “But the recent price arrived only after a significant pump-and-dump event. … While market leaders such as Binance CEO Changpeng Zhao were defending the project, Matic’s operations director, Sandeep Nialwal, called the depreciation of the asset the result of ‘obvious manipulation’ and promised to provide a detailed analysis of what had happened.”
We probably don’t have that yet. According to Coinfomania’s Wilfred Michael, “The project team has provided some evidence that they are not in any way involved in the sell-off.” This is despite a contemporaneous report by Ali Martinez at Crypto Briefing attributed it to “fears of an exit scam.”
Martinez does provide the closest thing I’ve found to a rational explanation, though.
“The fall is likely to have been a response to allegations made by Samuel Gosling, the founder of the self-governing crypto evaluation platform Validity,” he wrote. “He believed that the Matic Network Foundation had transferred 1.5 billion MATIC to Binance in the last 50 days. He argued that the Foundation was trying to liquidate 15% of the total supply, worth over $67 million.”
By the time Gosling checked his math, found that what he thought was 15% of market cap was actually 3% and recanted, though, the damage had been done. The ensuing FUD came within a whisker of bringing down a truly worthwhile project. Oops.
A tweet by @BTCMoonland offers a screenshot illustrating that an outsized sell wall for MATIC was set up on Binance. This December 9 order triggered a massive, sudden price decline.
By now, you’d think enough epitaphs have been scribed about cryptocurrencies up to and including BTC that the press would be careful not to write off anything until its value has gone to zero. And you’d be wrong.
“Matic — an alleged competitor of bitcoin — has reportedly sunk into oblivion and lost most of its value in just a matter of minutes,” bloviated Nick Marinoff in Bitcoin News after December’s crash. And he was half right. It did lose 70% of its value in under an hour, but it then steadied, and has been steady ever since.
To his credit, Marinoff concludes his article with this perspective from economist Alex Kruger: “What happened with Matic can happen to any token. … Adjust selling volume by market cap or order book liquidity, and presto. Hence why crypto is traders’ paradise and investors’ hell.”
Use cases
Matic, though, is one of those digital assets that has intrinsic value, and maybe speculating on its market value is not the best way to use it. It’s a scalability play; while Ethereum has struggled to scale beyond 15 transactions per second, Matic can scale up to 65,000 tps, according to Reuben Jackson at Big Think.
Matic Network Foundation, as the project team is known, sees this new speed limit as having great potential for payments, decentralized exchanges and gaming networks. According to the team’s website, third-party developers could leverage Matic’s capabilities to secure personal data, perform atomic swaps, improve credit scoring and protect identities.
Of all these use cases, though, gaming appears to be taking the lead — which wouldn’t come to the surprise of my fintech journalist friend William Freedman, who wrote a 2018 blog post for Fintech Connector headlined, “Forget what ought to be blockchain’s killer app — it will be gaming”. In Matic’s case, one of the earliest adopters was Altitude Games, publisher of Battle Racers, which uses Matic to create its nonfungible tokens.
Current state
The most unusual aspect of Matic Network is that it is based in India. There’s nothing bizarre about a team of software developers coming out of Mumbai generally speaking and yet, for whatever reasons, the blockchain bug has not really caught on in the Subcontinent.
Matic lives on Layer 2 — the open systems interconnection tier on which data packets are encoded and decoded. So it’s a protocol to enable data transfers between nodes, intended to be the Ethereum chain’s platform on which developers can best deploy dapps. Matic Network claims to have worked on implementations of Minimum Viable Plasma, WalletConnect and Ethereum’s Dagger event notification engine.
Matic focuses “on scalable Plasma and PoS sidechains that can not only complement Ethereum’s scaling but also bring UX of dapps closer to what mainstream users are accustomed to,” according to Brian Curran at Blockonomi.
Keeping perspective
Gosling could not, by one single tweet, nearly bring down Matic all on his lonesome. We may never know the full reason for the December crash. Was it manipulation? That would be the most likely answer. But by whom?
Binance doesn’t appear to have anything to do with it except as the exchange where the damage was done. If it was anyone connected with Matic Network, it would be an uncharacteristic bit of self-sabotage.
But it does have rivals. Parity, Raiden and other Layer 2 solutions might be jealous of Matic’s success, as are parties that promote such Layer 1 approaches as sharding or the Caspar protocol. Some individuals with the means to put up a sell wall might have concluded that a loss for MATIC is a gain for ETH which, unlike the broader crypto space, actually declined in value in 2019.
In the long run, we at BQT aren’t interested in such shenanigans. Matic is a practical, purpose-built utility token with an inherent value, so it’s unlikely to go bust in the foreseeable future. As it solves an actual problem that stands in the way of broader crypto adoption, though, it could very well go to the moon.
Edward is an Ernst and Young Entrepreneur of the Year Finalist, Blockchain Enthusiast and visionary behind many successful organizations. An avid entrepreneur, Edward has a knack for designing distinctive business models complemented with superior technology to deliver unparalleled service and profitability. Edward also has been advising and consulting for various successful Blockchain technology and recently launched BQTX.COM exchange, BQTUniversity.io Blockchain Education Platform, BQTexchange.com beta-P2P exchange helping traders connect with each other to leverage their crypto assets.
The information can be found online at BQT.io, on Telegram @BQTCommunity.
