Skycoin, the Crypto Black Swan
In our previous article, we suggested that Skycoin could be the crypto Black Swan. In this article, we explore that idea further and speculate on its potential ramifications.
For many millennia, European people believed that all swans were white. The concept of a black swan was preposterous, because only white swans had been sighted in the wild. In 16th century London, the term ‘Black Swan’ was used as a statement of impossibility.
But in the late 1600s, things changed radically when black swans were sighted by Dutch explorers to Western Australia. The event had massive ramifications — a single sighting of a black swan invalidated centuries of prior belief about the world.
The famous derivatives trader-turned philosopher, Nassim Nicholas Taleb, built on this philosophical concept. He used the term ‘Black Swan’ to refer to a highly impactful, unanticipated event in a book of the same name. From the author’s definition, a Black Swan is —
- A highly unexpected, i.e. a surprise (to the observer)
- Highly impactful i.e. has a highly significant effect on society/the world
- Retrospectively rationalized as predictable or expected
A key point is that black swans are subjective — what is a Black Swan to one person or group may not be to another. The Financial Crisis of 2008 was a Black Swan to most in the financial industry, except those who made money betting on the collapse of the banking industry.
From this we get the notion of positive and negative black swans — for banks, the financial collapse was a wholly negative outcome, but for the traders who made money it was enormously beneficial, hence a ‘positive’ black swan’.
So how does Black Swan theory apply to Skycoin?
Below we address each point.
Highly Impactful
As mentioned in previous articles, we speculate that Skycoin has the potential to overtake Bitcoin in total market capitalization in the long term based on a number of factors. These include current software development status, development trajectory, the total addressable market, ease of usability, and incentive aligning. Read our reasoning here and here.
Most notably, we believe Skywire could become the dominant private internet protocol that brings encrypted private browsing to the mainstream. The incentive design is so elegant that it makes staunch privacy advocates out of the most apathetic by allowing people to earn coins for forwarding encrypted bandwidth. A testament to the effectiveness of this approach is testnet network of almost 10 000 nodes currently running the Skywire software.
The addressable market for Skywire is enormous because it is carrier agnostic—running equally effectively on DIY wireless mesh networks, dark fiber, Elon Musk’s Starlink satellites or long range low bandwidth radio. Skywire could offer private, high-speed internet metering to places as remote as rural Africa and as developed as metropolitan New York, and everything in between.
Skywire could be the holy grail for privacy advocates, who rely on large scale uptake to provide strength in numbers. This is just one way the Skycoin ecosystem could be a highly-impactful event, and we have not yet even mentioned the other key pillars of the Skycoin ecosystem including Obelisk — the new standard for blockchain consensus that doesn’t rely on Proof of Work; the deterministic blockchain programming language for building decentralized applications called CX; or the immutable object system CXO designed to enable sovereign data storage applications.
Highly Unexpected
With a market capitalization of $20 million (at the time of publication) and the main Telegram group consisting of 8000 participants, Skycoin remains an obscure coin hiding in the recesses of the crypto world.
Therefore its emergence will come as an even greater surprise to the general population, who are just beginning to appreciate the value proposition of Bitcoin as sovereign money with no trusted 3rd party.
Recognizing the value-proposition of Skycoin and the genius of its design requires a level of understanding that exceeds all but the most knowledgeable blockchain analysts and coders. One must be able grasp concepts such as —
- The security limitations of Proof-of-Work as a blockchain consensus mechanism
- The need to create a circular economy in the adoption of new currencies
- The coming cyberbalkanization of the online world
- The need to decentralize money and communicate at the hardware level
These are concepts that Synth and the Skycoin developers have considered for the past 6 years in every considered design implementation of Skycoin. The issues remain nebulous in the minds of the crypto mainstream, but instantly make sense when explained coherently.
Retrospectively Plausible
In the history of technology and human progress, the only constant is change. Technologies become superseded in an iterative process (Landline telephone→cellphone-→smartphone).
It is our opinion that the technological shortfalls of Bitcoin as the first working version of digital money, a crypto proto-coin, will prevent it from remaining the dominant cryptocurrency indefinitely. Many of the Bitcoin core developers (John Newbery, Peter Todd, James O’Beirne to name a few) are open in discussing the shortcomings of the Bitcoin codebase design. They admit that key functions of Bitcoin like wallet and consensus would ideally be separated to reduce the possibility of an unanticipated catastrophic bug, as we saw last year.
Given what we know now, a new re-factored Bitcoin would be modular, with key functions like wallet and consensus separated. Skycoin has integrated these design changes.
Until now, no convincing use case for blockchain has been made other than money. However, it is incredibly bold (Taleb ‘epistemic arrogance) to believe that time and technological tinkering will not produce a similar breakthrough for decentralizing other essential societal services.
Skywire’s incentivized mesh internet could be the first proof-of-concept that bandwidth can also leverage censorship resistance and decentralization of cryptocurrencies. There is no reason to believe its technologically impossible to create functional decentralized applications, or that platforms such as Twitter and Facebook couldn’t be replicated on decentralized networks with sovereign data ownership.
Skycoin’s emergence will, therefore, be retrospectively plausible for a number of reasons — not least that it incorporates fixes to all the design flaws from 10 years of observing the cryptocurrency industry, and it implements practical use cases for blockchain outside of just money.
The Keys to Adoption
As we slowly build up to another crypto bull run, speculation will remain the chief tool for onboarding users and driving participation in both Skycoin and Bitcoin. As we saw in 2017/18, people came for the moon lambos and stayed for the technology. Through this process, incrementally larger numbers of people become educated and begin contributing to cryptocurrency projects.
Skycoin is perfectly poised to leverage this upswelling community engagement. People in every country of the world are experiencing exploitation that necessitates Skycoin and Skywire — maybe their bank account was frozen or they are being extorted by their internet service provider.
As more of the worlds 7.5 billion people gain access to the internet and smartphone technology, the potential for a software network like Skywire and its native supra-national currency Skycoin to change the world grows daily. The rise of Skycoin will certainly be a Black Swan to all but a select enlightened few.
This is not investment advice. Always do your own research.
