To the Moon?: Part One

A look at the complex world of cryptocurrencies

Michael Putnam

Published in

The Startup

7 min readSep 13, 2018

*Be sure to check out Part Two if you enjoy what you read here*

Before We Get Started

There’s been much speculation, including a good bit on our part, about the future of blockchain and cryptocurrencies. These relatively-new technologies are expanding both in ways some saw coming and ways no one could have expected. I wanted to look at what others were saying and speculate a bit myself on what the future might hold for these electronic units of value. The mining gold rush is subsiding and shifting to major corporations in countries with cheap energy, and the ICO boom is most likely finished. So where do we go from here with crypto?

The cryptocurrency landscape is a complicated and confusing one, as the market is constantly fluctuating, there continues to be a saturation of tokens. Even the purpose of these digital assets vary from token to token or even person to person. It’s hard to keep up, and even the most in-the-know crypto-guru is still, at the end of the day, just trying to read the tea leaves. Take, for example, a study from Invest in Blockchain which found that “[a]t the time of writing, just 36 out of the top 100 cryptocurrencies have working products.” What that tells me is we’re investing in fancy ideas, and anyone who claims to know which of these will pan out is being disingenuous. The industry is over-saturated, and it’s nearly impossible to determine which currencies are going to end up being useful or even delivering on their usability promise. I want to make it clear early that what follows in Part One and Two of this post is not Mike’s Red Hot Crypto Picks. All I’m shooting for is a look at how we might be using new types of tokens going forward and what we’re going to do with the ones already in existence.

I’m not about to discuss every cryptocurrency I’ve ever heard of. That would be a waste of both your time and mine. What I intend to do is, first, describe different types of tokens and explore their various purposes within the cryptocurrency community. I’m going to use a few examples to illustrate the utility of the varying systems behind different tokens already in existence. I don’t know how to say this without sounding like I’m hedging my bets. I hope my words can be read as an exploration of a variety of possibilities regarding the myriad of forms of currency and the systems that back those currencies. What are some possible outcomes for the crypto landscape? Will we see a cottage industry pop up for trendy tokens? Will bitcoin be a novelty, as valuable as gold, or a usable means of transaction? None of the above?

As those who have been following the crypto-sphere (that’s a term, right?) probably know, we hit a peak last year that has cooled off significantly in the ensuing months. While it’s fine to dream of another moon working in your favor, I wouldn’t suggest banking on it. In fact, playing the crypto market like that in 2018, and likely beyond, is probably a fool’s errand. This is not to suggest the market won’t continue to fluctuate, at the time of writing, Litecoin valuation had hit a one-month high. A recent study by Coinbase and Qriously found that interest in cryptocurrency and blockchain is growing at many universities. CreditCoin released their own study, complete with infographic, which PR Newswire reported on, that shows a desire in the general public to learn more and surmount the barriers to entry. Clearly, there’s still interest in crypto, which is why I want to look a little closer at the potential for the various kinds. But, once again, I’m not about to get you that lambo. I will, of course, take any credit for it you’d like to throw my way, should you end up with one.

So, with that being said, let’s get down to it.

That Crypto We Know and Love

I want to start with a little primer on where we’re at so far, in terms of the current crypto offerings. I did my best to describe currencies that I believe to be the most important in terms of their varying utility, but I may have forgotten a few new and dear to your heart. I would love to see any discussion of missing currencies in the comments section. The currencies I have chosen are bitcoin, which we will consider to be a pure currency, ethereum, which we will call a programmable virtual machine, Monero and Z-Cash, which are both anonymous or pseudo-anonymous currencies and stablecoins, coins purported to be tied to various fiat currencies.

Bitcoin

We’ll start with the OG crypto. I think the big question surrounding this currency is: Could we see bitcoin make a shift from being a peer-to-peer electronic fiat to actually being used as a form of payment? There’s no easy answer on this one, and you could find articles from equally-intelligent authors who argue points entirely in contrast with one another. And until all of this shakes out (years and) years from now, there’s no way to or reason to try and pick who’s right. Right now, there’s a reason people, when referring to cryptocurrencies, call everything that isn’t bitcoin an “altcoin.” If nothing else, bitcoin serves as the 800-pound gorilla in the market, taking up space and throwing its weight around.

Ethereum

But let’s not forget about Ethereum and, of course, ETH, the currency behind the network. Writing for TechCrunch, Jeremy Rubin suggests that even if ETH’s value utterly collapsed, the Ethereum Network could continue functioning and being used, given the benefits it would still provide those interested in using the platform for the DApp market. The Ethereum Virtual Machine allows for these decentralized applications as well as smart contracts. There’s an argument to be made that Ethereum is the most versatile offering in the crypto-sphere (I’m making this a thing).

Monero/Z-Cash

While bitcoin and ethereum both have features to help anonymize transactions, the Monero or Z-Cash model, which have anonymized transactions built in from the ground up, provide an option for those looking to be even more under the radar than a more traditional cryptocurrency would be able to offer. They’re biggest difference: Z-Cash has the potential to be truly anonymous, whereas Monero is partially anonymous.

Stable Coins

Here we’re talking Tether, TrueUSD, Havven, Basis, etc. These are seen by some to be the perfect token, as they are all backed by other, real-world currencies to varying degrees. The thought is that this backing adds a level of stability (hence the name) to these coins, and could potentially result in their being one of the more preferred models going forward Barry Eichengreen describes the three types of stablecoin: “fully collateralized: the operator holds reserves equaling or exceeding the value of the coins in circulation”, partly collateralized, which means “the platform holds dollars equal to, say 50%, of the value of the coins in circulation”, and uncollateralized, where “platform issues not just crypto-coins but also crypto-bonds.” Spoiler Alert, he’s not confident in the long-term success of any form of stablecoin and presents a compelling, and discouraging, argument to support those concerns.

Some of the leading digital assets (crypto), like bitcoin and ethereum, eos all require suitable infrastructure. They require applications and integrated ecosystems to support greater use of their coins. There is no one size fits all way to build on top of these assets which makes cross-chain interoperability important. Leaders in the crypto space are already emerging against the duds with no real projects associated with them. It’s the job of both the public and various companies interested in the market to look for solutions that can cross-pollinate across platforms. That’s really the chicken and egg problem in dev land: do you build the platform for one crypto asset or try to better understand how multiple digital assets communicate or interoperate? Some are focused solely on bitcoin or ethereum and may be missing an opportunity to capitalize on other coin winners.

End of Part One

I hope you’ve enjoyed Part One. I tried to get our feet wet here, instead of diving right in to my thoughts on cryptocurrencies and both the current and potential market surrounding these coins. Be sure to check out Part Two, where I break down two areas of this field I find particularly interesting: the DApp model and the “country coin” (for lack of a better term) like those tokens touted by the Venezuelan government.

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