Token Report Newsletter: Fog of War
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We have compared Ethereum against its competitors in several different ways by now; first by looking at how many ICOs are closing on their platforms, and later by weighing how much they collected in their initial funding rounds.
What’s more valuable for an ICO platform than just a heavy piggy bank, arguably, is an active community of hodlers, developers and users.
In this newsletter, we dive into the social media networks related to these ICO platforms, particularly looking at how these communities intersect.
For the smaller crypto communities (like Verge), their follower base is made up of relatively more “connected” members, or, users who also follow other cryptocurrencies.
The crypto communties with a larger follower base (like Ripple) also have a larger share of members that are unique to that community, and presumably a lower average knowledge of alternative cryptocurrencies.
Understanding the relationships between crypto communities like Ethereum and EOS can help in determining how popular a new project is, or how amenable a certain community would be to an ICO, i.e. “Are EOS followers interested in NEO?” The answer is yes; but they are far less likely to be interested in Stellar.
This chart shows how prominent Ripple followers are in other communities. Looking at the orange bar for each cryptocurrency, you can see how well Ripple overlaps with other cryptocurrencies on this chart. For example, almost 80% of Stellar followers, also follow Ripple. It also shows how ridiculously complicated this social network data can get!
We’ve got more charts like this, including a look at Telegram followers, that we’ve been reviewing with our friends at New Alchemy. Follow us on Medium so you don’t miss them.
1 Short Read: The State of Cryptocurrency Mining
It’s been called an “Absolute tour de force” and”illuminating”. In this blog post, David Vorick, lead developer ofSia.tech, discusses deep-in-the-weeds issues for Proof-of-Work based cryptocurrencies.
One topic discussed is well-funded operators of mining farms offering large rewards for exclusive rights to “secret ASIC” hardware for mining algorithms such as Equihash, a practice which Vorick says is likely to exist for “every Proof-of-Work coin with a block reward of more than $20 million in the past year.”
Ethereum has been getting ready to implement a Proof-of-Stake based consensue algorithm (called Casper) for their blockchain, specifically to counter the influence concentrated ASIC mining operations can have on a public blockchain.
For the cryptocurrencies that continue to use Proof-of-Work, countering ASICs by implementing software changes will likely be futile. Vorick explains:
“I think there are a lot of people out there who do not realize that flexible ASICs are possible, and expected that routinely doing small hardforks to disrupt any ASICs on the network would be sufficient. It may be sufficient sometimes, but just as algorithms can attempt to be ASIC resistant, ASICs can attempt to be hardfork resistant, especially when the changes are more minor.”
Crypto Climate: ☁️Fog of War⚔️
You’ve probably seen a person within a crypto community declare certain news to be FUD. Some people use the term using different meanings, and always with varying levels of seriousness. The scale goes from light sarcasm, i.e. “Don’t believe that, it’s just FUD,” and all the way to literal accusations of coordinated disinformation campaigns.
Reading user comments and trying to discern whether news items are being exaggerated (or fabricated) is not always a productive use of time, but for any cryptocurrency investor or ICO developer who has a significant interest in the value of a major cryptocurrency, it is important to pay attention to the sentiment within the coin’s community. There can be short-term price action if there is uncertainty or fear over a news item, whether that news item is real or being accurately portayed.
In the past week, for instance, there have been 2 cases of large subsets of crypto communities alleging FUD, and the corresponding cryptocurrency having major price dips following the event. To illustrate:
May 7th was being called a “Big Day for Ethereum and all its dApps” by crypto publishers and social influencers. The word on the street was, the SEC and CFTC were going to have a hearing on how to regulate the Ethereum platform’s cryptocurrency, Ether, and whether it is a security. This decision carries large potential implications for cryptocurrency investors and exchanges, as trading of securities is a regulated activity.
The “word on the street” about this hearing was based on words in the Wall Street Journal, which actually described the meeting as a “working group session between senior officials within the CFTC and SEC.” Not a public hearing. The headlines that got clicked the most leading up to May 7th, though, were based on the spectre of a hearing. This negative sentiment could have contributed to the”market woes” that beset Ethereum between May 6th and 10th.
Another cryptocurrency which had a “big day” last week was Ripple’s XRP, which on May 8th was featured in the 58th episode of Laura Shin’s “Unchained” podcast, titled “Ripple’s XRP: Why Its Chances of Success Are Low.” So, definitely a bearish viewpoint, which should obviously give holders of XRP some costernation, at least.
The episode was taken by the Ripple and XRP community as being more than just skeptical, though; many users on Twitter andReddit called Laura Shin “unethical” and said the two guests, Ryan Selkis and Matt Leising, were “horribly inaccurate.” The CEO of Ripple, who declined to be on the podcast, responded to Selkis on Twitter afterwards, accusing him of “Spreading misinformation” over his comment on the xRapid payments system.
Amidst all this fervor over Laura Shin’s podcast, the price of XRPsaw a ~5% dip, completing a full retreat from the rally in the later portion of April. Saying that Laura Shin’s podcast is solely responsible for that price action might be “missing the forest for the trees,” though. There was plenty of other positive and negative news, such as:
- Earlier this month, a holder of XRP filed a class-action lawsuitagainst Ripple for how they structured the sale of the cryptocurrency,
- Ripple was publicly criticized in UK’s parliament by Martin Walker of R3, saying their blockchain solution does not solve problems with getting people to update their payments status,
- and XRP announced that recent pilots of their xRapid system”cut costs by 40–70%” for participating merchants.
At least up until May 11th, XRP’s price movements indicate that the market has reacted negatively to these news items. It’s very difficult to say why, and to predict how new information will affect the price of a cryptocurrency.
To get a definitive understanding of how regular reporting (see: “FUD”) and investors’ emotions affect a financial asset like XRP would require psychographic data for the holders (and sellers) of the cryptocurrency; for this instance, you would need a large sample of XRP holders from last week, with data on what trades they made, what information they saw, and what their opinion of it was.
Without that real-time quantitative information, trying to make informed opinions (and predictions) based on recent news in the cryptocurrency space is like fighting through fog.
Last Week’s FOMO & FUD
You don’t have to believe any of it, but here’s what the Internet was saying about people and projects in crypto last week.
FOMO:
Blockstack announced a $1 million commitment to funding social media dApps, with each accepted team receiving over $100,000 to build interfaces which can “take cues from Facebook or Twitter”
BitFlyer has been aggressively “poaching Wall St. talent” in a bid to become Japan’s biggest crypto exchange — Bloomberg
Huawei, the Chinese manufacturer that have already sold over 40 million smartphones this year, announced that their devices will now be sold with Bitcoin wallet apps pre-installed — Bitcoinist
BMW completed a “succesful” pilot of an ERC-20 token based reward system (developed by DOVU) to incentivize lease owners to keep accurate records of their vehicle’s mileage -CoinTelegraph
The Pineapple Fund has shut down after distributing all of their $55 million in Bitcoin donations to “60 non-commercial organizations supporting humanitarian and scientific projects in various fields, from providing clean water to African countries to protecting digital rights” — CoinFox
FUD:
Facebook has appointed David Marcus, former lead on their Messenger App, as head of a new team dedicated to “exploring how to best leverage blockchain across Facebook,” which may or may not include creating their own cryptocurrency for cross-border payments — Cheddar
Zimbabwe’s Reserve Bank issued a ban on their country’s financial institutions from doing business with cryptocurrency merchants, or accepting crypto assets as collateral for loans, in an effort to “protect the public and safeguard the integrity and safety of the country’s financial system” — NewsBTC
Who to Follow:
If you enjoy looking at charts of cryptocurrency social media trends, you should check out @CoinTrendz on Twitter:
