Ted, I came across this article the other day and thought I'd share. I appreciate the insights the author provides, notably:
- Cryptocurrencies (which I prefer to call crypto assets) are a new asset class that enable decentralized applications
- Decentralized applications enable services we already have today, like payments, storage, or computing, but without a central operator of those services
- This software model is useful to people who need censorship resistance which tend to be people that are either off the grid or who want to be off the grid
- Most everyone else is better off using normal applications because they are 10x better on every other dimension, at least for now
- Society’s embrace or rejection of new technology is hard to predict (think about encrypted messaging)
- In the long-run, the value of a crypto asset will rise and fall in proportion to the use of the decentralized application it enables
- In the short-run, there will be extreme volatility as FOMO competes with FUD, confusion competes with understanding, and greed competes with fear (on both the buyer side and the issuer side)
- Most people buying into crypto assets have checked their judgement at the door
- Many sellers of new crypto assets aren’t actually building decentralized applications but are instead shoe-horning an ICO into their service because of the market mania; that doesn’t mean decentralized applications are bad, it just means people are capitalizing on the confusion and are probably themselves confused
- Don’t bet against crypto assets in the long-run: as we approach the 10 year anniversary of the Bitcoin paper it is clear that they aren’t going anywhere and that decentralized applications may very well find an important place alongside all the other forms of organization we have come to take for granted.
Source:
https://blog.chain.com/a-letter-to-jamie-dimon-de89d417cb80
"they are 10x better" -- Not really. For example, if you want to raise capital but you don't want to spend a million on lawyer fees in the US, move your operation to the Caimen islands, do an ICO, and you can raise 100+ mil today. 5 years from now, you could possibly raise a billion. Worldwide capital investment is not something traditional systems can achieve, and traditional systems exclude 99% of humanity.
Then I would also say, the decentralized trust mechanism is important because this elevated level of trust above and beyond traditional systems creates trust outside of 17th century style governments. And this manner of trust is more convenient in many ways than the old world method. For example, to achieve an end, you may have to resolve it in court which can be expensive... but a blockchain contract solves these issues without cost due to a formulaic outcome of the software on the distributed system. To the degree a decentralized contract works, it changes everything in those areas it will work. The primary interesting way this works is perhaps decentralized organizations / corporations.
I agree with the author to a limited extent. For now, it's safer and cheaper to use US dollars in the US. Yet there are already plenty of situations worldwide where it's safer and cheaper to use digital currency. This same concept applies to every area blockchain can penetrate. When it moves into an area, it will compete and beat many traditional systems around the world. It may not beat every system in every case, but it will beat many of them.
I agree about the junk ICO's out there. Most of them are useless, and just a way to get people to part with money.
The author provides a good framework to be critical of crypto assets. I agree with many of the author's points. You also make good counter-points.
Do you think ICOs continue to be the boom that we've been seeing? If and when a platform like EOS takes off, it's not clear to me what sort of function an ICO will really have. I guess there's just so much froth in the ICO market that 98% of what I'm looking at doesn't seem like viable tokens (EOS being one of the only exceptions).
ICO market needs to launch real projects, not junk scam. To the degree it just keeps hammering the scam projects, is the degree ICO's will be unpopular for a time. The main issue is that for some reason when they hit exchanges, people bid them up so there is almost no downside to ICO flipping lately. I would certainly not own most ICO's long-term. .... This all said, the method of operation for an ICO is revolutionary and when people figure out how to launch legit projects, and have systems for weeding out the scams (3rd party rating agencies), ICO's will be the best method to raise global capital.
100%