“Mainstream [blockchain] adoption is still pretty far ahead”

Alexander Lange published a piece titled Mapping the decentralized world of tomorrow, which includes an infographic showing the landscape of many of the tokens launched so far. He lays it out in a graph, beginning with platforms and protocols and followed by middleware, financing methods, and decentralized applications. A few interesting points:

On token value:

Value is created on token level rather than on equity level, therefore opposing everything we experienced in conventional software businesses. Tokens represent an atomic unit of a company’s business model. Some are sold to finance the project but their main purpose is to monetize products and services in the long run. Tokens don’t make sense for any business model and need to fit into the company’s landscape of services to be useful….. A more objective approach of valuing a token would be to define its “utility value” by analyzing real life KPIs.

On fundraising:

The fundamentally different value creation allows for new kinds of venture financing in form of ICOs attracting developers, technologists, early adopters and mainstream investors in that order.

On possible new business models:

We might see a paradigm shift from the “data economy” towards an “attention economy”. As soon as the infrastructure for self sovereign data ownership is in place and users get back the control over their data…think of being payed by the network for writing high quality stuff on reddit, medium or facebook… think of google with a transparent ranking algorithm fighting fake news and corruption.

Lange believe it will take time, since users don’t care about the backend technology, rather they care about the functionality. Still he believes the potential for major adoption is there:

Mainstream adoption is still pretty far ahead, maybe 5 years or more. People don’t care whether or not software is built on blockchain technologies, what counts is utility and price.

Some similar points to what Balaji S. Srinivasan wrote about recently, specifically in regards to looking at the bigger picture of the technology and temperament of timeframes.


For stable token values, sinks are highly beneficial

Vitalik published a post on the valuation of medium of exchange tokens, which have dominated the ICO landscape. This type of token implies that it can be exchanges for goods and services on a platform built by the development team. It’s similar to a Kickstarter-style funding, except that tokens must have ongoing value. It’s not sufficient to deliver a product once.

…the cycle is not complete, and in fact it never will be; there needs to be an ongoing stream of buyers and sellers for the token to continue having its value.

He goes on to the many factors that go into determining the value of a token, concluding:

One immediate conclusion from this particular insight is that appcoins are very much a multi-equilibrium game….Another, and perhaps even more important, conclusion is that the market cap of an appcoin depends crucially on the holding time H. If someone creates a very efficient exchange, which allows users to purchase an appcoin in real time and then immediately use it in the application, then allowing sellers to immediately cash out, then the market cap would drop precipitously….hyper-efficient exchanges are around the corner

Due to this, he says values cannot be sustained solely on their usage as a medium of exchange; there are too many outside factors. He cites Etherdelta as an example of an alternative model, where fees are collected in the interface. Another option it to set a side a specific amount to buy back tokens and burn them, thus reducing deflation/costs of holding over time.

The important thing is that for the token to have a stable value, it is highly beneficial for the token supply to have sinks – places where tokens actually disappear and so the total token quantity decreases over time.

There’s been a lot of discussion lately about the value of tokens and the right way to do a token sale/ICO. The standards around tokens/ICOs need to be raised and hopefully this helps push more projects in the right directly. Of course, it won’t do much to help the dozens of poorly structured projects that have already raised millions.


“A 1000X improvement over the status quo”

Balaji S. Srinivasan, CEO of 21.co, published a list of 16 Thoughts on Tokens. He summarized:

The most important takehome is that tokens are not equity, but are more similar to paid API keys. Nevertheless, they may represent a >1000X improvement in the time-to-liquidity and a >100X improvement in the size of the buyer base relative to traditional means for US technology financing — like a Kickstarter on steroids. This in turn opens up the space for funding new kinds of projects previously off-limits to venture capital, including open source protocols and projects with fast 2X return potential.

And a few highlights:

Because token launches can occur in any country, the importance of coming to the United States in general or Silicon Valley / Wall Street in particular to raise financing will diminish. Silicon Valley will likely remain the world’s leading technology capital, but it will not be necessary to physically travel to the United States as it was for a previous generation of technologists.

Tokens will break down the barrier between professional investors and token buyers in the same way that the internet brought down the barrier between professional journalists and tweeters and bloggers.

After the early kinks are worked out, the token launch model will provide a technically feasible way for tech companies (and open source projects in general) to spread the wealth and align their userbase behind their success. This is a better-than-free business model, where users make money for being early adopters. Kik is the first example of this, but expect to see more.

He ends by acknowledging it’s early, saying a crash is likely, and that things are going to change quickly. It feels like many art starting to look at the bigger picture changes made possible by tokens beyond the ICO-craze, and how it change business models, fundraising, etc. and finally:

But the world has changed. Tokens represent a 1000X improvement over the status quo, and those don’t come around very often.

ICO Returns Waning?

In their last two weekly emails, which unfortunately are not published on their blog, TokenData.io has shared some interesting findings around ICOs lately. Last week, they shared:

We’re also tracking more than 140 tokens that have been issued through ICOs (142 to be precise). A quick analysis on the returns of these 142 tokens – relative to BTC and ETH – shows that “only” 31% of tokens outperform both base cryptocurrencies (graph can be found below) if held since issuance.

And this week, they shared further data showing a slowdown:

On average, tokens outperformed the two base cryptocurrencies for the first 3 quarters of the year. And – although time and data are very sparse – this outperformance trend has come to a slight halt right now. The 4 ICOs that took place in October and whose tokens are being traded, have underperformed both ETH and BTC. Moreover, BTC is outperforming both tokens and ETH for the first time. While it’s too early to proclaim that “winter is here” the TokenData team will keep you up to date in the coming weeks as this unfolds.

Below is a screenshot of their data. Interestingly, the average amount raised by the 40 “successful” ICOs is much lower than the ones that underperformed ETH and BTC ($14.8 million vs $10.2 million).

 tokendata - ico performance

Likewise, ICOs have raised much more as of last vs pre-2017 and Q1.

  • 2016: $3.8 million
  • Q1 2017: $1.6 million
  • Q2 2017: $17.9 million
  • Q3 2017: $14.2 million
  • Q4 2017: $31.5 million

While recency likely plays a part, since some tokens haven’t had time to see large gains, the fact that the values are starting significantly higher decreases the changes of a huge gain significantly.




What’s old is new again, explaining crypto to Jamie Dimon, and valuations

Here’s a few links of articles we’ve been reading lately.

We’re working on posting more ICO analysis reports (including new projects as well as old projects that we haven’t yet posted). Once we catch up, we’ll look at the data to identify trends, commonalities, etc. Lately, we’ve been disappointed in the quality of the projects as well as the enormous size of the crowdsales. The good projects are becoming harder to fine.  We plan to spend more time analyzing some of the more established cryptoassets and currencies in the near future.

Anyway, here are 3 links worth checking out:

1. Insightful post from Elaine Ou including how some blockchain ideas aren’t as revolutionary as many think, and tokens may not be the answer:

services like Filecoin, Sia, Storj, MaidSafe, and all those other decentralized file storage tokens. Seventeen years ago, their founders were still in diapers when Mojo Nation launched to address the problem of Pareto-inefficient data storage.

Mojo Nation created a digital payment system to buy and sell computational resources. Participants could earn Mojo tokens by contributing things like disk space, bandwidth, CPU cycles. Those who wanted resources offered bids in outgoing requests. Mojo tokens relied on a centralized mint because blockchains weren’t around yet, but centralization was the least of its problems: Tokens were a huge distraction from what users really wanted to do, which was share files.

After Mojo Nation’s demise, a former employee stripped the token incentives out of the protocol…By 2004, BitTorrent was responsible for a quarter of all the traffic on the internet.

2. In response to Jamie Dimon’s recent comments on, here’s a letter from Adam Ludwin at Chain explaining cryptocurrencey, blockchain, and decentralized apps, and why it makes no sense to call Bitcoin a “hoax.”

crypto assets are a new asset class that enable decentralized applications.

And like every other asset class, they exist as a mechanism to allocate resources to a specific form of organization. Despite the myopic focus on trading crypto assets recently, they don’t exist solely to be traded. That is, in principle at least, they don’t exist for their own sake.

To understand what I mean, think about other asset classes and what form of organization they serve:

  • Corporate equities serve companies
  • Government bonds serve nations, states, municipalities
  • Mortgages serve property owners

And now:

  • Crypto assets serve decentralized applications

Decentralized applications are a new form of organization and a new form of software. They’re a new model for creating, financing, and operating software services in a way that is decentralized top-to-bottom. That doesn’t make them better or worse than existing software models or the corporate entities that create them. As we’ll see later, there are major trade-offs. What we can say is simply that they are radically different from software as we know it today and radically different from the forms of organization we are used to.

How different? Imagine the following: you grew up in a rainforest and I brought you a cactus and told you it was a tree. How would you react? You’d probably laugh and say it’s not a tree because there’s no point in a tree being a stumpy water tank covered in armor — after all, water is abundant here in the rainforest! This, roughly, is the reaction of many people working in Silicon Valley to decentralized applications.

3. A discussion of how to value cryptoassets by Chris Burniske, including the history of valuations, theory, and an example with a spreadsheet:

within its native protocol a cryptoasset serves as a means of exchange, store of value, and unit of account. By definition, then, each cryptoasset serves as a currency in the protocol economy it supports. Since the equation of exchange is used to understand the flow of money needed to support an economy, it becomes a cornerstone to cryptoasset valuations.

The equation of exchange is MV = PQ, and when applied to crypto my interpretation is:

  • M = size of the asset base
  • V = velocity of the asset
  • P = price of the digital resource being provisioned
  • Q = quantity of the digital resource being provisioned

A cryptoasset valuation is largely comprised of solving for M, where M = PQ / V. M is the size of the monetary base necessary to support a cryptoeconomy of size PQ, at velocity V.


Token/ICO Links & Notes – 10.13.17

Tokens/Projects We’ve Covered

  • BlockV has postponed their ICO (or token generation event) slightly. It will open on October 19th, a week later than originally anticipated.
  • Airtoken raised $15 million in their ICO. AIR is trading on HitBTC and EtherDelta. The token is down from the average ICO price with more to come. After a quick rise above the average ICO price, AIR is now down about 30% likely due to a number of early-buyers flipping after receiving significant bonuses.
  • Worldcore’s public sale begins on 10/14. They have changed their ICO to require less registration info.

Industry News

  • CoinDesk reported that news of a Nasdag traded ETH product. “CoinShares, headed by former JPMorgan Chase trader Daniel Masters, is launching an exchange-traded note (ETN) for ether
  • CrushCrypto, who recently launched a fund on ICONOMI, announced their first “crusher of the month” as 0x (ZRX tokens). 0x is a protocol upon which fast decentralized exchanges are built. They cite the relatively small market cap compared to Kyber. While true, we’d argue the market cap is closer to $189M (ZRX) vs $280M (KNC), when accounting for total tokens rather than available supply.
  • TokenData.io reported that of the 142 tokens they are tracking, just 31% have outperformed both BTC and ETH since their ICO date.

Slack ICO Scam

There’s been no shortage of ICO scams and it’s not surprising to issues are ongoing. Yesterday, I was targeted in a Slack ICO scam by a user who sent a private message in the Request.Network slack group.

The user appeared to be the group owner and sent a message saying the “Request Token Special-Sale is OPEN NOW!” When I first saw the message, I thought I must have missed something, sine I knew the Request TOken sale was set to begin on Friday, rather than Wednesday local time.

Since it appeared to be from the group owner, I checked out Slack group anyway to see what was going on. The private message came to me from someone with the same name, profile pic, and had even included their role as “group owner.” Other than the placement of the role and the timezone, the two profiles looked exactly the same.

Of course, the “special presale” included huge bonuses (up to 80%), which was a read flag – though seeing the trends of many ICOs, not necessarily a dead giveaway of a scam. The message also included their own ETH address for contributions. While there was some talk about these fake PMs in the Slack group, it wouldn’t surprise me to hear that someone sent ETH to that address.


This is the first time I’ve witnessed firsthand this type of scam attempt within Slack. Prior to this, I had read about one project’s Slack group being shutdown due to security concerns in the days leading up to the ICO, though I can’t seem to find it now.

This morning, I received an email from Request.Network about the scam, reminding users not to pay attention to any official looking message sent via PM. I’m glad they addressed the issue, but preventing this type of thing from ever happening should be the goal. Something like Twitter’s verified user mark comes to mind, where (only) the real group owner(s) would be identified as verified and possibly even barring non-verified users from sending PMs.

The anonymity of tokens makes ICOs ripe for scams and it’s unlikely all people will stop trying anytime soon. It’s be nice to see more measures put in place to prevent things like this Slack ICO scam, but we also shouldn’t count on it. Like any new territory, it’s important to keep an eye out for yourself and watch what you’re doing.