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.

 

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