Token Economy #30: 🔮 Gazing into the crypstal ball

(No, we are not going to talk about Ripple this week. We have a life and more important things to use our mental cycles on.)

The start of a calendar year is when lots of people start making bold predictions about how the industry will unfold. When it comes to crypto, a year is obviously an insanely long timeframe given the pace at which the industry moves.
Many smart folks placed their bets and we have selected the most thought provoking amongst them, in no particular order, organized by theme.

Prices

The total market cap of blockchain-based digital assets will exceed $2 trillion U.S. dollars by January 1, 2019

There will be a major correction in the ALTS

Most utility tokens, then, will go to zero, regardless of team quality and execution

in 2018 volatility of the crypto market can increase even more, as the rapid capitalization growth of late 2017 was not yet accompanied by a similar growth of the number of crypto wallets

Most crypto funds will (net of fees) underperform vs. BTC and ETH as benchmarks

Fundamentals

Ethereum will continue to be the largest blockchain developer ecosystem in 2018 by many multiples

We start to see the permissionless blockchains (e.g. Filecoin) gain (possibly limited) traction in 2018.

Law & order

The first “pump-and-dump” ring will be arrested as organised crime

Not convinced that the well-intentioned SAFT is right for most tokenization projects

The IRS and their equivalents globally will be demanding their pound of flesh

Now that the Coinbase precedent has been set with the IRS, expect Polo, Bittrex, and all other major exchanges with US customers to fork over trading records for clients above a certain trading threshold

We’ll see numerous kidnapping and blackmail cases where top personalities are extorted successfully. Expect to see more personal security details in 2018.

Hacks & cock ups

A major exchange will be hacked

We will see at least one traditional financial brokerage firm lose money and go out of business because of mismanagement with a derivatives product

A bank run? What if all those gains in crypto, on exchange, in cold wallets, all of it… starts having a hard time getting to USD?

ICOs & Token models

Forks with airdrops will become the preferred alternative to ICOs

Crypto-securities aren’t really a thing yet, but they will be massive

We’ll see many of the best practice initiatives mature and take a sensible approach to involving regulators and protecting investors whilst maintaining the innovation that makes the ICO compelling

A bulge bracket bank blockchain-based stablecoin in 2018 if they can get it through compliance.

Conspiracy

Yes, Craig Wright could be (part of) Satoshi.

Legacy

I have no doubt Facebook is exploring cryptocurrency payments within the Facebook Messenger platform or some other token-related initiative. We may even see an acquisition attempt by Facebook

Intranets were great training wheels, until the Internet was pervasive. The same trajectory will occur with permissioned blockchains in 2018 and beyond

Personal lives

It won’t happen overnight, but many of the “winners” will end up deeply dissatisfied

Expect more people to renounce their citizenship in high tax countries, and more people to move their legal residences to lower tax states.

My personal prediction is that 2018 is the year it all comes crashing down. We are surely building the future and witnessing a revolution, but we’re doing so at the ground floor of the biggest casino ever invented and sometime soon it will close its doors and kick everyone out to go and build in their dusty garages.

So, I think that aside from BTC and ETH, all of the other TOP 10 coins will disappear into oblivion. Staked 10 ETH for charity with Ari on Twitter as he took the over. (BTW, if you can help us write a smart escrow contract for this, we’d be happy to donate a part of the 10 ETH to a charity of your choosing).

Yannick instead thinks we’re still at the very, very early days and the capital influx has just started.

Below the links to the posts where the predictions have been sourced from.

95 Crypto Theses for 2018

by Ryan Selkis (TwoBitIdiot) of Messari

18 Blockchain Predictions for 2018

by Andrew Keys of Consensys

2018 Blockchain Predictions — Are YOU Ready?

by Simon Taylor of 11:FS

What Will Happen In The Crypto Market In 2018?

by Valentin Preobrazhenskiy of LAToken

Next Year in Crypto — 11 predictions for 2018

by The Element Group

Ten cryptocurrency predictions for 2018 from the co-founder of the Blockchain Research Institute

by Don Tapscott

📌 Token Economy

Mark Zuckerberg 2018 challenge

Since 2009 Zuck has started every calendar year by publicly taking on a new challenge, and this year he’s going to go deep into studying to positives and negatives of the technologies that are leading the decentralization wave (namely crypto currencies and encryption). This is significant given Facebook is the epitome of centralization, and often criticized for the power it has gathered in the process.

The fact that David Marcus, Messenger’s lead, has recently joined Coinbase Board of Directors could indeed suggest that Facebook have serious intentions to get into this space (as hinted by Don Tapscott in his 2018 predictions), or at the very least to get to know their enemy better…

Ethereum scalability research and development subsidy programs by Vitalik Buterin

The Ethereum foundation is getting serious about solving ETH’s scaling problems.

Vitalik announced two different grant programs, both with varying amounts from $50k to $1M.

There are two focuses:
1) Sharding (eg. getting a subset of the nodes to validate a specific block or a specific transaction in a block).
2) Layer-2, or Lighting-like stuff. Plasma and Raiden fall in here.

Really great to see the Ethereum foundation use its firepower towards external teams developing solutions that could benefit the entire space.

It sure would be cool to have the same for Bitcoin.

Ethereum at $1000 by Evan Van Ness

A pretty objective snapshot of Ethereum’s state of the nation by Evan from Consensys, as ETH price crosses $1,000 for the first time.

1. Ethereum hasn’t yet changed the world (thought there is a big promise it can in ETH price tag)
2. Many people buying don’t really understand what they’re buying (Ripple!)
3. Demand is real (1.3m daily transactions!)
4. Scaling matters (a high price helps drawing attention and talent to it)
5. Time to get apps live!

Alpha Casper launches on testnet!

Ethereum closed 2017 on a high note, delivering the alpha version of its proof-of-stake consensus algorithm Casper on the testnet.

Peter Thiel’s Founders Fund Makes Monster Bet on Bitcoin

Founders Fund, the venture-capital firm co-founded by Peter Thiel, reportedly invested $15–20 million into bitcoin over the years, now worth hundreds of millions of dollars at today’s price.

Funds that carved out even tiny allocations for bitcoin are bound to be this decade’s vintages best performers.

Kudos for taking the risk.

CryptoPunks, CryptoKitties & The Future of Digital Collectibles by Shamir

More thoughts on the digital collectibles craze.

The author’s key points are that:

1. cryptopunks/kitties demonstrated to developers that money can be made building Dapps, a tipping point for the industry
2. value derives from a strong narrative + scarcity + ownership (i.e. how it makes you feel to own something), nor from functional utility.

Perhaps not so coincidentally, the early use cases for internet-based consumer applications were also in games (as well as porn and gambling).

The one on narrative is a great and prescient point. I walked in a philatelic shop earlier this week, didn’t know they still existed. I own a large collection of old telephone cards back from when people called from phone boxes, some are 40+ years old. When I was a young teenager there was an vibrant market for used and new telephone cards, some of the rarest ones fetched very high prices at the time. The “narrative” was strong, there was scarcity as each edition had a finite run and owning them felt good.

I was curious to know if there is still a market for them now. I was feeling quite optimistic, in my mind now that no one makes them nor uses them anymore they must be even more valuable as rare collectibles. So I was a little surprised when the old shop owner told me that they aren’t worth the plastic they are made of anymore. When I asked why, he said that the new generations don’t even know what they are, let alone use them. Poof, the narrative was gone.
Maybe a museum one day would take them for free and display them in the history of communication room.

Visa Cracks Down on Bitcoin Debit Cards in Europe, Providers Say

This was not fun for all of the Xapo and similar card users (☝️ one here).

Wavecrest, the only issuing bank that was actually working with the crypto providers, got ordered by VISA to shut down all of its cards.

This could surely be a blow for crypto users, but in reality it just reinforces our vision of needing decentralization everywhere. VISA just showed us again what can happen when you have a centralized legacy financial system, and when you are never really in control.

Overstock Gets $100 Million from Soros Fund for Blockchain and More

George Soros’ Quantum Fund invested $100M in Overstock different businesses.

$20 million will fund DeSoto Inc., a company Overstock’s founder started with Hernando de Soto, a well known economist, which is developing blockchain tools for property rights management.

The rest is super complicated, going to fund both Overstock’s normal e-commerce stuff and some blockchain stuff.

Apparently no tokens, but then Overstock is buying tokens in its own ICO.
Wouldn’t want to be part of the accounting team there 😱

😎 Cool new projects

CryptoZombies

If one of your new year’s resolution is to get your hands dirty on some Solidity code, here’s a cool resource for you.

“CryptoZombies is a free interactive code school that teaches you to write smart contracts in Solidity through building your own crypto-collectables game.”

Built by Loom Network. 👌

PeerPad

An open-sourced decentralized online editor providing collaborative real-time editing using CRDTs and IPFS, built by Protocol Labs and the IPFS community.

Users can provide read / write keys for their documents, accessible via the browser.

Here’s a description of their architecture. And here’s an example of a live document (if you want to contribute click on the profile icon and set a name).

A New Advanced Token Standard · Issue #777

Interest is gathering in the Ethereum development community around a potential new token standard aimed at improving on the ERC20 token. The Aragon team are considering it as the standard for tokens issued on their platform.

The key improvements seem to be the ability to trigger actions in smart contract when tokens are transferred, while reducing the risk of token losses by letting addresses/contracts whitelist which tokens can be received and allowing holders to de/authorise operators that can manager their tokens (e.g. exchanges).

Watching with interest. Efforts led by Jordi Baylina.

Ethereum Decentralized Exchange (DEX) Order Tracker

Etherscan added a trade explorer showing all 0x trades, which coincidentally just crossed the $1 million mark a day.

Close to half of the volumes are currently on $SPANK.

DeadCoins

A curated list of cryptocurrencies forgotten by this world.

👮 This week in regulation

$4 Billion Crypto-Promoter Ordered to Halt Fraudulent Sales

We are not sure what took authorities so long, but finally someone sent a cease and desist order to BitConnect, one of the shadiest and most blatantly obvious examples of crypto scam.

The Texas Securities Commissioner took action as apparently there are sales agents on the State’s street selling investment programs operated by BitConnect under a Ponzi-like commission structure, promising guaranteed returns and all that.

Their site, which does not list any team member, still promotes an ICO starting on January 10th giving no information whatsoever.

China Isn’t Shutting Down Bitcoin Miners: Report

Lots of mixed news coming out of China, as usual. The latest seems to be that there will be no ban on bitcoin miners, but rather a crackdown on the preferential energy treatments that some benefit from in the local provinces. Some of the largest Chinese miners have already been launching overseas operations as a result of that.

With 2/3 of the bitcoin hashrate originating from China, this will probably lead to lower mining concentration and be healthy for Bitcoin.

UK Central Bank Mulls Cryptocurrency Linked To Pounds Sterling

This isn’t even news anymore, at this stage virtually all central banks are ‘mulling’ over crypto-fiat.

Let this be the last time we link to the topic until one actually launches (which regrettably could be as soon as next week as apparently Maduro just ordered the issue of 100 million Petros).

💰 New funds

Cryptocurrency Hedge Fund BlockTower Raises $140 Million

If you don’t follow Ari Paul on Twitter do it now, he’s got one of the clearest thinking on both the macro and micro of the crypto asset class.

His hedge-fund just closed $140M with the participation of no less than A16Z and USV. Congrats!

Bonus: it sounds like Ari diversified into *physical* gold this week.

Waves to launch $30 million fund to back blockchain startups

Continuing on the trend of protocols appending a native fund, Russian blockchain company Waves is launching its own VC fund called The Basics Fund of $30 million to back blockchain startups and projects (presumably building on their own platform).

Projects that completed ICOs in the first part of 2017 or earlier and hedl on to their cryptos, are now sitting on inordinate piles of liquid assets. Investing in their ecosystem seems to be the most sensible thing to do, bar returning funds to investors.

David Sacks raising a $350M fund with Bill Lee

If you follow David Sacks on Twitter you already know he’s been into crypto even listing himself as a “crypto capitalist”.

It turns out his next gig will be a VC-like one.

Axios reported that he’s raising a $350M fund.
“The investment strategy is to focus on early-stage opportunities in blockchain and other “Web 3.0” sorts of companies, with expectations of also doing a few incubations and later-stage deals.”

ℹ️ About us

Token Economy is written and curated by Stefano and Yannick.

If you’re building a new fundamental piece of technology for the future, please reach out 🤙