5 things I learned in crypto this week: 19 - 25 November
It’s been a horrible week in the markets, but a great week in crypto-related content.
I’ll leave the intro at that and dive right into what I learned this week…
1. “Markets are a way to organise a network with no single ruler”
One of my favourite podcasts at the moment is Venture Stories, presented by Venture Global co-founder Erik Thorenberg. He typically has great guests on the show, but few better than on this episode: a live discussion with angel investor Naval Ravikant and Coinbase CTO Balaji Srinivasen. The conversation begins with a discussion on the role of networks in society, on which Naval has some illuminating thoughts: ‘We build networks, which have to be governed. Electricity is a network. The phone system is a network. Money is a network. Your favourite religion is a network. So it’s very important who runs these networks.’ According to Naval, blockchains are a way to bring these market-based networks into digital systems, allowing people to contribute scarce resources to maintain their integrity.
Link: https://www.stitcher.com/podcast/village-global/venture-stories/e/57268238
2. Cryptonetworks are not companies
Keeping with the networks concept, I enjoyed reading this short Chris Burniske piece on cryptonetworks as a means for organising and incentivising human activity. These networks, he explains, are remarkably different beasts from the governments and corporations that have dominated the social and economic order to date, and so our understanding of them must also be different. As Chris puts it: These networks are ‘emerging economies using a protocol in place of the government, specialising in a single (digital) service, and capable of global scale from inception. The good ones, at least.’ His view is that rather than a multitude of networks emerging for every area of human activity, it’s more likely that a select few will build the effects necessary to sustain massive adoption. This means ‘the winners will be fewer but with returns greater than any other asset class from this time period.’
Link: https://medium.com/@cburniske/cryptonetworks-are-not-companies-a307ad6a61ae?ref=tokendaily
3. Valuing crypto networks
Building on that last point around the returns of this emerging asset class, Nathaniel Whittemore and Clay Collins released a detailed guide on evolving models for valuing crypto assets. We’ve covered this topic several times in recent weeks, but I would definitely recommend reading this as a rundown both of the inadequacies of ‘market cap’ as a valuation metric and how emergent models like MVRV and NVT are helping to address these shortcomings. There’s also a nice infographic at the bottom you can print out and stick to your wall for future reference.
Link: https://blog.nomics.com/essays/crypto-market-cap-review-emerging-alternatives/
4. Putting the crypto crash in context
As a tech industry veteran, Fred Wilson knows a thing or two about boom and bust cycles. It’s therefore worth reading this piece in which he discusses the slump in crypto prices in the context of a wider ‘de-risking’ that’s happening across all major markets. Ethereum bulls, who today saw the token drop below back into the double digits (just as Bitmex CEO Arthur Hayes’ predicted), might take some relief in this quote: “Ethereum feels like the easiest one to make a bull case for right now. It is hated. Everyone has lost their shirt on it by now. Nobody other than developers want to know about it. It feels like time to start nibbling on it but not loading up on it.”
Link: https://avc.com/2018/11/bleeding/
5. Learning to love the struggle
Let’s end today’s digest with another big-picture piece. Meltem Demirors wrote this article as a summary of what’s happened this year in the market from an investment perspective, and where we might be headed next. What’s particularly interesting is her commentary around the need to separate out investors and speculators. Investors, she says, are a critical part of the ecosystem but it must be understood that their survival is predicated on returns. Crypto startups therefore need to be mindful of the fact that: ‘selling all of your tokens to financial speculators is a great way to ensure your tokens will have no real utility.’ Her advice to those funds still holding on to tokens in the hope of a major rebound is stark: ‘Sell the assets, take the hit, and free up mental and emotional energy to focus on generating a return for investors’ – with many of the crypto funds that formed last year now operating on that basis, it’s likely we have some way to go before full capitulation hits the alts-market. Thankfully Meltem finishes her piece on a more positive note, discussing the ‘long road to utility’. She reminds us that while greater attention (both positive and negative) is being paid to the space, blockchain-based networks are ‘flawed, immature and experimental’ but they’re also ‘important and valuable’. On that basis, she concludes, ‘the future looks promising, but there’s still plenty of work to be done’.
Link: https://medium.com/coinshares/the-truth-about-the-crypto-crisis-7a38125983d5
If those five links haven’t sated your crypto appetite for this week, here are a few other things you might want to check out:
• Block by Block’s library of crypto and blockchain resources: https://blockbyblock.io/resources
• Jimmy Song’s refutation of the ‘mysterious’ Satoshi signature that appeared last week (we all know it was you Craig Wright!): https://medium.com/@jimmysong/faketoshis-nonsense-signature-8700a44536b5
• Outlier Venture’s report on VC investment in the blockchain space in Q3 18: https://outlierventures.io/research/state-of-blockchains-q3-the-professionals-have-moved-in-with-vc-investments-soaring-to-all-time-high/
• Josh Olszewicz’s fundamental research on Ethereum in light on recent developments: https://bravenewcoin.com/insights/ethereum-price-analysis-sec-takes-action-on-icos-dapps-and-dexs
• Hasu’s article on why ‘it’s ok to like fiat’ https://medium.com/swlh/why-bitcoin-3fdee2328759
