The Bus Factor
As defined by Wikipedia, the bus factor is a measurement of the risk resulting from capabilities not being shared among members of an endeavour "in case they get hit by a bus". When looking at cryptocurrencies and trying to predict which one would grow in value and survive the test of time, one risk factor to keep in mind is the bus factor. Let's see some of the most popular cryptocurrencies and their bus factor.
Bitcoin Bus Factor
Let's imagine that the person on the Bus Factor Wikipedia page is the real Satoshi Nakamoto and he is about to be hit by a bus. If such a terrible event happens, since nobody knows who is Satoshi, and more importantly, since he is not any longer involved actively with the bitcoin project, such an event would not affect Bitcoin slightest.
Unless Satoshi has shared his private keys for the 980,000 Bitcoins with his grandchildren, the coins would remain locked forever but Bitcoin still would strive until the end of time. Since we cannot name one person as the face of Bitcoin, its Bus Factor is determined by the core team members and the supporting community as a whole. The risk is distributed and at a much smaller scale.
Ethereum Bust Factor
Now let's imagine the Etehreum founder Vitalik is declared dead. Actually that happent in the past where Etheresum lost 4$ Billion in market value instantly. That forced Vitalik to use PoL (Prove of Liveness) to calm the markets down.
Vitalik being the creator and still very actively involved in defining the project vision increases Ethereum Bus Factor to a solid 1. Meaning, it takes only one bus accident to significantly impact the project.
That is not to suggest that Bitcoin is infinitely decentralised and Ethereum is centralised. Actually, Cornell Professor Emin Gun Sirer proved that Ethereum is more distributed and decentralised than Bitcoin from node distribution point of view. Ethereum nodes are better distributed and spread compared to Bitcoin nodes where the majority are managed by limited large miners.
But from visionary, leadership and influence point of view, by hiding his/her real identity, Satoshi potentially removed the most centralized point in his decentralized system. Etehreum is the second most popular currency with huge community already that can supports years ahead, but Vitalik still remains the most centralazed point in the Ethereum system.
Bus Factor in Action
Bus Factor is not dictated only by life and death situations. Similar risk hovered over Ethereum also when Vitalik tweeted his views about child porn. But Factor can express itself in so many different unpredictable situations and ways. A recent example that comes to mind is when the founder of , Rhett Chreighton decided to fork and abandon the project and start Bitcoin Private project. The price chart below is self explanatory for the result of such an action.
An example on the opposite site is the creator of Litecoin, Charlie Lee who took a different route, and publicly announced that he sold all of his Litecoin, to remain impartial to the project. He is basically an evangelist for Litecoin now who tries to make the project to survive without him.
Personality Cult Coins
There are other examples where a coin has the market cap close to the budget of a small country and that is primarily driven by a project founder or advisor. The common pattern to be aware is, when there is 1 to 1 association between a project and a single person, which is an indication of a bus factor of 1.
A recent tweet by Kevin Pham pointed out coins that are driven by a single person. Expanding that list, I came to the following one:
- Ethereu $ETH - Vitalik Buterin
- Bitcoin Cash $BCH - Roger Ver
- Cardano $ADA - Charles Hoskinson
- $NEO/$ONT - DA Hongfei
- $EOS - Daniel Larimer
- Litecoin $LTC - Charlie Lee
- Stellar $XLM - Jed McCaleb
- Ethereum Classic $ETC - Barry Silbert
- TRON $TRX - Justin Sun
- Zcash $ZEC - Zooko
- Zclassic $ZCL - Rhett Creighton
- Zilliqa $ZIL - Xinshu Dong
- Verge $XVG - Justin Vendetta
- Civic $CVC - Vinny Lingham
- Ambrosus $AMB - Angel Versetti - Chadsetti
- Dogecoin $DOGE - Jackson Palmer
- Skycoin $SKY - (Synth)
- BitConnect $BCC - Carlos Matos
Notice the people listed here have a much bigger influence on their project than a developer would have. Most of the people listed here are typically the visionary, the face, the blood and the flesh of the coins. It is a risk much bigger than a bus factor which is typically measuring the dependency of projects to technical roles.
Surviving Bus Accidents
I've been working with open source over a decade now and there are good lessons to learn from Apache Software Foundation (ASF) and other open source foundations about creating long living project ecosystems.
The main criteria at ASF for a project to graduate from incubation to a top level project is when it builds a self sustaining community. That is a diverse community (from multiple organizations) of committers, contributors and users. There is a similar criteria at Cloud Native Computing Foundation (CNCF) where the focus on supporting organizations rather than supporting individuals as in ASF. Ideally, you want senior developers and visionaries from multiple organizations and independent contributors all together.
In the crypto world, one of the primary criteria to measure community is the number of telegram/twitter/reddit followers . While that is an indication of a user interest, it can be easily manipulated, and actually it is a common and mandatory practise nowdays to pump these statistics through bounty programs and airdrops by project themselves. On the other hand growing the develop community and project visionaries is much harder and takes longer and it is a more accurate indicator for long term success. Make your picks wisely.
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