Pessimistic Blockchain Thesis 2019 Investment Market
ICO Mania is over. Period. We ran through a period of time where projects without working products were given assets with which they did not properly know how to handle. These blockchain projects lacked finance logic, ability to plan for over a 5 year time frame, or simply ideas that were too complex.
And so we here we are in the middle of a crypto winter. We see the first signs of light and are immediately excited for the next wave of hysteria. Yet the first thing that needs to be asked is on a macro scale what has changed in the blockchain space?
Regulatory process has been brutally slow. Some countries seem to be slowly making the proper changes — US regulators are extremely slow moving and are damaging on ramp institutional investors from fully backing the space. In addition, the institutional investors that are in the space (OTC or not) are largely controlling swings through futures and market manipulation. This isn’t a conspiracy, when you have a market that is illiquid and volatile as crypto you will have people who jump on the opportunity to control direction and momentum.
Actual scaling technology has been intriguing. Slow progress has been made. Blockchains that claim they are solving the transaction speed issues are really sacrificing decentralization and governance in the process — defeating the fundamental power of blockchain. And so if you ignore the countless number of projects not actually solving scaling, where is the progress?
Look. I know we can point to Ethereum with sharding/Constantinople and Bitcoin with Lightning network but as far as I am concerned the progress has been brutally slow. There is progress, but enough to justify an absurd price swing the other direction? I think not.
DeFi this. DeFi that. DeFi will change the world. DeFi is the 2019 buzzword brought around to magically legitimize a space in desperate need of a use case that can be pointed to. MKR and DAI are amazing. In fact, I would go as far to say that MKR is the greatest layer 2 solution success on any chain thus far. Props to that team (no I don’t hold MKR). But minus MKR, I am not entirely convinced. At this point the MKR thesis has proven that if you create a system backed by collateral we can create some pretty cool systems that users can use. But point to me a non-collateral based DeFi system. I’ll save you time. It doesn't exist. Until we can create a blockchain credit system or blockchain identity system that maintains privacy DeFi will be largely stuck with collateral based systems in my opinion.
Privacy. Data. Silos. Google. Facebook. The coming battle in the 2020s. Ironically I don’t think people in the blockchain space value privacy as much as you would think. I mean most of the speculative investors have passed right over the category that blockchain will be able to solve best. Zcash. Enigma. Monero. These are solving real problems that only blockchain can solve. If there is one train in 2019 that I truly believe in, it is the privacy space. In my opinion the reason privacy and blockchain will have the first killer application (separate from the bitcoin use case as the first ever provably scarce digital asset) is because the people in academia and from silicon valley who are passionate about this space are first and foremost intrigued with privacy and cryptography. Lets not forget here that cryptocurrency is quite literally built on the back of mathematical cryptography proofs. Where the majority of skilled labor in the space turn their attention to is where the majority of progress will be made. Where real progress is made is where money will go. Period.
And so at the end of the day I’m not buying the hype. As in, people are done with projects that are not actually innovating and creating. We’ve had it with a nice landing page, smooth ICO, and new exchange listings. The people who have survived the bear are looking for substance. The question on everyone’s mind is in the accumulation stage who do you take risks on? What does a quality project look like? How do we justify pricing for any project?
The truth of the matter is that people are going to hedge their bets. This is pre 2000s and over the course of the next 2 years projects are going to float to the top, turn over, and die. Violently. Maddeningly. Or they will be quiet. Volume slipping to nothing. Team gone quiet. The modern day gold rush is coming to a close, the question is where are the long term sustainable communities post gold rush? Bet on the right space within the blockchain space with an investment time frame of 5+ years and I can guarantee you are ahead of the curve. Not promising success, just that you may be increasing your odds of a good investment in a space littered with landmines. And who am I kidding, I’m not going to act like I truly have the patience for that. I try to convince myself I do, but here I am ready to FOMO just like the rest of you degenerate gamblers and stone cold killers. Its a great bunch here in the blockchain space. Cheers!
