Shitcoin scammers or visionary innovators? From BTC peers
Shitcoin scammers or visionary innovators?
There are literally thousands of cryptocurrency projects out there that most likely will no longer exist in a few years. The number of companies and their coins launched as part of the 2017 ICO madness is staggering, bringing in millions of dollars with little more than a white paper and a story that contributed to irrational exuberance.
Maximalists often remind us of how these companies printed “digital fiat” out of nowhere when they minted their own tokens and sold a dream to speculators who pretended to be investors. Statistically, there is nothing wrong with saying that almost all of these tokens are shitcoins. Some even go so far as to say that anyone working with or promoting a token project that is not based on Bitcoin or a Bitcoin second-layer solution like Lightning is a scam. If you just look at the numbers, they have a strong argument.
You are wrong too.
The declaration that all non-Bitcoin projects are shitcoins does not stand up to the test. Yes, there are important points that we will examine here. Some of these were brought to the attention of Congress, as Michael Goldstein reminded us:
“Shitcoin” is not profanity. It is a highly technical term in the money economy. I sincerely thank @WarrenDavidson for introducing such an important concept to the rest of the US Congress. pic.twitter.com/0S7NVjn4AH
– Michael Goldstein (@bitstein), July 17, 2019
If even one project is not Shitcoin, other non-Bitcoin projects can be real, valuable, and part of creating a world we all want to live in, too. With a massive developer base, loads of applications including heavily used DeFi platforms, and a market cap of over $ 240 billion, a strong argument can be made that doesn’t suck. Possibly easy to see now, but how was it when the ETH token first hit the market? How can we spot the next non-shitcoin when it almost doesn’t exist statistically?
If you imagine working on a project that has its own token, some of your target audience will rightly assume, based on historical data so far, that your project will fail on time and very few people will get a return on their investment ( see: Speculation), usually at the expense of someone else who bought the hype.
Usually they buy this hype with BTC profits, which eventually leads to selling pressure when project teams liquidate their BTC earnings to pay the staff and keep the lights on. It is understandable and even reasonable for those who steadfastly believe that Bitcoin is the future (and the only future) to believe that everything else will ultimately harm people and should be treated with ridicule.
They see themselves in protecting the uninformed from losing their worth in a sea of countless scams. They take the shorthand to refer to anything that is not Bitcoin as Shitcoin because that abbreviation is simple and continues to promote the value and supremacy of their holdings.
Just because a link is simple doesn’t mean it’s correct. Projects like ChainLink, Polkadot ,,,, Stellar and more are backed by a billion dollar market cap with billions of dollars in liquidity. To varying degrees, they can argue that they are innovative and offer solutions in the way that investors (actual investors) believe that bitcoin and second-layer bitcoin solutions currently cannot.
This fact does not depend on your opinion, but directly shows how the investment money flows. Will these projects exist in 10 years? That is the real question. Another important question is how to spot these projects before they hit the top 20 in market cap.
How do we recognize the innovators and pioneers working on new projects that Bitcoin are not anything but scammers, but on the contrary, to satisfy a real need that the market demands and financially supports? What investment categories (tier 1, tier 2, utility tokens, security tokens, etc.) include projects that should be seriously considered and what are the criteria?
To spot a diamond in the rough: 1. Start with the team. Are they real What have they achieved both in the cryptocurrency space and outside of it? Have you ever run a real company or is this your first start-up? Be careful if you get caught up in hype, charisma, or a personality cult. Having a strong Twitter following or YouTube presence doesn’t automatically mean they can build a business or lead a team.
2. Look at the code. Do they have a product or service that solves a real problem that people are willing to pay for, or is it just an idea with a white paper? Did you start from scratch or use an existing, proven technology? Don’t be distracted by tribalist reviews that aren’t based on the actual technology. If the person you’re listening to hasn’t written code professionally for a substantial part of their career, they likely don’t know what they’re talking about and are just repeating what they’ve heard from someone else.
3. Evaluate the model. Does the token make sense to solve a business problem for the customer? Is it sustainable in the long term? Does it create a virtuous cycle in which participation is without permission and everyone who participates is rewarded? Can an ecosystem make it? This is where the magic happens, and it is no easy task to evaluate it effectively. Some things to look out for are the distribution of tokens, reward incentives for participants, the level of token inflation, and whether the demand for success translates into a value for all. If a single entity, with no industry oversight, controls what happens to the token, you might be looking at shit.
4. Understand governanceWhat is the consensus model at chain level (proof of work, proof of commitment, delegated proof of commitment)? Have you taken innovative steps to improve the failures of other projects with similar consensus models? How are changes to the actual protocol decided by the community and how are the token holders involved in the process?
If the token is used for governance, how will it be distributed and how are those with skin in the game aligned with the long-term success of the project? This is another area where strong opinions can become arguments similar to religious crusades. Decentralization in terms of networks and governance is always on a spectrum and compromises are always made. Sometimes these tradeoffs are mining pools or proxy voting or permissions and guidelines for Github pull requests. Rate accordingly.
We may never convince maximalists that there is real value outside of Bitcoin, but if we’re right we don’t have to. Investors and actual users whose lives are being improved will take the case directly. As the managing director of a project in the mid-300s in terms of token market capitalization ranking, I think this is an important discussion as not all shitcoins are scammers and I don’t work on my own to create real value.
Some of us actually want to fix real issues in the room, such as the usability of the cryptocurrency. We have a solid team, a work code, a model that rewards everyone, and effective decentralized governance. Innovation requires risk and just like in traditional investing, most startups will not survive in the long run. We need to protect people from fraud, but we also need to inspire, encourage and support innovation and real problem solving.
This industry is regulated by our tweets, our memes, and our reputation. In short, the value that supports all of this is based on long-term belief rather than short-term speculation. Carefully choose what you believe in. You might get a diamond or a bag of shit.
Luke Stokes is the executive director of the Foundation for Interwallet Operability, which is working on the FIO protocol, a usability layer that ensures that cryptocurrency addresses can be easily read and used by the masses. He is passionate about voluntary systems of governance and has been in the Bitcoin field since early 2013. Since the beginning of 2018 he has been the consensus witness for the Hive blockchain (previously Steem) and custodian for eosDAC, a jointly owned EOSIO block producer and DAC enabler. since its inception. He holds a degree in computer science from the University of Pennsylvania and co-founded and co-ran the e-commerce startup FoxyCart for over ten years before devoting himself entirely to cryptocurrency.
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