The Daily Bit: July 23, 2018


THE DAILY BIT

Tweet of the Day

$eos raised ~$4,000,000,000. If they used $1 million every month, then that will last 4,000 months or 333 years.

– @BennettTomlin

Top Cryptos By Market Cap

BITCOIN (BTC) |  2.90% | $7,697.20
ETHEREUM (ETH) |  -1.25% | $462.18
RIPPLE (XRP) |  -0.91% | $0.451976
BITCOIN CASH (BCH) |  1.33% | $816.12
EOS (EOS) |  -1.21% | $8.06
*STELLAR* (XLM) |  -2.80% | $0.287762

*As of 10:45AM EST


Bitcoin shot up… and everything else fell to pieces. With the majority of altcoins decoupling from $BTC, it’s possible that the market will no longer throw money willy nilly at a project. 

Word On The Street

Digital Trends From DAR
One of the qualms that traditional finance has with the crypto markets is the lack of sufficient industry research. As we’ve learned, #HODL isn’t a convincing enough investment strategy to bring more capital into the markets.

So the report released by Digital Asset Research (DAR) towards the tail end of last week provided a nice change of pace. Of course, feel free to take the data at face value. All data used in the study is less than a decade old. But, everyone has to start somewhere, right?

Here are several tidbits that we’ll be chiming in on for your Monday brief.

There is seasonality in the crypto markets. Analyzing median monthly returns, DAR found that 7 of 12 months saw double digit returns on average, with only 2 of 12 months seeing negative returns (March @ -6.8% August @ -9.7%).

Our take: Over the long term, these figures should normalize. Bitcoin is competing to be the global reserve currency of the future, and it’s market capitalization is still droplets in comparison to the FX market. It’s understandable why most months are green as it’s use becomes more commonplace.

Most sectors were smoked in Q2. Similar to Fundstrat, DAR also produced a classification system for industry sectors – and the majority were pummeled during the market’s contraction.

Top 5 winners:

  • Exchange (36.1%)
  • Computation (11.5%)
  • Blockchain-as-a-service (7.5%)
  • Storage (5.7%)
  • Social Media (4.4%)

Top 5 losers:

  • Identity Management (-20.7%)
  • Payment Card (-20.4%)
  • Video Games (-15.9%)
  • Advertising (-14.5%)
  • Smart Contract (-14.3%)

Our take: Most winners arguably fall into the “infrastructure” bucket, whereas most losers fit the “consumer-facing” mold. Exchange tokens such as Binance Coin (BNB) also have a clearer valuation model than most tokens simply used as a medium of exchange within their ecosystem. But will performance hold up in the long term?

Mainnet launches were large value drivers. DAR found that alpha (active return) was generated leading up to launch, aka Buy the Rumour, Sell the News – that’s despite problems surrounding releases.

As for mainnet classifications, DAR identified three focuses:

  • Application Specific
  • Interoperability
  • Platforms

The kicker: Most are still considered beta products. That’s due to lack of software and other tools needed for projects to perform as promised. And with the majority not being battle-tested, it’ll likely be years before mainnets earn the market’s vote of confidence.

For the full webinar, head here.

Where’s Blockchain?

When In Doubt, Follow The Money
Paper trails have a lot of meaning. They’re a reliable indication of where a groups’ interests lie and what people are expecting in terms of future performance. But with digital assets, there are no paper trails for venture capital investments.

So we ask you: Is that good or bad? Ryan Selkis of Messari got a conversation going last night as to why having more disclosure for VC investments could have its perks. As outlined by Selkis, knowing where their allegiances lie in terms of ROI would give folks on the outside insight on 4 W’s:

  • Whether VC firms are pumping and dumping retail investors
  • Where VCs are placing their bets for the long run
  • What founders have a strong VC backing
  • Which VCs are true to the brand (i.e. not shady)

But, don’t hold your breath. As Nick Tomaino of 1confirmation notes, VCs were born in the dark, molded by it – secrecy is how they roll. Any change wouldn’t come for years, and funds that provide more than standard disclosures have received heat from investors.

What Else You Should Read Today

Education

  • Cryptocurrencies are money, not equity (Brendan Bernstein)
  • The Future Of Network Effects: Tokenization and the End of Extraction (KJ Erickson)
  • A beginner’s guide to Austrian economics (Saifedean Ammous)

General

  • There’s a blockchain summit this Friday in NYC for hedge fund players that will review market conditions, ICO investments, and infrastructure needs.
  • CoinMarketCap plans on adding 7-day and 30-day volume metrics among other new features to provide more flexibility to users.
  • Despite major hiccups by EOS, Galaxy Digital’s Mike Novogratz is bullish as ever – he expects the blockchain to “be doing 50,000 transactions per second in a few months.”

Markets

  • Bitcoin futures volume is picking up, with CME Group noting a 93% increase from the previous quarter.
  • HK-based investment firm Fusang Investment Office plans to introduce institutional grade custodial services for crypto investors in Q4.
  • Liverpool partnered with The Poseidon Foundation, a project built on Stellar’s blockchain that looks to increase carbon credit access to further combat emissions.

Problematic

  • A Ponzi game appropriately named FOMO3D is hot on the Ethereum blockchain. Contents of its smart contract will be distributed to the previous owner in the event that a timer expires.
  • Don’t look now, but Shinil Group, a company that claims they “found” $133B in a Russian shipwreck, plans to launch an ICO that uses the loot as collateral.

Bulls and Bears

There were no Sunday Scaries at Coinbase yesterday. Why’s that? Several items fell into place  over the weekend that should bring greater notoriety to the exchange in the coming months:

  • Ads are here. Specifically, we’re talking GoogleFacebook, and Instagram. The resurgence of ads means that more people are going to sleep at night counting sheep with $BTC sheared into their wool. Attention plays a big role in market cycles.
  • Coinbase Prime landed a $20 billion client. For anyone unfamiliar, here’s a primer: Coinbase Prime provides institutional grade tools for crypto investors. It’s a mark of confidence in Coinbase’s product and an indication that there are heavy hitters interesting in obtaining exposure to the market.
Let’s face it: cryptocurrency cloud mining is a risky business. Assuming that investors invest in a project that isn’t an outright scam, there is little guarantee that things will go according to plan.

The latest fiasco comes from HashFlare, a cloud mining service that abruptly ended support of all SHA-256 contracts due to the continued downturn in the markets. Naturally, most investors have a bone to pick with the company given little compensation was provided by the other than a Facebook apology.

Where else we’ve seen scams: Foxminers LLC, UFOMiners, and MinersLab (all related); HashOcean (exit scam); Zen Miner (Ponzi scheme).

In hindsight: Stick to what you know. There are too many businesses out there that claim to offer steady returns, have attractive facilities, and various other attractions… but many are a front.

Education

ERC 223
In short, ERC 223 is an 
adaptation of the ERC20 token framework. The improvement polishes two pain points in the ERC20 standard, which concern (1) tokens lost during transfers, and (2) energy intensiveness.

The perks of numero uno are outlined on the ERC 223 GitHub page:

If you send 100 ETH to a contract that is not intended to work with Ether, then it will reject a transaction and nothing bad will happen. If you will send 100 ERC 20 tokens to a contract that is not intended to work with ERC 20 tokens, then it will not reject tokens because it cant recognize an incoming transaction. As the result, your tokens will get stuck at the contracts balance.

As for #2, transfers to smart contracts are shaved down to one step. Fewer steps = less $GAS = smaller transaction queue.


THAT’S ALL FOR TODAY!

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