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BLOCKCHAIN for the non-technical

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What is Blockchain? What can(not) it solve? Industry by industry Impact of Blockchain

If the barrier to entry is the big issue for cryptocurrencies then education (or lack thereof) is the big issue for Blockchain Technology.
Highlight and Share any textToday we join those that are working toward demystifying the Blockchain Technology for non-technical folks. This whole segment will continue to be updated with all the different topics listed below (and more added as we go along).

In this segment we will learn:

Interview logoWant us to interview your favorite CEO/Executive? Tell us who and why in comments.

In EACH of these industry-specific Blockchain segments, we will explore: 

  • Blockchain use cases in that particular Industry
  • Hurdles to overcome for blockchain adoption in the Industry
  • Companies that are already using Blockchain in the Industry
  • Interview with an industry expert in the space

The next frontier in the Blockchain Evolution: 

Security Token Offerings
Tokenizing: Making illiquid assets liquid

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What is Blockchain Technology?

We explained in detail what Blockchain is in a previous article. For sake of continuity, let’s define what Blockchain Technology in this article, using a simple example.

In the good old days, we used to keep all records in a handwritten ledger book. It was very difficult to tamper the entries in the book without a trace. However, because this book was maintained by one or a few people – you can never be 100% sure about the integrity of the entries made.

Let’s say, every time a new entry is made in this ledger book, we made 100 copies and these 100 copies were held by 100 different people spread out geographically.  When someone tries to tamper a previous entry, a copy of the updated ledger book is sent to these 100 validators and they can immediately see that there is a change in a previous entry that does not reconcile with their copy.

Because the consensus between these 100 validators cannot be obtained, the change made in the ledger book is negated.

This system ensures that once an entry is made, it is never changed.  If there is a change that needs to be made to the original entry, you simply make a new entry at a later date referencing the original entry. In which case, all the 100 validators will agree with it because it did not alter previous entries in their copies.

How can you make sure that some random person is not making these changes to the original ledger book? Well, that’s where the handwriting comes into play. These 100 validators not only check for the integrity of historical data against their copies, but they also check whether the handwriting matches. What is Blockchain
To translate the above simple example into Blockchain Technology terms:

Think of Ledger book as a database, entries made as transactions, copies as the copy of the database maintained by everyone connected to the database, handwriting as cryptography, the validators in our example as the nodes (computers connected to the network) and the process of reconciling/agreeing on changes as consensus.

Blockchain then is a decentralized database that is connected by multiple nodes, each node maintains a copy of the entire database, every time a new transaction is entered into the database by anyone connected to the database, it is checked against the copies on all the nodes connected to the network. If the database copy matches with the copy maintained by the entire network and the cryptographical signature are accurate – then the consensus is obtained with all the nodes. Once consensus is obtained – all the nodes update their copies of the database, thus a new entry is entered.

Simple, right?

As you can see, none of the old entries can ever be tampered with, leaving blocks of information that remain immutable.  These blocks are linked with each other by a cryptographic signature.  You tamper one entry, and the cryptographical signature of all other blocks is altered, and when that happens the tampered entry is rejected and the whole database goes back to its original state.

Because the blocks are chained together with cryptographical signature, the term BlockChain came into being.

The technology that enables this consensus mechanism using cryptographical validation is Blockchain Technology.

A bit of jargon before we move on:

  • Hash: Hash is the alphanumeric (mostly 32 characters) string that acts as the cryptographic signature
  • Mining: The act of participating in the blockchain network to process and confirm the transactions, most blockchain networks need special equipment with high-end computing speeds

What is Proof of Work?

In our example, we said that all the 100 nodes (computers) that are connected to the database validate any changes made to the database by comparing their own databases and matching the cryptographical signature. This means these nodes are doing the work of validating.  Whichever node confirms that the transaction is either valid or invalid after the consensus is obtained from the network, is said to have done the work.

A node that validates the transaction gets a small-fees from the network, as a proof of work performed.

There are other forms of consensus mechanisms, such as, proof of stake, which gives rights based on the ownership of the network instead of a number of nodes.

What is a 51% attack?

In our example, we had 100 validators.  Every time a transaction takes place, to wait for all 100 validators to confirm the transaction takes too long. In the real world, there could be thousands of nodes. For instance, the Bitcoin core has over 10,000 nodes running at the time of this writing. To avoid delays, a democratic approach is embedded in the consensus methodology.

That means, if 51% of the nodes confirm a transaction, that transaction is committed to the network and the databases of the other 49% will be updated with the changes committed to the network.

This is where things get interesting.

There are many blockchain technology solutions available. Some of them are public blockchains and others are private blockchains, there are others that are in between.  We will look at how they differ in a bit, but for now, a public blockchain is accessible by anyone with the right equipment and internet.

Let’s say, on a particular public blockchain technology of your choosing there are a total of 10 nodes. Someone with a malicious intent connects 15 of their own new nodes to this public blockchain.  What this means is that this individual or group can manipulate the entire blockchain since they control more than 51% of the nodes.

This is one of the reasons why companies are choosing private blockchain where every node is handpicked.

There is an argument that private blockchains do not fully realize the true potential of what Blockchain technology can offer.

What is a Public Blockchain?

A Public Blockchain is a blockchain network that anyone with a computer and internet can access.  For instance, you can go to Bitcoin.com or Ethereum.com and join their network, and if you have the right type of equipment, you can even start contributing the hash power to the network.

For instance, you can go to Ethereum.com or Bitcoin.com and start participating in the blockchain network and get paid out fractions in their native currency.

But Public Blockchain’s utility doesn’t end in earning fractions, it spans a much broader landscape.

Many Decentralized Applications (DApps) are built on these open Public Blockchain networks.  When they launch their DApps on these public blockchains, they automatically inherit the massive security of the Blockchain that they are operating on.

This means an individual or a small entity can leverage the massive network strength without shelling their pockets out.

One day, we may find a broader use case for Public blockchains in healthcare, Government operations, money transfer, loyalty programs, etc.

What is a Private Blockchain?

Most companies realize the potential of Blockchain technology, they just don’t like the idea of putting their information out there.

This translated into creating blockchains that access restrictive. This means companies can utilize all the great features of Blockchain while keeping their information safe.

They can also specify who gets participate in their network since most of the participation is based on ‘invite only’.

Private Blockchains, although great, they really do not realize the true potential of blockchain because they lack the strength and transparency of a bigger blockchain. Alex Mashinsky  in our interview mentioned that “those that are working on Private Blockchains are wasting their time.”

In the technology world parlance, Public Blockchain is like the Internet, anyone with the right device and connection can join in. Private Blockchain is akin to the intranet, only those that are connected to the server can join in.

What is a Hybrid Blockchain?

A Hybrid Blockchain is where some parts are accessible by everyone and some parts are restricted for the public. For example, the public may have access to ‘view’ but not edit.  Only a few authorized individuals may have ‘edit/write’ access.

This is a good model for bringing Government related services on to blockchain where you want everyone to be able to ‘view’ Government activities without having access to edit the information.

For instance, identity management could be a good government service that can benefit from Hybrid Blockchain model, everyone with your specific address (or Bar code) can verify your identity but they will not be able to change it.

How does blockchain promote decentralization?

It is important to note that only Public Blockchain protocols are decentralized. Private blockchains are not decentralized.

Public Blockchain achieves decentralization by being accessible to anyone with the required equipment. People with requisite technical skills can see the information committed to most applications launched on these public blockchains.

The idea of accessing the strength of a massive network to launch your own Applications without having to pay the toll for doing so creates an environment where people want to build things that help the public at large.  If in return – creators of these applications are rewarded, well, that is commendable.

The feature of immutability instill trust in people that transact on the public blockchain, this trust leads to skipping the intermediaries (like banks or agencies) that used to play the ‘trust’ role earlier.  Because Blockchain is accessible globally, theoretically, it opens doors to transact with anyone from anywhere.

Trust, circumventing intermediaries, being accessible globally and lack of barriers to entry all help Blockchain promote decentralized commerce.

What are the benefits and shortfalls of Public and Private blockchains?

Public Blockchains are readily accessible, easy to launch your DApps on.  They are also relatively resilient to 51% attack since it takes a lot more computing power to break down some of the big networks.  Public Blockchains truly reflect the spirit of Blockchain.

When you participate in a more popular Public Blockchain, you are competing for processing power, this means, you may have long wait times.  Many businesses cannot afford this kind of wait time. You have to pay a premium to cut the line, this can easily eat into the company’s revenue.

Lack of privacy is another drawback of Public Blockchains.

Private Blockchains are restrictive and are not for broad use.  Since the resources are managed privately – there is not a long wait time to process the transactions like we have in Public Blockchain.  Safety of information can be ensured since you grant access to only trusted parties.

Private Blockchains may help companies but they do not instill the ‘trust’ factor which is the cornerstone of Blockchain revolution.  Collusion is a possibility in Private Blockchain.

What is Cryptocurrency?

what is CryptocurrencyMost people know Bitcoin as the king of cryptocurrencies, but what they may not realize is that Bitcoin also represents the Blockchain.

In its own right, Bitcoin is the first publicly accessed Blockchain with its own fuel/currency to run the network, the Bitcoin cryptocurrency.

What then is a cryptocurrency?

As we learned before, for Blockchain to work, we need computing power. Computing power comes at a cost.  Each Public Blockchain has its own fuel to reward the computing power contributed. This reward that represents a fraction of the value contributed to the Blockchain platform. That reward itself is the Cryptocurrency.  This process of providing computing power (hash) to solve a cryptographic puzzle of sorts is called mining.


In true sense, cryptocurrency is a real earned money! Although it is earned by the computers instead of by physical human labor.

Cryptocurrency is then a byproduct of Blockchain. Blockchain can survive without cryptocurrency but all forms of cryptocurrencies need some Blockchain basis to it.

What makes Bitcoin a store of value is the limit on its total supply. In the end, only 21 million Bitcoins can ever exist. Of these, almost 4 million are lost due to access, hardware issues, ignorance or any number of other reasons.

Not all Cryptocurrencies are mined, though.

Some blockchains pre-mine, that is, issue their platform currency and sell them for fiat currency for operational needs. When someone wants to use the services on their platform – they are then required to pay for such services in the pre-mined currency. This type of currency is known as utility tokens.

Utility tokens because their value is dependent on their usability on the platform. If the platform does not succeed – their value may become zero.

SEC has been warning companies that sell the pre-mined utility tokens that such utility tokens will be regarded as ‘securities’ and not complying with securities laws while issuing utility tokens will have consequences.

How are Blockchain and Cryptocurrency different?

Blockchain and CryptocurrencyCryptocurrency is a byproduct that acts as the fuel to encourage people to provide their processing power.

Blockchain technology can run without cryptocurrency, however, Public Blockchains usually rely on the reward (cryptocurrency) to allure people to commit their computing powers to the network.

Why are companies interested in Blockchain but not Cryptocurrency?

Business adoptionAs discussed earlier, cryptocurrency is a fuel that encourages people to commit their computing power to run the network.

However, since most enterprises do not want to share their information – they favor Private Blockchains.  Private Blockchains do not need Cryptocurrency.

Because of the negative press around Cryptocurrencies and securities boards, action against companies that issued cryptocurrencies (in the name of utility tokens) – companies of repute are trying to steer clear of the tag ‘cryptocurrency’ with their brands.

What does Blockchain solve?

Advantages of BlockchainBlockchain revolution started on the basis of many promises, however, its core promise comes from the technology’s ability to instill trust through immutability.

As we learned earlier, you cannot tamper with the entries once committed to the Blockchain, you always leave a trail that is there for anyone to see.  This instills a new level of confidence in the data that was not available in the traditional databases.

This deceivingly simple ability of immutability can one day help solve the issues of counterfeit, helps conduct intermediary less commerce, cover-ups, etc.

What Blockchain cannot solve?

Blockchain cannot stop bad players from taking advantage of people. Since anyone can access the network, not everyone that is accessing the network comes there with good intentions. There have been many ideas that were ‘proposed’ to be built on blockchain only to empty people of their hard-earned money.

Even with Blockchain, you need to know who is behind a particular project or initiative. If they are trustworthy people then they will build things that utilize the immutability and trust factor of Blockchain.

“Customer beware” applies to blockchain space as well.

The blockchain is NOT foolproof, literally. Human errors do cause mayhem in Blockchain.  Blockchain cannot save itself from 51% attack (people have to) that we talked about earlier.

Blockchain space is also prone to a lot of FOMO and FUD, that is short for Fear Of Missing Out and Fear Uncertainty and Doubt. The only antidote to these vices is education and knowledge.


What is a smart-contract?

Just like Blockchain, the term smart contract is not a new one. Nick Szabo used the term smart contract in his thesis dated 1996 titled “Smart Contracts: Building Blocks for Digital Markets.”

what is smart contractNick explains “New institutions, and new ways to formalize the relationships that make up these institutions, are now made possible by the digital revolution. I call these new contracts “smart” because they are far more functional than their inanimate paper-based ancestors. No use of artificial intelligence is implied. A smart contract is a set of promises, specified in the digital form, including protocols within which the parties perform on these promises.”

To break it down, a contract that can be executed by the system automatically upon fulfilling a set of agreed-upon conditions can be termed as a smart contract.

Nick’s vision to create instant, cheap and efficient smart contracts was just a theory in 1996, however, with the advent of Bitcoin Blockchain, that vision has taken shape.

Contracts executed by the systems on a Blockchain are forever immutable – which advances the trust aspect.

What is Initial Coin Offering (ICO)?

“A healthy dose of skepticism is always good. This bear market is forcing investors to demand more than just a colorful whitepaper,” said Dr. Jemma Green of Power Ledger during our interview.

Unfortunately, that wisdom was too late to arrive for many investors (including us) who invested in Initial Coin Offerings (ICOs) and lost a ton of money, including life savings.  Billions of dollars were raised using ICOs.

ICO model has indeed the paved way to raise capital for great ideas to change the world but no capital.


An ICO is where a company pitches the idea to the general public. If the public believes in the idea, they can contribute whatever is the minimum contribution, usually, the minimum contribution is very low to enable small investors to be able to join in. ICOs are different from crowdfunding on many fronts but one defining difference is that most ICOs are primarily used in the Blockchain space and accept cryptocurrencies as an investment.

ICOs opened up an avenue for raising capital for people and companies that may otherwise never been able to raise the capital.

Another beauty of an ICO is – people from all over the world can contribute capital into ideas they like.  There are few countries that specifically prohibit companies from accepting investments from their Citizens (for example, the United States, China, Singapore, etc.).

Although the idea of ICO has caught bad press in the recent year due to many bad players that scammed people out of their hard-earned money, the concept itself is quite an amazing one. The concept of ICOs will eventually help change the face of traditional capital markets through Security Token Offerings.

Security Tokens are similar to utility tokens issued in an ICO, however, security tokens follow the securities laws of the land instead of circumventing.

Because they are supposedly legal, big businesses can enter into them once the complete framework is made available by the respective authorities.

We use the word ‘supposedly’ since the legal framework within which Security Token Offerings can be issued is not readily available.  Most companies are working within the confines of exceptions and exemptions available in the securities law but a separate Security Token guidance or framework is yet to see the light of the day.

Industry by Industry impact on Blockchain

  • Blockchain and Law (upcoming)
  • Blockchain and Healthcare (upcoming)
  • Blockchain and Real Estate (upcoming)
  • Blockchain and Insurance (upcoming)
  • Blockchain and Supply Chain (upcoming)
  • Blockchain and Financial Services (upcoming)
  • Blockchain and Energy (upcoming)
  • Blockchain and Charity (upcoming)
  • Blockchain and Government services (upcoming)
  • Blockchain and Gaming and Gambling
  • Blockchain and Your Data Rights (upcoming)

Do you have a favorite CEO in Blockchain space who you would like us to interview? Tell us who and why in comments.

Thank you for reading the article.
Subscriber-Banner-smallIMPORTANT DISCLAIMER

Everything in this article is an opinion, not an advice of any kind. This material has been prepared for general informational purposes only and it is not intended to be relied upon as accounting, tax, investment, legal or other professional advice. Please consult with a professional for specific advice.

We do not endorse or guarantee the accuracy of the information and claims made.

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About the author

RK Reddy holds two Masters degrees, one in Accounting and another in Business Administration with over 15 years of experience in the financial services industry.

RK Reddy is an ardent fan of Blockchain and Cryptocurrencies. You can see the excitement about this new blockchain technology in every article on Cryptotapas.com. Sometimes this excitement leads to an overly optimistic view. Guilty as charged. RK Reddy says what may seem like an ‘overly optimistic expectation’ today may become an everyday norm in 5-10 years; look at the history of cars or airplanes, Blockchain and Cryptocurrencies belong to a similar frame of reference.”  Of course, that is just his opinion.


CryptoSpace

Factors adding gasoline to the Bitcoin shortage fire

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Bitcoin shortage

Bitcoin’s creation and its subsequent proliferation may have all been planned for a long time, this is the outcry of many conspiracy theorists.  

These conspiracy theorists also believe that whistle blowers are mere plants to help prepare the world for what’s coming.

One of their theories is that the end of physical fiat was planned a long time ago, however, the transition of physical fiat to digital fiat needed a catalyst to drive the conversation.

Either by meticulous design or by sheer coincidence – Bitcoin came to life in 2009.

We personally think that Bitcoin was designed by liberals who believed a ‘fair world’ was possible.

The invincibility of this groundbreaking technology meant that the forces that were working on doing away with physical fiat had a runway built for them.

So, the rhetoric has now changed from ‘Bitcoin is for anti-social elements’ to ‘Bitcoin is the currency for the visionaries’.

Why is that backdrop of conspiracies and layout necessary?

Because, irrespective of the underlying reasons the rhetoric has changed and it has changed for good.  This means, as the physical fiat follows the path of extinction, Bitcoin – the king of digital currency, will see a lot of demand.

We were warned a long time back that there will not be enough bitcoin in the world for everyone to buy.

Some studies say that owning .28 Bitcoin will guarantee you a seat in the top 1% bitcoin holders in the world while others say you need 5 bitcoins to claim the top 1% in the Bitcoin rich list.

Point is, even if you have all the fiat in the world, there is a limit on how much bitcoin you can buy.

When people who want to buy bitcoin are ready to pay any price while those who own the fractions of it are unwilling to sell it – the prices have only one way to go: UP.

 

The strategic moves into Bitcoin from MicroStrategy, Square, GrayScale, Fidelity and a host of billionaires who actually know something about money and finance is a tell-tell sign for the rest of the world.

Whether you want to get into Bitcoin to own a piece of technology itself, or to hedge against the inflation, or simply to use it as ‘digital gold’ that you can take with you, any and all of these reasons are good enough to look into Bitcoin.

If you had told us last year that a public limited company will convert its cash reserves into Bitcoin we would have laughed at you, but that is precisely what has happened.

As a result of converting fiat reserves to Bitcoin, the stock price of MicroStrategy saw an immediate boost which was as big as the reserve itself.

Do you think other public companies will stay on the sidelines for long?

When a legend like Paul Tudor Jones says ‘Bitcoin is the fast horse’ to bet on against inflation and he himself invests 2% of his portfolio, how long will it take for other fund managers to take note?

Add to this the demand from retail investors in the form of millennials, who are also set to inherit some $60 Trillion dollars from the baby boomer generation in the coming decade.

Conclusion

We personally think the goldilocks moment for Bitcoin has arrived.  It has the perfect combination of ‘scarce supply’ and ‘growing demand’.  It also has the added elements of adoption and ‘nascentness’ working in its favor.

These factors alone make Bitcoin one of the best investment assets of the century, in our opinion. 

We have been investing in Bitcoin using dollar cost averaging.  We don’t go selling our home or taking on insane loans to invest in bitcoin, rather, we invest $100 here and $100 there.

Before you invest your money into bitcoin or cryptocurrencies, spend some time understanding what Bitcoin is and why it is important in taking the world from the centuries old fiat system to a brand new global currency system.

In our personal view, Bitcoin will become one of the best assets to hold by the next halving.

Thank you for reading and sharing this article. We appreciate you.

Stay safe and healthy!

Top 5 Cryptocurrencies 2020

IMPORTANT DISCLAIMER

Everything in this article is an opinion, not an advice of any kind. This material has been prepared for general informational purposes only and it is not intended to be relied upon as accounting, tax, investment, legal or other professional advice. Please consult with a professional for specific advice.

We do not endorse or guarantee the accuracy of the information and claims made.

All product and company names are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by them.

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Why this bull run has no precedence? ONE key metric to rule them all

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bull run 2020

Everyone is singing the praises for the bulls’ arrival in the crypto space.

Some say that 2020 will mark the biggest bull run in cryptos’, albeit short, history.  

We are already in October so we doubt any fireworks will take place now since there is a lot of uncertainty about the US elections.

Add the uncertainty around the stimulus bills, unemployment trends, soon to be lifted forbearances and the list goes on.

2020 still has another 2.5 months to go but most of these uncertainties will take a while to show their true impact.

For instance, what will a Biden presidency mean for the economy and cryptos?  

How many people will be forced to sell their homes once the forbearance’s are lifted?

What happens if the next stimulus bill does not pass through?

When will the vaccine become available?

These are some of the unique situations that we have no precedence for. Do not let anyone convince you that we know what’s going to unfold, because no one does.

Yes, everyone has theories, like the ones we are presenting here, but that is all they are: theories.

The BIGGEST metric that crypto community is not considering

We are no economists nor can we run any fancy charts to impress a point on you.  

We are just good observers and have common sense to deduce a few things based on data.  

For instance, between 2007 and 2010 consumer spending dropped by an overall .2% and we know what that meant for the economy.

Personal consumption expenditure

In 2020, people have literally cut down on their spending.  Some of it is forced due to the restrictions imposed by external forces and most of it is self imposed.

I am sure the spending on marijuana, liquor and food have gone up but what about other spending?

2020 also saw a spike in the savings balances.  

Economy is not stimulated by people hoarding their money. People need to exchange value for the economy to thrive.

What happens to the spending behaviors when the true stats around evictions, lost jobs (that are not coming back) and small businesses that are shutting down permanently are out?

Our guess is that people are going to be weary of spending money in the short to medium term. If we were forced to pick a timeline – we would say about 12-16 months (assuming we get a vaccine in Q1 2021).

When is the next bull run? 

Based on what we have seen in 2007 through 2010 and observing the consumer spending habits in recent times, we think that Bitcoin (and cryptos) will not find their true peak until next halving.

We know this is not what you came to hear.  

If the bull run in your mind is hitting the 2017 highs then we do not think you have to wait until the next bull run.

If the bull run means a $100,000 bitcoin then we stand by our opinion on when that is going to be.

A case for bull run

In spite of what is going on in the street, following factors are acting as strong bull market signals for the crypto space. 

Hype: Crypto space (specifically Bitcoin) has been gathering a lot of steam in terms of brand awareness and mass penetration.  This is great for the long game.

Adoption: More than ever, private and public enterprises are becoming serious about bitcoin and underlying blockchain technology.  What is good for bitcoin is good for blockchain and vice-versa.  MicroStrategy investment, Paul Tudor Jones getting involved with bitcoin are some examples.

Tech explosion: Crypto space is home to some of the brilliant minds in the tech space. Add Big Techs interest in the crypto space and you have a perfect recipe for monumental shifts in crypto perception. Tech giants like Microsoft, Google, Twitter, Facebook are all getting involved with blockchain and cryptocurrencies in some shape or form.

Retail demand: More and more retail investors are looking for alternative investments and they are waiting on the sidelines to get involved with Bitcoin.  As soon as companies like Fidelity or other brands offer crypto investment through retirement plans – there would be a massive influx into this space.

DeFi: DeFi in its current state might be infested with shittty projects but as a concept and technological shift to turn the current banking system upside down – it holds great potential. Any demand to DeFi brings more demand to bitcoin, ethereum and blockchain in general.

Conclusion

The debate around when is the next bull run will hinge on how the market recovers from this pandemic. How soon will we get the vaccine and how many of the lost small businesses and jobs are we going to resurrect?

From a macro perspective, Bitcoin and few select cryptocurrencies will continue their upward trajectory so if you looked back to 2020 five years from now, you might think bitcoin was on sale.  

Question is: how many people have that kind of patience?

Thank you for reading and sharing this article. We appreciate you.

Stay safe and healthy!

Top 5 Cryptocurrencies 2020

IMPORTANT DISCLAIMER

Everything in this article is an opinion, not an advice of any kind. This material has been prepared for general informational purposes only and it is not intended to be relied upon as accounting, tax, investment, legal or other professional advice. Please consult with a professional for specific advice.

We do not endorse or guarantee the accuracy of the information and claims made.

All product and company names are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by them.

 

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Is Cryptocurrency driven by fundamentals or hype?

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Fundamentals or Hype

During the early 2000s India experienced a massive real estate bubble. With a lot of western companies opening their outsourcing centers in India, the land prices shot up 2x, 5x, 10x, and even 100x.

You read that right. 

Have you heard about 100x in Real Estate?

To be sure, the demand was exponentially growing in the major cities like Bangalore, Hyderabad, etc., which were quickly turning into back offices for the many western companies.

The hype in these cities was somewhat justified.

However, here is the kicker.  Many remote places which did not directly benefit from this influx of foreign direct investment started seeing their prices go up in similar fashion.

In a crazy case of trickle effect and super-hype created by the real estate agents, properties were just trading from one party to another for unbelievable markups and the prices constantly went up.

Today, that massive bubble is still intact minus the crazy multipliers.

The reason we like the comparison of what happened in Indian Real Estate market to the crypto is that a genuine need in a specific space has been exploited to translate that hype onto anything tagged with the name. 

In India that hype tag was ‘land’ and in crypto that hype tag could mean anything from ICOs to DeFi.

Ask any crypto enthusiast they will make you believe that crypto is all about fundamentals.  However, anyone who has spent even a few months in the space quickly realizes that crypto prices don’t follow fundamentals.  

This is one place where Crypto space shares its similarities with the stock market as well.

Stock market is completely distanced from the economy and it too acts irrationally, that is, when people are losing jobs and businesses are shutting down permanently, the stock market rallies higher and higher.

Similarly, crypto space, to its own detriment, is ignoring the projects that have amazing fundamentals while pumping other projects solely based on the hype.

Long term vs. Short term

Hype is short lived. Fundamentals are a long game.

That is why we emphasize that anyone interested in the crypto space does their own research in finding the projects that meet their fundamental criteria.

Once you know that a project has fundamentals (team that can execute, problem worth solving, solution that can solve, market demand, etc.,) then you just ignore the FOMO and FUD.

This will help you sleep better and use your spare time and energy in quality endeavors like taking care of yourself or spending time with family, etc.,

If you get on the hype train – it will be difficult to catch the right wave and this constant lookout for the next big thing is going to rob you of all the peace.

And, if you find yourself on the right side of the wave – you will be decimated and drowned.

DeFi defies all common sense

That is what happened with a lot of people who tried to ‘time’ the DeFi market.  

Don’t get us wrong. Many people made a ton of money (and good for them).  However, remember, crypto at this point of its evolution is a zero sum game.  That means, for everyone who made a million someone lost that million.

Unless you got on a project quite early keeping your risk level low or you have some insider information (not to mention this being illegal), you can generally not ‘time’ the market.

Many veteran traders have lost their shirts in chasing the market.

Conclusion: does this mean I should stay away from DeFi?

We cannot tell you that.  That is something you got to decide for yourself.

By market cap, Yearn Finance is considered one of the top DeFi projects. It lost over 67% in less than a month.   

Personally, if the top most project is still trying to find the ground while other projects are losing 99% of their value in a matter of a day, that means one thing:  the space needs time to mature.

We will continue to learn about DeFi. We will continue to invest what we can afford to lose when we find the right project that meets our fundamentals criteria.

That is our strategy at the moment. You have to find a strategy that suits you.

While crypto space is riding on the hype at the moment, we continue to believe in fundamentals.

Thank you for reading and sharing this article. We appreciate you.

Stay safe and healthy!

Top 5 Cryptocurrencies 2020

IMPORTANT DISCLAIMER

Everything in this article is an opinion, not an advice of any kind. This material has been prepared for general informational purposes only and it is not intended to be relied upon as accounting, tax, investment, legal or other professional advice. Please consult with a professional for specific advice.

We do not endorse or guarantee the accuracy of the information and claims made.

All product and company names are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by them.

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