Ten years after planting the seed, what does it take for Nakamoto’s tree to flourish?

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ICO is dead, long live Crypto

In the fiat wasteland soil of the financial crisis of 2008, a wise Japanese TreeMaker named Nakamoto planted an ingenious seed. A new tree was born, and He called the root: Bitcoin. He predicted that the tree would grow the money of the future. He believed that new strong trees would rise from the seeds of the flowers.

Photography: Lucien Lecarme

In the first years, nobody saw the tree growing, but almost ten years later, Christmas 2017, the tree miraculously started expanding to the sky. Around that time, hundreds of ICO-seeds started blossoming, creating worldwide attention and receiving many tokens of appreciation. The tree seemed there to stay, with bitcoin firmly rooted in the ground, and in its vicinity some younger sprouts coming up with strange names like ETH or XRP. But in the summer of 2018, the flowers started to fade, followed by more and more weaker ones falling from the tree. Autumn came, with only the most redundant ICO flowers still giving their beauty to the world. It was at the beginning of winter that something strange happened. Some people decided to take a branch out of the tree and plant it again, hoping to grow another even better Bitcoin tree. The initial tree shrank rapidly and winter winds started to shake the branches. Was the money of the future doomed a certain unavoidable death? The wise Treemaker looked at his creation, nodded his head and asked himself: “What is needed to make the tree healthy again?”

What is needed to grow the money of the future?

Let’s start with a short analysis of the rise and fall of ICO’s in 2018.

The Initial Coin Offering quickly became Willy Wonka’s chocolate factory in Crypto Town, and every project promising the golden ticket to the land of unbounded money and prosperity. It became hot after Bitcoin broke through to the masses after its December 2017 peak. A blockchain hype was born and any whitepaper with the word blockchain in it, a good looking team and a slick techy website used the magic tool: ICO. Money flooded in with a climax in 2018 Q1 and Q2 where the total amount raised was $16,8 billion. We are now near the end of the year, and 80% of ICO’s in 2018 Q3 failed, and 50% of total funds (close to 2 billion) was raised by a top 10 of ICO’s. The failure rate of ICO’s is skyrocketing. Weak, dodgy, scammy and even downright CON COINS are falling from the Crypto Tree towards their crypto death. www.deadcoins.com lists 984 death or almost death projects of which 182 Scams, 680 deceased, 12 hacked and the rest parody projects. It seems a round of purification is needed, hopefully, to give more light and energy to the healthy ones on the tree.

ICO statistics from 2018 show that raising billions doesn’t guarantee at all good ROI or a good product for that matter. From the ICO top 10 by money raised we find EOS (4,1 billion) and Telegram (1,7 billion) at the top, pretty good products for sure, but neither of this top 10 can be found in the top 10 by ROI. Can one conclude that raising a lot of money through ICO is a guarantee for low ROI? One negative effect caused by hundreds of millions circulating in a team without a real product is that money can be thrown at problems, that developing and programming can be outsourced, instead of solving issues with creativity and team spirit. Money and greed can take away from values and open sourced sharing. In a way, money can steel the soul of a project.

I realize this is probably a too short sided conclusion based on only some random statistics. Let’s have a look at number one in the ROI list: NXT with 60.000% ROI and around since 2013. NXT is a platform to create applications running on a blockchain. Their ability to transform the daily open sourced developing technology of blockchain into a real use application builder has proven to be a true innovation. Probably they have spent many hours of blood, tears, and bugs fixing sweat inventing the wheel for the recent wave of ICO’s to possibly thrive. Still, the question remains for the majority of them: how to survive the crypto winter? Before even dreaming of a community-based network using their token as a real means of exchange.

When your innovation becomes the product of your values instead of the product of money

I believe the chances to survive will dramatically increase when the startup can go beyond promises of a future product by simply presenting a product that has passed the concept phase already. It helps when the founders have an excellent tracklist of building innovative products that have proven to add value to the sector. A good example is ThreeFold Foundation. The founder and companies around him have come up with state of the art close to the edge cloud solutions for the past ten years. Their promise is not merely dreams on paper. It is real storage and compute capacity in an eco-system of distributed nodes. Filecoin and SIAcoin alike, bringing decentralized storage capacity close to the end-user. But what sets ThreeFold apart is innovative technology like zero-OS, zero-Robot technology in a self-healing containerized distributed GRID. In the field of cloud computing it is generally accepted that container technology and bringing capacity close to the end user is the next big innovative step. ThreeFold miners are called farmers since their technology makes up for green capacity. They farmed more than 70 million of 5 years future network revenue on the TF-Grid. A clear sign that their community believes in the technology and its underlying innovation

ThreeFold has, without having done an ICO, 79 PB active on the grid. SIAcoin did an ICO and has 3,8 PB, to name a number. Filecoin did a record-breaking ICO but lost significant parts of its community by aiming for decentralization when only accepting accredited, mostly US-based investors. This being probably an example that when the spirit of true decentralization, which is building something with the people, for the people, is put aside to gain more money, there is the danger that a soul can leave a project. This possibly blocks the way for the product to become part of the 2nd paradigm where values are ranked higher than revenue, where sharing exceeds greed and competition, where many are empowered instead of a happy few. In my opinion, the world is ready for a grant redistribution of wealth, for our own evolutionary sake. Blockchain and crypto are bringing humanity a window of opportunity for true decentralization.

Decentralization at its core, is a value system of a group of young people born in the 90ies ( among others), destined to make the world a better place. Radical decentralization is revolutionary. (Michael Spencer: the future of decentralization)

Not doing an ICO can be counterfeited by a solid product that has passed the concept phase and a community of developers, investors and believers that stands around the fire of true decentralization, warming their hands in inspiration and sticking around because for them that is the core value that brought them together in the first place.

Innovation is Key

It is not easy to innovate. It is mostly the result of years of research and product development in a specific sector. There is a thin line between success and failure. Philips and Sony invented the game-changing CD technology, Philips got excited and then created an epic flop, the video 2000 system. The introduction of the blockchain asks for innovative products and services, and continuous improvement of the blockchain technology itself. That the blockchain has not yet been accepted as a true innovation proves the fact that there is a wide range of ‘believers’, but about the same amount of critics. When the development and utilization of different blockchain technologies are done well, it can potentially propel entire sectors like financial services to another level. With five years of product development, NXT is a good example of simultaneously and continuously offering a great product and improving their blockchain.

The Jelurida’s Ardor Platform Could Revolutionize the Crypto Industry and completely revolutionize the fintech, crowdfunding, and governance industries by providing a powerful modular toolset that grants its users the opportunity to create their applications from scratch

Will ThreeFold foundation offer the same level of innovation to the cloud & data storage sector? ThreeFold aims even higher, by creating a fully decentralized compute and storage capacity network, it realizes the dream of the internet from the people for the people and in doing so staying close to their core values and thus to their community.

Innovation is the brightest flower growing on the Nakamoto tree; it is the young boy showing a brilliant drawing to his mother that is a perfect solution to one of the many questions about life that this boy has in his unspoiled imaginary mind. When the broader field recognizes the answer over time and when it works flawlessly then the ‘product’ or solution has enough value in itself for building a token architecture around it. And not the other way around. These will likely be the stable proven Utility tokens of the future. As THIEL states:

“Each moment in business happens only once, and as an extension, so does real innovation”

When is a token needed?

In many crypto projects, a token is far from wanted, even necessary. Aleksander Svetski explains in this article very clearly why so many Crypto projects don’t need a Token at all.

We have 2000 digital currencies today, with probably only 50 that will survive long term? because the other 1950, apart from a large proportion being just naive & stupid, are just well before their time. They are simply not required any time soon because money / value needs to be sorted out first ( quote from Homo Sapiens, evolution money & bitcoin )

But when your project and product aims for the innovation prize, you have an excellent tracklist and bright developers, and you bring new fresh and proven value to the world: why not go for your community driven token economy? In the case of ThreeFold, and also SIA coin and Filecoin, they don’t need a blockchain to offer a solution for the coming ‘data storage problem’ to the world. Why then use a blockchain and introduce their token? Because it is there? That’s like men showing muscle by looking at the Mount Everest and climbing it. When asked why they did it, they answer: because it is there! There is a truth in this, for developers and programmers the blockchain offers a new array of solutions and problems. It is a great puzzle to solve, a gratifying challenge to answer, and in fact the result of close to 30 years of open source development. The premise is simple: a better world. And here values and motivation come in. Blockchain offers the promise of decentralized networks and future token economies. Decentralization means stepping away from control, regulation and pyramid structures.

Peer to peer networks, redistribution of wealth and decentralization takes away the power from the hands of a few into the wallets of all.

This was precisely the dream of the libertarians, cyberpunks, and crypto-anarchists that helped the Treemaker to bring the bitcoin tree into existence. It is the soil of this tree to grow. When hijacked by old money, greed and big wales, it will organically shrink, shakedown unhealthy leaves, and birth healthier ones that are more in line with the values of the wise TreeMaker Nakamoto.

When will a token survive?

A token is needed and likely to survive when

  • from values, you embrace decentralization, and you stick to this value because it is the foundation and inner fire of your network and the true reason you use a blockchain
  • your product brings real innovation
  • the architecture of your network works!
  • you avoid the crypto hype and focus on developing your product and build your technology, improve your blockchain

A very well designed Utility token is one in wherein the underlying network the money-value relation is sorted out, and where the value is proven over time and stable, and connected to a utility. Let’s have a closer look at the design of ThreeFolds token architecture. In the model of their ecosystem, tokens are farmed when capacity is put on the Grid. This makes for a direct relation between the number of tokens and this ecosystem of capacity.

Furthermore, the TF token is also a future necessity: the TF token is the only way to buy capacity on the grid, thus creating automatic future demand for the token. This will make this token as good and stable and significant as the GRID will be.

amount of tokens = capacity on the GRID
capacity x tokens = TF token economy

When you buy TF tokens, you buy partly future capacity, to meet certain future demand. In their case of storage and compute capacity, it is most likely that there will be an explosion in the market of this kind of capacity, looking at AI, self-driving cars and IOT. Not many would agree the reverse: that there will be a decrease of capacity needed, that this world is going to create less and less data, that the experiment of self-driving cars will fail and AI is just a joke made up by Jonny Depp in his movie Transcendence.

The shadow side of a utility token that buys the utility

Birthing a token that can be used to purchase access to a capacity network, can hinder the development of that network. Let me explain from an investors perspective. Utility tokens are designed to express the value of, in ThreeFold case, the capacity put on the data-grid. At the same time, they are available on some small exchanges. For TF token buyers and investors to gain profit, the token should rise. The expectation is that this will happen automatically because, at conception time, TF token and its related capacity are undervalued 6 to 8 times. This undervaluation is a result of the innovation that threefold brings: the solving of the ‘big data center’ solution for the coming explosion of the demand for capacity. When capacity is farmed on the TF network, the farmer earns tokens. This amount is expected to be only 1/6 to 1/8 of the value of that capacity when you compare it to the price of capacity offered by the big five technology giants. Are you still with me? If not, do a deep dive in their wiki’s, it’s all open source.

Now here comes a bit of a tricky part. Because TF token is apart from being a store of value, also the entrance to their network, developing a working ECO system of capacity may decrease the TF Token value. Developers and users only can enter by spending TF tokens which increased the velocity and puts negative pressure on the price. It is more likely in this case that the very smart undervalue mechanism at the birth time of farming, will be the dominant determining factor of this specific token price. Take into account that the TF Eco-system has proven to grow very organically without much marketing spending, probably because they did not do an ICO. Threefold claims that their total amount of capacity farmed exceeds the capacity created by Filecoin and siacoin X 10!

We believe that, in the long term, a decentralized network will suffer when its utility token is poorly designed. A capped supply or centralized distribution may incentivize hoarding, lead to frequent supply shocks, and ultimately harm the network’s underlying utility (from Zech Herbert )

Most of the ThreeFold community, like the farmers of capacity, really believe in the product and its innovative power, they are aligned with the values of true decentralization and doing good for a better world, and they are in for the long run, since the tokens are farmed in a five year vesting plan. They are not in for a quick hit and run, that makes their ecosystem less vulnerable to pump and dump with 1st paradigm money. They also didn’t buy their way into big exchanges but put network and product first. All these elements together is a strong value/money design and a potential strong foundation for becoming a stable coin. Also, by being the best-kept secret as till so far, ThreeFold has carefully avoided the trap of becoming a hype.

Stick to your values

For a token to succeed, it should be and stay a true representation of any product, network or Eco-system that grows out of the soil of true innovation. Then a real, solid and non-volatile foundation is created for a solid token economy and products built on top of that like NXT Ardor platform or ThreeFold 3-BOT, a secure virtual grid operator. This economy will be carried as much as by the value of any underlying token, as the values that the founders, investors and the community share. Their stickiness to the underlying principles so to speak. And to become really decentralized: principles are everything! Coming back to Nakamoto’s tree of the money of the future: the soil is innovation and the strongest ICO flowers stick to their values. In the end, let us add another formula that might prove the strongest container for any movement in these exciting crypto times to grow, thrive and flourish.

token value = community values

Lucien Lecarme, December 2018