In the last episode of “Altcoin Evolution”, we discussed the obstacles that can prevent more casual crypto investors from acquiring some of the more obscure altcoins. Obviously, accessibility to investment is essential to get into the hands of consumers and for projects to pursue their own “evolution”. Despite the market’s continued efforts to make crypto more accessible, there is still a long, difficult road ahead.
Another “crypto-winter”, however, is possible. It is still unclear how society will adapt to digital currencies. The potential dangers are outweighed by the numerous benefits of emerging technology and coherent projects in the space.
The evolution of Altcoin: do you have questions, we have… more questions?
A tangible function can be associated with different coins, which is a variation on the accessibility feature that was covered last week. There are many questions: What is the purpose of the token and project? How does it fit in the current financial industry, or other industries like art and culture, information systems, or finance? Is the project using a different type of blockchain or one of the more established ones? Unique value propositions are essential in any project. These can include any number or things that can be derived by any of these questions.
Some coins are designed for specific uses, often on existing blockchains, and are commonly referred to as “utility tokens”. Let’s examine: Tokens are usually broken down into either utility tokens, or security tokens. The SEC’s Howey Test has been used historically to determine a securities contract. It is the difference that has been broadly established between the two. Utility tokens are not viewed as traditional investment vehicles but instead provide consumers with a product and service. Although the value proposition for security tokens is fairly clear, it is not as clear as utility tokens in today’s market.
The majority of these tokens are currently working on Ethereum blockchain, particularly those in the NFT space. This applies to ECOMI and its OMI token, as well as some of Flow’s original projects (such as CryptoKitties), that existed before the FLOW token was introduced (both of which are referenced by the early installments in this series). These were designed to provide access to goods and services, such NFT collectibles. The coin exchange is the basis of the economy. It is essentially a market that operates with no fiat money.
ECOMI was built on the backbone Ethereum network.Source: | Source: TradingView.com: OMI-USDT
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The boundaries between utility and utility are not always clear. Some NFT critics suggest that IP integration will not suffice to support the load for Topps MLB, NBA Top Shot, or ECOMI. Critics of other NFT projects like CryptoPunks and Bored Ape Yacht Club often claim that these communities will not be able to sustain themselves (although CryptoPunks prices remain high as we approach). The fifth year of the project.
While NFT projects that are just starting to emerge and those that are already established are great examples of this discussion, these criticisms do not end there. Cardano’s biggest critics (ADA), have reacted to the fact that the coin’s utility is unclear and poorly-defined for many years. Cardano is third in cryptocurrency market cap. Talk about the evolution of altcoins.
We are not going to argue for or against any of the projects mentioned here, but rather to highlight the fact that there is a lot of dialogue in the crypto-community about utility. The value of IP is often arbitrarily assigned in contexts other than crypto.
Don’t stop now… It’s more than intellectual property
The utility of course doesn’t stop at the IP. Zoe Scaman, writer and founder He presented his latest point of view“Five key components are essential for a crypto-native fan-centric brand.” Core components include Worldbuilding & Narrative and Cultivating Communities, Status & Access as well as Open IP and Shared Equity. These traits undoubtedly define “value,” but the measuring stick is more blurry than ever. While the bearish outlook would suggest that even these basic components will not be sufficient to ensure true longevity, the bullish outlook would indicate these qualities are capable of building NFT projects that last a lifetime. The reality is likely somewhere in between, like many things in life.
The concept and evolution of utility coin is still very new, even when compared to digital currency. The emerging coin-purpose landscape is best described by the wild west. The company’s continued reliance on digital innovation is gaining traction. Crypto projects are also finding more use cases.
OnlyFans was the best example of decision making this week. As reported by our sister networkBitcoinist. As the site restricts adult content, it becomes apparent that there is a need to create a decentralized platform. Many speculate that some kind of crypto solution such as the Bitcoin Lightning Network could fill the void.
DeFi and other use-case driven crypto projects will undoubtedly continue to progress, so there will be more utility opportunities as well as feature needs. Valuing them is the tough part. It is important to show the problem and the solution in order to value tokens and emerging projects.
In next week’s “Altcoin Evolution” we’ll take a look at the latest set of challenges – “selling” a project or token to the general public and what it takes to make crypto projects stand out.
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Charts from TradingView.com. Image courtesy Jerry Sena