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David Nage is the founder of Roadmap, LLC and the former CEO of Apeiron Ventures, a private investment firm. His crypts can be found on Medium a @ david_55389.
The following is an exclusive contribution for the 2018 year of CoinDesk under consideration.
"It is a false start if the ball has been placed ready for the game and, before the crack, an offensive player who has assumed a fixed charge position or moves in order to simulate the start of a game, or if a offensive player who is moving makes a sudden movement towards the line of scrimmage ".
Before we can start looking into our crystal ball and see what our magical internet money could be for the world and investors in the next year, I think we need an honest and in-depth review of the last 12 months and the narratives that played.
This does NOT mean that I will talk about how the bitcoin was the X price in December 2017 and that since then it has lost the Y% since then – which, in my opinion, does not help anyone.
As Winston Churchill said: "Those who do not learn from history are condemned to repeat it".
The talent before the & # 39; herd & # 39;
In February 2018, TechCrunch wrote that: "requests for on-demand blockchain talent are skyrocketing". Last year (2017), the Upwork freelance talent market saw blockchain grow fastest-growing by over 5,000 freelance billing competencies – a year-over-year increase of over 35,000 percent.
These requests cover ICO consulting services, engineering projects and general blockchain advice. Since January 2017, the demand for blockchain engineering talents on Toptal has grown by 700% and 40% of the fully managed software development projects required in the last month require blockchain skills.
Regarding investment talents, there was no shortage of institutional professionals who left their career in the business sector, in particular from Goldman Sachs: Juthica Chou, COO of LedgerX, spent seven years as a derivative trader. Within the Securities Division of Goldman Sachs, where he specialized in algorithmic trading.
Mike Novogratz has hired several high profile Goldman people, including Richard Kim, the new operations director of Galaxy Digital, who joined Luka Jankovic, another former Goldman Sachs hedge fund analyst. Esther Babb, a former Goldman Sachs executive, has recently been hired by Gemini to become their director of business development.
Babb's illustrious career on Wall Street began nearly two decades ago with Goldman Sachs, where he worked with the company's data intelligence team. BlockTower Capital recruited former Goldman executive Michael Bucella in January. Former Goldman Vice President Matt Goetz founded BlockTower last year.
James Radecki was CEO of Goldman and in 2016 he went out to work on strategic investments at another cryptocurrency company, according to his LinkedIn page. Now he leads the development of the global business of Cumberland Mining, one of the largest cryptocurrency traders.
Yet, at the same time, ICO fundraising, based on the $ 279 million raised last month, fell more than 90 percent from the historical high of January 2018. Starting from a peak in January, fundraising data they have declined steadily with only one interruption of the trend of May 2018. What I find very interesting here is that this extended decline, the "winter crypt", has not stopped these highly advertised professional investors and experienced engineers looking for employment in the asset class .
The herd is … turning
Have you ever been on a plane headed to a busy airport, only to find out that you are forced to wander in the sky because the track is full?
In my opinion "the herd" is going around: yes, Fidelity has spent four to five years reviewing cryptography because it has launched FDAS (Fidelity Digital Assets); Yes, TD Ameritrade has invested in a new cryptocurrency exchange called ErisX in an attempt to offer customers options for investing in digital assets over the bitcoin. Yes, NYSE / ICE has launched Bakkt, a platform for trading, storing and spending digital resources.
And yes, Yale Endowment, and in some ways the godfather of the investment investment model, David Swenson, has invested in two cryptographic funds, Paradigm and A16z Crypto. It seems that institutions and institutional investors have begun to understand that investing in cryptography has provided unrelated returns, improved compared to traditional investment instruments.
As noted in the research prepared by Matt Hougan of Bitwise: "examining the impact that an allocation of 1%, 5% and 10% in bitcoins would have had on a traditional stock portfolio of 60% equity / 40% from 1 January 2014, they noted that the allocation to the bitcoin would have significantly increased the portfolio risk adjusted returns assuming that the portfolio was systematically rebalanced over time.
The potential impact was great: with an allocation of 5%, for example, the Sharpe ratio of the portfolio almost doubled, the total returns more than doubled and the maximum drawdown was substantially reduced. "
Now change gear, as Mary Poppins sang: "A spoonful of sugar helps the medicine to go down … here comes the medicine".
The penalty of two years
Do you remember last year at this time when that new hot ICO was able to raise $ 100 million in 30 minutes? Do you also remember all these little bits, with all their 80+ page white papers that no one really read, telling you that they would reinvent the wheel?
Who can forget the useless Ethereum Token (UET) and Whoppercoin? Hint: me. Other bad news: according to deadcoins.com there are now 934 coins that, as the name of the website should give it away, are dead.
There are some problems besides these that I see on the whole: one, we have about 2,100 tokens in the market at the moment, many of those registered as "utility" and I think they will have difficulty passing Howey's test (* note: I am not he is a lawyer nor has he conferred with the regulators but I am reading the tea leaves given to the general public).
President Clayton gave us the analogy with the "laundromat" this year in a way to discern whether an entity is a
security or a utility:
"If I have a laundry to wash my clothes, it's not a safety, but if I have a set of 10 laundry tokens and laundries have to be developed and I get them as something I can use for the future and I'm buying them because I can sell them to the coming class next year, this is a security, what we find in the regulatory world [is that] the use of a laundry token evolves over time. Use can evolve towards or away from security. "
From observation, most of the 2,100 tokens currently on the market could have a very difficult time going through the coin laundry / Howey Test. This has already started to play and will continue in 2019.
Get the SEC order that AirToken and Paragon repay ICO investors.
According to the federal agency, both companies conducted their ICOs in 2017, despite the SEC's warning that their tokens are treated as securities, which are defined in the DAO Report of Investigation.
Then there's the problem of a small thing called treasury management.
Many of these new projects did not have big plans on how to implement their ideas with their new capital, and most presumed they had five years of track to understand it. Projects have raised funds in ether in the last year, but have forgotten to plan a coherent view of treasury management or a forecast.
Let's say that Project X raised $ 30 million in ETH around November 2017-January 2018 at all-time high price around $ 1,432. This would have coined the project about 21,000 ETHs. If the team did not understand or exercise proper cash management, dispense marketing and traveling all over the world, those 21,000 ETHs (assuming they have not yet spent) now are worth $ 2.3 million.
This has already begun to happen and will accelerate for the first few months of 2019: ETCDEV, the startup that led the development on Ethereum Classic, which is among the top 20 coins with a market capitalization of about $ 400 million, announced this week that is in balance transactions due to a financial crisis.
Are we fast or decentralized?
Currently, Ethereum can handle around 15 transactions per second (TPS), although its creator Vitalik Buterin believes that testing the zk-snarks could improve that to 1 million TPS. Bitcoin is still hovering around seven TPS.
Due to dAPP like CryptoKitties flooding the network of transactions, it has been shown that scalability needs to be improved across the network. The amount of transactions per second in the cryptocurrency space is often compared to the number of transactions that Visa or MasterCard can handle, which is set at around 2,000 transactions per second.
Overall, I think we are in the Friendster-Myspace right now; Facebook is a few years away and this also affects TPS and scalability. I think 2019 will see a real focus on what evidence of zero-knowledge, DPOS, or some more recent iterations such as proof of history can add to the ecosystem.
Many say no, not yet.
Many of the blockchain space projects – Metamask, CryptoKitties, UJO, Radar Relay, Cipher Browser, uPort – use the Infura API to connect their applications to the ethereum network.
In this way, Infura provides the fundamental infrastructure needed to manage both the short-term peaks that can occur during coin launches and the more fundamental long-term downsizing solutions. An average of 6.5 billion JSON-RPC requests per day on the ethereum network are channeled through the Infura infrastructure, making the project an essential pillar of the ecosystem.
A dream that is crypto
As Marcus Aurelius says in the movie "The Gladiator": "There was a dream that was Rome, you could just whisper it – something more than a whisper and it would have vanished, it was so fragile."
Well, in 2018 the dream and the promise to encrypt were not necessarily whispered – it was screamed from the tops of buildings and from business plans around the world. But was it ready? In my opinion, no. It was used and abused by those who, after 10 years of a quantitative drug-induced coma in public markets, understood that the party was coming to an end and needed a new kick.
From an institutional investor's point of view, the signal-to-noise ratio has been quite high this year; I expect the research and news agencies that will arrive online this year and in the next one will improve.
On 1 January 2016, the bitcoin was trading around $ 420. Even with a significant recession we have witnessed in recent weeks that still represents an 8x in the last two years if you have employed the HODL mantra.
Crypto was not ready for the early evening, but surely he will not die. Will rise from the ashes, stronger, more durable and cautious than those who let in. It will change the world we live in, providing protection against resource censorship, new ways to validate identities that are not based on outdated technologies like SSN.
It will allow suppliers and buyers to improve their relationship and start sweeping away billions of dollars of food that we humans throw away every year while people are dying of hunger and much more. All the talent that brought this year is growing just as you read this article. It has just begun and needs us to give it some time to mature.
Do you have a strong vision of 2018? News via e-mail [at] coindesk.com to submit an opinion to our year under review.
Red sports whistle via Shutterstock
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