In the last episode of Altcoin Evolution, we discussed hurdles that can keep occasional crypto investors from acquiring some of the more obscure altcoins. Obviously, access to investment is paramount to get into the hands of consumers and allow projects to continue their own “development”. Despite ongoing market-wide shifts to make crypto more accessible, the road is still long and turbulent.
Another “crypto winter” is never ruled out, and how society as a whole will adapt to digital currencies has yet to be determined. Still, the potential dangers are flanked by the enormous potential for upside from evolving technology and consistently emerging projects in space.
The Altcoin Evolution: You have questions, we have … Further questions?
Aside from last week’s coverage of accessibility, another variable in crypto comes from assigning a tangible function to different coins. The questions are practically endless: what is the purpose of the project and the token? How does it integrate into our current financial industry (or into other industries such as art and culture or information systems)? Does the project have its own form of blockchain or does it operate on one of the larger, more established arenas? Clear value propositions are paramount in any project, and these can include a number of things that can be inferred from any of these questions.
Some coins have been developed with specific uses in mind, often on top of existing blockchains, and are usually referred to as “utility tokens”. Let’s elaborate on this: Tokens generally break down into one of two buckets – utility tokens or security tokens. The differentiator between the two is broadly the SEC’s Howey Test, which has been used in the past to define a securities contract. Utility tokens predominantly offer consumers a product or service and are not viewed as a traditional investment vehicle. The value proposition of security tokens is usually pretty straightforward, however, things are usually not that clear with utility tokens in today’s landscape.
Much of these tokens, especially in the NFT space (which we have regularly addressed in this series), are currently working on the Ethereum blockchain. This applies to ECOMI (and its OMI token) as well as to some of the original projects on Flow that existed before the FLOW token (such as CryptoKitties), both of which are referenced in earlier parts of this series. These were designed with the concept of providing access to goods / services such as NFT collectibles and creating an economy based on exchanging the coin. Essentially a marketplace that works without fiat currency.
ECOMI is built on the backbone of the Ethereum network. | Source: OMI-USDT on TradingView.com
Related reading | Bitcoin ready to explode over $ 50,000? Why Fundamentals Are Screaming More Profits
Is it or not?
Of course, the boundaries between usefulness are often anything but black and white. Some NFT critics suggest that for players like NBA Top Shot, Topps MLB, or ECOMI, IP integration isn’t enough to carry the load. Critics of other NFT projects, such as CryptoPunks or Bored Ape Yacht Club, often argue that the communities generated from these projects will have no will to persevere (although the prices for CryptoPunks are as high as ever and are approaching the fifth year of the project).
Even if newly emerging and established NFT projects serve as prime examples in this conversation, these points of criticism do not begin or end with NFTs. The biggest critics of Cardano (ADA) frowned for many years that the benefits and use case around the coin were not clearly and clearly defined. Even so, Cardano is the third largest cryptocurrency by market capitalization. Talk about an altcoin evolution.
Our goal here is not to argue for or against one of these projects, but only to emphasize that the dialogue in the crypto community around the benefit is omnipresent. After all, the value of IP is often assigned arbitrarily, even in contexts outside of crypto.
Don’t stop now … It’s more than IP
In addition, of course, the utility does not just end or start with the IP. Author and founder Zoe Scaman outlined their current perspective of “five key components of a crypto-native, fandom-centric brand”. The core components include Worldbuilding & Narrative, Cultivating Community, Status & Access, Open IP and Shared Equity. These traits undoubtedly outline “value,” but the bar is as unclear as ever. The bearish perspective would likely suggest that even these core components are insufficient for true longevity, while the bullish perspective would suggest that these traits can build NFT projects that will last a lifetime. As with many things in life, reality likely ends up somewhere in the middle.
Overall, the concept and development of utility coins is still relatively new and fresh – also in comparison to the phenomenon of the digital currency as a whole. The Wild West is an apt metaphor for the evolving landscape of earmarked coins. With the increasing dependence of society on digital innovations, however, the opportunity for crypto projects to find more platforms for the exercise of use cases also increases.
A prime example this week was the decision-making process at OnlyFans, as reported in our sister network at Bitcoinist. As the site reportedly tightens adult content, the need for a decentralized, creator-first platform becomes abundant. Many have speculated that some kind of crypto solution like the Bitcoin Lightning Network could fill the void.
As DeFi and other use case-driven crypto projects inevitably move forward, there will be even more uses and functional requirements. The hard part is appreciating them. With new tokens and projects, it is crucial to demonstrate the problem and show how the project addresses the problem.
In next week’s “Altcoin Evolution” we take a look at the final challenges – “selling” a project or token to the general public and what it takes to highlight crypto projects.
Related reading | These Ethereum indicators show that whales are continuing to pile up
Charts from TradingView.com, image courtesy of Jerry Sena