As the bear market wears on, some are now calling for Bitcoin to go to zero as the number of such statements on Twitter has soared as of late. Others say cryptocurrencies are all a scam including Ethereum. Not much different from the FUD spread in 2014 and 2018.
History always rhymes. Today, we even have some “thought leaders” saying decentralised systems such as DeFi will never work as they point to the failures of Celcius, LUNA, BlockFi, and Voyager among others. Yet these were centralised companies! They were banking start-ups that were 20:1 leveraged, taking in short-term deposits while lending long to each other and others. Voyager lied to investors saying they were FDIC insured. BlockFi misrepresented its level of risk.
Meanwhile, DeFi protocols such as Aave, Compound, Uniswap, and MakerDAO cannot make such misrepresentations because everything is transparent on the blockchain. All were absolutely fine with 100% uptime. During the LUNA crash, DEXs continued to function flawlessly while some CEXs were forced to halt withdrawals.
The CeFi collapse proved DeFi works great even in the face of CeFi cataclysm. DeFi powers the financial backbone of blockchain for retail, institutional, and green loans. Yields secure the blockchain while incentivizing liquidity to minimize slippage. DeFi’s discipline for over-collateralization protects customers from CeFi. They can monitor their respective, fully transparent blockchain protocols knowing that code will execute all transactions. By contrast, CeFi shares no balance sheet visibility nor actions taken with your funds. CeFi under-collateralized in some cases while DeFi over-collateralizes typically between 110-150% with majors such as Aave, Compound, and MakerDAO at 200-300%.
All this disinformatic FUD reminds me of the early 2000s after the dot-com bubble burst with many making claims that the internet was just a fad and that streaming takes too much bandwidth while questioning how anything good could come from technology that was catalysed by pornography and credit card fraud.
Some argue that digital land is infinite and can be easily duplicated so question its inherent value. One can also travel in an instant from one area of the metaverse to another. But just as in the physical world, in the metaverse, it’s all about location, location, location. Think of it this way. Imagine if Google allowed you to place your ad on Google’s landing page google.com. It would be seen by hundreds of millions of users. This might be the most expensive digital real estate.
With web3, it’s the person who owns the digital real estate that matters rather than in web2 where it’s the company who owns it. NFTs identify the owners. Big names will attract more eyeballs thus businesses will want to adspend in such places. Big name concerts in the metaverse will attract huge audiences. Advertisers will want to adspend on such occasions. While the Superbowl attracted 208 million viewers, a Superbowl held in the metaverse through multiple streaming sites can attract even more.
Online land will be worth more than physical land. Why? Because in the physical world, a business without online presence can only serve people local to that area, but the audience for the metaverse is global. So the number of eyeballs seeing your ad is orders of magnitude greater in the metaverse than in the physical world enabling customers to buy your product from anywhere on the planet. While e-commerce has massively impacted retail sales over the years #amazonetal, metaversal constructs from live performances to gaming platforms are already having an economic impact on advertising. People in avatar form might walk out of a virtual concert together and then meander down an adjacent virtual shopping strip. Just like in the physical world, then, the shops closest to the virtual conference hall will get the most “foot traffic.”
The metaverse is likely to have key clusters which pull in many eyeballs. Entrepreneurs can try to launch their own businesses in these clusters by developing novel resources that serve as hubs that would attract others to build around. This means digital land can be especially valuable to users when it sits atop a platform architecture that’s already popular such as The Sandbox which integrates many digital communities. Some metaverse platforms will be built to support digital versions of day-to-day tasks while others will be multidimensional gaming worlds. Composability, a core feature of web3, lets people build on/add to existing frameworks to offer new services. Metaversal land is decentralized so anyone can create and benefit as opposed to web2 digital space which is controlled by central entities such as Google, Facebook (Meta), and Youtube. But just as with these centralized systems, the most successful metaversal platforms will be the ones that provide the greatest utility thus will attract the most users.
Keep an eye on SAND, MANA, and ENJ as three that led in the prior cycle that could continue to lead in the next bull cycle. All three still have formidable valuations though just as with all other cryptocurrencies, are off around -85% peak-to-trough since they peaked in late 2021. It will come down to the utility each provides their users. Utility can take the form of entertainment, finance, business, marketing, art, and music, among other themes. Each company has a vast network of users.
SAND jumped 20% when it was rumored it could be the target of a buyout. A property in SAND was recently acquired by HSBC, one of the world’s top banks. The Metaverse Standards Forum was recently unveiled and is comprised of Sony and Alibaba, but any company can join the group. It is designed to facilitate coordination and cooperation among the hundreds of enterprises competing for position in the metaverse.
Blockchain as a metaversal catalyst
Others say the metaverse is a meaningless buzzword. In reality, as with all words meanings, it has its roots in the PC revolution of the 1980s which pushed embryonic versions of the metaverse into mass adoption. Blockchain exponentially accelerates metaversal use cases from gaming to art to music to jobs to law to governance to publishing to most all creative endeavors. Blockchain as the beating heart of the metaverse blurs the line between the physical and digital worlds. Blockchain creates an efficient and transparent system for conveying rights and ownership such that groups can quickly coordinate to fund and pursue goals, catalyzed by DAOs.
Decentralised platforms on which to build and create provide a dev architecture that is limitless, private, secure, and uncensorable while minimizing switching costs. Contrast this with centralised systems that own your data and control your money. Such may not seem like such an issue until it is an issue. Those who tried to help the protesting truck drivers in Canada had their bank accounts frozen.
Freedom and transparency through blockchain
AI together with blockchain further catalyses freedoms in numerous ways while making the reporting of truth economic. “I may not like what you’re saying, but I defend your right to say it.” Meanwhile, the centralized cancel-culture spurs censorship. We are supposed to convince people of things through rational debate, not starve them of information.
Fundamentally, blockchain has to do with freedom. Bitcoin is the magna carta of code. Blockchain drives transparency. Freedom is the use case. The 3AC disaster could not have happened with an on-chain protocol that was transparent.
(͡:B ͜ʖ ͡:B)
Dr Chris Kacher, PhD nuclear physics UC Berkeley/record breaking KPMG audited accts in stocks & crypto/bestselling author/top 40 charted musician/blockchain fintech specialist. Co-founder of Virtue of Selfish Investing, TriQuantum Technologies, and Hanse Digital Access. Dr Kacher bought his first Bitcoin at just over $10 in January-2013 and contributed to early Ethereum dev meetings in London hosted by Vitalik Buterin. His metrics have called every major top & bottom in Bitcoin since 2011 to within a few weeks. He was up in 2018 vs the avg performing crypto hedge fund (-54%) [PwC] and is up well ahead of Bitcoin & alt coins over the cycles as capital is force fed into the top performing alt coins while weaker ones are sold.
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