5 things I learned about crypto this week [22–28 October 2018]

It’s been around 18 months since I first started taking an active interest in crypto. The challenge of gaining a firm understanding of blockchain technology and its many implications has led me face-first into a range of subjects and disciplines that I never thought I’d be tackling. In any given week, I can find myself devouring a range of materials, including articles, guides, books, podcasts and in-person events covering topics such as network governance and scaling, crypto-economics, token valuation models and market psychology. Some help further my knowledge, others leave me with even more questions and points for clarification. Fortunately, each week presents a feast of new content to help push my understanding forward.

I’ve written the round-up below to share some of the thoughts and opinions that have captured my attention this week. I’d like to do this regularly (hopefully weekly) and keep it as brief as possible, with a focus on big ideas rather than simply news items. The point of this isn’t so much to say ‘here are five great articles go read them’ but more to share some concepts that have stood out for me, and may make you want to explore further.

Here is what I learned this week…

1. Blockchain enables ‘collective action around collective value’

Summing up the true value of blockchain in concise terms can be a difficult challenge. After all, the term has become a ‘catch all’ for a range of dissimilar things, including cryptocurrencies, decentralised application platforms, smart contracts, tokenised network models and enterprise-focused DLT applications. I was relieved therefore to hear Piers Ridyard of Radix find a simple and compelling way of uniting all these innovations. Speaking at SVK’s event in London, he explained how the technology’s potential to facilitate and incentivise collaboration could have incredible implications for both business and society. If you’re in London, look out for further SVK events here.

2. Tokenisation can be the next disruptive business model…if properly engineered and designed

One of the highlights of this week has been the publication of Outlier Ventures’ Token Ecosystem Creation report. The report looks at the architecture and engineering required for a sustainable and thriving token ecosystem. It explains the firm’s thesis that tokenisation will enable new forms of economic value and outlines a range of important concepts on which any tokenised project should focus, including token design, utility, scaling and consensus. I particularly enjoyed the examples of how projects such as Ocean Protocol are engineering their token to encourage the user behaviours required for the network to function properly. You can find the full report here.

3. Bitcoin could go up, down, down-then-up or up-then-down. Clear?

This week I’ve enjoyed watching the series of streams on Tone Vays’ YouTube channel in which he, BTC trader Venzen and analyst Willy Woo engaged in a laid-back [they were at a beach resort in Thailand after all] discussion on a range of topics centring around technical analysis, price action and network-value-to-transactions (NVT) ratios. The streams, while long, are worth watching, at the very least to mentally escape the UK winter. One of the points I found most interesting was their discussion on BTC price development. Each of the three had entirely different ways of evaluating the market and arrived at completely different conclusions; Tone is short-term bearing, Willy is bullish and Venzen predicts a short-term bull run followed by a medium-to-long terms sharp correction to well below where we are now. It’s encouraging that even the experts can’t agree on what’s going to happen next.

4. Can smart contracts replace corporations? Not quite yet.

One of the many blockchain-based concepts that interests me is its potential to reinvent business models and displace the hierarchical corporate structures that have dominated the past century through self-executing smart contracts. The concept of a Decentralised Autonomous Organisation (DAO) is not new, and indeed has been tainted by failed experience. The idea however remains appealing: replace traditional corporate functions such as governance, logistics and labour management with code in order to remove the middleman and create a new era of efficiency. Sounds great, right? I’ve been thinking about this concept a lot recently, so this article from Daniel Jeffries proved timely in providing me with some restraint. Daniel provides a historical account of how the corporation has evolved in order to argue that until DAOs can replicate and offer more than what business structures offer today, it’ll be some time before our working lives are governed by code.

5. There are some things even the best technical analysts can’t predict

I have recently got into audio books, and this week have been working my way through Mark Douglas’s Trading in the Zone. Written nearly 20 years ago, the book gives insight into the mental approach required to successfully trade financial markets. He tells a great story about a technical analyst who begins a role at a commodities trading firm. The chairman of the firm, a veteran of the trading pits and open outcry, is sceptical of TA and asks the analyst to explain how the skill could be applied to soybeans futures markets. The analyst carefully explains the concept of support and resistance, and how soybeans’ price has hit resistance and is moving towards support. When the market dropped into the support area the chairman asked the analyst whether this would be the lowest price of the day. Confidently, the analyst replied ‘absolutely’. The chairman then picked up the phone to his broker and ordered he sell two million contracts of soybeans, causing the market to plunge to new depths. It’s worth bearing in mind whenever any crypto market expert seems too sure on price movements — anything can happen!