Are altcoins dying or are we about to see a digital renaissance?
Altcoins are just scams and hype right? They just pump and then dump, never to be seen again. Moving goals, re-writing road-maps, announcing announcements and touting affiliations as partnerships. For the most part this is how the average altcoin project operates. That or the project is painfully silent, except for a vocal community of shills. But there is a minority of projects really doing good work, some with working projects, others with plenty of momentum toward delivering a product.
In this article we explore the impact that blockchains and altcoins in particular will have on the fast-paced digital service industry, traditional business and their users or customers.
Popular Opinion Vs Altcoin Fundamentals
Personalities like Tone Vays hold the opinion that altcoins have no purpose, no use-case. At this point its plain to see this is a flawed view. Use-cases are abundant and the power of altcoins should not be overlooked.
Simply put – altcoins are platform tokens, they facilitate the transaction of value in a decentralised ecosystem. They represent value, gained or lost. All services – at their core, move value between participants.
Looking at this statement though a traditional lens. Taking Netflix as an example, it collects subscriptions from its users in return for streamed content from producers, whom it pays. This makes Netflix a middleman between producers and consumers. If this system where decentralised and the data served by the network participants Netflix wouldn’t need to exist nor would they take a cut. This system would streamline the delivery of content, increasing revenue for creators and decreasing subscription fees for users.
This service model can be extrapolated and applied to many different service, Basic Attention Token does this with internet ads in it Brave web browser, blocking 3rd party ads, serving their own ads through pop-ups and rewarding users for their attention to ads, it also has an in-built tipping system for creators.
Institutional Approval
Companies like Deloitte, PWC, KPMG Ernst & Young, Blackrock, Fidelity, JP Morgan and even Visa have seen the benefits of removing friction in enterprise systems using blockchain. They are not just expressing interest in the technology they are actively researching and developing solutions using blockchain technology. Right now a silent wave of enterprise blockchain development is sweeping every traditional industry. These large companies and even governments are adopting and legitimising blockchain at a pace never seen in the history of the space.
Crypto compliance consortiums are finding way to build regulatory compliance in at the protocol level so that chains are inherently compliant in whatever jurisdiction they are being used in.
Blockchain not Bitcoin
You may ask, ‘why not just use bitcoin as the platform token?’. As we have seen, corporations are making their own blockchains and will inevitably want to make their own private chains. Building these on bitcoin would be impractical as it lacks any kind of smart contract system so using it for every enterprise chain, although possible, is really not what it has been designed for.
The reason for the lack of smart contract on bitcoin is that blockchains are intrinsically too specific in their design. Bitcoins purpose is trustless value transfer. Its a ‘mission critical’ system, one where lots of capital and savings are held, it is not wise to add features that aren’t necessary.
Not only would introducing broad features weaken the system, if you were to use bitcoin to confirm all requests on all chains the network fees would be way too high. When you look at them not as network fees, but instead as a tax for using a chains resources, the need for alternate blockchains and these ‘micro-economies’ becomes even clearer.
Ethereums ‘smart-contracts’ solved many of these flaws with the drawback of having no-where near the network security of bitcoin. ETH is the real programmable money.
Having said that, strides are being taken in making bitcoin more programmable in Aug 2019 Pieter Wuille unveiled ‘Miniscript,’ a new smart contract language for bitcoin.
Defi Take Off
If you still in the school of thought that alt blockchains serve no purpose, let the meteoric success of defi aka open finance change your mind. The amount of outstanding loans using defi is around $150million, Granted, that’s peanuts compared to traditional finance, however it is allot of capital for a nascent industry. Whats more, the coins and governance tokens of these defi projects serve a real function, their blockchains couldn’t just be substituted for a database. These are prime examples of the use cases, power and functionality that these new protocols and frameworks provide.
Defi, in comparison to its peers in the alt-chain space, is relatively well developed. Considering the complexities and risks involved with the traditional finance space, defi is doing remarkably well. It is also a clear example of why we need many chains, each one specified to provide a particular service, each segregating risks and rewards to a particular user-base.
Many Chains
The list of services affected by this technological renaissance is lengthy & far-reaching. All aspects of banking, finance, remittances, health-care, journalism, social-media, gaming, public transport, tourism, gig work, logistics, insurance, AI, law, & more will be affected by this new paradigm. However for these ‘blockchain data islands’ to act like an true network, ways to communicate and inter-operate cross-chain must be developed.
In light of the cross-chain problem, crypto projects have been laying the foundations for instant swaps, interoperability, and integration with non-crypto companies. These three features will be critical for any alt-chain to be successful in 2020 & beyond. Some of the projects developing interoperability include Polkadot, Cosmos, Chainlink & Quant to name a few. A few projects developing cross chain transaction solutions are Kyber Network, Bancor and 0x.
Instant crypto swaps will remove friction between blockchains, improve user friendliness and increase on-boarding by allowing people to use a dapp on one blockchain by spending the native currency of another, instantly. Another way to put this is that if you are an Ethereum user but you find a Tron app that you want to use, you wont have to buy Tron, just spend the equivalent ETH, that will be instantly converted.
Blockchain interoperability allows chains to communicate information and verification with each other and external services. This will be critical for oracle services, smart contract platforms and currencies to work together as a network. Web 3.0 will be here once blockchains are fully inter-operable.
What will web 3.0 look like ?
Web 3.0 will be known as the blockchain era, but really, it will be the era of financial liberation. Its the powerful combination of true immutability micro-payments and trustless operation that will make blockchain as widespread as the internet. It will change our world, and it will be powered by alt-chains.
Identity services will be a huge use case for blockchains, imagine never having to sign into accounts, instead using a blockchain to verify yourself. Early in 2019 Facebook expressed interest in this technology, companies like ontology and even IBM are developing digital identification solutions.
Decentralised censor-proof social networks would answer many of the concerns around its centralised counterparts like Facebook. Data would be sovereign to the user, high-quality posts could be rewarded through a tipping mechanism. Offerings like Steemit a Dlive hint at what we could achieve in this area.
Gaming is going to be revolutionized by crypto. Collectables & items can now have impact across many games and not just the one they were acquired in these are made using non-fungible tokens, being tokens they can be traded for other items or sold for the relevant platform token. Not only that but it would be possible using this market platform to make enough money using this to pay for subscriptions, extra content or even as a secondary income stream. Eve online is a non-blockchain example of this working in real life.
Logistics is another sector that has proved a strong use case. Blockchain can help to improve compliance monitoring and customer experience by securing the producer and transit data. As well as providing that information to customers in an easily consumable manner i.e. via an app. Chains like Vechain are revolutionizing this space, they have served tea to the president of china that has been traced using their blockchain based tracking system.
AI and blockchain will be symbiotic, AI will shape the future and blockchain will secure it. The immutability of blockchains will secure the databases required for the operation of general purpose AI. Without the immutable operation of blockchains we could loose control of GPAIs.
Conclusion
There is no way bitcoin can cover all these use-cases and no reason it should, bitcoin is a digital store of value and currency. Altcoins are legitimate and are seeding web 3.0 as you read this.
Web 3.0 and the many chains paradigm will look like nothing we have seen before, unsurprisingly the projects powering this shift are fast becoming the leaders in the altcoin space, they have first mover advantage and will be the foundation of the future of crypto. In such a nascent industry it would be unwise to outright disregard them because they are not bitcoin.
However, unlike in 2017, picking the right altcoins at this stage in the market cycle is not just blind luck. Its about determining which ones are sustainable businesses, better still, which are working with the home-name companies, or have working products. Find the breadcrumbs, read documentation and most importantly DYOR. The Gems are out there. Our followup article detailing our top picks for 2020, will be dropping soon!