You guys remember Voltron, right?
Let’s skip to the point, Ethereum and every other ERC-20 token is neither sufficient nor sustainable. You already know that Ethereum is the most widely used digital asset on the market today, powering digital art, ICO’s, cat games, gambling, and anything else that might have been cooked up from underneath your local high school’s bleachers. This isn’t a bad thing. In this article we’re going to take a look at 4 problems with ERC-20 tokens (such as Ethereum) and the assets that, if successful, will make you handsomely wealthy.
The Four Limbs: Transaction time, Fiat Gateways, Liquidity, and Smart Contracts
What we know: ERC-20 tokens are not yet ready for mass adoption
How to profit: Buy whatever makes ERC-20 tokens ready for mass adoption
Transaction Time
Ethereum’s current transaction rate has an upper bound of 14 transactions per second. The average is about half that. I believe that speeds of at least 100,000 transactions/second should be the minimum required of anything looking for global adoption, and this is probably still much too conservative, considering the possibility of machine-to-machine microtransactions exponentially increasing the throughput required of the network.
Ethereum’s current options for scaling include Sharding, Raiden, and Plasma, three different methods of subdividing the work of processing transactions of the Ethereum Network.
Sharding: The Ethereum network is broken into groups and the work is distributed. This isn’t something you can invest in, other than simply investing in Ethereum.
Raiden: Raiden uses State-Channel technology to process transactions without the main Ethereum chain having to manually authorize the transactions. This is particularly useful for IoT and Machine-Machine transactions, and recently, a simplified version of this scaling solution called µRaiden was activated on the Ethereum Mainnet.
Plasma: The ERC-20 token OMG is currently undergoing development of a plasma-enabled exchange known as the OMG network, and according to the Omise Go team, the decentralized exchange “can support all the world’s currencies plus crypto for >1B users simultaneously.” This technology relies on Sharding, which cannot be implemented until Ethereum’s “Casper” update is live.
Now that you’ve learned a bit about the three scaling options, let’s figure out how you can make money! Options one and three, sharding and plasma, will work on any ERC-20 token. Therefore the way to make money on these is to invest in things like Omise Go and Ethereum.
The Raiden solution exists as the asset “Raiden Network”. Raiden may have fallen out of the top 100 market cap assets, and perhaps IOTA is more promising for machine-machine transactions… but if ERC-20 remains the de-facto standard, there’s a chance we’ll see a comeback.
Fiat Gateways
People want to buy Bitcoin! My grandma wanted to buy Bitcoin 6 years ago when I was in high school. She said, “Tell me how to buy it, I’m interested.”
“well, you have to link up your bank account and do a wire transfer, download a wallet, don’t forget to secure your private key, be very careful…”
People can’t do this! My Grandma can’t be expected to follow a 14-part YouTube tutorial! People need simple buttons that do simple things.
Request Network is the “Future of Commerce”, “Paypal 2.0", and one of the most promising ways for crypto to gain rapid adoption. The idea is simple, make a tool that converts crypto to cash quickly and easily. ‘Easily’ cannot be understated. Through the development of external apps funded by the team’s community hub, you can expect Request to be implemented by individuals, small businesses, and even empires. If that didn’t sink in, take a look at this:
If your heart just fluttered at the ‘Pay with Request’ feature, you’re not alone.
The Y-Combinator-backed team has the resources and motivation to complete this project, and there’s no doubt they’ll succeed. Described as “a financial platform with the potential to become the standard for invoices, accounting, auditing, and payments in crypto-currencies and fiat assets”, this is a VERY promising project. By allowing merchants and individuals to accept crypto without any type of technical knowledge, request is in a prime position to become the gateway into the free trade of crypto.
The team has the following goals for Q1 2018:
- First version of Request working with Ethereum on Main Net
- Deploy management of Crypto-currencies on Request (ERC20 tokens)
- Proof of concept : Request Core working with a Bitcoin Oracle
- Work on partnerships with Accounting, Payment and Audit firms
- Launch the Pay with Request project: an online button which offers an alternative to the traditional Pay with Paypal and Pay with credit card
- Outside audits of the Request Contracts
The asset to buy here is Request Network Token, currently trading at about $0.50, coming off an all-time high of about $1.20.
Liquidity
This goes hand-in-hand with the gateways issue. It’s hard to move money around. In addition to the problems with trading pairs and conversion rates, you need to feel comfortable with the speed, security, and reliability of asset-swapping. Request has partnered with the Kyber Network, a decentralized exchange that will allow Request to integrate its platform to the high liquidity that comes from active markets.
From the link above:
“Through this collaboration, Kyber Network will be added as a payment option for users and merchants on Request Network. Merchants that leverage on Request Network will be able to easily utilize Kyber Network and send or receive payment in a desired currency that differs from the sending or receiving currency, providing a seamless user experience for consumers.
Following the integration, Kyber Network will also be used for the burning of REQ tokens. By design, Request Network allows people to pay fees in Ether, and the contract automatically converts the Ether to a corresponding amount of REQ tokens before burning it. With Kyber Network, Request Network can receive a payment of request in Ether, and then designate a percentage of the payment as fee to be sent to Kyber contract for conversion into REQ token. After this, the REQ tokens will be forwarded to a destination address which burns everything it receives, thereby simplify and eliminating repetition in the burning process.”
The asset to buy here is the Kyber Network Crystal. In addition to making money from the high transaction volume of the Request Network, here are some reasons to buy Kyber:
- KNC is required as a fee for reserve manager to use Kyber platform
- Proceeds from fee minus operating expense will be used to buy back KNC from open market (basically a share buyback scheme)
From the same article, assuming Kyber has only 5% dominance in the (very competitive) space of crypto exchanges, that would easily place Kyber at a market cap of $1.2B, roughly 2.4x the current market cap. That means you can expect Kyber’s price to increase from it’s current $3.72 to a healthy $8.90. That’s a pretty safe bet, too. The mainnet launches Q1 2018.
Smart Contracts
Ok, for you non-tech people, you have to stay with me. This is the single most important piece of useful information I can shove down your throat about blockchain technology, so listen up: blockchains suck, blockchains are dumb, they’re worse than the oldest, crappiest calculators in the world. They’re bad at moving money, they’re largely untested and completely unregulated; we’re going to have to scrap almost every blockchain in development and learn from our mistakes.
And just like those crappy calculators that suck and were arguably worse than working out problems manually, they’ll develop to envelop every type of trade in the world, blanketing our households and our financial markets and our factories and our farms. Cryptocurrency will be used for voting and legal matters and birthdays, cryptocurrencies will be used when people are colonizing space and cryptocurrencies will be around longer than any living person or organization today, hundreds of thousands of years in the future.
Any type of useful blockchain application starts with a smart contract.
Smart contracts transform cryptocurrencies from being simple peer-to-peer asset exchange systems (which is ALL they are now) into the next google, or facebook, or UBER. Smart contracts give unimaginable possibilities to cryptocurrencies. It’s like cryptocurrencies are individual computers, and smart contracts are linking them all together and creating the internet.
The biggest misconception about smart contrats: The ability to contact external services.
The “Techies” among you are drooling at the idea of using API’s to connect [insert blockchain here] to [enter exciting external resource here]. You can’t do it. Ethereum’s network cannot retrieve any type of external information when making a decision. All programming for Ethereum must be deterministic, meaning only information previously stored in the blockchain may be used when evaluating a decision.
For the rest of you, all you need to know is that without Chainlink, cryptocurrencies will never reach even 1% of the world’s economy.
This man will make you rich
The Smart Contract Connectivity Problem, is the inability of a smart contract to interact with any external data feed, or other resource that is run outside the node network in which the smart contract itself is executed.
And here’s the solution:
In closing, buy Chainlink. Please. I thank you, the community thanks you, and the grandchildren of your grandchildren will thank you for supporting 3D AR video games or whatever blockchain will be doing by then. Probably something you disapprove of.
Just for fun, let’s look at the current price of the assets I’ve listed today and the value I hope from them by the end of 2018.
This isn’t scientific and is based on nothing more than my optimism.
Ethereum $1,060 -> $17,200 (Yes, I understand this is unrealistic)
Omise Go $17.19 -> $140
Raiden $4.63 -> $7
Request Network Token $0.48 -> $8
Kyber Network Crystals $3.67 -> $12
Chainlink $0.88 -> $400 (or 100 Trillion per token, I have no idea how to even calculate this.)
Edit from April of 2019: This hasn’t held up well at all! Hahaha!