How Vertical Growth On Bitcoin Will End ShitCoinery

July 09, 2018

by Editorial Team

Contributors: Dhruv Shah, Analyst, Game Theory Group

Imagine walking into a Chuck-e-Cheese and having to buy different tokens for every game you wanted to play. This is essentially what crypto has brought to us as far as utilities go. Each and every single utility token has built a private ecosystem that is closed off from the rest of the world. Interoperability has always been a heavily debated topic, yet more and more utility tokens with absurd valuations continue to pop up. Instead of moving closer to a more user friendly environment, interoperability across tokens has decreased. The solution is so blatant that often times we fail to recognize it. The solution is Bitcoin.

After a massive run up in late 2017, it was clear crypto had become the next supreme wealth generator. Unprecedented returns were being realized. Those that were "late" refused to enter at the astronomical price points seen in December. Instead, the alternative happened. These folks saw an opportunity to make real money in a nascent space by building out horizontally. Why buy bitcoin when you can create your own token? Big investors and VC firms backed many of these tokens prior to an ICO, because they were offered discounts in the private sale round. In December, just about any ICO could have raised $10 million. It was an opportunity to dump on retail investors and make "100x returns".

Retail investors saw these tokens gaining steam from big firms, and bought in. Eventually the tokens would create enough liquidity within the market, and create the opportunity for large sell offs. These large sell offs primarily  always came from those who created the tokens. The marketplace ended up with tokens upon tokens piling into the market - tokens that were simply marketing schemes leveraging buzzwords with no technology or vision to back the language.

We asked for this when we entered an open-software space (outside of Ripples closed software model). Although I find most tokens in the space to be useless long term, the horizontal growth of mass amounts of tokens has allowed for the developers to test multiple use cases within the blockchain. Everybody is searching for a unique take in a now-crowded space with various competitors. Prediction markets, the ability to access unused computing space, smart contract platforms, several different on-chain governance schemes, etc. The market has now expanded to test just about everything. This is the definition of a free market -- even if some (or most) is driven by greed.

Why build on top of another token when you can create your own and build up a massive reserve? Horizontal growth is the "right now". Vertical growth, hopefully, is next. Bitcoin will soon eliminate the need for most utility tokens with implementations of different layer solutions. Lightning network could unleash “Satoshi’s OG Vision” of micro-payments. Previously lagged by slow through-put Bitcoin, will now be able to support larger applications on the third layer. Utility tokens will soon be rendered useless through better Bitcoin dApps and eventually privacy will be built on Bitcoin too.

This vertical growth has been largely forgotten thanks to the wealth alt tokens have created. In reality, we must create a better user experience that doesn’t require switching currencies when hopping from one whack-a-mole machine to the next. Vertical layer growth is the next phase of that journey.

- Dhruv