If you are interested in crypto-currency or blockchain Nick Szabo is a name you may want to know. In 1998, Nick Szabo designed a mechanism for decentralized digital currency he called “Bit gold”. It has been called a direct precursor to Bitcoin architecture.
https://unenumerated.blogspot.com/2005/12/bit-gold.html
He also has an exceptional blog, “Unenumerated”, where he has discussed a process called “Quantum thought”. In his words, it is the ability to “be both for and against a proposition because I am entertaining at least two significantly possible but inconsistent hypotheses, or because I favor some parts of a set of ideas and not others.” It is the attempt to examine an issue from multiple sides since “thinking about and presenting only one side’s arguments gives one’s thought and prose a false patina of consistency”. The failure to play devil’s advocate to your own ideas conversely leads to overconfidence in your conclusions, particularly in predicting the future.
http://unenumerated.blogspot.com/2012/07/more-short-takes.html
In the following I will look at how this thinking can be applied critically to Bitcoin and (with complete respect to Nick Szabo and Bitcoin) why I am investing instead in another project.
1. Bitcoin as Digital Currency or Digital Gold
Arguments in favor of Bitcoin succeeding as a global currency due to its ability to securely transfer value are obvious. However, the lack of scaling has led to the creation of many competitors and virtually all of them possess faster transaction speeds. The ability to monitor activity on the blockchain from any given address and the resultant lack of fungibility also led to many privacy-focused coins. Lastly, with the realization that multiple countries are quickly developing their own digital version of cash that would not have the same volatility as Bitcoin et al. there are signs that no decentralized currency will dethrone their traditional counterparts in the near future (at least not the top fiat currencies).
https://www.ft.com/content/f15d3ab6-750d-11e6-bf48-b372cdb1043a
Inevitably, this has led to the argument that Bitcoin (with its scarcity) will act as a digital gold that is much more convenient due to the fact that it is more easily divided and transferred. Yet, digital gold is not a new concept (the former standard, Gold ETFs, etc...) and now there are already asset-backed equivalents utilizing blockchain technology, such as Digix.
2. Bitcoin’s Intrinsic Value
Then there is all this talk of Bitcoin being a bubble - an asset at a price or price range that strongly exceeds the asset’s intrinsic value. While many will point out that fiat currencies have even more limited intrinsic value they certainly have first mover advantage as money. Whether Bitcoin is hoping to fulfill the currency or store of value use case it is relying entirely on people exchanging their fiat currency or physical gold (through fiat).
3. Bitcoin = Trustless, Decentralization
The final aspects that hold promise for Bitcoin are its strong security and its trust-less decentralized attributes. However, the current process of mining Bitcoin through use of ASICs and the resultant centralization of mining is the current reason behind the fork and Bitcoin Gold. Further, we may be over-emphasizing the prominence of this to the daily consumer and while it is currently the strongest network it is not a property unique to Bitcoin but rather to blockchain itself.
https://bitcointechtalk.com/bitcoin-gold-what-you-need-to-know-8b3e645be409
What did I decide to invest in after this thought experiment?
In an attempt to use Szabo’s own “quantum thought” process I decided to pass on Bitcoin for another opportunity. While I still believe there is a very bright future for Bitcoin I believe even more strongly that blockchain technology will continue to expand in its use case. After discovering the project and spending sufficient time researching I switched my investment completely.
What project did I choose?
Here are some hints as they apply to the above three sections above if the tags, photo, and title did not give it away...
Its blockchain will be currency agnostic – its success will not depend on the mass adoption of decentralized currencies. It can act as an exchange and settlement layer whether one is dealing with Japan’s J-coin, BTC, or Digix’s gold backed DGD. Further, the project’s scaling proposal “Plasma” is forecasting the possibility of billions of computations per second and is developed by the leader in this area: Joseph Poon.
It is set to be one of the first successful projects in the space to have a readily quantifiable intrinsic value. Through its real world use case of being a more efficient decentralized exchange and settlement layer it will have value by confirming actual financial activity on its blockchain. Once this is running it will be easy to calculate the worth of each token based upon the transaction fees paid and the current/projected activity on the network. Even if the crypto-currency bubble bursts this value will remain largely unaffected.
The project is creating a proof of stake based platform technology that is completely public and owned by no one. This not only means decentralization that is resistant to government regulation and trust in a third party but it means that there is limited value of creating a competing blockchain and no competing miner incentives.
That's right, it is obviously OmiseGO. Here are the links that discuss the features above:
https://cdn.omise.co/omg/whitepaper.pdf
https://bravenewcoin.com/news/ethereum-scaling-solution-plasma-could-facilitate-billions-of-transactions-per-second/
https://cdn.omise.co/omg/crowdsaledoc.pdf
For further information about OmiseGO you can also check out these previous two articles:
Five Misconceptions About OmiseGO: https://steemit.com/omisego/@solveforh/five-common-misconceptions-about-omisego
Omise/OmiseGO Ecosystem: https://steemit.com/omisego/@solveforh/omise-omisego-ecosystem-primer
Recently, I was humbled to see links to both retweeted by Jun (CEO of Omise/OmiseGO).
Disclaimer: This is not investment advice and I encourage you to apply your own “quantum thought” evaluation to the points above. Any speculation or decisions regarding your money are your own. I own OMG and really admire their company but I have no formal relationship. While this article purposely critiques Bitcoin via "quantum thought", please rest assured I am also a fan of Bitcoin.
Edit: Grammar