There is a major misfocus in the world of cryptocurrency. It is causing projects a great deal of headaches and a lot of confusion. Personally, this is leading to slow growth rates.
What is the core of this?
Simply, people do not understand what type of asset their cryptocurrency is. Instead, they try to make it into something it is not, often to the detriment of their project.
Last month we covered the idea of HIVE being like stock and HBD more like currency. This is a concept that has to be expanded throughout all projects.
Failure to do so is causing a lot of effort being wasted. We ultimately end up with value misaligned.
Most Crypto Should Be Thought Of Similar To Stock
It is obvious that price speculation is the main feature of cryptocurrency thus far. People want to buy at a price and sell higher. Naturally, this is in line with what takes place in the equities' markets. While some do the same thing in FOREX, the number of participants is a lot less.
Most cryptocurrency seeks to capture value. The key is obviously to build said value. Here is where things go awry.
Too often projects want to develop use cases for their token that center around people accepting it as payment. While this feature is available, it is not the best one. Volatile assets make lousy mediums of exchange. When something can move 10% or 20% overnight, that is not suitable for this purpose.
Ultimately, we have projects trying to get their token used as payment which is akin to Tesla accepting stock as payment on the cars. Framed this way, it makes little sense. Yet that is what we see daily in the crypto world.
Another attribute that is common is token burns. Here again we see the thinking aligned with stock as compared to currency. Token burns are the equivalent of stock buybacks. They are designed to make the token more attractive by reducing the amount in circulation. The idea is there are less tokens divided into the same value, making each worth more.
Currency can be "burned" too but this should be done based upon economic conditions. Monetary elasticity is vital for long term economic productivity. There are times when contraction is necessary. However, the idea is not to increase the value of each unit of the currency. Stability is the primary focus.
Finally, we see governance often tied to the stake one has. This is commonly determined by the holdings. Again, we see the alignment with how stocks operate. Buying shares often gives people voting rights, which naturally increase as more is owned.
Separate Transactions From Value
For the sake of this part of the discussion, we will focus upon the Hive Backed Dollar (HBD).
Simply put, each project tied to Hive should have HBD (or some derivative) as the primary transaction mechanism. This is designed to maintain a degree of stability, with efforts being made to tighten that.
Ultimately, this will remove a great deal of pressure from the development team regarding the token.
With a currency, factors such as liquidity come into play. We know teams prefer scarcity because that is where the "price go up" often comes from. However, a lack of liquidity is not good for growing a project. In fact, often the exact opposite required.
Let us use a bit of logic: can you imagine a CEO of a public company trying to enhance the value for the stockholders while also developing a payment currency for the customer base? That would be a difficult challenge to take on.
The primary focus for any project team is to build value. Cryptocurrency allows this to be captured by the token/coin. Naturally, the market may have ideas about where it is priced but the team cannot control that. Instead, building a project's value is where concentrated effort should reside.
Ultimately, the goal is to give the userbase along with others a lot of reasons for holding the token. An evolving project that is expanding will present people with the feeling of being crazy to unload it. Instead we see most monkeying around with the tokenomics as the primary means of trying to generate value.
Of course, in the end, this only affects price. The value will still be missing.
Millions Of tokens
It was reported that there are now more than 20,000 cryptocurrencies. Many are baffled how that can be.
The reality is we are going to end up with millions of different cryptocurrencies in the future. Understanding the tokenization of everything means that most of what we indulge in today will have a token.
We can see how this is a baffling situation if we attribute the idea of currency to each of these. Who is going to use all of these as payments? This is a valid question.
Some believe there is no way this many tokens can have value. This is incorrect. While it is true that not all of the ones presently listed will, framing them as having properties of stock shows how value is derived. If the projects are valuable, the tokens will reflect that.
How many applications are there online? We often discuss the idea of tokenized communities. What is the upper limit on that? It is impossible to know but safe to say it is a high number. Heck, every university in the world already has its own community. That is just one example.
Hive is presently developing infrastructure to make communities a central part of the ecosystem. Eventually, this will spawn a large number of tokens being spun up for many of the communities. Once this happens, a new evolutionary step takes place.
Certainly, many of the projects will frame their tokens around the idea of payments. However, as some become larger, they will realize that trying to get HODLers is vital. Therefore, they are sabotaging their economy by trying to get people to hold the token while also wanting to grow things. It creates too much friction.
Fortunately, any project on Hive can instantly tap into [HBD as a medium of exchange](@taskmaster4450/what-gives-hbd-value-payment-system0. By building this into the application or game, the team only needs to focus upon value. Things such as liquidity are the responsibility of the larger community.
In Conclusion
One advantage to cryptocurrency is that it can operate as a medium of exchange. That said, it is not necessarily best served for that end. We will never remove that aspect of things, nor should we.
However, with new projects constantly rolling out, it is imperative that resources and focus be allocated to where it can have the greatest impact. Trying to development value via a payment system is rather difficult. It is far easier to tap into something that is already in place and concentrate efforts on the business at hand.
Most would agree that fungible and non-fungible tokens have different purposes. It is time to realize that we have the same within the "cryptocurrency" category too. Simply because a token is fungible does not mean it is like every other one.
Using the idea of stock versus currency helps us to separate where focus and effort needs to go.
Sadly, most are trying to make their token valuable by framing it as currency instead of thinking of it like stock.
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