Your birthday is coming up. Your crazy Aunt offers you the choice between a $500 Amex Giftcard -- the holy grail of bday presents -- or a $500 gift card to somewhere you shop a few times a year. Say Nike, for example.
Which would you prefer?
Which would you prefer?
Now imagine that a service emerged, called Giftcard0x that allowed you to seamlessly trade your Nike gift card into its cash / amex card value. Would you do it?
The key piece to understand is the optionality of cash and positive feedback loops between liquidity and value. The more *other people* demand your money, the more valuable it is
An Amex card is more valuable than a Nike card b/c it's easier to get rid of b/c more people want it
An Amex card is more valuable than a Nike card b/c it's easier to get rid of b/c more people want it
The situation will actually be worse with crypto appcoins. Nike is legally required to give you $500 of Nike goods with the gift card, regardless of the behavior of other people.
They are mandated to accept the gift card.
They are mandated to accept the gift card.
Appcoins, OTOH, fall in liquidity the less people demand it. There's an oppty cost to holding an appcoin versus a more liquid and in demand alternative
Thus instead of it being highly *in demand* by others, it's the exact opposite.The market is one-sided on the sell side
Thus instead of it being highly *in demand* by others, it's the exact opposite.The market is one-sided on the sell side
This reinforces itself until the point where appcoins are no longer accepted as there's a unilateral benefit to adopting something more liquid
The benefit of cash is the optionality it confers. But appcoins suffocate this optionality and restrict the opportunities of its holders
This is why CCs will be winner take all. There needs to be a *continuous* benefit across time to hold something, or it will not be held
This is why CCs will be winner take all. There needs to be a *continuous* benefit across time to hold something, or it will not be held
Whether or not a cryptocurrency's marketing material describes it as a "money" -- if it has money like behavior (it does), it's competing in a zero sum fashion for this liquidity and recognizability with all other cryptocurrencies
There is not a stable equilibrium between two
There is not a stable equilibrium between two
This isn't to say that "dapp" technology will not be valuable. What I'm worried about is if dapp success is predicated on this native token, when the tokens fail they will bring the tech down with it.
If I were developing a dapp today, I'd figure out how to integrate a more liquid token from day 1, instead of bootstrapping your own monetary network.
Don't be the crazy Aunt that forces someone to hold onto a niche gift card. Just give us a damn amex gift card instead.
Don't be the crazy Aunt that forces someone to hold onto a niche gift card. Just give us a damn amex gift card instead.
