People refer to Bitcoin as a cryptocurrency and tokens as “altcoins”.
In other words, we have framed Bitcoin as money and tokens as alternative money to that.
That is an insanely skewed view of what is actually happening in blockchain.
Allow me to expand.
If anything is alternative to the broader world, it is Bitcoin. So if anything, Bitcoin is alt-money.
Tokens are broadly *not* money. They are on avg more like equity. Also they are (in general) not BTC substitutes, they are innovations in their own right in their own verticals.
Finally, Bitcoin being framed as money is also not quite correct. Bitcoin is volatile and has poor properties for being a unit of account until it achieves broad and serious stability.
That’s why it’s now framed more as a store of value or a digital gold.
What Bitcoin actually is, is a superadditive cooperative game with a stable equilibrium at saturation as a money or gold.
Also, that stability is *technically* more fragile than any stability achieved through any explicit cryptoeconomic stabilization mechanism.
Standing in front of a newbie crypto user, describing the space as “Bitcoin the cryptocurrency & altcoins”, we’re doing a real disservice to that person’s understanding of the space.
We should be saying “version 0 alt-gold, the cryptoequity tokenization of everything & NFTs”. 😂
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Some thoughts on fractionalization as a price discovery mechanism for NFTs.
1. Capital Efficiency. As a first matter, the capital efficiency of such a mechanism is high: a few participants trade a few units to create an implied valuation for the overall asset.
2. Complexity. Fractionalization is a complex mechanism. It requires an entire token supply + trading volume for each NFT it appraises. Given there are probably trillions of NFTs, this heavy machinery is likely to be applied to the most expensive ones.
3. Governance. Fractionalization is really about governance, because it creates all kinds of new questions. What happens if someone buys 51% of the shards and burns it? How does an asset defractionalize? What governance system is appropriate?
I donate hours & hours of my time handholding newbies into blockchain. Prospective creators @edition1art, family, people curious about #DeFi, or non-finance/tech friends who are learning about crypto for the first time.
It's tough as it is to learn new paradigms.
2/When you get to explaining Ethereum transactions, it's intense. You have to explain how transactions work given a world computer, what "allowances" are for, and transaction costs.
Gas fees represent an insane barrier to entry, cognitively and economically, for new users.
3/Layer 2 helps, but here's the reality:
- There's virtually no L2 coverage across apps right now, just as we march into consumer adoption phase & Elon is loading up $BTC.
- We're about to create massive segmentation in L2 market with no clear consensus on L2 interop tech.
First key take away is that inflation is really a relative measure, and poorly expressed through the CPI.
Real inflation rates are much worse than they appear & the cost of your capital is not being compensated adequately by traditional investments like bonds and real estate.
MicroStrategy found an interesting way to obtain a loan and buy Bitcoin with it in a way that takes advantage of the inflation hedge, control downside risk, and bet on the future.
“There is no 5 year timeframe in which Bitcoin underperformed.”
2/Some say that NFTs “shouldn’t be” liquid, yet the innovation process continues.
Just like photography has become much easier to create in the last 100 years, liquid NFTs will surely bring down price points of tokenized digital content but will also open expansive new markets.
3/The key observation is this: #NFTLiquidity is merely a technical problem for #DeFi, and the entire set of economic mechanisms is its solution space.
👉🏻 In particular, because of tokenization, *the NFT liquidity problem reduces to the NFT price discovery problem.*