Quoting market cap as a success metric for a cryptocurrency implicitly treats it like a company. Which might indeed be the more accurate vantage point. Token transfer verification as a service?
At the risk of angering the zealots, let's have a look at how Bitcoin works as a corporation. Actually, angering the zealots is always fun, so...
Indeed, while Bitcoin-as-a-cryptocurrency is a bit of a clusterfuck, Bitcoin-as-a-corporation is a really really really intriguing proposition.
And when I say "corporation" I don't mean incorporated entity (aka accounting entity aka accountable entity), but production function. So "enterprise" might be the better word.
Enterprise in the sense of "taking a technological advantage and using it to convert inputs into outputs in a way that creates sustainable positive net cash flow." Still with me?
Of course that condition: you have to make more money than you spend, turns almost any org into an enterprise: FIFA, UNICEF, the Roman Catholic Church. But...
The dominant design for such an enterprise, absent special circumstances, is the incorporated (read: accountable), privately or publicly owned, hierarchical for-profit company.
The "Satoshi moment" was to say "ZOMG we don't need any of this!" More specifically, this complicated apparatus can be replaced with another complicated apparatus, which, under certain conditions, is more efficient.
The tricky part is to figure out under which conditions (if any) this is true. The trickier part is to figure out under which conditions (if any) this can be extrapolated to other value propositions.
Because let's face it, to be operational, Bitcoin-the-enterprise took a whole bunch of shortcuts, and the effort to keep the enterprise operational if we relax these shortcuts are not as simple as many peeps thought.
[Little side note: a key task of accounting is to account for (sic) discrepancies between property (ownership) and possession (control). Accounting makes absentee ownership possible by keeping tracks what's owed vs owned.]
So to understand how Bitcoin-the-enterprise works, we need to figure out: 1. what does it produce, 2. how that creates (residual) value, 3. who is able to reap that residual value, and 4. how can we do all of this without a traditional corporate structure.
In order: 1. B-t-e certifies a defined effort and rewards it with tokens according to a fixed formula, then it certifies transfers of said tokens by keeping a record of all transfers. That was the easy part.
2a. There's this misconception that B-t-e is valuable because bitcoins-the-tokens are in finite supply. B-t-e is valuable because it is very very good at this certification business. (Finite supply mostly drives speculation.)
2b. B-t-e is very good at two things: transactional efficiency (huh wot??) and precision. B-t-t transfer verification works without gatekeeping or dispute resolution (mediation), partly because it is very good at matching valid claims with recognized claims.
2c. This is in large part the result of a number of design choices, which I discuss in turn, but we should contrast simplification (good) against externalization (not so good).
2d. Btw, what is the whole point of this "decentralized" stuff? Think of it as a circular firing squad: everyone keeps everyone from making rent-seeking adjustments to the enterprise. That's both good and bad, bc at its core, entrepreneurship is rent-seeking.
3a. Next question: who owns Bitcoin-the-enterprise? At first approximation: mining nodes. Because they're the first ones to receive the certificates that give them a claim against the residual value of B-t-e.
3b. Which brings us to a key shortcut: to roll the functionalities of equity, unit of account, product price, actual certificate, into one. I'm sure I forgot a couple of functions.
3c. I'll let you play around with the ramifications for a bit. Examples: Microsoft pegging the price for Office to its share price, or Björk selling her music only in Icelandic kronar, bc that's how she keeps her books.
3d. But, since there's no distinction between these functions, everyone is a shareholder for as long as they acquire b-t-t for whatever reason. The result is a. yay socialism!, or b. post-Soviet land grab, or c. some weird cooperative-collective hybrid.
3e. This arcs back to the initial tweet. B-t-e and B-t-t are not at all in alignment. Hodling is a really smart entrepreneurial strategy but it conflicts with the certification business. Keep that in mind when you read cryptotwitter...
4a. Almost-final-question: B-t-e isn't incorporated, it doesn't keep books, doesn't hold board meetings, doesn't pay dividends, oh and doesn't pay taxes either. How does it keep operating as an enterprise?
4b. Of course rolling all those things into one creates enormous efficiency advantages. No double-entry bookkeeping. (If you ever called a blockchain a "ledger" you probably know more about accounting systems than about accounting...)
4c. Repeat after me: B-t-e doesn't record transactions, it records transfers. The "goods" side of the transaction is externalized (to god knows where), which super simplifies the accounting.
4d. Also, the window of opportunity for owe vs own discrepancies is small if all you have to take care of is double-spending leading to disputed ownership.
To wrap up, Bitcoin-the-enterprise is a really intriguing proof of concept for, well, alternative forms of organizing value creation. Sadly it has far more internal validity than external validity, and the externalization of various functions don't help either.
But regardless, the consequences for industrial organization might ultimately be more profound than in finance. Just don't expect any pixie dust solutions in 2018. The enterprise world doesn't move that fast...
