
To deflate the cryptocurrency token bubble, fix the market cap indicator - serg_chernata
https://blog.sia.tech/want-to-deflate-the-token-bubble-fix-the-market-cap-indicator-d50f7f1e1ec4
======
runeks
If you want your token to be used as money, the only relevant metric is
liquidity: how many USD/EUR/etc. are deposited into exchanges, bidding
on/selling for the token in question right now?

To prove my point, imagine I have created a crypto currency with 2^128
currency units, and I sell you one currency unit for a thousandth of a cent.
Result: my crypto currency is now the "biggest" in the world, with a market
cap of ~10^35 USD.

------
crypt1d
I've been following Siacoin development very closely for the last couple of
months. Their devs seem like one of the few remaining people in crypto that
actually care about developing a working product/coin, vs just abusing the
unregulated market and getting filthy rich.

Kudos to the team for getting on the front page of HN. I'm sure this will
raise awareness of their product at least a little bit. Just looking at the
coin itself, looks like it jumped 10 points since this blog appeared.

~~~
placeybordeaux
For those that aren't following it seems that siacoin is looking to provide an
efficient distributed storage network made up of individuals that offer a
contact to store data. To offer the contract the host puts up collateral that
will be given to the renter if the host fails to provide a proof of storage
(my guess before reading the paper is that the contract gives a hash and a
file size and the host is responsible for giving a file of that size and that
hash if there is a dispute).

Seems cool. I have an always on computer & ~100 GB free, I might experiment
with running a node.

~~~
nemo1618
>my guess before reading the paper is that the contract gives a hash and a
file size and the host is responsible for giving a file of that size and that
hash if there is a dispute

Close! Sia uses Merkle trees to construct the storage proof. The storage
contract specifies the Merkle tree root hash. The host must then provide one
of the "leaves" of the tree (64 bytes of actual data), along with the other
subtree roots in the tree necessary to construct the root hash. The consensus
algorithm can then verify that by hashing the leaf and combining it with the
other subtree roots, the top-level root can be obtained. This is a lot more
compact and efficient than sending the entire file contents. The only trick is
selecting _which_ leaf to demand from the host -- if it could be predicted in
advance, the host could cheat and store less data. But it can't be purely
random either, since all nodes on the network need to pick the same leaf to
arrive at consensus. So the leaf is chosen using existing entropy in the
blockchain (e.g. the hash of the last block), so that it's both deterministic
and difficult for an attacker to control.

~~~
placeybordeaux
Neat!

When I first learned about bitcoin I spent a fair bit of time navel gazing
about how to make something like siacoin. Excellent to see an ostensibly well
made implementation.

Any experience actually using it for storage?

Also any other coins actually doing some innovative work?

A friend of mine got excited about Golem, but somehow I don't have a good
feeling about that, wish I could easily short it...

------
highd
Are these valuations really that outrageous compared to startups? Yes they're
really early, but the ETH platform is a huge force multiplier in terms of
decentralized scaling engineering that you don't have to do, not to mention
the intrinsic benefits it has.

If you think in terms of valuing based on how far a project has gone it seems
crazy, but if you think in terms of valuing based on how far away it is, that
actually lines up reasonably in my mind. $100M for a decent shot at eating a
big chunk of a $10-100B industry in 2-3 years? I've seen crazier things in SV.

Obviously a lot of these are scams, but there's some good ones, and I mostly
agree with which ones the market has picked.

~~~
Taek
> but the ETH platform is a huge force multiplier in terms of decentralized
> scaling engineering that you don't have to do

Well, we will see about that. To date, eth has been a security nightmare, and
most of the experts in the Bitcoin system do not think eth has any chance of
achieving decentralized scalability.

That's all fairly tangent though. What venture capital investor would grant a
$1B valuation to a company with a team of 10 with no product, with a well
funded competitor that has better tech (by my appraisal) and a larger general
userbase, and itself only a valuation of $140M?

Ethereum itself is only worth $8B. Seems like a stretch to me to suggest that
Gnosis is worth 1/8th of that, and in fact if you assume that the average
speculator is not considering dilution, you end up at a much more reasonable
valuation of $50M or so.

I mostly disagree with every valuation that the market has currently ascribed
to any token with massive inflation or massive dev-ownership.

~~~
highd
> most of the experts in the Bitcoin system do not think eth has any chance of
> achieving decentralized scalability

Most of the experts in the natural gas industry do not think solar power has
any chance of achieving scalability, either.

------
Rmilb
Lots of people are seeing these ICOs as easy money. It is unbelievable how
many people will invest their money (mostly bitcoin gains) into unproven teams
without a product and barely a white paper. Unhappy investors from events like
this may draw more attention of the SEC or CTFC.

~~~
RexetBlell
It's not mostly Bitcoin gains. Lately people are buying over 100,000,000 USD
worth of Ether per day with mostly fiat (and not Bitcoin) in order to invest
in these ICOs.

~~~
frakr
Do you have a source for that statistic?

~~~
RexetBlell
[https://coinmarketcap.com/currencies/ethereum/#markets](https://coinmarketcap.com/currencies/ethereum/#markets)

------
Kinnard
Spanish Price Revolution:
[https://en.wikipedia.org/wiki/Spanish_Price_Revolution](https://en.wikipedia.org/wiki/Spanish_Price_Revolution)

------
davidgerard
"Market cap" is a basically ridiculous measure to use of crypto assets. It
implies a realisability of price that really just isn't there.

Trading is too thin and the price is too volatile, even for the most-traded
one, Bitcoin. Consider the recent Bitcoin flash crash on GDAX, where BTC
dropped from $1184 to 6 cents - this was courtesy about 100 BTC of trades.

Then there's the Bitcoin "price", which is a weighted average ... including
exchanges like Bitfinex, where the USD "price" includes a huge premium because
you literally can't get hard currency out of Bitfinex for the foreseeable
future.

It's a hyped number to pretend this stuff is worth more than it is and attract
attention.

~~~
Jenya_
GDAX example is not a good one. They started up trades after the maintenance
shutdown and they did it incorrectly. They allowed market trades before order
book had a chance to fill up.

~~~
davidgerard
My point was how thin the order book turned out to be. This is why the Bitcoin
price is so ridiculously volatile. Single trades, even on the Chinese
exchanges, _frequently_ send the price up or down tens of dollars.

------
RichardHeart
Enterprise value is better than market cap. Market cap doesn't accurately
reflect currencies, which is why they have M numbers like M2.

The point in this article is that, currently outstanding currency tokens
relationship to future inflated outstanding tokens is wildly different between
currencies, and not accounted for in the "market cap" measurement. Thus, what
many should be looking at, and aren't, is the known future inflation of the
particular system.

When you understand that you're going to be diluted, your current tokens
ecosystem price should reflect that knowledge. Their suggestion for better
understanding what the "value" of a cryptotoken should be understood as is
good.

------
gwbas1c
I keep smelling "pump and dump" when it comes to cryptocurrency. Perhaps when
the bubble bursts the honest people will be able to get to work developing
something worthwhile?

~~~
bsder
Traceability and reversibility are _features_ of our current monetary system
that most users really like.

The only users who don't like those features generally don't want to have to
cough up their ill-gotten gains when they get caught.

------
gibybo
Is there a reasonably safe/reliable/cheap way to short Gnosis? I'm guessing
not, because there's a pretty easy $10-20 million to be made here and some
hedge fund probably would have done it already if possible.

I wonder if a smart contract could be created on Ethereum to securely borrow
Gnosis. Perhaps with Eth as collateral. Anyone with experience building
Ethereum contracts care to enlighten me?

~~~
samlewis
You can margin trade on exchanges like Poloniex right now. Whether or not it's
a bright idea is another matter. Even if you assume that it's presently
overvalued, how can you know when (or even if) the bubble will pop?

~~~
gibybo
Well that's always the risk with shorting I suppose, I just meant as safe as
shorting can reasonably be :)

Thanks for the Poloniex tip though, looking into it now!

------
aml183
There is not a bubble. Gnosis value has been cut to $100MM. The markets are
working efficiently and punishing ICOs on valuation. Many ICOs have failed and
not raised money. The market is focusing on these mega projects and not
looking at the whole picture.

~~~
Taek
This comment proves the entire point of the post. The Gnosis token is
currently trading at more than 3x what it sold for during the pre-sale. It has
gained in value A LOT, and people don't even realize that Gnosis is a success
story. The price hasn't been cut at all.

The originally advertised $300M valuation included the dev tokens. The $100M
you reference does not. To compare to the dev tokens, check this chart
(putting the current full valuation at $960M):

[http://coinmarketcap.com/assets/views/market-cap-by-total-
su...](http://coinmarketcap.com/assets/views/market-cap-by-total-supply/)

~~~
aml183
I apologize. You are right. I don't think Gnosis is healthy for the market.
The incentives of the ICO were very misaligned. However, I still think the
team is very strong and the potential is there. The market roots out companies
that aren't up to snuff. Once you go below the top 20 crypto assets, the
market starts dropping off fast.

------
draw_down
Sorry, what is this about? The first 2-3 paragraphs are almost
incomprehensible.

~~~
fragsworth
The context is tradeable tokens that are built on top of cryptocurrency
platforms like Ethereum.

~~~
soVeryTired
So nonsense squared, then.

~~~
gibybo
There is $30+ billion currently invested in cryptocurrencies. While the masses
may still not know very much about it, I think we're beyond the point where
any individual educated in how they work can reasonably call it nonsense.

~~~
Finnucane
Really? During the housing bubble a lot more money was bet on nonsense. During
the first Internet bubble a lot of money was bet on nonsense. $30 billion is
nothing for the purveyors of nonsense.

~~~
gibybo
That's a fair point, $30B is certainly not sufficient to disprove nonsense.
However, I think it does raise the bar somewhat for the amount of evidence
needed to claim nonsense.

