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A Detailed Summary of Every Single Reason Why I am Bullish on Ethereum

The following will be a list of the many reasons why I hold and am extremely bullish on ETH.

This is an extremely long post. If you just want the hopium without the detail, read the TL;DR at the bottom.

ETH 2.0

As we all know, ETH 2.0 phase 0 is right around the corner. This will lock up ETH and stakers will earn interest on their ETH in return for securing the network. Next comes phase 1 where the ETH 2 shards are introduced, shards are essentially parallel blockchains which are each responsible for a different part of Ethereum’s workload, think of it like a multi-core processor vs a single core processor. During phase 1, these shards will only act as data availability layers and won’t actually process transactions yet. However, their data can be utilised by the L2 scaling solution, rollups, increasing Ethereum’s throughput in transactions per second up to 100,000 TPS.
After phase 1 comes phase 1.5 which will move the ETH 1.0 chain into an ETH 2 shard and Ethereum will be fully secured by proof of stake. This means that ETH issuance will drop from around 5% per year to less than 1% and with EIP-1559, ETH might become a deflationary asset, but more on that later.
Finally, with ETH 2.0 phase two, each shard will be fully functional chains. With 64 of them, we can expect the base layer of Ethereum to scale around 64x, not including the massive scaling which comes from layer 2 scaling solutions like rollups as previously mentioned.
While the scaling benefits and ETH issuance reduction which comes with ETH 2.0 will be massive, they aren’t the only benefits. We also get benefits such as increased security from PoS compared to PoW, a huge energy efficiency improvement due to the removal of PoW and also the addition of eWASM which will allow contracts to be programmed in a wide range of programming languages, opening the floodgates for millions of web devs who want to be involved in Ethereum but don’t know Ethereum’s programming language, Solidity.

EIP-1559 and ETH scarcity

As I covered in a previous post of mine, ETH doesn’t have a supply cap like Bitcoin. Instead, it has a monetary policy of “minimum viable issuance”, not only is this is a good thing for network security, but with the addition of EIP-1559, it leaves the door open to the possibility of ETH issuance going negative. In short, EIP-1559 changes the fee market to make transaction prices more efficient (helping to alleviate high gas fees!) by burning a variable base fee which changes based on network usage demand rather than using a highest bidder market where miners simply include who pays them the most. This will result in most of the ETH being paid in transaction fees being burned. As of late, the amount which would be burned if EIP-1559 was in Ethereum right now would make ETH a deflationary asset!

Layer 2 Scaling

In the mean time while we are waiting for ETH 2.0, layer 2 scaling is here. Right now, projects such as Deversifi or Loopring utilise rollups to scale to thousands of tx/s on their decentralised exchange platforms or HoneySwap which uses xDai to offer a more scalable alternative to UniSwap. Speaking of which, big DeFi players like UniSwap and Synthetix are actively looking into using optimistic rollups to scale while maintaining composability between DeFi platforms. The most bullish thing about L2 scaling is all of the variety of options. Here’s a non exhaustive list of Ethereum L2 scaling solutions: - Aztec protocol (L2 scaling + privacy!) - ZKSync - Loopring - Raiden - Arbitrum Rollups - xDai - OMGNetwork - Matic - FuelLabs - Starkware - Optimism - Celer Network - + Many more

DeFi and Composability

If you’re reading this, I am sure you are aware of the phenomena which is Decentralised Finance (DeFi or more accurately, open finance). Ethereum is the first platform to offer permissionless and immutable financial services which when interacting with each other, lead to unprecedented composability and innovation in financial applications. A whole new world of possibilities are opening up thanks to this composability as it allows anyone to take existing pieces of open source code from other DeFi projects, put them together like lego pieces (hence the term money legos) and create something the world has never seen before. None of this was possible before Ethereum because typically financial services are heavily regulated and FinTech is usually proprietary software, so you don’t have any open source lego bricks to build off and you have to build everything you need from scratch. That is if what you want to do is even legal for a centralised institution!
Oh, and if you think that DeFi was just a fad and the bubble has popped, guess again! Total value locked in DeFi is currently at an all time high. Don’t believe me? Find out for yourself on the DeFi Pulse website.

NFTs and tokeniation

NFTs or “Non-Fungible Tokens” - despite the name which may confuse a layman - are a basic concept. They are unique tokens with their own unique attributes. This allows you to create digital art, human readable names for your ETH address (see ENS names and unstoppable domains), breedable virtual collectible creatures like crypto kitties, ownable in game assets like Gods Unchained cards or best of all in my opinion, tokenised ownership of real world assets which can even be split into pieces (this doesn’t necessarily require an NFT. Fungible tokens can be/are used for some of the following use cases). This could be tokenised ownership of real estate (see RealT), tokenised ownership of stocks, bonds and other financial assets (which by the way makes them tradable 24/7 and divisible unlike through the traditional system) or even tokenised ownership of the future income of a celebrity or athlete (see when NBA player Spencer Dinwiddie tokenized his own NBA contract.)

Institutional Adoption

Ethereum is by far the most widely adopted blockchain by enterprises. Ethereum’s Enterprise Ethereum Alliance (EEA) is the largest blockchain-enterprise partnership program and Ethereum is by far the most frequently leveraged blockchain for proof of concepts and innovation in the blockchain space by enterprises. Meanwhile, there are protocols like the Baseline protocol which is a shared framework which allows enterprises to use Ethereum as a common frame of reference and a base settlement layer without having to give up privacy when settling on the public Ethereum mainnet. This framework makes adopting Ethereum much easier for other enterprises.

Institutional Investment

One of Bitcoin’s biggest things it has going for it right now is the growing institutional investment. In case you were wondering, Ethereum has this too! Grayscale offers investment in the cryptocurrency space for financial institutions and their Ethereum fund has already locked up more than 2% of the total supply of ETH. Not only this, but as businesses transact on Ethereum and better understand it, not only will they buy up ETH to pay for their transactions, but they will also realise that much like Bitcoin, Ethereum is a scarce asset. Better yet, a scarce asset which offers yield. As a result, I expect to see companies having ETH holdings become the norm just like how Bitcoin is becoming more widespread on companies’ balance sheets.

The state of global markets

With asset prices in almost every asset class at or near all-time highs and interest rates lower than ever and even negative in some cases, there really aren’t many good opportunities in the traditional financial system right now. Enter crypto - clearly the next evolution of financial services (as I explained in the section on DeFi earlier in this post), with scarce assets built in at the protocol layer, buying BTC or ETH is a lot like buying shares in TCP/IP in 1990 (that is if the underlying protocols of the internet could be invested in which they couldn’t). Best of all, major cryptos are down from their all-time highs anywhere between 35% for BTC or 70% for ETH and much more for many altcoins. This means that they can significantly appreciate in value before entering uncharted, speculative bubble territory.
While of course we could fall dramatically at any moment in the current macro financial conditions, as a longer term play, crypto is very alluring. The existing financial system has shown that it is in dire need of replacing and the potential replacement has started rearing its head in the form of crypto and DeFi.

Improvements in user onboarding and abstracting away complexity

Ethereum has started making huge leaps forward in terms of usability for the end user. We now have ENS names and unstoppable domains which allow you to send ETH to yournamehere.ETH or TrickyTroll.crypto (I don’t actually have that domain, that’s just an example). No longer do you have to check every character of your ugly hexadecimal 0x43AB96D… ETH address to ensure you’re sending your ETH to the right person. We also have smart contract wallets like Argent wallet or the Gnosis safe. These allow for users to access their wallets and interact with DeFi self-custodially from an app on their phone without having to record a private key or recovery phrase. Instead, they offer social recovery and their UI is straight forward enough for anyone who uses a smart phone to understand. Finally, for the more experienced users, DApps like Uniswap have pretty, super easy to use graphical user interfaces and can be used by anyone who knows how to run and use a browser extension like Metamask.

The lack of an obvious #1 ETH killer

One of Ethereum’s biggest threats is for it to be overthrown by a so-called “Ethereum killer” blockchain which claims to do everything Ethereum can do and sometimes more. While there are competitors which are each formidable to a certain extent such as Polkadot, Cardano and EOS, each have their own weaknesses. For example, Polkadot and Cardano are not fully operational yet and EOS is much more centralised than Ethereum. As a result, none of these competitors have any significant network effects just yet relative to the behemoth which is Ethereum. This doesn’t mean that these projects aren’t a threat. In fact, I am sure that projects like Polkadot (which is more focused on complimenting Ethereum than killing it) will take a slice out of Ethereum’s pie. However, I am still very confident that Ethereum will remain on top due to the lack of a clear number 2 smart contract platform. Since none of these ETH killers stands out as the second place smart contract platform, it makes it much harder for one project to create a network effect which even begins to threaten Ethereum’s dominance. This leads me onto my next reason - network effects.

Network effects

This is another topic which I made a previous post on. The network effect is why Bitcoin is still the number one cryptocurrency and by such a long way. Bitcoin is not the most technologically advanced cryptocurrency. However, it has the most widespread name recognition and the most adoption in most metrics (ETH beats in in some metrics these days). The network effect is also why most people use Zoom and Facebook messengeWhatsApp despite the existence of free, private, end to end encrypted alternatives which have all the same features (Jitsi for the zoom alternative and Signal for the private messenger app. I highly recommend both. Let’s get their network effects going!). It is the same for Bitcoin. People don’t want to have to learn about or set up a wallet for alternative options. People like what is familiar and what other people use. Nobody wants to be “that guy” who makes you download yet another app and account you have to remember the password/private key for. In the same way, Enterprises don’t want to have to create a bridge between their existing systems and a dozen different blockchains. Developers don’t want to have to create DeFi money legos from scratch on a new chain if they can just plug in to existing services like Uniswap. Likewise, users don’t want to have to download another browser extension to use DApps on another chain if they already use Ethereum. I know personally I have refrained from investing in altcoins because I would have to install another app on my hardware wallet or remember another recovery phrase.
Overthrowing Ethereum’s network effect is one hell of a big task these days. Time is running out for the ETH killers.

Ethereum is the most decentralised and provably neutral smart contract platform

Ethereum is also arguably the most decentralised and provably neutral smart contract platform (except for maybe Ethereum Classic on the neutrality part). Unlike some smart contract platforms, you can’t round up everyone at the Ethereum Foundation or any select group of people and expect to be able to stop the network. Not only this, but the Ethereum foundation doesn’t have the ability to print more ETH or push through changes as they wish like some people would lead you on to believe. The community would reject detrimental EIPs and hard fork. Ever since the DAO hack, the Ethereum community has made it clear that it will not accept EIPs which attempt to roll back the chain even to recover hacked funds (see EIP-999).
Even if governments around the world wanted to censor the Ethereum blockchain, under ETH 2.0’s proof of stake, it would be incredibly costly and would require a double digit percentage of the total ETH supply, much of which would be slashed (meaning they would lose it) as punishment for running dishonest validator nodes. This means that unlike with proof of work where a 51% attacker can keep attacking the network, under proof of stake, an attacker can only perform the attack a couple of times before they lose all of their ETH. This makes attacks much less financially viable than it is on proof of work chains. Network security is much more than what I laid out above and I am far from an expert but the improved resistance to 51% attacks which PoS provides is significant.
Finally, with the US dollar looking like it will lose its reserve currency status and the existing wire transfer system being outdated, superpowers like China won’t want to use US systems and the US won’t want to use a Chinese system. Enter Ethereum, the provably neutral settlement layer where the USA and China don’t have to trust each other or each other’s banks because they can trust Ethereum. While it may sound like a long shot, it does make sense if Ethereum hits a multi-trillion dollar market cap that it is the most secure and neutral way to transfer value between these adversaries. Not to mention if much of the world’s commerce were to be settled in the same place - on Ethereum - then it would make sense for governments to settle on the same platform.

ETH distribution is decentralised

Thanks to over 5 years of proof of work - a system where miners have to sell newly minted ETH to pay for electricity costs - newly mined ETH has found its way into the hands of everyday people who buy ETH off miners selling on exchnages. As pointed out by u/AdamSC1 in his analysis of the top 10K ETH addresses (I highly recommend reading this if you haven’t already), the distribution of ETH is actually slightly more decentralised than Bitcoin with the top 10,000 ETH wallets holding 56.70% of ETH supply compared to the top 10,000 Bitcoin wallets which hold 57.44% of the Bitcoin supply. This decentralised distribution means that the introduction of staking won’t centralise ETH in the hands of a few wallets who could then control the network. This is an advantage for ETH which many proof of stake ETH killers will never have as they never used PoW to distribute funds widely throughout the community and these ETH killers often did funding rounds giving large numbers of tokens to VC investors.

The community

Finally, while I may be biased, I think that Ethereum has the friendliest community. Anecdotally, I find that the Ethereum developer community is full of forward thinking people who want to make the world a better place and build a better future, many of whom are altruistic and don’t always act in their best interests. Compare this to the much more conservative, “at least we’re safe while the world burns” attitude which many Bitcoiners have. I don’t want to generalise too much here as the Bitcoin community is great too and there are some wonderful people there. But the difference is clear if you compare the daily discussion of Bitcoin to the incredibly helpful and welcoming daily discussion of EthFinance who will happily answer your noob questions without calling you an idiot and telling you to do you own research (there are plenty more examples in any of the daily threads). Or the very helpful folks over at EthStaker who will go out of their way to help you set up an ETH 2.0 staking node on the testnets (Shoutout to u/superphiz who does a lot of work over in that sub!). Don’t believe me? Head over to those subs and see for yourself.
Please don’t hate on me if you disagree about which project has the best community, it is just my very biased personal opinion and I respect your opinion if you disagree! :)

TL;DR:

submitted by Tricky_Troll to CryptoCurrency [link] [comments]

A Detailed Summary of Every Single Reason Why I am Bullish on ETH.

The following will be a list of the many reasons why I hold and am extremely bullish on ETH.

This is an extremely long post. If you just want the hopium without the detail, read the TL;DR at the bottom.

ETH 2.0

As we all know, ETH 2.0 phase 0 is right around the corner. This will lock up ETH and stakers will earn interest on their ETH in return for securing the network. Next comes phase 1 where the ETH 2 shards are introduced, shards are essentially parallel blockchains which are each responsible for a different part of Ethereum’s workload, think of it like a multi-core processor vs a single core processor. During phase 1, these shards will only act as data availability layers and won’t actually process transactions yet. However, their data can be utilised by the L2 scaling solution, rollups, increasing Ethereum’s throughput in transactions per second up to 100,000 TPS.
After phase 1 comes phase 1.5 which will move the ETH 1.0 chain into an ETH 2 shard and Ethereum will be fully secured by proof of stake. This means that ETH issuance will drop from around 5% per year to less than 1% and with EIP-1559, ETH might become a deflationary asset, but more on that later.
Finally, with ETH 2.0 phase two, each shard will be fully functional chains. With 64 of them, we can expect the base layer of Ethereum to scale around 64x, not including the massive scaling which comes from layer 2 scaling solutions like rollups as previously mentioned.
While the scaling benefits and ETH issuance reduction which comes with ETH 2.0 will be massive, they aren’t the only benefits. We also get benefits such as increased security from PoS compared to PoW, a huge energy efficiency improvement due to the removal of PoW and also the addition of eWASM which will allow contracts to be programmed in a wide range of programming languages, opening the floodgates for millions of web devs who want to be involved in Ethereum but don’t know Ethereum’s programming language, Solidity.

EIP-1559 and ETH scarcity

As I covered in a previous post of mine, ETH doesn’t have a supply cap like Bitcoin. Instead, it has a monetary policy of “minimum viable issuance”, not only is this is a good thing for network security, but with the addition of EIP-1559, it leaves the door open to the possibility of ETH issuance going negative. In short, EIP-1559 changes the fee market to make transaction prices more efficient (helping to alleviate high gas fees!) by burning a variable base fee which changes based on network usage demand rather than using a highest bidder market where miners simply include who pays them the most. This will result in most of the ETH being paid in transaction fees being burned. As of late, the amount which would be burned if EIP-1559 was in Ethereum right now would make ETH a deflationary asset!

Layer 2 Scaling

In the mean time while we are waiting for ETH 2.0, layer 2 scaling is here. Right now, projects such as Deversifi or Loopring utilise rollups to scale to thousands of tx/s on their decentralised exchange platforms or HoneySwap which uses xDai to offer a more scalable alternative to UniSwap. Speaking of which, big DeFi players like UniSwap and Synthetix are actively looking into using optimistic rollups to scale while maintaining composability between DeFi platforms. The most bullish thing about L2 scaling is all of the variety of options. Here’s a non exhaustive list of Ethereum L2 scaling solutions: - Aztec protocol (L2 scaling + privacy!) - ZKSync - Loopring - Raiden - Arbitrum Rollups - xDai - OMGNetwork - Matic - FuelLabs - Starkware - Optimism - Celer Network - + Many more

DeFi and Composability

If you’re reading this, I am sure you are aware of the phenomena which is Decentralised Finance (DeFi or more accurately, open finance). Ethereum is the first platform to offer permissionless and immutable financial services which when interacting with each other, lead to unprecedented composability and innovation in financial applications. A whole new world of possibilities are opening up thanks to this composability as it allows anyone to take existing pieces of open source code from other DeFi projects, put them together like lego pieces (hence the term money legos) and create something the world has never seen before. None of this was possible before Ethereum because typically financial services are heavily regulated and FinTech is usually proprietary software, so you don’t have any open source lego bricks to build off and you have to build everything you need from scratch. That is if what you want to do is even legal for a centralised institution!
Oh, and if you think that DeFi was just a fad and the bubble has popped, guess again! Total value locked in DeFi is currently at an all time high. Don’t believe me? Find out for yourself at: https://defipulse.com

NFTs and tokeniation

NFTs or “Non-Fungible Tokens” - despite the name which may confuse a layman - are a basic concept. They are unique tokens with their own unique attributes. This allows you to create digital art, human readable names for your ETH address (see ENS names and unstoppable domains), breedable virtual collectible creatures like crypto kitties, ownable in game assets like Gods Unchained cards or best of all in my opinion, tokenised ownership of real world assets which can even be split into pieces (this doesn’t necessarily require an NFT. Fungible tokens can be/are used for some of the following use cases). This could be tokenised ownership of real estate (see RealT), tokenised ownership of stocks, bonds and other financial assets (which by the way makes them tradable 24/7 and divisible unlike through the traditional system) or even tokenised ownership of the future income of a celebrity or athlete (see when NBA Star Spencer Dinwiddie Tokenized His Own NBA Contract.

Institutional Adoption

Ethereum is by far the most widely adopted blockchain by enterprises. Ethereum’s Enterprise Ethereum Alliance (EEA) is the largest blockchain-enterprise partnership program and Ethereum is by far the most frequently leveraged blockchain for proof of concepts and innovation in the blockchain space by enterprises. Meanwhile, there are protocols like the Baseline protocol which is a shared framework which allows enterprises to use Ethereum as a common frame of reference and a base settlement layer without having to give up privacy when settling on the public Ethereum mainnet. This framework makes adopting Ethereum much easier for other enterprises.

Institutional Investment

One of Bitcoin’s biggest things it has going for it right now is the growing institutional investment. In case you were wondering, Ethereum has this too! Grayscale offers investment in the cryptocurrency space for financial institutions and their Ethereum fund has already locked up more than 2% of the total supply of ETH. Not only this, but as businesses transact on Ethereum and better understand it, not only will they buy up ETH to pay for their transactions, but they will also realise that much like Bitcoin, Ethereum is a scarce asset. Better yet, a scarce asset which offers yield. As a result, I expect to see companies having ETH holdings become the norm just like how Bitcoin is becoming more widespread on companies’ balance sheets.

The state of global markets

With asset prices in almost every asset class at or near all-time highs and interest rates lower than ever and even negative in some cases, there really aren’t many good opportunities in the traditional financial system right now. Enter crypto - clearly the next evolution of financial services (as I explained in the section on DeFi earlier in this post), with scarce assets built in at the protocol layer, buying BTC or ETH is a lot like buying shares in TCP/IP in 1990 (that is if the underlying protocols of the internet could be invested in which they couldn’t). Best of all, major cryptos are down from their all-time highs anywhere between 35% for BTC or 70% for ETH and much more for many altcoins. This means that they can significantly appreciate in value before entering uncharted, speculative bubble territory.
While of course we could fall dramatically at any moment in the current macro financial conditions, as a longer term play, crypto is very alluring. The existing financial system has shown that it is in dire need of replacing and the potential replacement has started rearing its head in the form of crypto and DeFi.

Improvements in user onboarding and abstracting away complexity

Ethereum has started making huge leaps forward in terms of usability for the end user. We now have ENS names and unstoppable domains which allow you to send ETH to yournamehere.ETH or TrickyTroll.crypto (I don’t actually have that domain, that’s just an example). No longer do you have to check every character of your ugly hexadecimal 0x43AB96D… ETH address to ensure you’re sending your ETH to the right person. We also have smart contract wallets like Argent wallet or the Gnosis safe. These allow for users to access their wallets and interact with DeFi self-custodially from an app on their phone without having to record a private key or recovery phrase. Instead, they offer social recovery and their UI is straight forward enough for anyone who uses a smart phone to understand. Finally, for the more experienced users, DApps like Uniswap have pretty, super easy to use graphical user interfaces and can be used by anyone who knows how to run and use a browser extension like Metamask.

The lack of an obvious #1 ETH killer

One of Ethereum’s biggest threats is for it to be overthrown by a so-called “Ethereum killer” blockchain which claims to do everything Ethereum can do and sometimes more. While there are competitors which are each formidable to a certain extent such as Polkadot, Cardano and EOS, each have their own weaknesses. For example, Polkadot and Cardano are not fully operational yet and EOS is much more centralised than Ethereum. As a result, none of these competitors have any significant network effects just yet relative to the behemoth which is Ethereum. This doesn’t mean that these projects aren’t a threat. In fact, I am sure that projects like Polkadot (which is more focused on complimenting Ethereum than killing it) will take a slice out of Ethereum’s pie. However, I am still very confident that Ethereum will remain on top due to the lack of a clear number 2 smart contract platform. Since none of these ETH killers stands out as the second place smart contract platform, it makes it much harder for one project to create a network effect which even begins to threaten Ethereum’s dominance. This leads me onto my next reason - network effects.

Network effects

This is another topic which I made a previous post on. The network effect is why Bitcoin is still the number one cryptocurrency and by such a long way. Bitcoin is not the most technologically advanced cryptocurrency. However, it has the most widespread name recognition and the most adoption in most metrics (ETH beats in in some metrics these days). The network effect is also why most people use Zoom and Facebook messengeWhatsApp despite the existence of free, private, end to end encrypted alternatives which have all the same features (https://meet.jit.si/ for zoom alternative and Signal for the private messenger app. I highly recommend both. Let’s get their network effects going!). It is the same for Bitcoin. People don’t want to have to learn about or set up a wallet for alternative options. People like what is familiar and what other people use. Nobody wants to be “that guy” who makes you download yet another app and account you have to remember the password/private key for. In the same way, Enterprises don’t want to have to create a bridge between their existing systems and a dozen different blockchains. Developers don’t want to have to create DeFi money legos from scratch on a new chain if they can just plug in to existing services like Uniswap. Likewise, users don’t want to have to download another browser extension to use DApps on another chain if they already use Ethereum. I know personally I have refrained from investing in altcoins because I would have to install another app on my hardware wallet or remember another recovery phrase.
Overthrowing Ethereum’s network effect is one hell of a big task these days. Time is running out for the ETH killers.

Ethereum is the most decentralised and provably neutral smart contract platform

Ethereum is also arguably the most decentralised and provably neutral smart contract platform (except for maybe Ethereum Classic on the neutrality part). Unlike some smart contract platforms, you can’t round up everyone at the Ethereum Foundation or any select group of people and expect to be able to stop the network. Not only this, but the Ethereum foundation doesn’t have the ability to print more ETH or push through changes as they wish like some people would lead you on to believe. The community would reject detrimental EIPs and hard fork. Ever since the DAO hack, the Ethereum community has made it clear that it will not accept EIPs which attempt to roll back the chain even to recover hacked funds (see EIP-999).
Even if governments around the world wanted to censor the Ethereum blockchain, under ETH 2.0’s proof of stake, it would be incredibly costly and would require a double digit percentage of the total ETH supply, much of which would be slashed (meaning they would lose it) as punishment for running dishonest validator nodes. This means that unlike with proof of work where a 51% attacker can keep attacking the network, under proof of stake, an attacker can only perform the attack a couple of times before they lose all of their ETH. This makes attacks much less financially viable than it is on proof of work chains. Network security is much more than what I laid out above and I am far from an expert but the improved resistance to 51% attacks which PoS provides is significant.
Finally, with the US dollar looking like it will lose its reserve currency status and the existing wire transfer system being outdated, superpowers like China won’t want to use US systems and the US won’t want to use a Chinese system. Enter Ethereum, the provably neutral settlement layer where the USA and China don’t have to trust each other or each other’s banks because they can trust Ethereum. While it may sound like a long shot, it does make sense if Ethereum hits a multi-trillion dollar market cap that it is the most secure and neutral way to transfer value between these adversaries. Not to mention if much of the world’s commerce were to be settled in the same place - on Ethereum - then it would make sense for governments to settle on the same platform.

ETH distribution is decentralised

Thanks to over 5 years of proof of work - a system where miners have to sell newly minted ETH to pay for electricity costs - newly mined ETH has found its way into the hands of everyday people who buy ETH off miners selling on exchnages. As pointed out by u/AdamSC1 in his analysis of the top 10K ETH addresses (I highly recommend reading this if you haven’t already), the distribution of ETH is actually slightly more decentralised than Bitcoin with the top 10,000 ETH wallets holding 56.70% of ETH supply compared to the top 10,000 Bitcoin wallets which hold 57.44% of the Bitcoin supply. This decentralised distribution means that the introduction of staking won’t centralise ETH in the hands of a few wallets who could then control the network. This is an advantage for ETH which many proof of stake ETH killers will never have as they never used PoW to distribute funds widely throughout the community and these ETH killers often did funding rounds giving large numbers of tokens to VC investors.

The community

Finally, while I may be biased, I think that Ethereum has the friendliest community. Anecdotally, I find that the Ethereum developer community is full of forward thinking people who want to make the world a better place and build a better future, many of whom are altruistic and don’t always act in their best interests. Compare this to the much more conservative, “at least we’re safe while the world burns” attitude which many Bitcoiners have. I don’t want to generalise too much here as the Bitcoin community is great too and there are some wonderful people there. But the difference is clear if you compare the daily discussion of Bitcoin to the incredibly helpful and welcoming daily discussion of EthFinance who will happily answer your noob questions without calling you an idiot and telling you to do you own research (there are plenty more examples in any of the daily threads). Or the very helpful folks over at EthStaker who will go out of their way to help you set up an ETH 2.0 staking node on the testnets (Shoutout to u/superphiz who does a lot of work over in that sub!). Don’t believe me? Head over to those subs and see for yourself.
Please don’t hate on me if you disagree about which project has the best community, it is just my very biased personal opinion and I respect your opinion if you disagree! :)

TL;DR:

submitted by Tricky_Troll to ethtrader [link] [comments]

A detailed summary of every reason why I am bullish on ETH.

The following will be a list of the many reasons why I hold and am extremely bullish on ETH.

This is an extremely long post. If you just want the hopium without the detail, read the TL;DR at the bottom.

ETH 2.0

As we all know, ETH 2.0 phase 0 is right around the corner. This will lock up ETH and stakers will earn interest on their ETH in return for securing the network. Next comes phase 1 where the ETH 2 shards are introduced, shards are essentially parallel blockchains which are each responsible for a different part of Ethereum’s workload, think of it like a multi-core processor vs a single core processor. During phase 1, these shards will only act as data availability layers and won’t actually process transactions yet. However, their data can be utilised by the L2 scaling solution, rollups, increasing Ethereum’s throughput in transactions per second up to 100,000 TPS.
After phase 1 comes phase 1.5 which will move the ETH 1.0 chain into an ETH 2 shard and Ethereum will be fully secured by proof of stake. This means that ETH issuance will drop from around 5% per year to less than 1% and with EIP-1559, ETH might become a deflationary asset, but more on that later.
Finally, with ETH 2.0 phase two, each shard will be fully functional chains. With 64 of them, we can expect the base layer of Ethereum to scale around 64x, not including the massive scaling which comes from layer 2 scaling solutions like rollups as previously mentioned.
While the scaling benefits and ETH issuance reduction which comes with ETH 2.0 will be massive, they aren’t the only benefits. We also get benefits such as increased security from PoS compared to PoW, a huge energy efficiency improvement due to the removal of PoW and also the addition of eWASM which will allow contracts to be programmed in a wide range of programming languages, opening the floodgates for millions of web devs who want to be involved in Ethereum but don’t know Ethereum’s programming language, Solidity.

EIP-1559 and ETH scarcity

As I covered in a previous post of mine, ETH doesn’t have a supply cap like Bitcoin. Instead, it has a monetary policy of “minimum viable issuance”, not only is this is a good thing for network security, but with the addition of EIP-1559, it leaves the door open to the possibility of ETH issuance going negative. In short, EIP-1559 changes the fee market to make transaction prices more efficient (helping to alleviate high gas fees!) by burning a variable base fee which changes based on network usage demand rather than using a highest bidder market where miners simply include who pays them the most. This will result in most of the ETH being paid in transaction fees being burned. As of late, the amount which would be burned if EIP-1559 was in Ethereum right now would make ETH a deflationary asset!

Layer 2 Scaling

In the mean time while we are waiting for ETH 2.0, layer 2 scaling is here. Right now, projects such as Deversifi or Loopring utilise rollups to scale to thousands of tx/s on their decentralised exchange platforms or HoneySwap which uses xDai to offer a more scalable alternative to UniSwap. Speaking of which, big DeFi players like UniSwap and Synthetix are actively looking into using optimistic rollups to scale while maintaining composability between DeFi platforms. The most bullish thing about L2 scaling is all of the variety of options. Here’s a non exhaustive list of Ethereum L2 scaling solutions: - Aztec protocol (L2 scaling + privacy!) - ZKSync - Loopring - Raiden - Arbitrum Rollups - xDai - OMGNetwork - Matic - FuelLabs - Starkware - Optimism - Celer Network - + Many more

DeFi and Composability

If you’re reading this, I am sure you are aware of the phenomena which is Decentralised Finance (DeFi or more accurately, open finance). Ethereum is the first platform to offer permissionless and immutable financial services which when interacting with each other, lead to unprecedented composability and innovation in financial applications. A whole new world of possibilities are opening up thanks to this composability as it allows anyone to take existing pieces of open source code from other DeFi projects, put them together like lego pieces (hence the term money legos) and create something the world has never seen before. None of this was possible before Ethereum because typically financial services are heavily regulated and FinTech is usually proprietary software, so you don’t have any open source lego bricks to build off and you have to build everything you need from scratch. That is if what you want to do is even legal for a centralised institution!
Oh, and if you think that DeFi was just a fad and the bubble has popped, guess again! Total value locked in DeFi is currently at an all time high. Don’t believe me? Find out for yourself at: https://defipulse.com

NFTs and tokeniation

NFTs or “Non-Fungible Tokens” - despite the name which may confuse a layman - are a basic concept. They are unique tokens with their own unique attributes. This allows you to create digital art, human readable names for your ETH address (see ENS names and unstoppable domains), breedable virtual collectible creatures like crypto kitties, ownable in game assets like Gods Unchained cards or best of all in my opinion, tokenised ownership of real world assets which can even be split into pieces (this doesn’t necessarily require an NFT. Fungible tokens can be/are used for some of the following use cases). This could be tokenised ownership of real estate (see RealT), tokenised ownership of stocks, bonds and other financial assets (which by the way makes them tradable 24/7 and divisible unlike through the traditional system) or even tokenised ownership of the future income of a celebrity or athlete (see when NBA Star Spencer Dinwiddie Tokenized His Own NBA Contract.

Institutional Adoption

Ethereum is by far the most widely adopted blockchain by enterprises. Ethereum’s Enterprise Ethereum Alliance (EEA) is the largest blockchain-enterprise partnership program and Ethereum is by far the most frequently leveraged blockchain for proof of concepts and innovation in the blockchain space by enterprises. Meanwhile, there are protocols like the Baseline protocol which is a shared framework which allows enterprises to use Ethereum as a common frame of reference and a base settlement layer without having to give up privacy when settling on the public Ethereum mainnet. This framework makes adopting Ethereum much easier for other enterprises.

Institutional Investment

One of Bitcoin’s biggest things it has going for it right now is the growing institutional investment. In case you were wondering, Ethereum has this too! Grayscale offers investment in the cryptocurrency space for financial institutions and their Ethereum fund has already locked up more than 2% of the total supply of ETH. Not only this, but as businesses transact on Ethereum and better understand it, not only will they buy up ETH to pay for their transactions, but they will also realise that much like Bitcoin, Ethereum is a scarce asset. Better yet, a scarce asset which offers yield. As a result, I expect to see companies having ETH holdings become the norm just like how Bitcoin is becoming more widespread on companies’ balance sheets.

The state of global markets

With asset prices in almost every asset class at or near all-time highs and interest rates lower than ever and even negative in some cases, there really aren’t many good opportunities in the traditional financial system right now. Enter crypto - clearly the next evolution of financial services (as I explained in the section on DeFi earlier in this post), with scarce assets built in at the protocol layer, buying BTC or ETH is a lot like buying shares in TCP/IP in 1990 (that is if the underlying protocols of the internet could be invested in which they couldn’t). Best of all, major cryptos are down from their all-time highs anywhere between 35% for BTC or 70% for ETH and much more for many altcoins. This means that they can significantly appreciate in value before entering uncharted, speculative bubble territory.
While of course we could fall dramatically at any moment in the current macro financial conditions, as a longer term play, crypto is very alluring. The existing financial system has shown that it is in dire need of replacing and the potential replacement has started rearing its head in the form of crypto and DeFi.

Improvements in user onboarding and abstracting away complexity

Ethereum has started making huge leaps forward in terms of usability for the end user. We now have ENS names and unstoppable domains which allow you to send ETH to yournamehere.ETH or TrickyTroll.crypto (I don’t actually have that domain, that’s just an example). No longer do you have to check every character of your ugly hexadecimal 0x43AB96D… ETH address to ensure you’re sending your ETH to the right person. We also have smart contract wallets like Argent wallet or the Gnosis safe. These allow for users to access their wallets and interact with DeFi self-custodially from an app on their phone without having to record a private key or recovery phrase. Instead, they offer social recovery and their UI is straight forward enough for anyone who uses a smart phone to understand. Finally, for the more experienced users, DApps like Uniswap have pretty, super easy to use graphical user interfaces and can be used by anyone who knows how to run and use a browser extension like Metamask.

The lack of an obvious #1 ETH killer

One of Ethereum’s biggest threats is for it to be overthrown by a so-called “Ethereum killer” blockchain which claims to do everything Ethereum can do and sometimes more. While there are competitors which are each formidable to a certain extent such as Polkadot, Cardano and EOS, each have their own weaknesses. For example, Polkadot and Cardano are not fully operational yet and EOS is much more centralised than Ethereum. As a result, none of these competitors have any significant network effects just yet relative to the behemoth which is Ethereum. This doesn’t mean that these projects aren’t a threat. In fact, I am sure that projects like Polkadot (which is more focused on complimenting Ethereum than killing it) will take a slice out of Ethereum’s pie. However, I am still very confident that Ethereum will remain on top due to the lack of a clear number 2 smart contract platform. Since none of these ETH killers stands out as the second place smart contract platform, it makes it much harder for one project to create a network effect which even begins to threaten Ethereum’s dominance. This leads me onto my next reason - network effects.

Network effects

This is another topic which I made a previous post on. The network effect is why Bitcoin is still the number one cryptocurrency and by such a long way. Bitcoin is not the most technologically advanced cryptocurrency. However, it has the most widespread name recognition and the most adoption in most metrics (ETH beats in in some metrics these days). The network effect is also why most people use Zoom and Facebook messengeWhatsApp despite the existence of free, private, end to end encrypted alternatives which have all the same features (https://meet.jit.si/ for zoom alternative and Signal for the private messenger app. I highly recommend both. Let’s get their network effects going!). It is the same for Bitcoin. People don’t want to have to learn about or set up a wallet for alternative options. People like what is familiar and what other people use. Nobody wants to be “that guy” who makes you download yet another app and account you have to remember the password/private key for. In the same way, Enterprises don’t want to have to create a bridge between their existing systems and a dozen different blockchains. Developers don’t want to have to create DeFi money legos from scratch on a new chain if they can just plug in to existing services like Uniswap. Likewise, users don’t want to have to download another browser extension to use DApps on another chain if they already use Ethereum. I know personally I have refrained from investing in altcoins because I would have to install another app on my hardware wallet or remember another recovery phrase.
Overthrowing Ethereum’s network effect is one hell of a big task these days. Time is running out for the ETH killers.

Ethereum is the most decentralised and provably neutral smart contract platform

Ethereum is also arguably the most decentralised and provably neutral smart contract platform (except for maybe Ethereum Classic on the neutrality part). Unlike some smart contract platforms, you can’t round up everyone at the Ethereum Foundation or any select group of people and expect to be able to stop the network. Not only this, but the Ethereum foundation doesn’t have the ability to print more ETH or push through changes as they wish like some people would lead you on to believe. The community would reject detrimental EIPs and hard fork. Ever since the DAO hack, the Ethereum community has made it clear that it will not accept EIPs which attempt to roll back the chain even to recover hacked funds (see EIP-999).
Even if governments around the world wanted to censor the Ethereum blockchain, under ETH 2.0’s proof of stake, it would be incredibly costly and would require a double digit percentage of the total ETH supply, much of which would be slashed (meaning they would lose it) as punishment for running dishonest validator nodes. This means that unlike with proof of work where a 51% attacker can keep attacking the network, under proof of stake, an attacker can only perform the attack a couple of times before they lose all of their ETH. This makes attacks much less financially viable than it is on proof of work chains. Network security is much more than what I laid out above and I am far from an expert but the improved resistance to 51% attacks which PoS provides is significant.
Finally, with the US dollar looking like it will lose its reserve currency status and the existing wire transfer system being outdated, superpowers like China won’t want to use US systems and the US won’t want to use a Chinese system. Enter Ethereum, the provably neutral settlement layer where the USA and China don’t have to trust each other or each other’s banks because they can trust Ethereum. While it may sound like a long shot, it does make sense if Ethereum hits a multi-trillion dollar market cap that it is the most secure and neutral way to transfer value between these adversaries. Not to mention if much of the world’s commerce were to be settled in the same place - on Ethereum - then it would make sense for governments to settle on the same platform.

ETH distribution is decentralised

Thanks to over 5 years of proof of work - a system where miners have to sell newly minted ETH to pay for electricity costs - newly mined ETH has found its way into the hands of everyday people who buy ETH off miners selling on exchnages. As pointed out by u/AdamSC1 in his analysis of the top 10K ETH addresses (I highly recommend reading this if you haven’t already), the distribution of ETH is actually slightly more decentralised than Bitcoin with the top 10,000 ETH wallets holding 56.70% of ETH supply compared to the top 10,000 Bitcoin wallets which hold 57.44% of the Bitcoin supply. This decentralised distribution means that the introduction of staking won’t centralise ETH in the hands of a few wallets who could then control the network. This is an advantage for ETH which many proof of stake ETH killers will never have as they never used PoW to distribute funds widely throughout the community and these ETH killers often did funding rounds giving large numbers of tokens to VC investors.

The community

Finally, while I may be biased, I think that Ethereum has the friendliest community. Anecdotally, I find that the Ethereum developer community is full of forward thinking people who want to make the world a better place and build a better future, many of whom are altruistic and don’t always act in their best interests. Compare this to the much more conservative, “at least we’re safe while the world burns” attitude which many Bitcoiners have. I don’t want to generalise too much here as the Bitcoin community is great too and there are some wonderful people there. But the difference is clear if you compare the daily discussion of Bitcoin to the incredibly helpful and welcoming daily discussion of EthFinance who will happily answer your noob questions without calling you an idiot and telling you to do you own research (there are plenty more examples in any of the daily threads). Or the very helpful folks over at EthStaker who will go out of their way to help you set up an ETH 2.0 staking node on the testnets (Shoutout to u/superphiz who does a lot of work over in that sub!). Don’t believe me? Head over to those subs and see for yourself.
Please don’t hate on me if you disagree about which project has the best community, it is just my very biased personal opinion and I respect your opinion if you disagree! :)

TL;DR:

submitted by Tricky_Troll to ethfinance [link] [comments]

COVID-19's Economic Impact in Canada: a collection of stats on jobs losses, investment returns, consumer confidence, interest rates, housing, and future forecasts

Over the past few weeks, the COVID crisis has hurt the Canadian economy and the average Canadian's financial situation in more ways than one.
I tried to tally up the damage by going through the info that's been published thus far (by Stats Can, the Bank of Canada, the Parliamentary Budget Officer, news sites, etc.), and have put together some visualizations and commentary on the data.
In summary:
Jobs
Investments (2020 year-to-date returns)
Consumer Confidence
Interest Rates
Housing
Post-COVID Economic Forecasts
On April 9th, Canada’s Parliamentary Budget Officer released a “scenario analysis” report on the potential impact of COVID-19 on the Canadian economy.
 
These points are addressed in chart form at the link above. You can download a spreadsheet which contains all of the source data / charts.
There's also a summary of the emergency response initiatives announced by the federal government (CERB, GST credit, CCB one-time payment, the 75% wage subsidy, etc.), and thoughts about steps that Canadians can take today to improve their financial situation.
I'll continue to update the page as new economic stats roll-in, and as the government announces new initiatives.
I'd love to hear your thoughts about COVID's economic impact in Canada. Also, please feel free to share any other stats, articles, or reports that you think are relevant!
 
Edit: typo.
submitted by getToTheChopin to PersonalFinanceCanada [link] [comments]

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submitted by ViralMedia007 to FREECoursesEveryday [link] [comments]

500 to 5000 MCO Upgrade Strategy

Currently the 500 MCO tier is sort of the sweet spot for most users where a lot of valuable perks kick in. When I first purchased MCO it was under $3 USD, so going straight to the 500 tier was an obvious choice. I was planning to put some Stablecoins and Bitcoin into earn, so the added 2% bonus in-kind in earn, plus the 3% card cashbacks and Netflix reimbursement made the choice economically beneficial quite quickly. Less than a year later the benefits have provided me a larger return on investment than if I had done otherwise.
I have been eyeing the upgrade to the 5000 tier, but I wanted to do an analysis of what sort of upgrade strategy makes sense to optimize ROI weighted against risks and if I'm even the right candidate for such an investment. With the price of MCO being higher, it's not such a clear decision. I will outline my thought process below.
Assumptions - These are the assumptions that I am working with for my analysis. Working with a different set of assumptions will affect the decision making process differently for different people.
Based on the above assumptions we can now look at different upgrade pathways and see which options make the most sense. This thought process is a place to start and can be adjusted to each person's individual case.

Stablecoin (Fiat) to MCO pathway

At today's price of ~$4.85 USD at time of writing, it would cost $21,825 USD to upgrade directly into the 5000 tier by buying 4500 additional MCO. This gives additional benefits of 2% in earn, 1% on card, and 8% vs 6% on staked MCO.
The variables we need to look at to find out if this makes sense over the next year are: assets in Earn and annual card spend.
The opportunity cost of putting the money into MCO is a 4% yield on $21,825 (12% in Earn minus 8% staked in MCO) minus a 2% yield on 500 MCO, or roughly $824.50.
We also open ourselves up to exchange rate volatility, there is a very real, non-0% chance that the crypto market collapses, or that MCO itself collapses in value. There is also a chance it will go way up. If you are looking to hold the MCO, or crypto in general, for longer periods of time, we need to sort of normalize the projected trend to figure out ROI. That means ignoring big jumps and drops, or retroactively thinking you could have made or lost money by trading in and out… that falls under trading and speculation. In general, most of us think the crypto market is going up, but by how much and how fast are variables that need to be considered in how exposed to crypto you want to be
In order to make this pathway a positive ROI, we need to make an additional $824.50 through the added benefits in Earn and card spending over the course of one year. What does that look like?
Assets in Earn*0.02 + Card spend*0.01>824.50 
Examples:
If you don't have roughly $35-40k in Earn, upgrading to 5000 Tier makes very little sense IMO.
Full Account Examples (Assuming today's crypto prices):
Case 1 and 2 are very similar in total assets, but case 2 provides the better return after one year ($20,760 - $17,735.50 = $3,024.50) at the cost of being more exposed to crypto.

Bitcoin to MCO pathway via Drip

Another option to consider is upgrading to the 5000 tier via Bitcoin. I mention "Drip" in the header because I imagine most people able to do a lump sum conversion would encounter a taxable event and would be less inclined to go that route. Utilizing a drip format will upgrade on a longer time scale, but result in negligible taxable gain. It also keeps crypto exposure at roughly the same level throughout the process.
The benefits from going to MCO from BTC is a higher interest rate for MCO being staked at 6% vs BTC in Earn at 5.5%; I also assume CDC will be able to keep the 6% on MCO longer than they can keep the rate high on BTC. The drawbacks are less liquidity on MCO, potentially more volatility, and potential loss of value relative to BTC in Satoshis (we'll ignore the last point since we are assuming a similar sat ratio over time).
Another thing to mention, if we want to upgrade over the course of one year, BTC holdings need to be pretty sizable at $400,000 That's a little unreasonable for most people, so let's assume a smaller holding of $100,000 btc like the two cases above. This will take three years to accomplish and the equation gets a bit more complicated in this situation.
Basically if you take the above situation and plug it into a compound interest calculator, compounding quarterly, it takes almost 3 years exactly to drip your way into the 5000 tier. We can mostly ignore any change in crypto USD value as long as the MCO/BTC ratio stays similar.
If you definitely want to go to the 5000 tier, the question becomes purchase lump sum via Fiat or drip via crypto.
The opportunity cost of dripping is the lost 2% gain in earn over the course of 3 years (which as you'll see below, could be significant if the market jumps quickly at which point purchasing via Fiat becomes prohibitively expensive). But the benefit is that you maintain your current crypto exposure in the case of a major bear market where you could potentially purchase via Fiat at a much lower price.

Exit Strategy

I think it's important to think about an exit strategy. In my opinion, upgrading to the 5000 tier only really makes sense if you are having a lot of assets in Earn. The added 1% on card spend and other perks pales in comparison to the added 2% on Earn with a large amount of assets. It's also my opinion that MCO should only be a small portion of a crypto portfolio. Regardless, if MCO is your main holding you are betting on the crypto market going up, because the added 5000 tier benefits won't comparatively amount to much over a year anyway.
If crypto prices stay the same the benefits to holding MCO stay flat, but as crypto prices rise, the incentives change. Imagine we go on a huge bull run and the market goes up 20x. I bet a lot of people will want to rebalance and cash in some of that profit. It's quite possible holding 5000 MCO becomes too big of a risk for the benefits received.
What's nice is that CDC seems to have thought about the optimal profile for people to get to the 5000 tier level...like I stated above, people with significant assets in Earn.
Imagine the person in Case 2 above in an environment where the crypto market shoots up 20x.
In this situation, it makes sense to rebalance your portfolio and take some earnings off the table. However, it actually makes a lot of sense to keep the 5000 MCO staked and rebalance away from BTC into Stablecoins. Look at the yearly earnings of different options below:
As you can see, losing the bonus 2% in earn cuts your profit over the course of a year.
CDC was quite thoughtful in changing the award structure for the added 2% in Earn. It should keep early adopters from leaving if the market goes up, and should actually attract newly minted crypto whales as they rebalance out of other cryptos. This should keep the MCO price strong for a long time and give confidence to people investing in MCO.

Conclusion

I think upgrading to the 5000 tier can make a lot of sense for certain people. But after reaching the 5000 tier I would probably immediately cash out all rewarded MCO to Stablecoins to compound at a higher interest rate and just maintain the 5000 level. Unless there are some dramatic new rewards for the 50,000 level I don't see the value proposition to go for Black. Perhaps an additional 2% in Earn, but that is probably not sustainable to the company.
Let me know what you think, or if I made any mistakes.

Edit: Changed numbers to reflect 8% earned on staked MCO at the 5000 Tier level. This makes the upgrade more compelling.

submitted by gym7rjm to Crypto_com [link] [comments]

What Is a Bull Market?

Introduction


Market trends are among the most fundamental aspects of financial markets. We can define a market trend as the overall direction that an asset or a market is going. As such, market trends are closely watched by both technical analysts and fundamental analysts.
Bull markets tend to be relatively straightforward to trade, as they can allow for some of the easiest trading and investment strategies. Even inexperienced traders may do well in really favorable bull market conditions. With that said, it’s also crucial to understand how markets move in cycles.
So, what should you know about bull markets? How can traders take advantage of bull markets? We’ll explain it all in this article.

What is a bull market?


A bull market (or bull run) is a state of a financial market where prices are rising. The term bull market is often used in the context of the stock market. However, it can be used in any financial market — including bonds, commodities, real estate, and cryptocurrencies. Besides, a bull market may also refer to a specific asset such as Bitcoin, Ethereum, or CTT. It could even refer to a sector, such as utility tokens, privacy coins, or biotech stocks.
You may have heard traders from Wall Street use the terms “bullish” and “bearish.” When a trader says they are bullish on a market, it means that they expect prices to rise. When they are bearish, they expect prices to decline.
Being bullish can often mean that they are also long that market, though that may not necessarily be the case. Being bullish may not necessarily mean that a long trade opportunity is present right now, just that prices are rising or are expected to rise.
It’s also worth noting that a bull market doesn’t mean that prices don’t fall or fluctuate. This is why it’s more sensible to consider bull markets on larger time frames. In this sense, bull markets will contain periods of decline or consolidation without breaking the major market trend.
So, in this sense, the definition of a bull market depends on what time frame we’re talking about. Generally, when we’re using the term bull market, we are talking about a time frame of months or years. As with other market analysis techniques, higher time frame trends will have more validity than lower time frame trends.
As such, there may be prolonged periods of decline in a high timeframe bull market. These counter-trend price movements have a notoriety for being especially volatile — though this can vary greatly.

Bull market examples


Some of the most well-known examples of bull markets come from the stock market. These are the times when stock prices and market indexes (such as the Nasdaq 100) are continually rising.
As far as the global economy is concerned, it fluctuates between bull and bear markets. These economic cycles can last years, even decades. Some say that the bull market starting from the aftermath of the 2008 Financial Crisis and lasting until the coronavirus pandemic was “the longest bull market in history.” This may or may not be true — as we’ve said, high time frame bull markets can be a matter of perspective.
Even so, let’s take a look at the long-term performance of the Dow Jones Industrial Average (DJIA). We can see that it basically has been in a century-long bull market. Certainly, there are periods of decline that can last for years, such as 1929 or 2008, but the overall trend is still pointing upwards.
Some argue that we could see a similar trend with Bitcoin. But we can’t really tell if and when Bitcoin will face a multi-year bear market. It’s also worth noting that most other cryptocurrencies (i.e., altcoins) will probably never experience similar price appreciation, so be extremely aware of what you invest in.

Bull market vs. bear market — what’s the difference?


These are opposite concepts, so the difference isn’t particularly difficult to guess. Prices are continuously going up in a bull market, while prices are continually going down in a bear market.
This also results in differences in how it may be best to trade them. In a bull market, traders and investors will generally want to be long. While in a bear market, they either want to be short or stay in cash.
In some cases, staying in cash (or stablecoins) may also mean shorting the market, since we’re expecting prices to decline. The main difference is that staying in cash is more about preserving capital while shorting is about profiting off the decline in asset prices. But if you sell an asset expecting to buy it back lower, you’re essentially in a short position — even if you are not directly profiting from the drop.
One additional thing to consider is fees. Staying in stablecoins will likely not incur any fees, as there typically isn’t a cost to custody. However, many short positions will require a funding fee or interest rate to keep the position open. This is why quarterly futures may be ideal for long-term short positions, as there is no funding fee associated with them.

How traders can take advantage of bull markets


The main idea behind trading bull markets is relatively simple. Prices are going up, so going long and buying dips is generally a reasonable strategy. This is why the buy and hold strategy and dollar-cost averaging are generally well-suited for long-term bull markets.
There’s a saying that goes like this: “The trend is your friend, until it’s not.” This just means that it makes sense to trade with the direction of the market trend. At the same time, no trend will last forever, and the same strategy may not perform well in other parts of a market cycle. The only certainty is that the markets can and will change. As we’ve seen with the COVID-19 outbreak, multi-year bull markets can be wiped out in a matter of weeks.
Naturally, most investors will be bullish in a bull market. This makes sense since prices are going up, so the overall sentiment should also be bullish. However, even during a bull market, some investors will be bearish. If their trading strategy accommodates for it, they may even be successful with short-term bearish trades, such as shorting.
As such, some traders will try to short the recent highs in a bull market. However, these are advanced strategies and are generally more suitable for professional traders. As a less experienced trader, it’s usually more sensible to trade according to the trend. Many investors get trapped trying to short bull markets. After all, stepping in front of a raging bull or a locomotive can be a dangerous undertaking.

Closing thoughts


We’ve discussed what a bull market is, and how traders may approach trading in bull market conditions. Typically, the most straightforward trading strategy in any market trend is to follow the direction of the overall trend.
As such, bull markets may present good trading opportunities, even for beginners or first-time investors. However, it’s always essential to manage risk properly and keep learning to avoid mistakes as much as possible.
Still having more questions about market trends, bull markets, or trading? Check out our Q&A platform, Ask service support, where the Citex community will answer your questions.
submitted by CITEXexchange to u/CITEXexchange [link] [comments]

LeanFIRE and Goal Oriented Investing: 10 Mistakes you should avoid

Dear All -
After my earlier post regarding COVID-19 and 10 rules to deploy savings that generated lots of questions and interest I would like to share my thoughts about Goal Oriented Investing. While it's a 101 it may nevertheless be helpful to highlight especially in this market environment. I wasn't able to put graphs and videos here so you may find the full version here. Looking forward to hearing your feedback.

1. Not clearly defining your goals. Define your objectives and think in terms of sub-portfolios

Define your short and long term goals. Allocate to asset classes based on your time horizon (e.g. short term goals need to be carefully managed with a defensive portfolio since the short term volatility of high risk assets like stocks can hurt you). Be sure to have a reserve fund of liquid short-term investments and cash so you can cover emergencies and upcoming large expenses without having to sell your investments during down markets.

2. Not being patient and overreacting. Good things come to those who wait

Returns tend to smooth out over the long term. There is a myth about a Fidelity study that analysed all its performing accounts and realised that best performance came out of portfolios of people who either forgot about their accounts or were dead. You can understand why people believe these findings although the study never took place (look at the chart here - 1 to 20 year rolling performance again!). Logging into your brokepension plan account every day may not be helpful. You may tend to react – do not rush investment decisions.

3. Oveunderestimating your risk tolerance

Take a risk tolerance assessment if necessary to understand your risk profile. Your risk tolerance is important to tweak the asset allocation of your goal sub-portfolio. It is determined by: the degree of flexibility you have with regard to your financial goal, and your personal comfort level with volatility in your portfolio.

4. Aiming at influencing things outside of your control. Focus of what’s in your control

This is the Stoic part of the 10 recommendations (if you also happen to adhere to this philosophy get the Stoic newsletter I never stopped reading for the past 5 years). One of the eye-openers that you learn while studying for the gruelling (Chartered Financial Analyst ‘CFA’) Charter is that research estimates that asset allocation (not stock selection!) drives up to c. 90% of overall portfolio performance. You control asset allocation and rebalancing. You do control your spending and savings that will grow over time – don’t waste most of your time on researching individual stocks (read: Are you more qualified than a professional analyst).

5. Not acquiring enough education and taking excessive idiosyncratic risks

Some of the most trending Google searches during this COVID-19 pandemic include ‘best stocks to buy now’, ‘how to invest in oil stocks’, ‘best stock for 2020’ or ‘best investments for 2020’ etc. In fact the phrase ‘how to buy a stock’ surged to record highs. This also relates to FOMO which I have described here and chasing upward trends in a bear market. Acquiring Investment Knowledge is key as it is ultimately your decisions that will determine whether your hard-earned savings generate long term returns. Do your homework. Understand investment risks. Research fundamentals. Take a bit more time if needed – the market is efficient and is pricing in information relatively quickly – you have no edge in acting quickly.

6. Being overly conservative over the long run

Think of your goals as liabilities that you need to match with your investments. The power of compounding means that you need a much lower amount today to meet a higher amount expenditure in the future. Einstein said compound interest is the 8th wonder of the world. He who understands it, earns it; he who doesn’t, pays it. If you have high needs with long time horizon you need to take calculated risks. Invest too defensively (e.g. low allocation to Equities) and it may not match your long term objective. Buffett’s exceptional investment returns are also due to his time horizon.

7. Holding excessive cash. Not taking risks involves high opportunity costs

Believe it or not but a lot of bankers working for the top names tend to hold cash and under-invest. By holding cash you are not only missing out on compounding interest but also paying more taxes! Inflation is an indirect tax that works by destroying savings in exchange for gov’t financing. It gets worse – as central banks print an unprecedented amount of money – most standard measurements of inflation, such as the consumer price index (CPI), do not account for the disproportional effects of quantitative easing which is rising asset prices (monetary inflation). Even when you hear about deflation it’s often very misleading. This bear market may be a good opportunity to gradually deploy cash for long term returns if you haven’t already.
As an example – the ‘headline’ inflation in the UK (2.9%) that over 10 years increased prices by 29.29% vs. London Property Prices that increased over twice as much. The same applies to other real assets, like company valuations (stocks) or gold.

8. Not considering diversification

Yes, bonds are not as sexy as stocks since your returns may not be as spectacular in the short term but these are excellent diversifiers that may be sometimes better suited depending on your investment objective and time horizon. Other currencies or hard metals/BTC may be good as well. As an example YTD performance (as of March 9th when I did the analysis) was -14.2% for stocks, +6.1% for bonds and +10.7% for Gold.

9. Letting your emotions rule

This is difficult to implement since we tend to have emotional biases. If you do decide to have a small part of your goal-oriented strategic asset allocation dedicated to tactical asset allocation, sector or stock selection emotions could drive investment decisions based on loss aversion or overconfidence (e.g. confusing brains with a bull market). If it’s e.g. the latter try to stay humble/rational and ask yourself if you really have an edge before making a decision.

10. Forgetting to rebalance

Some advisors recommend that investors rebalance their portfolios on a regular time interval while others recommend rebalancing only when the relative weight of an asset class deviates from the target allocation (glide path investments). Either way, this is something that needs to be observed on a regular basis. I aim to discuss glide path investments in future posts.
With all charts: https://bankeronwheels.com/how-do-i-start-investing-start-learning-how-to-invest-in-stocks-and-bonds-by-avoiding-these-10-common-investing-mistakes/
Stay well!
submitted by bankeronwheels to leanfire [link] [comments]

Bull Bitcoin’s Dollar-Cost Averaging tool for Canadians: a detailed overview

Hello fellow Canadian Bitcoiners!
I'm Francis Pouliot, CEO and founder of Bull Bitcoin (previously known as Bitcoin Outlet) and Bylls.
I haven't been active on Reddit for a while but I thought I'd pop back here to let the community know about our new dollar-cost averaging feature, "Recurring Buy"
This post is a copy of my most recent medium article which you can read here if you want to see the screenshots. https://medium.com/bull-bitcoin/bull-bitcoins-dollar-cost-averaging-tool-for-canadians-the-right-time-to-buy-bitcoin-is-every-day-82a992ca22c1
Thanks in advance for any feedback and suggestions!
[Post starts here]
The Bull Bitcoin team is constantly trying to reduce the frictions ordinary people face when investing in Bitcoin and propose innovative features which ensure our users follow Bitcoin best practices and minimize their risks.
We are particularly excited and proud about our latest feature: an automated Bitcoin dollar-cost averaging tool which we dubbed “Recurring Buy”.
The Recurring Buy feature lets Bull Bitcoin users create an automated schedule that will buy Bitcoin every day using the funds in their account balance and send the Bitcoin directly to their Bitcoin wallet straight away.
We put a lot of thought in the implementation details and striking the right trade-offs for a simple and elegant solution. Our hope is that it will become a standard other Bitcoin exchanges will emulate for the benefit of their users. This standard will certainly evolve over time as we accumulate feedback and operational experience.
In this article, I cover:
The problem that we are trying to solve
Recurring Buy feature details, processes and instructions
The rationale (and tradeoffs) behind the main feature design choices
Bull Bitcoin is only available to Canadians, but non-Canadians that wish to have a look at how it works are welcome to make a Bull Bitcoin account and check out how it works here. You will be able to go through the process of create the schedule for testing purposes, but you wont be able to fund your account and actually purchase Bitcoin.
What problems does Dollar-Cost Averaging solve?
The most common concern of Bitcoin investors is, not surprisingly, “when is the right time to buy Bitcoin?”. Bitcoin is indeed a very volatile asset. A quick glance at a Bitcoin price chart shows there are without a doubt “worse times” and “better times” to invest in Bitcoin. But is that the same as the “right” time?
Gurus, analysts and journalists continuously offer their theories explaining what affects the Bitcoin price, supported by fancy trading charts and geopolitical analysis, further reinforcing the false notion that it is possible to predict the price of Bitcoin.
Newbies are constantly bombarded with mainstream media headlines of spectacular gains and devastating losses. For some, this grows into an irresistible temptation to get rich quick. Others become crippled with the fear of becoming “the sucker” on which early adopters dump their bags.
Veterans are haunted by past Bitcoin purchases which were quickly followed by a crash in the price. “I should have waited to buy the dip…”
Many Bitcoin veterans and long-term investors often shrug off the question of when is the right time to buy with the philosophy: “just hodl”. But even those holding until their death will recognize that buying more Bitcoin for the same price is a better outcome.
Given the very high daily volatility of Bitcoin, a hodler can find himself in many years having significantly less wealth just because he once bought Bitcoin on a Monday instead of a Wednesday. His options are either to leave it up to chance or make an attempt to “time the market” and “buy the dip”, which can turn into a stressful trading obsession, irrational decisions (which have a negative impact on budget, income and expenses) and severe psychological trauma. In addition, trying to “buy the dip” is often synonymous to keeping large amounts of fiat on an exchange to be ready for “when the time comes”.
There must be a better way.
Bitcoin investors should be rewarded for having understood Bitcoin’s long-term value proposition early on, for having taken the risk to invest accordingly and for having followed best practices. Not for being lucky.
Overview of features and rules
In this section I go into every detail of the Recurring Buy feature. In the following section, I focus on explaining why we chose this particular user experience.
The user first decides his target investment amount. Ideally, this is a monthly budget or yearly budget he allocates to investing in Bitcoin based on his projected income and expenses.
The user then chooses either the duration of the Recurring Buy schedule or the daily purchase amount. The longer the better.
The frequency is each day and cannot be modified.
The user must submit a Bitcoin address before activating a Recurring Buy schedule. By default, every transaction will be sent to that Bitcoin address. It’s the fallback address in case they don’t provide multiple addresses later.
Once the user has filled the form with target amount, the duration and the Bitcoin address, he can activate the Recurring Buy Schedule.
The user is not required to already have funds in his account balance to activate the schedule.
We will randomly select a time of day at which his transaction will be processed (every hour, so 24 possible times). If the user insists on another time of day, he can cancel his Recurring Buy schedule and try again.


The Recurring Buy feature as displayed on bullbitcoin.com/recurring-buys
The schedule is then displayed to the user, showing the time and date at which transactions that will take place in the future. The user will be able to see how long his current balance will last.
He can follow the progress of the dollar-cost averaging schedule, monitor in real time his average acquisition cost, and audit each transaction individually.
At this point, the user can and should change the Bitcoin address of his next transactions to avoid address re-use. Address re-use is not forbidden, but it is highly discouraged.
After having modified the Bitcoin addresses, there is nothing left for the user to do except watch the bitcoins appear in his Bitcoin wallet every day!
The Bitcoins are sent right away at the time of purchase.
Bitcoin transactions using the Recurring Buy feature will have the lowest possible Bitcoin network transaction fee to avoid creating upwards pressure on the fee market impact other network users.


What users see after first activating a schedule
The Recurring Buy schedule will be cancelled automatically at the time of the next purchase if the balance is insufficient. He can add more funds to his balance whenever he wants.
The Recurring Buy schedule will continue until the target amount is reached or until the account balance runs out.
The user can cancel his Recurring Buy schedule whenever he wants.
If the user wants to change the amount or duration of the schedule, he can simply cancel his current schedule and create a new one.
Each schedule has a unique identifier so that users can keep track of various schedules they perform over time.
Once a schedule is completed, either fully or partially, a summary will be provided which shows the number of transactions completed, the average acquisition cost, the total amount of Bitcoin purchase and the total amount of fiat spent. Useful for accounting!


A partially completed Recurring Buy schedule cancelled after 9 days due to insufficient funds
Though process in making our design choices
Recurring Bitcoin Purchases vs. Recurring Payment/Funding
The first and most important design choice was to separate the processes of funding the account balance with fiat (the payment) from the process of buying Bitcoin (the purchase). Users do not need to make a bank transaction every time they do a Bitcoin purchase. They first fund their account manually on their own terms, and the recurring purchases are debited from their pre-funded account balance.
Another approach would have been to automatically withdraw fiat from the user’s bank account (e.g. a direct debit or subscription billing) for each transaction (like our friends at Amber) or to instruct the user to set-up recurring payments to Bull Bitcoin from their bank account (like our friends at Bittr). The downside of these strategies is that they require numerous bank transactions which increases transaction fees and the likelihood of triggering fraud and compliance flags at the user’s bank. However, this does remove the user’s need to keep larger amounts of fiat on the exchange and reduces the friction of having to make manual bank payments.
Bull Bitcoin is currently working on a separate “Recurring Funding” feature that will automatically debit fiat from the user’s bank accounts using a separate recurring schedule with a minimum frequency of once a week, with a target of once every two weeks or once a month to match the user’s income frequency. This can, and will, be used in combination from the “Recurring Buy” feature, but both can be used separately.
The ultimate experience that we wish to achieve is that users will automatically set aside, each paycheck (two weeks), a small budget to invest in Bitcoin using the “Recurring Funding” feature which is sufficient to refill their account balance for the next two weeks of daily recurring purchases.
Frequency of transactions
The second important decision was about customizing the frequency of the schedule. We decided to make it “each day” only. This is specifically to ensure users have a large enough sample size and remain consistent which are the two key components to a successful dollar-cost averaging strategy.
A higher amount of recurring transactions (larger sample size) will result in the user’s average acquisition being closer to the actual average Bitcoin price over that period of time. Weekly or monthly recurring purchases can provide the same effectiveness if they are performed over a duration of time which is 7x longer (weekly) or 30x longer (monthly).
It is our belief that the longer the duration of the schedule, the more likely the user is to cancel the recurring buy schedule in order to “buy the dip”. Dollar-cost averaging is boring, and watching sats appear in the wallet every day is a good way to reduce the temptation of breaking the consistency.
We do not force this on users: they can still cancel the schedule if they want and go all-in. We consider it more of a gentle nudge in the right direction.
Frequency of withdrawals (one purchase = one bitcoin transaction)
This is one of the most interesting design choices because it is a trade-off between scalability (costs), privacy and custody. Ultimately, we decided that trust-minimization (no custody) and privacy were the most important at the expense of long-term scalability and costs.
Realistically, Bitcoin network fees are currently low and we expect them to remain low for the near future, although they will certainly increase massively over the long-term. One of the ways we mitigated this problem was to select the smallest possible transaction fee for transactions done in the context of Recurring Buy, separate from regular transaction fees on regular Bitcoin purchases (which, at Bull Bitcoin, are very generous).
Note: users must merge their UTXOs periodically to avoid being stuck with a large amount of small UTXOs in the future when fees become more expensive. This is what makes me most uncomfortable about our solution. I hope to also solve this problem, but it is ultimately something Bitcoin wallets need to address as well. Perhaps an automated tool in Bitcoin wallets which merges UTXOs periodically when the fees are low? Food for thought.
When transaction fees and scalability becomes a problem for us, it will have become a problem for all other small payments on the Bitcoin network, and we will use whatever solution is most appropriate at that time.
It is possible that Lightning Network ends up being the scalability solution, although currently it is logistically very difficult to perform automated payouts to users using Lightning, particularly recurring payouts, which require users to create Bolt11 invoices and to convince other peers in the network to open channels and fund channels with them for inbound capacity.
These are the general trade-offs:
Send a Bitcoin transaction for every purchase (what we do) - Most expensive for the exchange - Most expensive for the user (many UTXOs) - Increases Bitcoin Network UTXOs set - Inefficient usage of block space - Most private - Zero custody risk
Keep custody of the Bitcoin until the schedule is over or when the user requests a withdrawal (what Coinbase does) - No additional costs -No blockchain bloating - Same level of privacy - High custody risk
Batch user transactions together at fixed intervals (e.g. every day) - Slightly lower transaction costs for the exchange - Same costs for the user - Slightly more efficient use of block space - Same level of UTXO set bloating - Much lower level of privacy - Slightly higher custody risk
Single address vs multiple addresses vs HD keys (xpubs)
The final decision we had to make was preventing address re-use and allowing users to provide an HD key (xpub) rather than a Bitcoin address.
Address re-use generally decreases privacy because it becomes possible for third-party blockchain snoops to figure out that multiple Bitcoin transactions are going to the same user. But we must also consider that even transactions are sent to multiple addresses, particularly if they are small amounts, it is highly likely that the user will “merge” the coins into a single transaction when spending from his wallet. It is always possible for users to prevent this using Coinjoin, in which there is a large privacy gain in not re-using addresses compared to using a single address.
It is important to note that this does not decrease privacy compared to regular Bitcoin purchases on Bull Bitcoin outside of “Recurring Buy”. Whether a user has one transaction of $1000 going to a Bitcoin address or 10x$100 going that same Bitcoin address doesn’t reveal any new information about the user other than the fact he is likely using a dollar-cost averaging mechanism. It is rather a missed opportunity to gain more privacy.
Another smaller decision was whether or not we should ask the user to provide all his addresses upfront before being able to activate the schedule, which would completely remove the possibility of address re-use. We ultimately decided that because this process can take a very long time (imagine doing Recurring Buy every day for 365 days) it is better to let the user do this at his own pace, particularly because he may eventually change his Bitcoin wallet and forget to change the addresses in the schedule.
There are also various legitimate use-cases where users have no choice but to re-use the same address . A discussion for another day!
Asking the user to provide an XPUB is a great solution to address re-use. The exchange must dynamically derive a new Bitcoin address for the user at each transaction, which is not really a technical challenge. As far as I can tell, Bittr is the only Bitcoin exchange exchange which has implemented this technique. Kudos!
It is however important that the user doesn’t reuse this XPUB for anything else, otherwise the exchange can track his entire wallet balance and transaction history.
It is worth noting that not all wallets support HD keys or have HD keys by default (e.g. Bitcoin Core). So it is imperative that we offer the option to give Bitcoin addresses. We believe there is a lot of potential to create wallet coordination mechanisms between senders and recipients which would make this process a lot more streamlined.
In the future, we will certainly allow users to submit an XPUB instead of having to manually input a different address. But for now, we wanted to reduce the complexity to a minimum.
Conclusion: personal thoughts
I have a somewhat unique perspective on Bitcoin users due to the fact that I worked at the Bitcoin Embassy for almost 4 years. During this time, I had the opportunity to discuss face-to-face with thousands of Bitcoin investors. One of my favourite anecdotes is a nocoiner showing up at our office in December 2013 with a bag full of cash attempting to buy Bitcoin, “I know how to read a chart”, furious after being turned away. Many people who went “all-in” for short-term gains (usually altcoins) would show up to the Bitcoin Embassy office months later with heart-breaking stories.
This isn’t what I signed up for. My goal is to help people opt-out of fiat and, ultimately, to destroy the fiat currency system entirely.
This instilled in me a deep-rooted concern for gambling addiction and strong aversion to “trading”. I do not believe that Bitcoin exchanges should blindly follow “what the market dictates”. More often than not, what dictates the market is bad habits users formed because of the other Bitcoin services they used in the past, what other people are used to, and what feels familiar. Running a Bitcoin company should be inseparable from educating users on the best practices, and embedding these best practices into the user experience is the best way for them to learn.
Another important anecdote which motivated me to build a dollar-cost averaging tool is a person very close to me that had made the decision to buy Bitcoin, but was so stressed out about when was the right time to buy that they ended up not buying Bitcoin for a whole 6 months after funding their Bull Bitcoin account. That person eventually gave up and ultimately invested a large amount all at once. In hindsight, it turned out to be one of the worst possible times to invest in Bitcoin during that year.
Investing in Bitcoin can, and should be, a positive and rewarding experience.
Buying Bitcoin every day is the right strategy, but it is not necessarily lead to the best outcome.
The reality is that the best time to buy Bitcoin is at when market hits rock bottom (obviously). Sometimes, the upside from buying the dip can be much bigger than the risk (e.g. when the price dropped below $200 in 2015). But these are exceptions rather than the rule. And the cost of chasing dips is very high: stress, investing time and mental energy, and the very real psychological trauma which results from making bad trading decisions. Ultimately, it’s better to do the right thing than being lucky, but it’s not always a bad idea to cheat on your dollar-cost averaging from time to time if you can live with the costs and consequences.
Yours truly,
Francis
submitted by FrancisPouliot to BitcoinCA [link] [comments]

Quant Network: Token valuation dynamics and fundamentals

Quant Network: Token valuation dynamics and fundamentals
This post intends to illustrate the dynamics and fundamentals related to the mechanics and use of the Quant Network Utility Token (QNT), in order to provide the community with greater clarity around what holding the token actually means.
This is a follow-up on two articles David W previously wrote about Quant Network’s prospects and potential, which you can find here:
For holders not intending to use Overledger for business reasons, the primary goal of holding the QNT token is to benefit from price appreciation. Some are happy to believe that speculation will take the QNT price to much higher levels if and when large-scale adoption/implementation news comes out, whilst others may actually prefer to assess the token’s utility and analyse how it would react to various scenarios to justify a price increase based on fundamentals. The latter is precisely what I aim to look into in this article.
On that note, I have noticed that many wish to see institutional investors getting involved in the crypto space for their purchase power, but the one thing they would bring and that is most needed in my opinion is fundamental analysis and valuation expectations based on facts. Indeed, equity investors can probably access 20 or 30 reports that are 15 pages long and updated on a quarterly basis about any blue chip stock they are invested in, but how many of such (professional) analyst reports can you consult for your favorite crypto coins? Let me have a guess: none. This is unfortunate, and it is a further reason to look into the situation in more details.
To be clear, this article is not about providing figures on the expected valuation of the token, but rather about providing the community with a deeper analysis to better understand its meaning and valuation context. This includes going through the (vast) differences between a Utility Token and a Company Share since I understand it is still blurry in some people’s mind. I will incorporate my thoughts and perspective on these matters, which should not be regarded as a single source of truth but rather as an attempt to “dig deeper”.
In order to share these thoughts with you in the most pertinent manner, I have actually entirely modelled the Quant Treasury function and analysed how the QNT token would react to various scenarios based on a number of different factors. That does not mean there is any universal truth to be told, but it did help in clarifying how things work (with my understanding of the current ruleset at least, which may also evolve over time). This is an important safety net: if the intensity of speculation in crypto markets was to go lower from here, what would happen to the token price? How would Quant Treasury help support it? If the market can feel comfortable with such situation and the underlying demand for the token, then it can feel comfortable to take it higher based on future growth expectations — and that’s how it should be.
Finally, to help shed light on different areas, I must confess that I will have to go through some technicalities on how this all works and what a Utility Token actually is. That is the price to pay to gain that further, necessary knowledge and be in a position to assess the situation more thoroughly — but I will make it as readable as I possibly can, so… if are you ready, let’s start!

A Utility Token vs. a Company Share: what is the difference?

It is probably fair to say that many people involved in the crypto space are unfamiliar with certain key financial terms or concepts, simply because finance is not necessarily everyone’s background (and that is absolutely fine!). In addition, Digital Assets bring some very novel concepts, which means that everyone has to adapt in any case.
Therefore, I suggest we start with a comparison of the characteristics underpinning the QNT Utility Token and a Quant Network Company Share (as you may know, the Company Shares are currently privately held by the Quant Network founders). I believe it is important to look at this comparison for two reasons:
  1. Most people are familiar with regular Company Shares because they have been traded for decades, and it is often asked how Utility Tokens compare.
  2. Quant Network have announced a plan to raise capital to grow their business further (in the September 2019 Forbes article which you can find here). Therefore, regardless of whether the Share Offering is made public or private, I presume the community will want to better understand how things compare and the different dynamics behind each instrument.
So where does the QNT Utility Token sit in Quant Network company and how does it compare to a Quant Network Company Share? This is how it looks:
https://preview.redd.it/zgidz8ed74y31.png?width=1698&format=png&auto=webp&s=54acd2def0713b67ac7c41dae6c9ab225e5639fa
What is on the right hand side of a balance sheet is the money a company has, and what is on the left hand side is how it uses it. Broadly speaking, the money the company has may come from the owners (Equity) or from the creditors (Debt). If I were to apply these concepts to an individual (you!), “Equity” is your net worth, “Debt” is your mortgage and other debt, and “Assets” is your house, car, savings, investments, crypto, etc.
As you can see, a Company Share and a Utility Token are found in different parts of the balance sheet — and that, in itself, is a major difference! They indeed serve two very different purposes:
  • Company Shares: they represent a share of a company’s ownership, meaning that you actually own [X]% of the company ([X]% = Number of shares you possess / Total number of shares) and hence [X]% of the company’s assets on the left hand side of the balance sheet.
  • Utility Tokens: they are keys to access a given platform (in our case, Quant Network’s Operating System: Overledger) and they can serve multiple purposes as defined by their Utility Document (in QNT’s case, the latest V0.3 version can be found here).
As a consequence, as a Company Shareholder, you are entitled to receive part or all of the profits generated by the company (as the case may arise) and you can also take part in the management decisions (indeed, with 0.00000001% of Apple shares, you have the corresponding right to vote to kick the CEO out if you want to!).
On the other hand, as a Utility Token holder, you have no such rights related to the company’s profits or management, BUT any usage of the platform has to go through the token you hold — and that has novel, interesting facets.

A Utility Token vs. a Company Share: what happens in practice?

Before we dig further, let’s now remind ourselves of the economic utilities of the QNT token (i.e. in addition to signing and encrypting transactions):
  1. Licences: a licence is mandatory for anyone who wishes to develop on the Overledger platform. Enterprises and Developers pay Quant Network in fiat money and Quant Treasury subsequently sets aside QNT tokens for the same amount (a diagram on how market purchases are performed can be found on the Overledger Treasury page here). The tokens are locked for 12 months, and the current understanding is that the amount of tokens locked is readjusted at each renewal date to the prevailing market price of QNT at the time (this information is not part of the Utility Token document as of now, but it was given in a previous Telegram AMA so I will assume it is correct pending further developments).
  2. Usage: this relates to the amount of Overledger read and write activity performed by clients on an ongoing basis, and also to the transfer of Digital Assets from one chain to another, and it follows a similar principle: fiat money is received by Quant Network, and subsequently converted in QNT tokens (these tokens are not locked, however).
  3. Gateways: information about Gateways has been released through the Overledger Network initiative (see dedicated website here), and we now know that the annual cost for running a Gateway will be 500 QNT whilst Gateway holders will receive a percentage of transaction fees going through their setup.
  4. Minimum holding amounts: the team has stated that there will be a minimum QNT holding amount put in place for every participant of the Overledger ecosystem, although the details have not been released yet.
That being said, it now becomes interesting to illustrate with indicative figures what actually happens as Licences, Usage and Gateways are paid for and Quant Network company operates. The following diagram may help in this respect:
Arbitrary figures from myself (i.e. no currency, no unit), based on an indicative 20% Net Income Ratio and a 40% Dividend yield
We have now two different perspectives:
  • On the right hand side, you see the simplified Profit & Loss account (“P&L”) which incorporates Total Revenues, from which costs and taxes are deducted, to give a Net Income for the company. A share of this Net Income may be distributed to Shareholders in the form of a Dividend, whilst the remainder is accounted as retained profits and goes back to the balance sheet as Equity to fund further growth for instance. Importantly, the Dividend (if any) is usually a portion of the Net Income so, using an indicative 40% Dividend yield policy, shareholders receive here for a given year 80 out of total company revenues of 1,000.
  • On the left hand side, you see the QNT requirements arising from the Overledger-related business activity which equal 700 here. Note that this is only a portion of the Total Revenues (1,000) you can see on the right hand side, as the team generates income from other sources as well (e.g. consultancy fees) — but I assume Overledger will represent the bulk of it since it is Quant Network’s flagship product and focus. In this case, the equivalent fiat amount of QNT tokens represents 700 (i.e. 100% of Overledger-related revenues) out of the company’s Total Revenues of 1,000. It is to be noted that excess reserves of QNT may be sold and generate additional revenues for the company, which would be outside of the Overledger Revenues mentioned above (i.e. they would fall in the “Other Revenues” category).
A way to summarise the situation from a very high level is: as a Company Shareholder you take a view on the company’s total profits whereas as a Utility Token holder you take a view on the company’s revenues (albeit Overledger-related).
It is however too early to reach any conclusion, so we now need to dig one level deeper again.

More considerations around Company Shares

As we discussed, with a Company Share, you possess a fraction of the company’s ownership and hence you have access to profits (and losses!). So how do typical Net Income results look in the technology industry? What sort of Dividend is usually paid? What sort of market valuations are subsequently achieved?
Let’s find out:
https://preview.redd.it/eua9sqlt74y31.png?width=2904&format=png&auto=webp&s=3500669942abf62a0ea1c983ab3cea40552c40d1
As you can see, the typical Net Income Ratio varies between around 10% and 20% in the technology/software industry (using the above illustrated peer group). The ratio illustrates the proportion of Net Income extracted from Revenues.
In addition, money is returned to Company Shareholders in the form of a Dividend (i.e. a portion of the Net Income) and in the form of Share repurchases (whereby the company uses its excess cash position to buy back shares from Shareholders and hence diminish the number of Shares available). A company may however prefer to not redistribute any of the profits, and retain them instead to fund further business growth — Alphabet (Google) is a good example in this respect.
Interestingly, as you can see on the far right of the table, the market capitalisations of these companies reflect high multiples of their Net Income as investors expect the companies to prosper in the future and generate larger profits. If you wished to explore these ideas further, I recommend also looking into the Return on Equity ratio which takes into account the amount of resources (i.e. Capital/Equity) put to work to generate the companies’ profits.
It is also to be noted that the number of Company Shares outstanding may vary over time. Indeed, aside from Share repurchases that diminish the number of Shares available to the market, additional Shares may be issued to raise additional funds from the market hence diluting the ownership of existing Shareholders.
Finally, (regular) Company Shares are structured in the same way across companies and industries, which brings a key benefit of having them easily comparable/benchmarkable against one another for investors. That is not the case for Utility Tokens, but they come with the benefit of having a lot more flexible use cases.

More considerations around the QNT token

As discussed, the Utility Token model is quite novel and each token has unique functions designed for the system it is associated with. That does not make value assessment easy, since all Utility Tokens are different, and this is a further reason to have a detailed look into the QNT case.
https://preview.redd.it/b0xe0ogw74y31.png?width=1512&format=png&auto=webp&s=cece522cd7919125e199b012af41850df6d9e9fd
As a start, all assets that are used in a speculative way embed two components into their price:
A) one that represents what the asset is worth today, and
B) one that represents what it may be worth in the future.
Depending on whether the future looks bright or not, a price premium or a price discount may be attached to the asset price.
This is similar to what we just saw with Company Shares valuation multiples, and it is valid across markets. For instance, Microsoft generates around USD 21bn in annual Net Income these days, but the cost of acquiring it entirely is USD 1,094bn (!). This speculative effect is particularly visible in the crypto sector since valuation levels are usually high whilst usage/adoption levels are usually low for now.
So what about QNT? As mentioned, the QNT Utility model has novel, interesting facets. Since QNT is required to access and use the Overledger system, it is important to appreciate that Quant Network company has three means of action regarding the QNT token:
  1. MANAGING their QNT reserves on an ongoing basis (i.e. buying or selling tokens is not always automatic, they can allocate tokens from their own reserves depending on their liquidity position at any given time),
  2. BUYING/RECEIVING QNT from the market/clients on the back of business activity, and
  3. SELLING QNT when they deem their reserves sufficient and/or wish to sell tokens to cover for operational costs.
Broadly speaking, the above actions will vary depending on business performance, the QNT token price and the Quant Network company’s liquidity position.
We also have to appreciate how the QNT distribution will always look like, it can be broken down as follows:
https://preview.redd.it/f20h7hvz74y31.png?width=1106&format=png&auto=webp&s=f2f5b63272f5ed6e3f977ce08d7bae043851edd1
A) QNT tokens held by the QNT Community
B) QNT tokens held by Quant Network that are locked (i.e. those related to Licences)
C) QNT tokens held by Quant Network that are unlocked (i.e. those related to other usage, such as consumption fees and Gateways)
D) the minimum QNT amount held by all users of the platform (more information on this front soon)
So now that the situation is set, how would we assess Quant Network’s business activity effect on the QNT token?
STEP 1: We would need to define the range of minimum/maximum amounts of QNT which Quant Network would want to keep as liquid reserves (i.e. unlocked) on an ongoing basis. This affects key variables such as the proportion of market purchases vs. the use of their own reserves, and the amount of QNT sold back to the market. Also, interestingly, if Quant Network never wanted to keep less than, for instance, 1 million QNT tokens as liquid reserves, these 1 million tokens would have a similar effect on the market as the locked tokens because they would never be sold.
STEP 2: We would need to define the amount of revenues that are related to QNT. As we know, Overledger Licences, Usage and Gateways generate revenues converted into QNT (or in QNT directly). So the correlation is strong between revenues and QNT needs. Interestingly, the cost of a licence is probably relatively low today in order to facilitate adoption and testing, but it will surely increase over time. The same goes for usage fees, especially as we move from testing/pilot phases to mass implementation. The number of clients will also increase. The Community version of Overledger is also set to officially launch next year. More information on revenue potential can be found later in this article.
STEP 3: We would need to define an evolution of the QNT token price over time and see how things develop with regards to Quant Network’s net purchase/sale of tokens every month (i.e. tokens required - tokens sold = net purchased/sold tokens).
Once assumptions are made, what do we observe?
In an undistorted environment, there is a positive correlation between Quant Network’s QNT-related revenues and the market capitalisation they occupy (i.e. the Quant Network share of the token distribution multiplied by the QNT price). However, this correlation can get heavily twisted as the speculative market prices a premium to the QNT price (i.e. anticipating higher revenues). As we will see, a persistent discount is not really possible as Quant Treasury would mechanically have to step in with large market purchases, which would provide strong support to the QNT price.
In addition, volatility is to be added to the equation since QNT volatility is likely to be (much) higher than that of revenues which can create important year-on-year disparities. For instance, Quant Treasury may lock a lot of tokens at a low price one year, and be well in excess of required tokens the next year if the QNT token price has significantly increased (and vice versa). This is not an issue per se, but this would impact the amount of tokens bought/sold on an ongoing basis by Quant Treasury as reserves inflate/deflate.
If we put aside the distortions created by speculation on the QNT price, and the subsequent impact on the excess/deficiency of Quant Network token reserves (whose level is also pro-actively managed by the company, as previously discussed), the economic system works as follows:
High QNT price vs. Revenue levels: The value of reserves is inflated, fewer tokens need to be bought for the level of revenues generated, Quant Treasury provides low support to the QNT price, its share of the token distribution diminishes.
Low QNT price vs. Revenue levels: Reserves run out, a higher number of tokens needs to be bought for the level of revenues generated, Quant Treasury provides higher support to the QNT price, its share of the token distribution increases.
Summary table:
https://preview.redd.it/q7wgzpv384y31.png?width=2312&format=png&auto=webp&s=d8c0480cb34caf2e59615ec21ea220d81d79b153
The key here is that, whatever speculation on future revenue levels does to the token in the first place, if the QNT price was falling and reaching a level that does not reflect the prevailing revenue levels of Overledger at a given time, then Quant Treasury would require a larger amount of tokens to cover the business needs which would mean the depletion of their reserves, larger purchases from the market and strong support for the QNT price from here. This is the safety net we want to see, coming from usage! Indeed, in other words, if the QNT price went very high very quickly, Quant Treasury may not be seen buying much tokens since their reserves would be inflated BUT that fall back mechanics purely based on usage would be there to safeguard QNT holders from the QNT price falling below a certain level.
I would assume this makes sense for most, and you might now wonder why have I highlighted the bottom part about the token distribution in red? That is because there is an ongoing battle between the QNT community and Quant Treasury — and this is very interesting.
The ecosystem will show how big a share is the community willing to let Quant Network represent. The community actually sets the price for the purchases, and the token distribution fluctuates depending on the metrics we discussed. An equilibrium will be formed based on the confidence the market has in Quant Network’s future revenue generation. Moreover, the QNT community could perceive the token as a Store of Value and be happy to hold 80/90% of all tokens for instance, or it could perceive QNT as more dynamic or risky and be happy to only represent 60/70% of the distribution. Needless to say that, considering my previous articles on the potential of Overledger, I think we will tend more towards the former scenario. Indeed, if you wished to store wealth with a technology-agnostic, future proof, globally adopted, revenue-providing (through Gateways) Network of Networks on which most of the digitalised value is flowing through — wouldn’t you see QNT as an appealing value proposition?
In a nutshell, it all comes down to the Overledger revenue levels and the QNT holders’ resistence to buy pressure from Quant Treasury. Therefore, if you are confident in the Overledger revenue generation and wish to see the QNT token price go up, more than ever, do not sell your tokens!
What about the locked tokens? There will always be a certain amount of tokens that are entirely taken out of circulation, but Quant Network company will always keep additional unlocked tokens on top of that (those they receive and manage as buffer) and that means that locked tokens will always be a subset of what Quant Network possesses. I do not know whether fees will primarily be concentrated on the licencing side vs. the usage side, but if that were to be the case then it would be even better as a higher amount of tokens would be taken out of circulation for good.
Finally, as long as the company operates, the revenues will always represent a certain amount of money whereas this is not the case for profits which may not appear before years (e.g. during the first years, during an economic/business downturn, etc.). As an illustration, a company like Uber has seen vast increases in revenues since it launched but never made any profit! Therefore, the demand for the QNT token benefits from good resilience from that perspective.
Quant Network vs. QNT community — What proportion of the QNT distribution will each represent?

How much revenues can Overledger generate?

I suggest we start with the basis of what the Quant Network business is about: connecting networks together, building new-generation hyper-decentralised apps on top (called “mApps”), and creating network effects.
Network effects are best defined by Metcalfe’s law which states: “the effect of a telecommunications network is proportional to the square of the number of connected users of the system” (Source: Wikipedia). This is illustrated by the picture below, which demonstrates the increasing number of possible connections for each new user added to the network. This was also recently discussed in a YouTube podcast by QNT community members “Luke” and “Ghost of St. Miklos” which you can watch here.
Source: applicoinc.com
This means that, as Overledger continues to connect more and more DLTs of all types between themselves and also with legacy systems, the number of users (humans or machines) connected to this Network of Networks will grow substantially — and the number of possible connections between participants will in turn grow exponentially. This will increase the value of the network, and hence the level of fees associated with getting access to it. This forms the basis of expected, future revenue generation and especially in a context where Overledger remains unique as of today and embraced by many of the largest institutions in the world (see the detailed summary on the matter from community member “Seq” here).
On top of this network, multi-chain hyper-decentralised applications (‘mApps’) can be built — which are an upgrade to existing dApps that use only one chain at a time and hence only benefit from the user base and functionalities of the given chain. Overledger mApps can leverage on the users and abilities of all connected chains at the same time, horizontal scaling, the ability to write/move code in any language across chains as required, write smart contracts on blockchains that do not support them (e.g. Bitcoin), and provide easier connection to other systems. dApps have barely had any success so far, as discussed in my first article, but mApps could provide the market with the necessary tools to build applications that can complement or rival what can be found on the Apple or Google Play store.
Also, the flexibility of Overledger enables Quant Network to target a large number of industries and to connect them all together. A sample of use cases can be found in the following illustration:
https://preview.redd.it/th8edz5b84y31.png?width=2664&format=png&auto=webp&s=105dd4546f8f9ab2c66d1a5a8e9f669cef0e0614
It is to be noted that one of the use cases, namely the tokenisation of the entire world’s assets, represents a market worth hundreds of trillions of USD and that is not even including the huge amount of illiquid assets not currently traded on traditional Capital Markets which could benefit from the tokenisation process. More information on the topic can be found in my previous article fully focused on the potential of Overledger to capture value from the structural shift in the world’s assets and machine-related data/value transfers.
Finally, we can look at what well established companies with a similar technology profile have been able to achieve. Overledger is an Operating System for DLTs and legacy systems on top of which applications can be built. The comparison to Microsoft Windows and the suite of Microsoft Software running on top (e.g. Microsoft Office) is an obvious one from that perspective to gauge the longer term potential.
As you can see below, Microsoft’s flagship softwares such as Windows and Office each generate tens of billions of USD of revenues every year:
Source: Geekwire
We can also look at Oracle, the second largest Enterprise software company in the world:
Source: Statista
We can finally look at what the Apple store and the Google Play store generate, since the Quant Network “mApp store” for the community side of Overledger will look to replicate a similar business model with hyper-decentralised applications:
Source: Worldwide total revenue by app store, 2018 ($bn)
The above means total revenues of around USD 70bn in 2018 for the Apple store and Google Play store combined, and the market is getting bigger year-on-year! Also, again, these (indicative!) reference points for Overledger come in the context of the Community version of the system only, since the Enterprise version represents a separate set of verticals more comparable to the likes of Microsoft and Oracle which we just looked at.

Conclusion

I hope this article helped shed further light on the QNT token and how the various market and business parameters will influence its behavior over time, as the Quant Network business is expected to grow exponentially in the coming years.
In the recent Forbes interview, Quant Network’s CEO (Gilbert Verdian) stated : “Our potential to grow is uncapped as we change and transform industries by creating a secure layer between them at speed. Our vision is to build a mass version of what I call an internet of trust, where value can be securely transferred between global partners not relying on defunct internet security but rather that of blockchain.”.
This is highly encouraging with regards to business prospects and also in comparison to what other companies have been able to achieve since the Web as we know it today emerged (e.g. Microsoft, Google, Apple, etc.). The Internet is now entering a new phase, with DLT technology at its core, and Overledger is set to be at the forefront of this new paradigm which will surely offer a vast array of new opportunities across sectors.
I believe it is an exciting time for all of us to be part of the journey, as long as any financial commitment is made with a good sense of responsibility and understanding of what success comes down to. “Crypto” is still immature in many respects, and the emergence of a dedicated regulatory framework combined with the expected gradual, selective entrance of institutional money managers will hopefully help shed further light and protect retail token holders from the misunderstandings, misinformation and misconduct which too many have suffered from in the last years.
Thanks for your time and interest.
Appendix:
First article: “The reasons why Quant Network (QNT) will rise to the Top of the crypto sphere in the coming months”
Second article: “The potential of Quant Network’s technology to capture value from the structural shift in the World’s assets and machine-related data/value transfers”
October 2019 City AM interview of Gilbert Verdian (CEO): Click here
October 2019 Blockchain Brad interview of Gilbert Verdian (CEO): Click here
July 2019 Blockchain Brad interview of Gilbert Verdian (CEO): Click here
February 2019 Blockchain Brad interview of Gilbert Verdian (CEO): Click here
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About the original author of the article:
My name is David and I spent years in the Investment Banking industry in London. I hold QNT tokens and the above views are based on my own thoughts and research only. I am not affiliated with the Quant Network team in any way. This is not investment advice, please do your own research and understand what you are buying before doing so. It is also my belief that more than 90% of all other crypto projects will fail because what matters is what is getting adopted; please do not put more money at risk than you can afford to lose.
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