Cryptocurrencies and their diffusion

[Maluridea]

My 2 cents on the business aspects of crypto-currencies.

Who am I? I research innovation management and business development and teach strategy and innovation at a Swedish university. Thus the perspective I employ is very much influenced by this. This is not to say that other aspects are not important, on the contrary; as dogecoin and numerous other successful launches have shown.

My personal belief is that cryptocurrencies have the potential to change the world in a way that the internet did. This technology presents an opportunity whose limits we have not even begin to test. It might just be one of the biggest threats that the current financial and control establishment has seen, and one of the biggest opportunity for global development we have ever seen.

However, the long term survival of a coin will not be guaranteed by technological aspects, nor by your 12 year old sibling going AWWW when they see the coin. It may guarantee early diffusion amongst miners and users, but it does not offer anything that will guarantee the long term survival of the coin. I therefore urge the community as a whole to start considering business aspects to a far greater extent than what is currently evident. Bitcoin already has a fair share of services that are basically required before a wider scale diffusion, which is a good thing since a lot can be learned from it.

By that I do not mean fast transaction times and cold wallets. Technological aspects are by now mere qualifiers that a potential adopter will consider as given. Consider the technological superiority of cryptocurrencies, and then take a moment to think about what may hinder their adoption. In order to ensure diffusion there are a few other aspects that are important. I will here only mention those that are relevant for businesses.

• First, I believe that the dominant logic of payment methods today are disrupted by cryptocurrencies. It does not matter if they payment method is superior if it disrupts the whole eco-system.
• Second, I believe that there will be a lot of forces acting against the diffusion of cryptocurrencies. The attack will be direct in countries like China, but in “democratic” countries the approach will probably rely on the every so trustworthy terrorism or war on drugs or something. This complicates diffusion especially on the crucial industry level. This probably already spurs the development of decentralized exchanges and etc.
• Third, I believe that fluctuations in price poses a serious problem for a payment system solely based on cryptocurrencies.

 

There are more aspects but these are the three major ones I see as most crucial. In time, technological advancements such as payment processors (e.g. BitPay) will be crucial to address number one and three above. As for the second part, I have great faith in the ability of developers to wage that war against centralized control.

Now, I see great potential in many coins and great enthusiasm. However, I have so far lacked any true business sense in any. If I have offended anyone by saying this then by all means present yourself here . Alts today seem more eager to ensure a launch that either benefits the community by being fair, or the developer by being unfairly skewed or pre-mined.

What I would like to offer the community is a discussion around the business aspects. Feel free to discuss whatever you like that concerns business aspects and technological innovations with me. I have my ideas on what I believe may result in a significant boost in the sustainability of a coin, so if you are interested feel free to PM me. I am up for any serious discussion on business diffusion and adoption, and am interested in contributing to the development of such.

Given that I just recently got on this community I would like to give you the possibility to get to know me a bit better:
http://se.linkedin.com/pub/peter-altmann/28/96a/73b/

[markm]

I suspect that Mircea Popescu, as in Mircea Popescu's Options Emporium (MPOE) might suggest that the fluctuations in price aka volatility of exchange rate thing is actually a finance thing rather than purely a business thing.

Aren't options supposed to be the financial world's answer to such "problems" ?

Isn't being caught out by a change of price aka exchange-rate really just a symptom of a failure to properly hedge oneself with an appropriate array of options?

Oughtn't payment processors and such be able to offer a stable price across a span of time by proper employment of options?

-MarkM-

[tokyoghetto]

such words. so smart. many IQ.

[hypostatization]

I therefore urge the community as a whole to start considering business aspects to a far greater extent than what is currently evident.

There are more aspects but these are the three major ones I see as most crucial. In time, technological advancements such as payment processors (e.g. BitPay) will be crucial to address number one and three above.

Now, I see great potential in many coins and great enthusiasm. However, I have so far lacked any true business sense in any.

How far have you looked?

Google Ventures, Andreessen Horowitz, IDG Capital Partners, FF Angel, Lightspeed Venture Partners, The Bitcoin Opportunity Fund and Vast Ventures all found Ripple: https://ripple.com/

They emphasize support of all currencies (thereby mitigating price instability issues of single currency systems), payments, and decentralized exchange.

Director of Business Development: https://ripple.com/blog/interview-with-welly-sculley-director-of-business-development/

[Maluridea]

I suspect that Mircea Popescu, as in Mircea Popescu's Options Emporium (MPOE) might suggest that the fluctuations in price aka volatility of exchange rate thing is actually a finance thing rather than purely a business thing.

Aren't options supposed to be the financial world's answer to such "problems" ?

Isn't being caught out by a change of price aka exchange-rate really just a symptom of a failure to properly hedge oneself with an appropriate array of options?

Oughtn't payment processors and such be able to offer a stable price across a span of time by proper employment of options?

-MarkM-

I do not know enough to give an informed opinion . Financial factors are undoubtedly having a huge impact on the development of cryptocurrencies. As stated in my original post, I see cryptocurrencies as any other technological innovation and apply that perspective. Price stabilization mechanisms that are of financial nature are very interesting and a must for a long term viable currency, but it is also not a necessity at the current state we are in. Being in the early stages of the development I would argue that diffusion to merchants is enough by simply being able to accept cryptos that are traded into fiat currency using the exchange rate at that moment.

[Maluridea]

How far have you looked?

Google Ventures, Andreessen Horowitz, IDG Capital Partners, FF Angel, Lightspeed Venture Partners, The Bitcoin Opportunity Fund and Vast Ventures all found Ripple: https://ripple.com/

They emphasize support of all currencies (thereby mitigating price instability issues of single currency systems), payments, and decentralized exchange.

Ripple is indeed an extremely interesting system and I believe that one reason it is attracting so much interest is because it does not disrupt the whole financial eco-system. Ripples are as I understand it more akin to a payment network/system rather than a cryptocurrency. Unlike cryptocurrencies like BTC LTC etc. Ripple does not offer an alternate currency as much as it addresses a need to transfer currencies. As such it is extremely important for the long term viability of cryptos given how it allows for a merchant to take payment in local fiat whilst the buyer can pay with e.g. BTC.

The way I see it, cryptos will not "revolutionize" the world by having actors switching currencies left and right. The switching costs are too high, it breaks established ecosystems controlled by VERY powerful players, and uncertainty is still too high for mainstream businesses to adopt cryptos of any kind. However, payment processing systems such as ripple, bitpay etc. will pave the way for their adoption.

This is why I would like to see a crypto putting way more emphasis on business aspects. Two reasons stand out:
1) Technological aspects are pretty much qualifiers by now. Business models and business aspects become ever more important if a crypto wants diffusion outside miners and the user community.
2) For payment systems to adopt a crypto, the crypto has to show that it is a viable trading currency that is used in trade.

As I see it, there are still a plethora of possibilities to encourage diffusion of cryptos, and many different business models can be applied. Technology will not sell itself. What I am interested in is discussing these options, and by what viable means they can be incorporated into cryptos. I am by no means claiming that coins such as Doge/CAT/moon etc. will not succeed in the future, as previously said many other factors than business related and diffusion related play a central role. I am however saying that they make very little sense from those perspectives, as does the majority of cryptos today, but they do not necessarily need to.

[hypostatization]

Ripple is indeed an extremely interesting system and I believe that one reason it is attracting so much interest is because it does not disrupt the whole financial eco-system. Ripples are as I understand it more akin to a payment network/system rather than a cryptocurrency. Unlike cryptocurrencies like BTC LTC etc. Ripple does not offer an alternate currency as much as it addresses a need to transfer currencies. As such it is extremely important for the long term viability of cryptos given how it allows for a merchant to take payment in local fiat whilst the buyer can pay with BTC.

Ripple handles payments, exchange, and also provides its own currency: XRP.

XRP may be used directly for transactions. It also serves infrastructure purposes, mitigating DDOS attacks and easing path finding for currency conversion.

Here is a solid introductory video on Ripple: http://vimeo.com/63784865

Similarly, this page is a great introduction for people who understand Bitcoin: https://ripple.com/wiki/Introduction_to_Ripple_for_Bitcoiners

The way I see it, cryptos will not "revolutionize" the world by having actors switching currencies left and right. The switching costs are too high, it breaks established ecosystems controlled by VERY powerful players, and uncertainty is still too high for mainstream businesses to adopt cryptos of any kind. However, payment processing systems such as ripple, bitpay etc. will pave the way for their adoption.

In addition to handling payments, Ripple solves for currency switching. It does this while lowering costs, and without breaking established ecosystems. Ripples seeks to enable users on opposite ends of all transactions to use any currency they choose. A vendor accepting Yuan will eventually be able to be paid in Yuan by a buyer holding only DOGE.

This is why I would like to see a crypto putting way more emphasis on business aspects.

As of yesterday, Ripple now accepts cash deposits via ZipZap: https://ripple.com/blog/ripple-now-multi-lingual-supports-cash-deposits-and-more/

Regarding early adopter diffusion of XRP (the internal currency), Ripple Labs has created a method to allow users to earn XRP in a manner similar to mining: https://www.computingforgood.org/

CureCoin and GridCoin are also worth checking out, if contributing to humanitarian computing projects appeals to you.

[Maluridea]

I've been thinking some more about the development of cryptocurrencies. Now, having that said I see two things that I believe will impact the continued development (the first wave being technological development and variations of technology to ensure its feasibility and functionality) of this technology: 1) The role of "bridgers", and 2) the creation of ecosystems.

I define 'bridgers' are functions, actors, entities and/or activities that aim to create a 'bridge' between the old ecosystem and the new technology that is otherwise disruptive of old ecosystems. The bridgers can be for instance technological (payment processors, exchanges etc), institutional (tax laws including cryptos, or regulations around how they can or cannot function), social (memes, user diffusion etc.). The bridgers play a crucial role in the short term viability of a crypto (by this I do not mean launch day+2 ... but rather refer to them being able to used in trade).

'Ecosystem' creation is basically the creation of systems centered around the new technology that does not rely on existing systems to function. These can be  technological use of the underlying technology to ensure various user needed functions (domains, anonymity, communication, data etc.). But more importantly from a business diffusion perspective, they also need to create ecosystems that businesses find attractive, such as platforms for trade (e.g. eBay like platforms, or online stores), salary systems, tax and regulatory systems, DACs etc.

The first is crucial for short term viability. The second is about 10-15 years down the line (if the story of the internet will repeat itself). Those who feel that they may be too late to board the ship should probably stop looking for the ships that have sailed and instead focus on the ones that will undoubtedly emerge over the years to come.

Share your thoughts!