Big Bang of Tokens
When a government becomes greedy, it printedlots of money. When coinpreneurs get greedy, they minted a lot of tokens. Inthis new revolution or big bubble, there are a new bunch of people partying,traditional players such as government, banks, venture capitalists were notinvited like ugly girls at college prom.
Coinpreneurs created new money, and theyreinvested these new monies into even newer cryptocurrency projects thatcreated their own cryptocurrencies. You can easily see this is a reinforcing loop.you wouldn't be surprised at all when there is a boom, bubble and then a BigBang, until finally the ugly girl decided that nobody gets fun if she doesn'tlast September.
The currencies may be minted afresh, but theeconomic rule of demand and supply is old and good. When there is an oversupplyof monies, the money depreciates in value, unless the coinpreneurs successfullybuild the economy that creates a demand for this currency. The problem is many“coinpreneurs” don't bother to build what they said they will, many tokenbuyers don't bother to read the whitepaper to find out what the team promisedto build, simply because they know someone who has made a lot of money quicklywithout reading one page of any whitepaper.
Bad coinpreneurs, bad Leeks and bad results
In 2017, when many new monies are created;there tags along with a group of token buyers, often called “leeks” in the nameof a Chinese vegetable that looks like the grass on your lawn, you need to getthem trimmed all the time and they always grow. The metaphor here is thatbigger players often manipulate the token prices and gain at loss of these“leeks”.
When both “coinpreneurs” and “leeks” solepurpose is to “making money”, things get weird and wild. If the “coinpreneur”can mint money, dump them on token exchanges for fiats and buy himself a Porsche,why would he bother to build anything? If the token buyers can make lots ofmoney and give a damn if the project is solid, why do the leeks bother to readthe often full-of-tech-jargon whitepapers?
If there are token buyers who lost money,I need to point out that token buyers are not completely victims, they are accomplices.Some token buyers buy shitty coins knowingly because they think they can dumpthem before the price crash.
When both “coinpreneurs” and “leeks” wantnothing but “making money” and powerful tool such as blockchain andcryptocurrencies are put in their hands, the result is not pretty. Many coinprices plummeted below the sea level.
Diversified Source of Funding
These individual token buyers, aka, leeks,don't even consider themselves investors, instead they are more often referredto as token speculators by themselves and others. They might not be as sophisticatedand professional as venture capitalists. But the bullish token markets of 2017were truly king makers, I personally met at least two guys who told me someonewho started with a modest 100,000-yuan initial fund and ended up with10-billion-yuan worth of tokens on their cellphone token apps. Most VCswouldn't make that kind of money for years with their “portfolio” of deals,most of which ended up written off.
These newly minted rich token investorsare firm believers of blockchain economy. I believe that will change theinvestment landscape because they are wealthier than most people who callthemselves VCs and they bring with them a new set of standards about how tochoose coins to buy. The impact of this new blood into the dead water VCcommunity is yet to be unveiled.
Brave new world of crowd investment
ICO could be thebest fundraising tool in hands of ambitious visionaries who get moresatisfactions in building things than having Italian shoes, expensive cars andhouses; best token buyers are dreamers who wanted to be part of the processduring which the world is changed, or “make a dent in the universe”.
I hope to see a new brave world thatidealistic technologists envisioned, millions of individual investors pooltheir cryptocurrencies to fund moonshots that are too long term than mostventure capitalists would be willing to invest, but of significance to humanityand the future of the world.
The introduction of crypto currencies is ahistorical moment, at which for the first time that entrepreneurs mint currencyand offer their personal currency for other liquid currency to fund theirprojects. This is significant because this is the cheapest money ever. A privilegethat has been reserved for central banks for hundreds of years. Establishmentssuch as governments, banks and venture capitalists are watching this happeningin awe. The knee jerk response is to proclaim this is illegal fundraising. Itis easy to call something illegal, it is not yet completely certain how thisnew ban on “illegal fundraising” can be reinforced. To stop people buyingtokens minted by entrepreneurs instead of central banks, there are two ways,either all jurisdictions come to an agreement to shut down all crypto-fiat exchangesworldwide, or to shut down the internet worldwide. Neither comes easy without amajor damage occurred.
Why VC Lose to Leeks?
Fiat is the most expensive money in theworld, because government is a monopoly business, they don't have incentives toimprove their work efficiency.
The secret weapon of entrepreneurs and leeksis cheaper money, tokens that they minted and sold cheaply; VCs still raised fiatmoney from some else, often no easier than entrepreneurs beg money from VCs. Whenthey sell their expensive money to entrepreneurs, how could they compete withsomeone who mint them or buy them cheap as dirt?
Token buyers get tokens from ICOs atprices often counted in a number with multiple decimal places, in cents andfens. When these coins get to exchange and becomes tradable, prices easily jumphundred-fold, thousand folds. The token investors don't need to wait for yearsto exit and liquidate their equities. That is like using a machine guns toslaughter charging Mongolian horsemen.
Many VCs chose to join the ranks of leeks.That is a wise choice. If you cannot beat them, you join them. An ex-VC that Ihave met at an event shared a story. He was approached end of 2016 by someblockchain startups for seed funding, he deemed that project was “crap andun-investable” at a VC standard so he rejected them, one month later the tokensale of the startup successfully raised hundred million Yuan worth of ETH andbitcoins. He was impressed but not moved. He was approached again by a few blockchainstartups, but he considers them un-investable a said no. For the next 5 months,he had not received a single call from any entrepreneur, he was curious and calledthem back and asked what you guys are up to. They said they went ICO and theydid not need money. Finally, he decided to buy some “shitty coins”. The resultis that he has made more money in months than what he had made in his previousyears of career as a VC combined. That experience converted him to a tokenbeliever and he went all in.
Investment in more personal currencies
In this new brave bizarre world, fiat isno longer the only money, VC is no longer the preferred source of fund, Nasdaq,Shanghai and Shenzhen Stock Exchange is no longer the only destinations to goIPO, even IPO is no longer the only option to raise fund and go public.
Put a cap on the hot lava of volcano is probablynot a good idea…no matter what you call them, illegal fundraising or not moneyat all.
to be continued.
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