Vitalik Buterin, the founder of the groundbreaking Ethereum cryptocurrency, stated in a recent BitNewsToday interview that 90% of token startups will fail. Sounds kind of jaded for a 23 year old, and especially cheeky, when you consider that Bitcoin rocketed to a record $18K this past week.
More than a few investors have been vindicated, this week, for having the vision to invest in Bitcoin.
But, before conclusions get jumped to, let’s take a deeper look at what this crypto whizz might be trying to tell investors. To start with, here are two reasons he gave for this observation.
1) Cryptocurrency has not yet made the transition to mainstream as a clear medium of exchange.
2) No clear [mainstream] “business model” exists after which ICO startups can pattern themselves
As-glam-as the Bitcoin ascendancy has been for investors, it is for all intents and purposes a currency investment.
For the purposes of this discussion, Lantah will take a short look at these points.
Mainstream Cryptocurrency Spending
Where does a Bitcoiner spend his hard won crypto?
In a Google search of places you could spend Bitcoin—the Rockstar of Currencies—back in 2015. It was pretty promising. Not sure what’s out there now. Personally, I’m holding out for Walmart.
3 ATM Machines
Here’s a map of local places in my community that take Bitcoin.
This does beg the question, why these 3 machines are needed except that Bitcoiners use them to cash out their crypto for dollars. Mostly these are 3rd party intermediaries. Some big names do take Bitcoin: Overstock, Microsoft, Virgin Galactic, Save the Children, Wikipedia, Tesla, the MIT bookstore, Shopify, and social gaming giant Zynga among others.
85 US Restaurants now accept Bitcoin
If you were planning on taking the family out tonight for a meal on Bitcoin, you better make sure your tank is full, because you’re going to drive. That is unless you live close to one of the 85 US restaurants that take Bitcoin. Enough said.
Locations in the Metropolitan New York City Area
At this very speculative moment in the history of Bitcoin, I think it silly to imagine someone would spend their Bitcoin on a dinner when it might double in price tomorrow.
I think Mr. Buterin has made this particular point, even with queries from a cursory Google search.
No Clear Business Model
Let’s start with the definition. A business model is a design for the successful operation of a business, identifying revenue sources, customer base, products and details for financing.
Last February, The Merkle offered a list of 5 cryptocurrencies with “unique” business models, which includes Ethereum but these are not traditional ramp up bootstrappers for every customer and their grandfather. They tend to be tightly bound to the digital, cryptocurrency space. They are:
Storj - a blockchain twist on cloud storage
MaidSafe - a private data storage provider
Augur - is a prediction market quasi world event betting house
Ethereum - originator of smart contract technology
Steemit - a content sharing platform
And, the big wave of ICOs and PreICOs seen over the last year have really been designed as funding mechanisms for startups. Only a small percentage of these tokens have actually a utility.
It’s Still Early
Pronouncing sentence on this new method for funding business is slightly premature. Blockchain and cryptocurrency are in their infancy, and the crypto-community is still busy ironing out the bugs.
A better declaration might be, now that we’ve identified a few opportunities, let’s see what solutions the innovators present.