The Cryptosphere Teaches Economics
Bitcoin proves that good ideas are copied, creating competition. When I was a boy, I would get frustrated when my brothers would copy me until my granny pointed out one time that “imitation is the sincerest form of flattery.” She was right. No one copies bad ideas because they’re bad ideas, but good ideas will have thousands of imitations. When people tried to argue against bitcoin because “I could just copy it” I was laughing so hard at their pathetic arguments because it actually proved the very opposite of what they were saying! If bitcoin was a terrible idea, it would have no one trying to imitate it and yet look at how many other copies of it exist. In economics, we call this competition, but the winner is generally the early bird.
Steem teaches inflation. The cryptocurrency Steem experiences 100% inflation per year forever, unless this is later changed. When I first warned people of this fact, no one cared because “OMG, bright shiny speculation” and there were some people who were dropping $10,000 into the currency Steem at $2+ per Steem, thinking that it would eventually rise to $100. Then inflation did what it’s good at: more Steem kept being printed and people who actually value their time and money didn’t buy or hold onto Steem and the result was that it inflated. In fact, Steem experienced such strong inflation that after we suggested to get rid of it, Steem subsequently crashed over 90% in value! The great thing about Steem is that it’s teaching people how destructive inflation is. As my buddy Fred pointed out, he saw his account “value” drop 80+% in a few months. Does low inflation sound like a problem to you? Didn’t think so.
We noted that Zcash was significantly overpriced and our theoretical FinTekNeeks Hedge Fund has been obliterating the Zcash longs. As I wrote about Zcash, which is one of many reasons I have no interest in it from the long side:
From my view, it lacks any of the infrastructure that bitcoin has and the community is solving a problem that’s already been solved (Dash, Monero, Shadowcash, Boolberry, etc), so they’re late to the party. Even if they later catch up completely on privacy, these other cryptocurrencies are two steps ahead of them and are working on the next innovation.
In most cases, supply shocks bring a lot of economic hardship to people, such as the sugar supply shock in Egypt that is presently underway (listen to my talk on
blockchain-based solutions with commodities where I mention it). Zcash is not comparable as it was self-inflicted, but it does highlight a good example of one.
Dash is to the cryptosphere as Rome was to Eras. The Roman Era lasted from about 800 BC to 1400 AD – an era that lasted over 2000 years (Roman Kingdom, Roman Republic, Roman Empire, Byzantine Empire). Rome started as an early agricultural empire that went unnoticed for quite some time, but was fundamentally founded on the principal of the natural republic – a system where people with merit rose to the top and ruled over those without merit. Dash is the closest model to the Roman Era in the cryptosphere; with its Masternodes, governance model, and miners, Dash provides users with routes to help govern the success of Dash. For a simple example of this, you can earn 8.65% Dash a year with a Masternode, but it requires 1000 Dash principal. Noting that you will have to set aside Dash for this, would you vote on ideas that will hurt Dash when you’re holding a lot? No. This is what the Roman Era understood and this is what Dash also gets. In modern times, we teach this system in game theory and advocate that a system which encourages cooperation over the long run will succeed for a long time.
Ratios are economic and financial measurements meant to convey the value and pricing accuracy of an item. A simple example of this is a price-to-earnings ratio; a security with a price-to-earnings ratio of 200 means that the security’s price is 200 multiples of its earnings. Our ratios look at the supply ratios to compare value.
Indicators show health assessments or measurements of economic parameters. For an example, if inflation is 3.5%, this is an inflation indicator showing that the currency experiencing inflation is losing 3.5% of its value every year. Economic Indicators and Strategies are exclusive for clients and these update from time to time so that clients know how we see markets and where we see opportunities. For the Beta release, the Indicators and Strategies are the FTN COSIWA, FTN Inflation, FTN NII, and FTN Allocation.