The state of cryptocurrencies now, where they are heading in 2018, and why we believe users need to be activated.
The current discourse surrounding cryptocurrency in the mainstream media often focuses on the negative and unproductive aspects of the industry. Frequently the media reports on fraudulent ICO’s, damming statements by financial regulators and other crypto-horror stories. The top trending stories about cryptocurrencies on any news site are typically negative. Amongst all this it’s more than easy to forget the original ideas that first drew us to the space. This type of news coverage is also likely to be driving away people who would otherwise be valuable members of the community.
Over-speculation is a huge issue for projects trying to build a reputable brand and product in the space. Whales take advantage of an immature market with high liquidity to make huge returns at the cost of ordinary users. Despite the dangers of a highly volatile market the basis for this speculation is still good. With so many getting into cryptocurrencies as a way to make money rather than to use them, volatility in the market is to be expected. Despite this volatility being bad for business, the best companies that are forged in these conditions and survive will go on to change the way consumers interact with markets.
What will differentiate the cryptocurrency projects that run into the sand from those that drift off into widespread adoption?
For a cryptocurrency to thrive into the future it must merge functionality with a striking and beneficial ethos. The successful cryptocurrencies will be the innovative ones, but they must also couple their game-changing ethos with practical, and money saving, benefits. Once a user has and understands these, they will not follow the day-to-day fluctuations of the market as they will look to be holding for the longer term. Those investing only to chase the high percentage returns they read about on the news, often whilst having little understanding, will cut their losses when the tide turns against them, or once they hit a certain return they have been holding out for.
Sustainable crypto-projects should therefore be looking to recruit a certain type of investor, one who is looking not just to make a return but also to support the network. At Dune we believe in the overriding importance of the way in which a user-base interacts with a network to support it, as we will go on to show.
There are a few key areas that cryptos are looking to work on in 2018. Often the issue is not so much how to solve these issues, it’s how to do so whilst maintaining the decentralization of the original bitcoin network. As Steve Wozniack recently said, “all the other [cryptos] tend to give up some of the aspects of bitcoin, […] for example, being totally decentralized and having no central control. That’s the first one they have to give up to try to have a business model.” These platforms can not guarantee decentralization, instead peers must define and delegate decentralization.
Governance comes down to attempting to give direction to a decentralized network in which many disparate individuals have significant funds and energies invested and conflicting interests. When this has not been properly handled it has resulted in hardforks, clearly an undesirable outcome. Solutions implemented by networks usually involve placing a minority as having superior positions on the networks, enabling them to make decisions for the rest. Often there are protocols in place to try to hold these groups accountable, but not always. The issue with most of these solutions is as Wozniack’s says, networks are effectively trading efficiency for decentralization.
In December 2017 bitcoin saw a huge rise in the cost of transaction on their network, linked to the huge rise in the number of transactions and the rise in transaction times. As Vitalik Buterin pointed out in 2017 “bitcoin is processing a bit less than 3 transactions per second, Ethereum is doing five a second. Uber gives 12 rides a second. It will take a couple of years for the blockchain to replace Visa.” Once these barriers are overcome, the viability of blockchain payment systems comes a long way.
Arguably the most important problem to be solved is privacy, as is well known with bitcoin, and others, all transactions and therefore account balances are viewable on the blockchain. Suddenly the currency valued for its privacy is the opposite, with programs already developed to work out what your bitcoin address is from your activity.
The Dash currency innovated the developments of a second tier to the blockchain, an upper network of nodes that can verify the blockchain below, while adding private transactions and instant transactions. Since then many coins have forked off of Dash’s code, or have mirrored it to some degree. Others have adopted the protocol but renamed it, and perhaps altered the way they function. As a blanket term to refer to a wide variety of differently behaving second-tier nodes, we use the super-nodes.
Super-nodes provide a way for network supporters to vote on key decisions, for example Dash masternode operators are given one vote per masternode on certain governance issues. For a crypto to be viable it’s user base must have real power in deciding what happens at key junctures, and it is this which will keep super-nodes as an attractive option for crypto users.
We are seeing the market attractiveness of the super-node model already. Since Dash launched there are now 325 other masternode currencies, not counting other super-node protocols. It’s clear that masternodes are a useful problem solving device for currencies, and they are being championed by market analysts such as Crypto de Medici. They have rapidly become a huge feature of the cryptocurrency world. As of the 6th June 2018 https://masternodes.online/ reports 170,000 masternodes being live.
Appetite for financial change is here, and the shift will be induced by direct financial savings coupled with the ability to side step traditional financial services. Each and every intervention, whether negative or positive, into the cryptocurrency galaxy from those in political power or the mainstream financial institutions brings this event horizon one step closer. As time progresses those currencies that provide a powerful decentralized services will be turned to by more and more people, probably not because they believe in some utopian money system, but just to save some money, hassle and to provide security. Users must have incentives if adoption is to happen.
It is clear that there must a connector between networks and their network supporters, to solve problems of usability and centralization mentioned earlier. A system of governance that only benefits the wealthy is not desirable if it is also supposed to be revolutionary. In short as much as new developments flood in, there is still much work to be done on the way in which these innovations reach the average user before they get any benefit from them.
It is from this position of understanding that we have come to develop Dune, a dynamic layer to sit in between users and the masternode networks, to the benefit of both. Stay tuned for more updates on how our world first protocol does just that.