As the long summer of crypto drags on, there is not much on the surface to get excited about right now. It feels like only the most passionate individuals stuck around after the ‘Fall of Bitcoin’ to slog through the lean times. However, those that are still here will be rewarded once the market turns bullish once again.
If you are not a developer or a day trader, you do not have a lot of options for how to spend your time in crypto. With prices stagnant and at a steep discount, accumulating and holding coins for the green times is your primary path forward.
One important skill that is learned systemically by the industry in times like these is the ability to evaluate projects thoroughly, scrutinizing their every detail. Your Bitcoin is even more precious now and you should ask every question imaginable to verify where you are sending it is worth your time.
Because of this increase in investor care and knowledge, projects are forced to evolve. The old tricks will not work anymore on a large scale and developers are finding that the only way to earn investor’s trust is to create a project worth their time.
Another byproduct of the bad times is that it provides an opportunity for innovation. Innovation in cryptocurrency does not always have to be a groundbreaking invention, like smart contracts. Sometimes innovation occurs when the industry decides to write their promises in their code, not just in their White Papers. Right now, that is happening with the emerging Proof-of-Consumption coin structure.
Proof-of-Consumption (PoCon)
In cryptocurrency, we have learned to ask two very simple questions about a project, “What is the point? And how will it be used?” As I have said in previous articles, utility will be the dominate trend for the rest of 2018, leading into 2019. The world wants to know what cryptocurrency can achieve besides speculation, manipulation, scams, and hacks.
PoCon is the product of teams taking the time to find ways to implement their utility directly into their code, verses simply suggesting there is a specified use case for their coin. Because of this, teams commit to achieve their utility as soon as possible in order to continue to reward their investors.
Let us take Trittium for example. Trittium is a loan platform that specializes in collateralized loans and peer-to-peer collateralized loans. Users can use Trittium coins or other cryptocurrencies as collateral to gain access to fiat currency quickly, leveraging the expectation that their digital currency will appreciate while they use the fiat and pay back the loan.
Trittium earns revenue through fees, interest earned on loans, and the appreciation of collateral collection due to defaulted loans. Recently Trittium announced their switch from purely Proof-of-Stake (PoS) and masternodes to a PoCon structure. Instead of a slow, continuous emission of new coins into the market, a hard cap on their coin supply will be set.
As revenue begins to flow into the platform, a large portion of those funds will be burned and a mirroring ‘reward block’ will be created with an identical number of coin and be paid out to masternode holders and staking wallets. This way the maximum supply of coins will remain unchanged and completes the PoCon process.
Commitment to Utility
One of the most desirable features of a cryptocurrency to investors in today’s market is the use case, its utility. They judge projects based on how realistic it is, how popular it could be, and ultimately how that utility will drive demand and increase the value of their investment. PoCon is the industry reacting to that desire.
Value should be derived from action, not speculation. The teams that are implementing PoCon are expressing to their investors that they have confidence in their product and that it will begin producing revenue soon. Teams will reward their coin holders as proof that their product is in fact useful and profitable. This is a systemic fulfillment of the promise of utility.
There is one major risk with this system that teams should consider carefully before committing to it. If a platform reaches their coin supply’s hard cap but their utility is not yet producing as expected, very little or no rewards will be distributed to investors. If their investors are not receiving rewards they deem acceptable, they could lose confidence in the project and sell off their holdings.
In today’s crypto market, investors are skittish and quick to come to conclusions about the health of a project. Collateral damage of the boom and bust cycle at the end of 2017. This makes executing their utility immediately even more imperative for teams.
That risk however is necessary for the success of cryptocurrency. Like most markets, only the strong survive. There are going to be projects that crumble under the pressure of the demand for the continued influx of revenue. However, if mass adoption is the desired outcome for crypto, we as a whole need to commit to creating a culture of action.
Wrap Up
Proof-of-Consumption should be the chosen path for any cryptocurrency that plans on offering revenue-generating services or products to the world. And it should be the first thing investors look for when looking at new projects to invest in. If a team is not serious enough to commit to the success of their use case, then you as an investor should take the time to seriously consider whether or not to spend your precious Bitcoins on them.
With that being said, there are some projects where PoCon does not quite fit. For example, charity coins or coins like Dash. The coins come from a portion of the block rewards and are utilized by the team to execute their plans. They can also coordinate coin burns from that amount to help reduce supply. However, with no active revenue stream like service providers, PoCon would not be an appropriate choice.
This next year will be the consequential ‘crap or get off the pot’ time for cryptocurrency. My favorite saying when I want people to stop wandering, make a decision, and move forward. The real world wants to know what digital currency can do for them. We have had a decade to figure it out. Now it is either put up or shut up.
The industry must prove to the world why it is important and that will only occur when individual projects elevate their expectations of themselves and challenge each other to succeed at bringing utility to the world. Proof-of-Consumption is a step towards fulfilling that promise.