Wall Street. Lambos. Mooning. Alt-Coin Season. Stock-To-Flow Models. Institutions.
We hear these words a lot tossed around in the crypto industry. Unfortunately, this shows the mindset that is being created surrounding all that is taking place. It summarizes how people view cryptocurrencies in general.
All these words have something in common. They show that people are viewing what is taking place as an investment. The idea is to get cryptocurrency today in hopes that it will go up tomorrow. Wall Street entrance takes this to another level.
Many feel that Bitcoin is going to be the "money of the Internet". That might end up being true although I find it unlikely. Bitcoin is epitomizes this viewpoint since the price is discussed on a daily basis on financial shows all over the world.
In fact, can anyone name 5 projects that are being built on Bitcoin that have useful application to the average person from a non-financial perspective? The entire development around this blockchain is how to make transferring money quicker and easier.
Of course, this is of tremendous benefit to the world. This is provide a growing alternative to the SWIFT network. However, it does present a problem when it comes to economic development.
The alt-coins fall into the same category. People are looking for the accumulation of tokens to become rich. This is obviously a benefit to being an early adopter. Those who are at the forefront of any new technology are in position to take advantage of that if it goes mainstream.
However, the entire industry appears to be focused upon what to do to get the price of the token up. This is looking at things from an investment perspective.
What is missing is the idea of growing economies. If we are becoming "Netizens", then the networks we are operating upon are akin to nation-states.
Look at the support sites that are out there. We all know what the price of the Ethereum token is. That information is found in a number of locations. Nevertheless, can anyone tell me what the GDP was of that blockchain last year? What was the growth rate in terms of production of the ecosystem? Notice how we do not have those metrics.
Few people in most countries will know if their currency is strong or weak. Unless they follow the financial shows, do a lot of traveling, or deal with imports/exports, it is a non-issue to them. They do not engage upon currency trading so it matters none.
What does concern them is how their economy is doing. If it is going well, more is generated in the economy, creating more wealth, jobs, and opportunities. Of course, as we are now seeing, the opposite happens when things slow down (or come to a crashing halt).
Cryptocurrency is a wonderful development in that it allows us to monetize peer-to-peer transactions. This is revolutionary when you think about it. Yet, after a decade, what does the crypto-economy look like? How much of an economy do we really see?
We all want the price of the tokens we are holding to increase. This only makes sense. However, the focus upon that results in a series of steps taken to do simply that. Little else appears to be done.
How many people in cryptocurrency, when talking about a particular token, discuss the velocity of the token.
Investopedia defines Velocity of Money this way:
The velocity of money is a measurement of the rate at which money is exchanged in an economy. It is the number of times that money moves from one entity to another. It also refers to how much a unit of currency is used in a given period of time. Simply put, it's the rate at which consumers and businesses in an economy collectively spend money. The velocity of money is usually measured as a ratio of gross domestic product (GDP) to a country's M1 or M2 money supply.
Is the velocity of money high or low? If we look at most cryptocurrencies, it is almost non-existent. Obviously, there are valid reasons for not utilizing a cryptocurrency, such as staking. In many DPOS systems, there is a benefit to staking which provide more alternatives to individuals such as increased payout. Thus, staking ends up being an investment of sorts.
However, there is a lot of cryptocurrency sitting by idly on exchanges and in personal wallets. This is done because people are speculating on those particular assets increasing in value.
The end result is cryptocurrency will be stagnant as compared to the existing financial system until widespread economies begin to form. When the velocity of a currency starts to rise, then we will see ecosystems starting to accelerate forward.
Fortunately, there is one arena that is accustomed to developing economies using a virtual token and that is gaming. The gaming industry did a fabulous job arriving at virtual economies. Where the challenge comes in with that is, for the most part, the economies are not tied to the outside world. In other words, once the game is shut off, one is completely disconnected from that economy. It does not transcend the boundaries of the game at all.
This will change with NFTs and cryptocurrency. Blockchain games will likely be the first widespread economies we see forming. Developers will keep building out their projects in ways that add to their games providing their Netizens with a circular economy. The difference is that at any point, individuals can transfer their assets onto exchanges to immerse themselves in other communities.
The future is one where more of our lives will reside on different networks. An idea of being a "Netizen" can alter one's outlook upon our relationship with things online. We can also see how important the formation and growing of economies truly is. Down the road, it will be as, if not more so, important as the economic growth rate of the country we reside in.
Hopefully through the investment of time and money that we are all making, we start to see major economies form within the cryptocurrency world. It is something that humanity really needs.
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