“Utility” and “Scarcity” do wonders for value. It is the formula of these two fundamental attributes of “Value” that fashion incredible opportunities for investors.
There are two digital assets out there today, that scream the loudest. Namely, Monero (XMR) and BitcoinCash (BCH).
Where do I begin – the reasons are countless. First and foremost it is today the most private crypto-currency in the space, second to none. Not only has the FBI flagged and named Monero as a concern for their chain analysis tools (which cannot decipher XMR transactions), but many ransomware attacks are now utilising Monero also. This may not come across in positive light, but it does highlight the fungible and private nature of the asset – which is important for money. Even ransomware attacks that use Bitcoin, are found to ‘shapeshift’ their revenue into Monero to avoid detection. Recently, Matt Suiche, founder of Dubai-based security firm Comae Technologies stated that Monero “is one of the favourites, if not the favourite” for ransomware, in an interview for Bloomberg.
I’ve been an avid supporter of Monero, and its development team for its unwavering dedication to fungibility and privacy. I’ve in the past praised leadership decisions which I noted to be a bar above most other dev teams in the crypto space, and in mid August 2017, I wrote a piece titled “Monero’s best market performance is yet to come” for CoinGeek which ended up being the most popular article on the site – by far at the time. Sure enough, a week after the release of that very article, the price had tripled independently of BTC movements.
The very reasons discussed in that article, stand today. Specifically, Monero’s supply curve this year continues to take a significant turn, with the supply tangent being even more pronounced than Bitcoin’s. The green line in the chart below shows today’s date.
Source: reddit link
Given that Monero’s aggressive mint rate in the early days, it is actually surprising to take note of its performance. It begs the question, if Monero can perform so well with such inflation, how much better will it do, with a somewhat more mature market, and far less emission rate over the next couple of years?
Monero recently created ripples within its community after a ‘contentious’ hard fork last weekend birthed a number of side projects – most of which are operating on the legacy chain. There were two prime reasons for the fork, the first was to increase privacy ‘even more’ by increasing the ring size to 7. This obscures transaction outputs in a pool of 7 outputs, and adds to a sender’s plausible deniability.
The second change was a rather contentious change to the proof of work algorithm. This has caused a wild stir in the community, which has led to another forking-crisis. It should be stated however, that the price impact on Monero itself has been minimal, if apparent at all. The stability of price following the split in chain, has re-assured investors.
So why did the proof of work need changing? Though my personal attitude leans towards a pro-free market, I cannot deny that a core tenet of Monero philosophy is – CPU/GPU mining. This has been made clear by Monero devs since its inception.
So what were the changes that killed off Bitmain’s ASICs?
Specifically, two functions in the CryptoNight algorithm.
The nature of these modifications mean that it’ll be even easier to further tweak the algorithm in future. I believe this is mightily important, as a precedent has now been set, and the team needs to continuously tweak the PoW algorithm to maintain its ASIC resistance. This is the path chosen.
At some point Monero devs may find an organic way to continuously change the mining algorithm at set block heights… This would be somewhat akin in style to their clever ‘adaptable blocksize’ technology. But an organic algorithm of this nature could also be gamed by a clever ASIC manufacturer since, the algorithm would inherently reveal the details of future changes. With some clever cryptography, this can be made more obscure, but requires significant work and testing.
The free market choice for those not opposed to ASIC mining remains on the legacy fork.
But with scalability improvements on the horizon, and more privacy enhancements to come later this year, Monero’s developers maintain a stronghold to steer the ship into successful territory.
What about Bitcoin Cash?
One of the things that first attracted me to Monero aside from its fungible/privacy properties, was its adaptable blocksize. BTC shot itself in the foot, and Bitcoin Cash has resurrected a fallen giant. BCH holds a roadmap for continuous on-chain scalability – and this trait is of unconditional importance. For mainstream ecommerce and merchant adoption, volatile fees are a death trap. Fees need to be low, and they need to be consistently low.
In 2017, Bitcoin Core lost swathes of territory and it remains the only year in which Bitcoin merchant adoption actually went backwards. Numerous key entities such as Steam and Fiverr dropped support.
This is where Bitcoin Cash has done something that is absolutely unprecedented in the crypto space. It has successfully managed to re-engage all the big players within less than one year of forking. Former Core Developer (and pro big blocks) Mike Hearn recently made the following comment regarding Bitcoin Cash (while referencing his BitcoinXT client):
“the sort of split BCH did is incredibly costly. You need new wallets, exchanges have to list the new currency, you need new miners, you need to build a new p2p network with a new set of nodes, new development team, new merchants and payment processors (or convert the existing ones) etc. You basically start over from scratch except for the open source code.” – Mike Hearn
Incredibly Bitcoin Cash has managed to do all of the above, as well as regain an abundance of BTC lost territory. Even Hearn, then later admits “The speed with which Bitcoin Cash has recovered infrastructure and rebuilt community is impressive.”
What does this have to do with the success of BCH? – EVERYTHING. Utility and adoption are key – something that the Monero community is well aware of also.
With Coinbase and BitPay featuring full integration, and Bitcoin Cash forum r/btc very recently overtaking the subscriber count of r/litecoin, the pendelum is in full swing.
What’s the outlook on price?
The entire crypto market is today pegged to the price of BTC. I’ve written about the Gartner hype cycle before and its fractal recurrence, and there is no doubt now that this pattern is consistently recurring. Until when? That’s anybody’s guess… Crypto adoption is STILL young, and STILL has a very long way to go. So let’s look at the charts from previous all-time highs.
November 6 – 2010
Source: coindesk.com June 9 – 2011
Source: coindesk.com April 9 – 2013
Source: coindesk.com December 4 – 2013
Source: coindesk.com December 16 – 2017
Though timelines are skewed (ie the bigger the bubble, the bigger the time frame), it is undeniable that each successive cycle, not only repeats a very similar pattern, but it also dwarfs the previous.
With Bitcoin Cash’s massive inroads into adoption, and repossession of lost BTC ground, the next hype cycle, may very well see it catapult into uncharted territory.