Eric Wall
@ercwl

1/ Plenty of coins & ICOs are now down -90%. Hopefully the people who'll never be receptive the following commentary have left crypto twitter by now, but they'll surely be back for the next bull run. Making this thread to use as a reminder for when the idiocy returns ūüĎá

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2/ If you never fully grasped how the ICO market worked, here's a recap of how things typically went down. This is also *best-case*. It's not too uncommon that ICO creators decide they want to do an ICO *first* and realized they need to build a blockchain/dApp *after*.

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3/ This also misses dozens of smaller things, which helped make things way worse. The two biggest mistakes that people did in this market are the following:

1. Mistaking money raised & token price increase as indicators of success
2. Thinking that "DYOR" = watch YouTube videos

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4/ On 1: Nothing that has materialized from 2017 ICOs can be deemed a success. It's way too soon to tell. The only thing that a 100x gain has ever meant in the ICO market is that "there once was a person who got a 100 times shittier deal than another person due to market demand".

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5/ Your friend who is "totally into crypto" who told you to buy a coin and then the price went up 20x doesn't necessarily understand anything. If your friend wasn't a genius before he/she entered the crypto markets, he/she is probably not a genius all of a sudden now either.

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6/ On 2: DYOR never meant go to YouTube and watch whatever video comes up on the coin you are "researching". The "O" means you actually have to do your *own* research. Why? Because so many YouTubers are paid shitcoin-advertisers. If the content is free, you are the product.

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7/ This is a large industry now and unless you DYOR *you're the bottom-feeder*. You are the person who is paying for all of this. All the ghostwritten whitepapers, marketing, paid YouTube shills, paid exchange listings, Vinny Lingham's advisory fees, social media ads etc etc etc.

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8/ "But I follow person X and I trust him." Well, @CryptoGat was trusted and still engaged in pump and dump schemes scamming his followers. He still has 70k+ followers and is still out there shilling crap even though he was exposed for it. Twitter forgets.
steemit.com/cryptocurrency…

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9/ If you DYOR, you will be immune to all this nonsense. So let's begin. If we are talking long-term investments, the key thing you need to get a grasp of is the role a token plays in the thing being built.

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10/ While most say that we're entering in to a uncharted territory here, that's not actually true. Beyond common sense, we do have a few early historical examples of ICOs which we can begin with:
1. The Mastercoin ICO (2013)
2. The Ethereum ICO (2014)
3. The Mycelium ICO (2016)

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11/ The Mastercoin ICO: So in 2013, this guy J.R. Willett goes to the bitcointalk forum one day and he says that he has this idea for a supplementary protocol to Bitcoin. He described a protocol that would leverage the Bitcoin blockchain, but would add more features to it.

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12/ Basically, the protocol would add the ability to create custom tokens on top of the Bitcoin blockchain, a DEX and a few other things. To fund this development, he kindly asked for some donations in BTC. bitcointalk.org/index.php?topi…

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13/ To spice things up for the investors, he promised that features inside the Mastercoin protocol would *only* be accessible to those with Mastercoins. By doing so, Willett had invented not only the ICO, but the first utility coin as well. web.archive.org/web/2014072616…

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14/ So what happened to Mastercoin protocol? Was it successful?

Yes, in fact, it was extremely successful. Today it is known under the name "Omni Layer" and is the protocol used for the Tether token (USDT), which is the most traded crypto token after BTC itself.

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15/ However, despite the ambitious plans, the actual *Mastercoins* $MSC themselves never found an actual usage within the protocol. It turns out, requiring users to hold tokens in order to access basic features is bad UX, horribly inefficient & unnecessarily complex.

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16/ After the rebrand to Omni, these coins still exist out there today under the ticker $OMNI, with no purpose, no plan. Fun fact, even an old deprecated shitcoin as $OMNI pumped in 2017 mania, from $4 to $123. Now it rests at $7. Jesus, people did some dumb as hell things...

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17/ So what can we learn here? Well, the short story is that not only can a token have such a poor excuse for existing other than fundraising, it can actually be so inefficient that it needs to be removed altogether for the product to succeed. And yet it's tokens you're buying.

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18/ Willett was a pioneer and never knew this was how things would turn out. In fact, Willett was super-transparent and actually listed all the risks he could come to think of as a warning when announcing Mastercoin. A mindboggling contrast to the practices of today's ICOs.

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19/ If you still don't understand why tokens that merely exist to constrain an apps usage are harmful and probably won't accrue value, think in terms of liquidity (what ridiculous problem do you think Bancor is solving?), friction and the velocity problem. coindesk.com/blockchain-tok…

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20/ The Ethereum ICO: Evidently certain ICOs, such as the 2014 ICO of Ethereum itself, can be successful. $ETH is used today. So what distinguishes a successful coin from a useless one? In one word: irreducibility. Ethereum wouldn't really have any way to function without ether.

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21/ None of this has ever been new/controversial information to the people who were already in this space when everyone started shilling and buying utility tokens. And yes, for the record, bitcoiners tried to warn the industry countless of times last year. twitter.com/peterktodd/sta…

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22/ One of the most idiotic things newcomers of 2017 did was to reject all cautionary recommendations from bitcoiners as "Bitcoin maximalism".

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23/ Like, how can you be so damn ignorant to believe that the reason Peter Todd (@peterktodd) would say something negative another coin than bitcoin because he's a BTC bagholder? Let's work through that logic for a second:

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24/ If Peter Todd found a true use for the shitcoins you invest in, what do you think Peter Todd would do?

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25/ By the way, this is Peter Todd in 2001 (15 years old at the time) discussing essentially bitcoin with Hal Finney years before its time. What do you think guys like @CryptoGat were doing when they were 15? If you for some reason felt like you *had* to trust someone, why them?!

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26/ To wrap this up, if you asked me to list the number of non-base-layer tokens that *do* have some utility that makes sense and doesn't suck for all the reasons I just mentioned on the top of my head, I could probably count them on one hand. $REP $GNO $MKR $FCT. That's it.

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27/ Does that mean that most non-base-layer tokens suck? Yes, that's exactly what it means. Let's now dig into the third and last category for this thread.

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28/ The Mycelium ICO: In 2016, @MyceliumCom had for a long time been people's wallet of choice on Android. The ICO represented a way for people to gain exposure to their success as a business as a retail person, without owning actual shares.

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29/ So what happened? Well, this. And it turns out that the best way to have exposure to a business is owning actual shares, not some piece of legal engineering made in Cyprus. And while we may get there with STOs, we're not really there *yet*. news.bitcoin.com/mycelium-emplo…

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30/ In summary, if crypto was a party, you showed up at 01:30, drank all the punch, kicked the host in the nuts and spent the rest of the night flirting with the family's underage daughter. Now it's 06:45, you're throwing up in the laundry bin & complaining that nobody likes you.

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