Does competition matter?
Welcome to this week’s edition of the RHIZOME Wire!
Does competition matter?
This week, I’d like to tackle the topic of competition, but breaking up the subject into two separate categories.
First, I want to talk about whether competition — in the form of more cryptocurrencies in the market place — will place a drag on future price growth for ICX (and other projects as well).
Next, I want to address some concerns I have seen floating around that other projects have a competitive advantage over ICON and thus pose an existential threat.
The impact of a growing market
A common refrain I’ve seen on various ICON and cryptocurrency channels is the notion that if we have a future bull-run, it won’t be as big as 2017, due to the increase in the number of tokens on the market. More specifically, there is a belief held by some that ICX can’t reach ATH again for this same reason.
Well, what does history say?
Let’s take a look at what’s happened in the past as the crypto market has expanded and more tokens are added.
I believe the best way to do this is to start by looking at the Top 4 oldest cryptocurrencies:
Ripple (XRP) - August
Litecoin - April
Dogecoin (yup, Dogecoin is older than ETH, and basically 99% of other tokens in circulation right now)
Until 2013, Bitcoin was the only token in the market. Then, Litecoin came along in April of 2013, followed by XRP in August, and Dogecoin in December.
This new attention and activity drove what could be called the “first” bull-run, which peaked in December of 2013. Here is how those tokens did during that bull market (note that Doge had it’s peak shortly after the market as a whole peaked):
BTC - From $13.16 to $1,156.1 (8,684.95%)
XRP - From $.0029 to $.061 (2,003.45%)
LTC - From $1.62 to $53.15 (3,180.86%)
DOGE - From $.0001 to $.0018 (1,700.00%)
In 2013, there were about 35 total projects with tokens that could be bought and sold. By 2014, there were a bit more than 100.
After the peak in December of 2013, a bear market took over, lasting until about the beginning of January 2015, when the downtrend ended, and the market saw an extended accumulation period, which started to tick back upward during the Fall of 2015.
How did those same projects perform from the bottom of the bear market in 2015 to their highs in 2017/18, when there were somewhere between 700 - 1600 projects (depending on what date you used as your marker)?
BTC - From $171.5 to $20,089 (11,613%)
XRP - From $.004 to $3.84 (95,900%)
Litecoin - From $1.11 to $375.3 (33,710%)
Dogecoin - $.000085 to $.019 (22,252%)
Not only did these tokens grow in value more in the 2017 bull run than the 2013-14 bull run, but most of them grew significantly more in value. Despite the fact that their “competition” increased by about tenfold.
If you’re not convinced yet, let’s look at a different set of tokens: those that emerged during the 2014 bear market, or prior to the market rise in Fall of 2015:
Dash - Launched Feb. 2014
Monero - Launched May 2014
Stellar - Launched August 2014
Ethereum - Launched August of 2015
For context, by the end of 2015, there were about 200 tokens on the market.
Dash (DASH) - Launched at $.21 and peaked at $16 (7519.05%)
Monero (XMR) - Launched at $2.47 and peaked at $5.01 (102.83%)
Stellar (XLM) - Launched at $0.0026 and peaked at $0.006 (123.08%)
Ethereum (ETH) - Launched at $2.83 and peaked at $20.51 (660.42%)
Granted, these growth numbers are limited due to the fact that these tokens missed out on the momentum from the peak of the bull-run, as well as the fact that most were swept up almost immediately in the bear-market, thus severely limiting their growth potential. That being said, they still had the advantage of far less competition when they first launched compared to the future bull run.
And how did those tokens do from the bottom of the 2015 bear market to the 2017/18 bull run?
DASH - From $1.05 to $1,394.3 (132,690%)
XMR - From $0.21 to $495.8 (235,995%)
XLM - From $0.0026 to $.94 (36,053.85%)
ETH - From $0.42 to $1,432.9 (341,066%)
Is this indisputable proof that this pattern will play itself out for a potential third bull-run? Of course not. Does it throw some cold water on the theory that competition only makes it harder to achieve significant growth rates? I certainly think it does.
Here’s why I think people incorrectly jump to this conclusion:
If you believe the size of the pie doesn’t grow very much, then obviously the slices will get smaller and smaller as more people (in this example, new projects) claim a part of the pie.
If you believe the size does grow in size — and if it grows in size by a good amount — then the slices can get bigger, even as more people (projects) want a slice.
It’s clear that in 2017, the size of the pie got bigger. Way bigger.
What grows more clear is the fact that each cycle brings more and more people into the market. That’s why we’re now seeing stories of Bitcoin being bought by institutions. They weren’t here for the past bull-run. But their entry is creating demand for Bitcoin.
The same thing happened in 2017 to the market as a whole. A lot of people who hadn’t bothered with crypto showed up, pouring unseen sums of money into the market. If you’re reading this, there’s a good chance you’re one of those people. Sure, many left once the party ended, but a lot stayed, building the foundation for the next cycle.
What do you estimate the worldwide acceptance and adoption of cryptocurrency is? How many of your friends, family, and colleagues own any? I assume both numbers are very low. Objectively speaking, worldwide adoption of crypto is tiny. So I think the pie has a lot of room to grow.
ICON vs. Polkadot
Of course, there’s more to competition than just price. There’s also the implications to projects in the context of their need to operate like a competent business, meaning offering a superior product to actual end users, relative to that of their competitors.
ICONists have noticed this, and I’ve seen some worry that PolkaDot — one of the more recently listed coins that has already landed in the Top 10 based on market cap — is in a position to outcompete ICON on the interoperability front. Cosmos falls under a similar situation — a “newer” project with a higher market cap offering some form of interoperability.
Primarily, I believe some ICONists see the term “interoperability” and immediately assume these projects are in direct competition, and the last man standing will achieve full market domination.
Fortunately, I think these concerns are unwarranted.
First, let’s look at the technical side. Scott Smiley of ICX Station offered a good description of what makes ICON unique:
ICON’s original vision was (and still is) to act as connector between several different private blockchains. Enterprise blockchain adoption itself moves slowly, so for the first stages of ICON’s development it made more sense to focus on “operability” before “interoperability” -> meaning lets get our blockchain stable and decentralized, then we can focus on bridging other networks.
These days, the necessity of interoperability is growing with DeFi use cases, creating immutable data for private chains, etc. The work on BTP never stopped and is now complete 1. The reason you are not seeing it live on the ICON Network currently is because of our decision to prioritize the migration to ICON 2.0 as detailed here 1. ICON 2.0 will launch with BTP already live with the purpose of doing public chain to public chain interoperability allowing for ICON’s DeFi products to utilize coins from other networks.
BTP itself is actually quite exciting, and as ICON 2.0 gets closer to launch we’ll be sure to promote it more. Unlike every other interoperability protocol I have seen, BTP does not require any trust of the Relayer and there is no game theory necessary. Everything is verifiable and secured via the BTP smart contracts. Relayers can’t collude to steal money, and this is unique among decentralized interoperability solutions that I have seen.
And here’s his take on Polkadot:
First thing to point out is that PolkaDot did it’s ICO over 3 years ago in October 2017 (hard to find reliable info), but they chose to release their token just recently and it was listed on Binance in August 2020. ICON released an ERC20 token soon after ICO, so it creates the appearance that we have been around much longer even though we started at around the same time. PolkaDot did not do this, and all investors were locked in for years until the main net was complete.
Narrative is important, and I will never argue with that. PolkaDot certainly has a strong share of the interoperability narrative and many projects are building Parachains. But it’s actually a bit misunderstood by many. PolkaDot has an entirely different architecture compared to typical blockchains. PolkaDot does not have smart contracts , but instead, application specific blockchains that all connect to the base PolkaDot chain. This means you will never see something like ICONbet built on PolkaDot, it would be built as a parachain or parathread that connects to PolkaDot. So if ICONbet were “on PolkaDot”, technically it would be an example of interoperability because ICONbet would be its own chain that would stamp their tx data on the PolkaDot main chain. Most Dapps will be their own chain using PolkaDot’s architecture, while on ICON, DApps build smart contracts rather than their own blockchain. It’s just a different architecture. In terms of connecting to other public/private blockchains that are not parachains / parathreads, PolkaDot is not working in this direction afaik.
A lot of this gets a bit technical, but the short of it is that while Polkadot does offer interoperability, it’s a different version (and vision) of interoperability that ICON is offering, at least from a technical perspective. I imagine both designs have their pros and cons, and each was designed in order to cater to what their likely client base would be looking for.
As a reminder, ICON was borne in response to businesses expressing a specific desire for this type of blockchain. Tapering off from that point, it’s one thing to compete on technology, it’s another to compete on business development and market position.
Even if ICON and PolkaDot (and others) did offer the same exact technology, it’s important to remember the advantage that ICON has built primarily in Korea. Keep in mind, ICON has already attained approval for use by financial regulators (typically a group of regulators who are very hard to make happy).
Similarly, ICON has also assembled the MyID Alliance, a collection of nearly 100 companies and institutions, who have expressed a clear desire to utilize the service. The island of Jeju and the MIT of Korea (POSTECH) are using the ICON public chain as we speak.
Is it possible for another blockchain to show up and steal all these enterprise users who are in the process of onboarding ICON or have already done so? Technically, it’s possible. But it isn’t very likely (and certainly not anymore likely than ICON doing something similar to “competitors”).
I think it’s ultimately likely there will be multiple blockchain projects offering some version of interoperability. I believe they can all be successful. A project doesn’t need to obtain world domination to succeed.
The comparison I like to make is to programming languages. There are dozens of mainstream programming languages. Some are geared toward website development, some are geared toward game development, some are geared toward application development. There are several languages that fall under each category. They each offer pros and cons (for example: one language is faster, but the other a bit more secure; depending on what you’re building, one may be more important than the other). But they all co-exist, and they’re all successful in their own right, as they’ve been adopted and utilized by millions of developers.
So, as long as ICON keeps building momentum and capturing new enterprise clients, I don’t really care who else comes along. You shouldn’t either.
News from ICON World
Draft for ICON’s upcoming multi-token standard is up!
Scott Smiley shares progress on interoperability
ICON 2.0 will be EVM compatible
ICON Republic will be launching early next week!
A deep dive into Project Nebula
The CPS (Contribution Proposal System) is nearly complete!
An update on ICONFi
Blockchain Industry News
New York Attorney General Says Bitfinex, Tether Could Complete Loan Document Handover in ‘Weeks’ - CoinDesk
The NYAG has alleged that Bitfinex attempted to cover up the loss of $850 million in funds held on behalf of customers via payment processor Crypto Capital, and that it secretly borrowed the shortfall from sister firm Tether’s reserves. Tether issues the USDT stablecoin, which now has a market capitalization of close to $20 billion, according to markets data site CoinGecko.
Lil Yachty Teases NFT Collab With Winklevoss Twins, Gemini and Nifty - Decrypt
Lil Yachty, the Grammy-nominated rapper who today sold $375,000 worth of Yachty Tokens, his new cryptocurrency, in an ICO, has teased his 5.2 million Twitter followers with the prospect of limited edition crypto art.
SEC's Peirce calls for an 'embrace' of the personal liberty ethos that underlies crypto - The Block
In a speech today to the Federalist Society, Peirce — a dissenting voice against the SEC's past rejections of proposed bitcoin exchange-traded funds — said crypto poses new challenges to regulators, but that agencies "should figure out a way to embrace the personal liberty principles undergirding it."