Cryptonomics: Welcome to the Age of Fuzziness

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Home > Articles > Cryptonomics: Welcome to the Age of Fuzziness

 Cryptonomics: Welcome to the Age of Fuzziness

Terence Tse and Mark Esposito | Today's Manager
March 1, 2019
Being aware of the existence of these crypto and initial coin offering (ICO) mechanisms of immaterial value creation is important to best make sense of the fuzziness of our times.

ICO stands for ‘initial coin offering’. Many of us know this. But, to us, it may as well stand for ‘incredible commercial opportunities’ or ‘incredulous and crazy offerings’ and it is an equal mirror of the unique times we are living in. As you often hear these days, what an amazing time to be alive! And there is indeed ground for even more fascination, looking at the whole cryptonomics of these days.

If you recall the way the good old economies used to function, major fluctuations in price values, share price values, or currency movements would have been anchored or triggered by some sort of factually stable economic vector, such as trade, foreign direct investment, or central banks interventions and why not, some sort of significant externality, crafting the market sentiment vividly. In other words, major reactions to the markets were historically caused by tangible or semi-tangible factors. But in a recent article posted by Terence, it was easily shown how some companies’ share prices jumped as a result of merely announcing the development/deployment of blockchain. For example, the chart below shows the stock performance of Kodak, which was able to gain some headlines again, after years of drowsiness in the market and quasi disappearance. In fact, on 9 January 2018, the company’s share price shot up by more than 300 per cent when it announced a forthcoming ICO with the aim of creating a “photo-centric cryptocurrency”. This may come across as intriguing and it definitely is. But moreover, it is interesting to see how news on cryptocurrencies and blockchain can garner more economic value than if we had to rely on more classic finance tenets.


Kodak’s share price shot up by more than 300 per cent when it announced a forthcoming ICO with the aim of creating a “photocentric cryptocurrency”. (CB INSIGHTS 1)

A survey by TokenData on 2017’s ICOs found that out of 902 events it tracked, 142 failed before funds were raised, with an additional 276 failing after fundraising. This represents a failure rate of 46 per cent. But there’s more. The survey also finds another 113 projects that it calls ‘semifailed’ because their teams dropped off the radar or their community withered away. This proves the widespread nature of speculative behaviour when dealing with these forms of currency/assets and a disheartening degree of madness when investing in these new portfolios. Now, if you think this is crazy, wait until you delve deeper into what some of the cryptos do—or don’t do.

First, some coins don’t even bother with blockchain. For instance, there was a crypto issue that carried the (noble) intention of raising money to build the new satellite city of New Dubrava in Russia. The whitepaper on the RSC coin (we do not know the breakdown of the acronym as the source never mentions it) is six pages long and comes in the form of a letter pleading for help, in its quite unorthodox format. It does not mention any business models, growth strategies, or anything that can help investors understand how the funds raised will be used.

Other cryptos have much more realistic objectives. Wu-Tang Coin is just using ICO to raise the money needed to buy a limited-edition recording by the hip-hop group The Wu-Tang Clan. And that’s it. Reading its five-page whitepaper is, therefore, easy, as it makes it clear that it is a gift and nothing else. Amount raised: US$954.

At least it managed to raise that amount though. After all we are talking about raising money out of thin air, or almost. A quick count on TokenData reveals that 19 ICOs received less than US$500. Most interestingly, 15 of these were within the past seven months (March to September 2018). This probably reflects the fact that investors are becoming warier of ICOs and are being increasingly aware of their pitfalls, hence raising increasing concerns or dubiousness on the good standing nature of these ICOs and they walk away.

Make Your Country Great Again?
As we continued to explore and scout around the wild land of ICOs, we were finally rewarded with some interesting discoveries. For instance, we bumped into the PutinCoin (market value: US$1.65M). According to its whitepaper, it “is a cryptocurrency coin [its description] created to pay tribute to the people and the president of Russia. It was created and developed with the intention of supporting the vastly growing Russian economy, the market around it and even the economy across the Russian boarders [sic]”. As you could perhaps guess, there is also the TrumpCoin (market value: US$379,000) which was created to support his election campaign. Russians seem to be more inclined to trust immaterial forms of currency which supports their ‘supreme leader’ than what Americans demonstrated for their prospective one, at the times of the election. And, of course, there is the MACRON coin (market value: US$767,500). The purpose of this coin is rather telling: “MACRON was created in support of (then) French Presidential candidate, Mr Emmanuel Macron (who eventually went on to win the elections).” Crystal clear.

Praise the Lord!
Jesus Coin, on the other hand, seems to have much bigger drawing power. With a market value of US$1.4 million, its Web site claims that “It’s Time to Decentralise Jesus”. And it is hard to disagree with that.

It is “the currency of God’s Son. Unlike morally bereft cryptocurrencies, Jesus Coin has the unique advantage of providing a global access to Jesus that can be safely asserted as faster than ever before.” We must admit that the fact that the team behind this coin is considerate enough to also provide the whitepaper in Latin, shows a devotion that is second to any real religious cult.

Apparently, commercial opportunities aren’t confined to coins alone. This year sees the debut of Virtual Currency Girls (仮想通貨少女/Kasotsuka Shojo) in Japan. It is formed of eight female band members, each of whom wears a character mask representing a crypto. Between them, they show Bitcoin Cash, Bitcoin, Ether, NEO, NEM, Ripple, Mona, and Cardano.

By now you may read this short exposé on the state of arts of cryptos and ICOs with surprise and skepticism, but we invite you to explore our sources yourselves and share them with your close networks. Being aware of the existence of these mechanisms of immaterial value creation is important to best make sense of the fuzziness of our times. We are more than certain that newer ‘value creation’ ideas will emerge, and this article could experience a follow-up for sure, with the new funky additions that are outlining out there, pioneering a level of creativity never experienced before in the nascence of new currencies: we can guarantee you that it is going to be a one-of-a-kind ride from here. It will be so entertaining, that Netflix will look like a pale rookie in comparison to the flamboyant news that are to be expected from the ICOs front. Buckle up. Imagination in the financial industry has been been unleashed.

References
1 Bitcoin & Blockchain, 27 March 2018. Companies ‘pivoting to blockchain’ see huge stock spikes–but does the hype hold up?, Research Brief, CBInsights, https://www.cbinsights.com/research/blockchain-hype-stock-trends/?utm_source=CB+Insights+Newsletter&utm_campaign=839a5d5a90-TuesNL_03_20_2018&utm_medium=email&utm_term=0_9dc0513989-839a5d5a90-90235053.

1st IMAGE: 123RF


Dr Terence Tse, a Professor of Finance at ESCP Europe Business School is the co-founder and chief financial officer of Nexus Frontier Tech. He had previously worked in mergers and acquisitions at Schroders, Citibank, and Lazard Brothers in Montréal and New York as well as a consultant at EY in London focussing on UK finan¬cial services. He obtained his doctoral degree from the Cambridge Judge Business School, University of Cambridge and is the author of Corporate Finance: The Basics.​

Dr Mark Esposito is a Professor at Harvard University’s Division of Continuing Education and a Professor of Business and Economics at Hult International Business School. He is an Institute Council Co-Leader for the Microeconomics of Competitiveness programme (MOC) at the Institute of Strategy and Competitiveness at Harvard Business School, a Research Fellow at the Judge Business School, University of Cambridge, as well as the co-founder and chief strategic officer of Nexus Frontier Tech.


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