Is Crypto a Ponzi Scheme or Creating Real Value?

Real Use Cases Making a Real Difference

Crypto Is a “Dangerous Ponzi Scheme” According to Jamie Dimon, Is He Right?

Since the introduction of the concept of a consensus-based blockchain, we have seen the rise and fall of many crypto coins as investors have managed their holdings through various cycles.  One question we hear often is, ‘What is the intrinsic value of a Bitcoin or an Ethereum Coin?’  Is this a short-lived Ponzi scheme or will these tokens continue to see more use cases?’

In this paper we review some of the key applications that define why we believe that blockchain is here to stay and why it will be used by more and more by companies to better utilize resources and data as well as reduce costs.  Although the blockchain concept has been around for some time, combining a shared immutable ledger with the consensus protocol has opened up an entire new segment of offerings that can give consumers and businesses frictionless payments, better privacy, and more efficiency. 

For some, this technology has been about token speculation and finding the next token to invest in.  As we have seen prices rise, many have benefited from this appreciation, but for us, the utility that this new technology brings us is where we see the real value.  Below we look at some examples of decentralized projects which are blockchain based and have proven to offer businesses and consumers a better way of accessing their services.  

Examples of Decentralized Applications (DApps)

Golem, a decentralized application to share computing power, was founded in 2016 in Switzerland.  According to their website, ‘Golem Network is an accessible, reliable, open access and censorship-resistant protocol, democratizing access to digital resources and connecting users through a flexible, open-source platform.’  The network uses a crypto token to allow users to buy computer processing time and allow others to sell unused computing power.  The use of a crypto token allows users to transact in a frictionless, trustless way which would not be possible without a blockchain-based solution. 

The Helium Network is a decentralized wireless Internet of Things Network that allows companies and individuals to create nodes using hardware they purchase to provide bandwidth to the network.  ‘Helium’s mission has always been to rapidly build open, affordable, and secure global wireless networks that are owned and operated by the people.’  Their first real-world implementation of this vision was launched in 2019 for the Internet of Things (IoT), seen as one of the most underserved markets in the telecommunications industry.  According to their website, ‘there are now over 828,000 Hotspots deployed with a remarkable 5,000 cities added every month, and new applications using Helium daily by everyone from independent developers to large Fortune 500 companies.’  Again, payment is made through crypto tokens allowing transactions to take place in a trustless environment.  Helium recently signed a deal with T-Mobile where Helium will look to grow its number of 5G hotspots from 5,000 to 50,000 in the coming years. 

Filecoin is another DApp which looks to apply the same concept in data storage.  Filecoin offers file storage to customers who wish to access data storage in a decentralized way. It is a distributed, peer-to-peer network consisting of Filecoin nodes and storage providers.  Filecoin works with storage providers who use cryptographic proofs called proof of replication and proof of spacetime to prove the data is being stored correctly. The proof is recorded on the blockchain.  As of January this year, Filecoin had over 3,600 storage providers with storage capacity upwards of 16 Mio Terabytes of data. 

Each of these decentralized applications offers both consumers and suppliers key advantages over centralized services.

Benefits of Decentralization

Trustless Environment

In a decentralized blockchain network, there is no need for users to know or trust one another.  The payments are made and received through a cryptographic process where there is an immutable ledger where transactions are recorded.

Data Reconciliation

Using blockchain technology, data is stored in a secure decentralized way where permissioned entities are given real time access to the data.  There is no data manipulation taking place, minimizing any errors or gaps. 

Fewer Points of Weakness

The nature of decentralization allows for greater redundancy and minimizes potential outages and failures. 

Better Distribution of Resources

Decentralization can offer greater consistency and performance given the greater number of nodes. 

Cost Efficiency

Creating a market for both consumers of services and suppliers of services at prices which are appealing to both allows for value to be captured on both sides. 

Utilization of Resources

In a world where resources can be limited, decentralization allows for resources to be shared in a trustless way. In all of the above DApp projects, users are able to access resources that would otherwise not be available without this technology.

The price of Bitcoin is now seen as a bellwether for crypto and increasingly, you are seeing it being quoted next to major world currencies. Many crypto enthusiasts refer to it as ‘digital gold’ and see it as a store of wealth that avoids the expansionist monetary policy that many central banks around the world have subscribed to.  Although the rise of crypto coins has supported investment in blockchain projects, it is our view that the real value of blockchain is in the utility of the technology and the applications this technology will allow.

Thanks for following our journey in this space and look for our product updates in the coming months.  We are excited to be building in this new and exciting technology and look forward to sharing more soon.