Blockchain Stocks vs Cryptocurrencies: What’s the Real Value?
When it comes to the world of blockchain technology, many investors and enthusiasts wonder, “Wouldn't the technology be more valuable than the currency?” This article delves into the core concepts and misconceptions surrounding blockchain stocks and cryptocurrencies, helping you understand the real value of the technology.
What’s a 'Blockchain Stock'?
First and foremost, there really isn’t such a thing as a 'blockchain stock.' Most major cryptocurrencies like Bitcoin, Monero, Zcash, and Litecoin don't have a for-profit entity. Instead, their codebase is maintained by a non-profit foundation, and the currencies are generated through mining or staking. There’s no stock to purchase in these blockchain projects.
The Role of Cryptocurrencies in Blockchain Projects
Even in cases where there is a for-profit organization (such as a project like Ethereum1), it’s still unclear how the price of the cryptocurrency will affect the business. The projects may have utility tokens that are in full production, but it's challenging to predict how the value of the token impacts the stock value, and vice versa. Additionally, even if a project does have utility tokens in production, these organizations are usually private, with no stocks available for purchase.
Moreover, the open-source nature of most blockchain projects means that anyone can fork the codebase and start a competitor. Therefore, buying stock to gain access to the technology isn't necessary, as the technology itself is accessible to all.
Understanding the Initial Coin Offering (ICO)
The backbone of many blockchain projects is the concept of an Initial Coin Offering (ICO), a fundraising technique where a project’s developers exchange newly minted tokens or coins for established stores of value like Bitcoin, Ethereum, and other well-established cryptocurrencies. During an ICO, the value of these tokens is often determined by market demand and hype.
While the developers of a blockchain project strive to create technology with inherent value, the utility tokens they issue serve as a means to fund the initial stages of the project. This funding model is designed to encourage early adoption and investment in the project, rather than relying solely on traditional stock markets. However, the steep fluctuations in cryptocurrency values due to hype and FOMO (fear of missing out) can sometimes lead to over-inflated values.
The True Value of Blockchain Technology
In an ideal world, everyone involved in a blockchain project would believe in a clear separation between the value of the technology and the value of their created currency. The developers should aim to build technology that enhances the original blockchain, providing unique products or services that offer significant value to users. This viewpoint is critical to sustaining long-term growth and adoption of the technology.
For blockchain to thrive, the underlying technology must be valuable. The specific DApps (decentralized applications) created on a blockchain should offer unique products or services that add value to the original blockchain, rather than relying on the speculative value of the currency.
This article highlights the need to differentiate between the value of technological innovation and the value of the currency generated by projects. While cryptocurrencies may be subject to market fluctuations, the true value of blockchain lies in its ability to decentralize products and services, and provide unique value to users through innovative DApps and utilities.
References:
1Initial Coin Offering - CoinDesk