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The Commerce Index

The Commerce Index

I’ve decided to come up with a new index to measure how suitable a coin is for generable purpose commerce.

For a consumer to hold a coin in their wallet, they want good liquidity and low volatility. Similarly the merchant on the other side of the transaction want the same two properties.

Good liquidity allows exchanging into the coin and out of it without too much loss in exchange rate (in detailed terms this is a factor of buy and sell spreads in an exchange market and the volume of buy and sell orders).

Low volatility means the price is relatively stable and will not swing wildly day to day.

This graph above is the Commerce Index of Bitcoin. It’s showing progress over time and is becoming a safe coin to hold for day to day use and for merchants to accept. This is critical for Bitcoin payments as consumers want a stable currency and merchants want good liquidity to easily cash out into fiat currency.

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Historical performance snapshots of the top 10 coins

Top 10 coins, returns starting 30 months ago

I ran some charts on the top 10 coins by marketcap, to see how they individually performed had you invested 6, 12, 18, 24 and 30 months ago. Here’s my results. The conclusions are unclear but some thoughts come to mind:

  • Over the long term (2 years or more) very few alt-coins out perform Bitcoin
  • Recently, in the last 18 months or less, alt-coins have been performing well with very few producing losses and small ones if they do. However many are relatively new arrivals and could be a sign that newer coins have more merit and than alt-coin projects of the past.
  • We could be in an alt-coin bubble

I think we have a division in possible conclusions, it’s: “Bitcoin will kill all/most alt-coins given enough time” vs “new alt-coins have utility that will eventually out perform Bitcoin”.

 

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My rapidfire thoughts on some emerging alt-coins

Thoughts on alt-coins

I made some comments on some of the leading alt-coins on a Slack channel yesterday. People found it useful, so this is an informal quick and dirty paste of comments for reference. I might add more to this post later.

FCT – I like Factom, have just recently started holding them. I like that the project comes from a founder deep inside an industry working on a solution rather than the other way around which is the norm for crypto projects. You can see this playing out with industry players coming onto the technology, including government departments

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Exodus Wallet Roadmap – what we know about upcoming assets and features

Exodus Wallet

This is a bit of a tangent to my usual posts on crypto-asset analysis. But since any investor in this space will need a good solution for storing your tokens, I thought I’d make mention of Exodus Wallet.

Currently there’s only two user friendly multi-token wallets available, Jaxx and Exodus. Of the two, Exodus appeals most to me due to its design and usability. It’s in fast development and the most common question from the community is what tokens and features will be supported in the roadmap?

I did some research on their Slack channel this morning and here is my best definitive list below which I’ll keep updated for a while until Exodus have their own FAQ that supersedes this one. This article will continue to be updated through direct conversation with the Exodus team.

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Bitcoin Market Cap should be $40b according to Metcalfe’s law

Metcalfe’s Law states the value of a network is proportional to the number of members squared.

I thought it’d be fun to run the numbers on the Bitcoin Network.

Since we don’t have solid figures on the number of active users on the network, I’ve had to use network transactions** as a proxy to active users.

** Network transactions per day excluding long chains (e.g. produced by bitcoin mixers)

Bitcoin Market Capitalisation correlated to Metcalfe's Law

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Analysis of Dash’s valuation as a function of transaction volume

dash-logo

Dash’s focus is a payment network so transaction turnover will be key. Let’s run some numbers to figure out transaction turnover and market cap valuations…

This is Bitcoin’s transaction turnover as a function of their market cap:

Bitcoin transaction turnover vs market capSource: https://twitter.com/dangermouse117/status/771387879117430784
Source Data: http://bit.ly/2ccjMDI

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Block size debate : Increasing block size for capacity won’t work

Bitcoin’s blockchain is like a telephone party line, it’ll work for a village but it won’t when it scales to the world.

Pundits are debating whether we should increase the block size indefinitely to allow more capacity on the network. Well I guess it’s time to take an analytical approach…

Here’s the block size over time on a log scale.

Blockchain size over time

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