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Sound Bites

"Borders are going to be less and less relevant and what's going to be relevant is this decentralized world."

 

–Draper Fisher Jurvetson founder Tim Draper on "First Mover."

What others are writing...

Off-Chain Signals

  • Crypto meets the real world (Axios)

  • Venture Capital funding for crypto in surging (New York Times)

  • Inside Coinbase's budding plan to become the AWS of crypto (Forbes)

  • Croatia's largest supermarket chain now accepts crypto (Cointelegraph)
  • A normie's guide to becoming a crypto person (New York Magazine)

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You are invited to Horizen's Zendoo mainnet launch party! There will be ZEN and swag giveaways!

 

Horizen is the zero-knowledge network of blockchains powered by the largest and most decentralized node system. Its blockchain deployment protocol, Zendoo, is launching on mainnet on Dec 1st, 2021!  

 

Zendoo enables developers and businesses to deploy private and public blockchains with unmet scalability, flexibility, and throughput to support any real-world needs.

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Putting the news in perspective

The Takeaway

Shiba Inu: Memes as the Future of Money

Hi, David Z. Morris here. The shiba inu (SHIB) coin has had a really interesting week. Between late October and Nov. 28, the "Dogecoin Killer" meme token lost about half of its value in dollar terms. Then it surged more than 30% as the Kraken exchange announced it would list the token. Then, starting early this morning, it crashed again by about 20%.

 

Volatility has been a notorious feature of most cryptocurrencies, of course – they're speculative investments so they swing on sentiment, much like Tesla and GameStop and Rivian stock. SHIB is distinct in that it's explicitly a "meme token": It declares pretty much up front that it has no unique utility and depends on attracting a "community" of holders for its value. I don't think it would be unfair to describe SHIB as a "decentralized Ponzi scheme."

 

Parts of that also applies to the likes of bitcoin or ether but meme tokens lack the underlying technological advantages of top cryptos – bitcoin's hardness, ether's use in smart contracts run on the Ethereum blockchain – or even the innovation in so-called altcoins like Decred's governance experiments over the years. Shiba inu's spiritual forebear, dogecoin, was in fact created to more or less make fun of the idea that crypto was actually an "innovation." One of its co-creators has become an extremely salty crypto critic.

 

But instead of standing as a performance-art critique, DOGE ended up presaging a wild new species of free-market speculation. It was the first meme token, and during its early days circa 2013-2015 it test-drove the lighthearted community shenanigans that have become an inescapable bizarro element of 21st century capital markets. Just like the GameStop crowd nearly a decade later, DOGE holders organized through message boards like Reddit and engaged in eye-catching stunts such as sponsoring a NASCAR team and the Jamaican bobsledders.

 

The DOGE community is not as prominent these days, but those early memes have helped the currency stay in or near the top ten of all cryptos. As developers put their blood, sweat and tears into technological innovators like Ethereum, and more recently Solana and Avalanche, DOGE just kept derping along, changing barely at all, coasting on Good Vibes.

 

And it worked! Which makes it all the more emotionally complicated to watch something like shiba inu skyrocket in value over the past few months. It is arguably an even purer distillation of the memecoin ethos of uselessness than dogecoin. DOGE at least has its own blockchain, while shiba inu is just an ERC-20 token on Ethereum. It offers no defensible market or technology "moat." It seems to have benefited substantially from unit bias as new entrants came to crypto and bought the token just because it was "cheap." Its presence among the most valuable cryptos on some indexes is thanks to a perhaps misleading "market cap" metric. And its supply cap of 4 trillion coins, even if it were reliably enforceable, means there's very little long-term scarcity.

 

And yet there it is, trading with the big boys. The one thing you can't do in response is become a meme yourself, gritting your teeth and growling about how "SHIB offers no technological innovation and should be worth zero!"

 

By getting mad at SHIB, you're implicitly buying into the Efficient Markets Theory, or EMT. EMT is (loosely) the "invisible hand" you learned about in your high school economics class, the idea that supply and demand magically converge on a "correct" price. When it comes to assets, EMT assumes that investors, collectively, have access to all relevant information about an asset and reach a price based strictly on that information.

 

But boy oh boy, is that idea deader than a doornail.

 

Read the full essay here.

 

David Z. Morris

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