In last week’s research note from the ETF think tank, we covered the concept of a Bitcoin ETF. We noticed that issuers have been working on the product for over five years and no US-listed Bitcoin ETF has yet been launched. However, much has been done in the five long years to improve the infrastructure and transparency of the cryptocurrency market and blockchain technology. This week we’re delving deeper into the crypto world and discussing the survival of altcoins.
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Sock puppet marketing
In the late 1990s, many amazing internet applications came to light and tried to be successful. Perhaps the most notable rise and fall was Pets.com. From Wikipedia:
“Pets.com was a dot-com company headquartered in San Francisco that sold pet supplies to retail customers. It was put into operation in November 1998 and liquidated in November 2000. A high profile marketing campaign gave him a widely recognized public presence, including an appearance in the 1999 Macy’s Thanksgiving Day Parade and an advertisement in the Super Bowl 2000. The popular sock puppet advertising mascot was interviewed by People Magazine and appeared on Good Morning America.
Although sales increased dramatically due to the attention, the company lost money on most of the sales due to mismanagement. Its high public profile during its brief existence made it one of the most notable victims of the dot-com bubble in the 2000s. “
The Wikipedia excerpt above blames mismanagement for the failure, but we would argue that Pets.com’s ultimate demise was caused by poor timing. The first iteration of Internet applications faced major real-world challenges. Despite the excitement of the experience, the infrastructure and logistics to support this business model were expensive or non-existent. Today a company like Chewy.com is booming with a similar business model but in a world with more internet users, better internet speeds, seamless payment systems, online marketing companies, and inexpensive shipping and logistics.
Are Altcoins Bad Ideas?
There are over 2000 altcoins and most will not survive in their current form. However, many of their value propositions will be revived once the dominant blockchain infrastructure reaches critical mass. Utility tokens such as STEEM and BAT are very useful and transfer ownership of content and data to the participants in a decentralized protocol. Defi, security tokens, and NFTs are other great ways to transfer secure transactions without a verified third party, but all of these concepts are like building storefronts on the moon. Before we can transact on the moon, we need a cheap, efficient network to get there. We believe a network like Bitcoin has the potential to get there, but by then, most of the altcoins will look more like Pets.com than Chewy.com.
Maybe Elon Musk can help …
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