by Steve Quan
January 28, 2020
Blockchain Organizations vs Crypto — The Use Case of Crypto
The Jaw Dropping Comment below…
In the past decades there have been primarily TWO funding mechanisms for businesses and organizations.
- Selling Equity
- Selling Debt obligations
Fast forward to today and especially the “ICO” craze of 2016.
The “Use Case for Crypto” is ……………. The THIRD FUNDING MECHANISM
I will say this loud and clear.
If you own a “crypto coin” in an organization, you are entitled to ZERO PERCENT of that organizations gains or losses.
You helped a capital raise and are betting that someone else will derive a value out of that said coin.
It is not an Equity or Debt, so no ties, no rewards, simply the capital you put in is at risk.
The closest thing in blockchain I have seen to an equity or debt piece is in the beloved or hated…
“master node space”
You buy some coins, add to the network. The nodes make up the network hence you own a part of something.
And the “rewards” work as interest.
Only problem, venture capital is generally restricted to accredited investors, and is not exchange traded.
So, imagine all of the problems this caused when people with limited capital and little experience started looking for a one-day return in a startup that had little idea of what they were entering into to.
I didn’t get it at first, but now I do and others are discovering, people will definitely revalue their portfolios.
If I use a paypal account and I am a “member” does that entitle me to a share of their revenue, earning or dividends?
How about if I use a JPM Chase Visa, Black card even. Surely I then have a say in Visa and JPM daily activities ?
Well we know it doesn’t work that way.
The ultimate “use case” is on a project by project basis, if you own a coin in a project with a team, congratulations, you are now involved in venture capital and they have raised money through a crypto raise, ICO, IEO, who really cares on the name.
Point being there are a few people that get “it”.
Many do not.
Things like Bitcoin, Litecoin, Bitcoin Cash, Ethereum, ETC, BSV, even DOGE coin, those are simply along the lines of commodities. They have value because there is a market.
Gold has a value because there is a market.
You can’t use either of them as easily as cash or credit, but I’m sure you can find many businesses that will trade their goods or services for Gold or Bitcoin, or Silver, Ethereum, Litecoin, etc.
Something mined, took capital out of someone’s pocket before they opened the proverbial door, like mining in precious metals, or commodities.
Now on to businesses using blockchain in real day to day activities or “Blockchain Organizations”.
RIPPLE vs XRP
Ripple Labs is a Company, with visible people, hierarchy, and real world offices.
They process payments.
They have two very popular technologies that do this.
They were also one of the first organizations to raise billions of dollars selling a token, called XRP.
Oh and get this they own more than 50% of that token XRP.
Ripple Labs is in the news about what their valuation is and will they ICO, yes on the stock exchange under the SEC.
And if they do, the valuation will be based on their team, technology, network, etc.
So surely the XRP token owners must benefit from this, those with XRP in “cold storage” or HODLING ?
Well not exactly.
Owning XRP tokens, they funded a start up, and the start up became Ripple Labs, but since they are neither equity or debt owners and have no contracts through and legal entities, they have a bunch of alpha numeric numbers on some device.
The guys behind Ripple are nothing short of Genius.
They are and always will be the first to successfully use Blockchain in real world finance, and to be a business who uses a blockchain daily.
They will also be the first organization to successfully use a blockchain token or “crypto” but not really crypto, to fund a large business publicly.
Ripple Labs will most likely be a thriving business and the first true blockchain organization.
XRP token will go down as the most successful capital raise using a blockchain token.
When one invests, especially in a startup, you want some contract, terms, etc.
Here, XRP was simply sold as a token used by Ripple Labs and people bought in hand over fist.
Ripple Labs could end up being a $100 million dollar business or maybe more sooner rather than later.
But again, XRP owners have no claim to that and since Ripple Labs owns more than 51%.
Well, all those XRP floating around in personal wallets…
Not going to get much use.