Thursday, November 6, 2014

Further Thoughts on HashCoin and the ICO

Not everyone over on Hashtalk is drinking the cool-aid, though plenty are. Here is a good post for instance that echoes many of my thoughts.

As I noted in the last update, my biggest concern with HashCoin/Hashbase is that there's apparently 8% of 1.2 billion HashCoins being "premined" for the ICO. Only a portion of that is going to be sold to miners for HashPoints at 400 HashPoints per coin (apparently), and the rest is "being valued at $20 per coin". Only according to Josh (GAW's CEO), that's the supposed minimum and it will "probably be a lot higher". I might have some nice beachfront property I'm willing to sell you for a song as well... any takers?

Let me put it this way: 8% of 1.2 billion times $20 is a hell of a lot of money, and $30 million as a reserve to prop up the price won't do jack squat. In fact, $30 million would actually guarantee a price of just $0.3125 per HashCoin, while the value of 8% ICO at $20 is $1,92 billion. And we're also hearing talk of "way more than $20 -- probably $75 per coin in the first year." So we're not saying $1.92 billion, but $7.2 billion in the first year as the market capitalization of the currency.

Realistically, even $4 per HashCoin is probably overly ambitious for a new cryptocurrency with 1.2 billion coins. Maybe in 10 or 15 years it won't be, but at that point the coin will be well established and useful -- or it will be dead and buried.

Counting coins mined and assuming the payout rate will be somewhat similar to other coins (e.g. starting out with higher block rewards and gradually trailing off), we have a target of mining all of the 1.2 billion HC in 15 years. Thus in one year I think it's safe to expect we'll have at least 15-20% of all HashCoin planned already mined, possibly as much as 25%. (That's including the 8% ICO premine.)

At $4 per HC, that would be $720 million to $1.2 billion. Again, how far will a $30 million reserve go in propping up a base price of $4 per HC? And at $20 we would have a market capitalization five times that high (basically matching or exceeding the current valuation of Bitcoin). If there are real companies (e.g. Walmart, Target, Amazon, etc.) on board, the reserve should probably be closer to $250 million, or even $500 million, at the very least -- and $1 billion would make me feel a lot better about things. But who would put that much money into an untested cryptocurrency?

[Crickets]

It sounds a bit too reminiscent to things like GuarantCoin, UroCoin, GPUCoin, and any number of alternative cryptocurrencies that aren't doing so well. Okay, URO isn't dead yet, but their tactics still don't lend much credibility to what they're doing. Anyway, I digress....

I do think that going "all in" on HashPoints is the best bet right now for Hashlets, especially Zen Hashlets, because what else are you going to do? Mining on Zen Pool is generating about $0.1015 per MH, so by switching a Zen Hashlet over to the HashPoints Pool you're only giving up a potential profit of $0.0215 per MH per day. I've got close to 500MH in Hashlets (mostly in Zen Hashlets, plus some Primes I got by converting my Lightning X6 ASICs), and the potential to earn roughly $10 per day compared to $75+ in HashPoints means the only viable options are to sell or mine HashPoints.

Put it another way: if I buy HashCoins at 400 HashPoint per coin, then to match the value of what I would have otherwise made by mining on Zen Pool I only need HashCoin to stay at about $2 or more. That's certainly not an impossibility, especially when you consider all the other people that are likely to buy into HashCoin at $4 per coin (in HashPoints), so rather than selling my Hashlets and "getting out while the getting's good", I'm taking a calculated risk.

Here's another interesting thought: there are probably at least 500,000 Hashlet Primes and another 500,000 Zen Hashlets in existence right now. (There could be more, or perhaps less, but that's at least enough to get us started.) One million Hashlets on the HashPoints Pool means 17 million HashPoints are generated daily (give or take). Let's just assume this goes on for a month; at that point there will be at least 500 million HashPoints available, and if all of that goes into HashCoin we're looking at 1.3 million HashCoins being purchased by miners in the initial ICO. That sounds like a lot at first... until we again recall the 8% premine/ICO, which means 96 million HashCoins will exist.

So if the ICO for HashPoints is only 1% of the total premine, and the actual fiat ICO is at $20 per HashCoin, I'm guessing only a small fraction of the premine will end up being sold. That could mean GAW will hang onto the remaining chunk of the ICO and hopefully use it to prevent inflation (and not sell it on the open market for less than, say, 10% above the current price). But until some big company like Walmart, Target, or Amazon actually comes forward and says, "Yes, we are working with Hashbase and will accept their cryptocurrency -- which definitely doesn't sound like it's a done deal, though there have "been talks" -- this is all pie in the sky talk.

Let's be blunt: when Josh says things like "People that sell their Primes on the Hash Market are going to be very sorry once Hashbase comes online", he sounds like a used car salesman. He might be right, and we definitely don't know everything about what's happening behind the scenes, but then some used car salesmen actually do tell the truth -- and they still sound like liars while they're doing it. Real businesses that are worth hundreds of millions of dollars (or even billions of dollars) don't have to make such grandiose claims in advance. Let's just hope GAW doesn't pull a Zalman/Moneual on us....

2 comments:

  1. Nice analysis, ty and lets assume the best for hashcoin :-)
    Your "share to twitter" gives me "This webpage is not available" only.

    ReplyDelete
    Replies
    1. Hmmm... it seems to work okay for me. Maybe you already have to be logged in on Twitter? Or maybe you have some sort of extension that's interfering?

      Delete