The Reasons Why Consensus 2018 Did Not Lead To A Consensus On Cryptocurrency Market
Last week in New York one of the most large-scale and significant actions of this year in a blockchain industry, Consensus 2018, was held. In conference partisipated the most influential representatives of cryptocurrency community, regulators and businessmen from around the world.
Many blockchain startups concluded the most important agreements, presented their developments and told about plans for the future as part of the event. It was not without curious moments like dummy "Lamborghini", bankers' protests and Snoop Dog performances, which only made the conference even more discussed.
So-called bitcoin-maximalists and developers of various altcoins participated in Consensus too. In the framework of the panel discussions, dozens of disputes took place, as the event gathered an extremely diverse audience whose representatives agree only on one thing: the technology of the distributed ledgers is already changing the world: the blockchain broke into finance, business, management and even the public sector.
It is worth emphasizing that this year the conference set a new attendance record - about 8,500 guests, which undoubtedly indicates a growing interest in the innovative industry.
Final attendee count for #Consensus2018: ~8,500
— Barry Silbert (@barrysilbert) May 14, 2018
Nevertheless, it is impossible not to notice that the Consensus was missing one of the leading figures in the industry - Ethereum co-founder Vitalik Buterin. At the end of last month, he announced a boycott of the event in protest against the journalistic activities of the publication CoinDesk, which, in his opinion, violated a number of important standards.
His example followed co-founder of Ethereum and the creator of the competitive platform Cardano, Charles Hoskinson, who, like Buterin, counted $ 3,000 per ticket is an unreasonably high price.
Because it legitimizes a $3,000 ticket industry event that claims to be the most important conference. To be honest I feel the conference model is broken entirely. Meetup groups and YouTube are far more powerful
— Charles Hoskinson (@IOHK_Charles) April 26, 2018
The most reason why most so-called retail investors waited for Consensus was potential growth of digital currencies.
On the eve of the event, the well-known bitcoin enthusiast and co-founder of Fundstrat Global Advisors, Thomas Lee, said that holding the conference would have a positive effect on the dynamics of the cryptocurrency market. This assumption he made on the basis of the experience of previous years.
He stressed that in the past, cryptocurrencies showed growth in the range between 10% and 70% after the Consensus, and the event could bring bitcoin to a mark of $ 15,000.
However, the market behaved quite the opposite way, which caused disappointment of many retail investors and confused Thomas Lee himself.
CRYPTO: #Consensus2018 rally did not happen, very disappointing. What we needed was a trifecta of progress: (i) institutional custody/tools; (ii) buy-in by banks/investment managers; (iii) regulatory clarity (3 of 3 needed), but we got progress on (i) and (ii). Full text below pic.twitter.com/XcqNhgYgK7
— Thomas Lee (@fundstrat) May 18, 2018
The main reason why his expert forecast hasn't come true is regulatory uncertainty, he considers.
Nevertheless, the original forecast of Lee and other analysts in the context of the rally after the Consensus is a clear example of the "turkey problem", and their exculpatory arguments are retrospective and don't really mean that much.
So, the butcher fattens the turkey before Thanksgiving Day. Every day the turkey itself is becoming increasingly convinced that the butcher will continue to look after her. From the standpoint of a turkey, every new day only confirms the fact that butchers like turkeys, but on the 101st day, they suddenly cut off her head.
Turkeys problem is that it builds forecasts on the basis of last events, at the same time it doesn't know about Thanksgiving Day.
Experts use the same rule in price forecasts, which were based on the experience of previous years, without taking into account other factors.
As a result, Thomas Lee dubbed the lack of growth as "disappointing," but in general, in his opinion, the cryptocurrencies "became stronger". What exactly was meant by "stronger" is not entirely clear, but it was necessary for him to comment on the situation, since not all have forgotten about this "forecast."
The Situation On Cryptocurrency Market According To Coindesk
CoinDesk published a survey of market sentiments by interviewing participants in the cryptocurrency community. 79% of respondents are convinced that the bear market is a short-term phenomenon; 86% of respondents stressed that the cause of the market collapse is a natural correction after speculation in late 2017; 62% added that the policy of regulators had a negative impact on the dynamics.
It is worth emphasizing that most retail investors are confident of breaking through the $ 10,000, $ 11,700 marks and the subsequent update of price highs in the future, just because the price of bitcoin has already reached such values that again puts them in the position of a turkey that does not know about Thanksgiving Day.
The Federal Reserve Bank of San Francisco is confident that bitcoin futures that triggered the collapse, as short-trades have significantly exceeded the number of longs.
CoinDesk noted that the hash power of the bitcoin network in the first quarter of 2018 increased by 47%. In their opinion, the miners count on a long-term perspective, unlike pessimists in the futures market. In addition, transaction fees have significantly decreased not only in the network of the first cryptocurrency, but also in many altcoins.
Optimists associate this with the active implementation of offchain solutions (Lightning Network) and batching, and pessimists emphasize that low commissions indicate a drop in demand.
Separately, the publication highlighted the tax issue, noting that for most respondents both in the US and other countries it was generally difficult to determine what kind of tax they should pay, but in the United States in general, cryptocurrency investors paid 20% more than in other countries.
Representatives of CoinDesk are confident that this is an extremely negative indicator for the US, since such a tax policy restricts the development of the industry and speaks of a lack of understanding by regulators of the legal status of a new class of assets in general.
The number of ICO-projects has significantly decreased, however, on average, each attracted almost twice as much as in the campaigns of December 2017.
It is worth adding that 40% of respondents invested in such startups in the first quarter, and in the fourth quarter of last year this figure was only 30%.
Nevertheless, one does not need to be a genius to notice how the ICO sector has evolved. Increased attention from the ubiquitous US Securities and Exchange Commission (SEC) and regulators around the world to the status of tokens forces the projects to sell so-called SAFT agreements and conduct closed rounds of funding for accredited investors.
Co-founder Telegram Pavel Durov demonstrated that in order to avoid problems with the law, projects need to know their investors in person and to be able to filter out those who want to invest. This indicates that the concept of crowdfunding in the context of financing cryptocurrency projects is experiencing a kind of depression.
In addition, such up-and-coming giants of the industry as Robinhood, Circle and Binance at all prefer venture financing.
During the Consensus 2018 co-founder of RSK Labs, Gabriel Kurman, said that every tenth bitcoin miner is already supporting the first sidechain solution for smart contracts in the network of the first cryptocurrency.
Many people also associate the growth of bitcoin hash power with the confidence of the miners in the "bright future", but this does not say anything about the battles in the world of manufacturers of mining hardware and their secrets.
On the eve of the Consensus conference, the founder of Sia project and the head of the manufacturer of equipment for the production of cryptocurrency Obelisk David Vorick talked about behind-the-scenes games in this sector that have a huge impact on the entire industry.
Sia lead dev David Vorick just published a post about the state of cryptocurrency mining. https://t.co/DhcCwa2piY
— Sia Tech (@SiaTechHQ) May 13, 2018
"Bitmain sold A3 miners for a hundred million dollars, knowing at the same time that buyers will not be able to recoup their invested money, even using free electricity," said Vorick.
When the first installment of A3 devices were saled in social networks, appeared videos in which people talked about fabulous daily profits, which led to the staggering success of the second installment, which was the main one, he said.
Vorick calls this phenomenon flooding and notes that there is "a dangerous asymmetry between [the interests] of producers and buyers."
Moreover, the leading companies in market for cryptocurrency production hardware use the so-called place-and-route tactics in order to minimize the time for the production of chips and the rapid release of a new product. In this case, the chips, as a rule, are 2-5 times weaker than what the developers could have done for a longer period. This means that players are focused on quick profits, rather than improving the miners.
If expressed neutrally or, to be more precise, politically correct, then the producers simply "optimize" their business processes, and, in their opinion, the fact that it is not in the interests of consumers is solely their problems.
He also added that no algorithm supposedly resistant to ASIC-miners actually can stop manufacturers. Devices based on Google TPU chips and Baikal's miners, in his opinion, can successfully implement the hardforks, although partially sacrificing performance.
This means that manufacturers not only can control the hash by using secret ASIC-miners, but also maintain positions in case of hostile to this type of mining, which fundamentally changes the discussion about the need for such updates to the protocols.
According to Vorick, the secret ASIC-miners on Monero were launched in March 2017 - for a whole year the network was threatened with an attack of 51% because of the centralization of the hash, and before the announcement of the release of the Z9 miner, at least three different groups have already exploited the secret ASIC-miners on ZCash, he added.
"I believe that secret ASIC-miners have already been developed for almost every PoW coin with a monthly award for blocks of more than $ 20 million. For the rest of these coins, they will be developed in the coming months," Sia's creator is convinced.
"It's just a way to optimize the business, they know that they will not do anything for it," he explained.
Vorick stressed that the classic Nakamoto consensus caused the centralization of the hash in the hands of leading hardware manufacturers, and it is quite natural that in such conditions, 2-3 players dominate the market.
Without a consensus in the market
Returning to the reasons why the consensus in the market was not reached during the conference, and the bitcoin rate was on the brink of a return to the global downtrend, it is worth emphasizing that there was nothing fundamental at the event, despite the abundance of events.
As CIO of BlockTower Capital hedge fund Ari Paul noted, the developers make up only 5% of the total number of participants. They, in his opinion, "are building the future and deserve more recognition than other members of the community."
At Consensus and other conferences this week, developers probably make up 5% of the attendees. Promoters, investors, biz dev people, service providers etc are all helpful to the ecosystem, but the devs are building the future and deserve far more recognition than the rest of us.
— Ari Paul (@AriDavidPaul) May 14, 2018
Consensus is a kind of social event, the visit of which is simply a prestige for many, and not an opportunity to improve the industry.
So, some statements could locally push the course of certain altcoins, but in general Consensus did not bring a fundamental positive effect associated with the progress of distributed ledger technology or with new breakthroughs in solving the problem of scaling public lockers.
Growth forecasts were based on an incorrect belief in the value of statistics from previous years, which put many retail investors in a turkey position.
Moreover, such giants as Goldman Sachs and Intercontinental Exchange have come to the market that already speaks about structural change of a situation and about a cardinal difference with last years. When the most part of retail investors makes a mistake of a turkey, to silly expect that big whales won't use it. Using the hope of people based on incorrect forecasts they will always put against the market. Why? Because they can and want to earn not less the others.
Thus, major players and centralization of mayningovy business are Thanksgiving Day for all turkeys who expect rally only that such rallies were in the past. Besides, it should be taken into account that we don't see a full picture and are forced to make decisions in the conditions of limited awareness.
So, given unforeseen circumstances and Thanksgiving Days, long-term forecasts of the bitcoin rate have absolutely no value. This is the reason why the consensus in the market for crypto currency has not been reached. Who ever said that this was supposed to happen?