Coinbase Coin Breakdown

TL;DR

If you want to pay me for good and services I’ll accept Bitcoin $BTC and Ethereum $ETH

 

Introduction

I intended to create a matrix of the pros/cons/features of the cryptoassets on Coinbase but ended up with much much more. However; this is FAR from complete breakdown of each cryptoasset. Maybe I’ll do a complete workup for each one.

Over the past week I’ve received many questions and had long conversations about Coinbase, the cryptoassets that they support and the difference between them.

With so many friends and family jumping into cryptoassets, I feel like I need to do my best to help educate them before they risk their money. I’m not a financial adviser, I’m a technologist, my views are based on technical characteristic not “if the price will go up”. Anything that is stated here, please add “for me” as a prefix or suffix. #DYOR

Supported Coins

Currently Coinbase supports a VERY small subset of the cryptoasset space. Current estimates suggest that there are over 2000 different cryptoasset today. Coinbase’s support of this limited set of cryptoassets and them being the largest US facing exchange means that any cryptoasset added to Coinbase will likely have a massive price jump since most US investors us the Coinbase platform.

It’s safe to say that in 2018 we can expect more cryptoassets added to Coinbase, but it’s hard to guess which ones.

coinbase_portfolio

Ethereum

eth-logo

Overview: Ethereum is a software development platform where developers can build web and mobile applications. The goal of Ethereum is to replace centralized services like Amazon Web Services and Microsoft Azure. Ether, the native currency of Ethereum, is required to run programs developed on Ethereum. Because Ether is required for executing programs on the Ethereum platform; it has value, but Ethereum is not a cryptocurrency in the same way that bitcoin is.

Assessment: Today, Ethereum is going through some growing pains, the world at large has caught onto cryptoassets and decentralized applications a few years ahead of when Ethereum – and any other – application platform is going to be ready. That being said; the Ethereum development community is one of the strongest teams in the world, their proposals for solving these growing pains are cutting edge and their work output at a blazing pace for a system that manages $80 billion dollars.

Concerns: We are seeing a small amount of brain-drain into competing projects. Also, there are theories that the value of the tokens that power platforms like Ethereum will go to zero as new versions of the platform can easily be replicated. Also, Ethereum uses a “foundation” model to manage the development of the software, this model requires the community to contribute funds (unless the foundation maintains funds from the initial release) to continue development efforts. We are seeing new platforms us a “rewards” model that takes a % of the mined coins and pays them to the core developers.

Conclusion: Ethereum FTW

Bonus: 

  • Ethereum’s “killer” app – to date – has been the ability to “crowed fund” a project.
  • The largest consumer app has been: https://www.cryptokitties.co

Bitcoin

bitcoin

Overview: The OG cryptocurrency, bitcoin’s initial use-case (and title of the whitepaper) is to be used as an electronic cash but has morphed into a system for storing “value” that can’t ever be taken away from you.

Bitcoin proper prioritizes anti-censorship and decentralization over transaction price and speed.

A large part of the current bitcoin development is to create a system on top of bitcoin called the Lightning Network that can be used for smaller payments; such as coffee.

Assessment: Like Ethereum, Bitcoin is going through some growing pains, the world at large has caught onto cryptocurrency (for both store of value and medium of exchange) a few years ahead of when Bitcoin – and any other decentralized cryptocurrency – is ready to support this volume of users.

Concerns: Bitcoin has shown a very strong aversion to network upgrades that require a new version of the software (fork).  With the all the drama around the last 2 upgrades; it’s unknown what will happen if/when there is need to perform a network wide upgrade. Bitcoin relies on it’s focus on decentralization and anti-censorship to suggest that it is the leader in “Store of Value”, there are a small handful of cryptocurrencies that are legitimate contenders in regards to decentralization and anti-censorship.

Conclusion: Bitcoin has positioned itself as the king in the “Store of Value” space, by far. The focus on decentralization and anti-censorship and the MASSIVE amount of developer (and corporate) interests around bitcoin suggest that it has a chance to active the goal of being the futures “Store of Value”…and with Lightning Network a “Medium of Exchange”.

Bitcoin Cash

bitcoin_cash

 

Overview: With Bitcoin transaction fees rising, Bitcoin – with it’s current feature set – becomes less usable for everyday purchases. The, what Bitcoin developers say is temporary, loss of this “feature” has caused rift in the Bitcoin community. A small group of people decided not to wait for the proposed Bitcoin solutions (or didn’t believe they would/will work) and created a clone of Bitcoin with an adjustment. This adjustment (block size increase) allows Bitcoin Cash to process more transactions per-10 minutes and thus reduces the fees required to have your transaction included in a block.

The Bitcoin community has decided against block size increases because they believe that by keeping the block size small; it allows Bitcoin to run on more hardware (better decentralization).

Assessment: Bitcoin Cash is trying to stand out among the crowded cryptocurrency space as the “Medium of Exchange”.

Concerns:  The group of people working on bitcoin cash are…unique. Their very questionable morals make them the type of people I would not align myself with. They have decided to lay claim to the “original vision” of inventor of Bitcoin. They have purposely chosen a name for their coin with the intent of confusing new and non-technical people.

The limited development resources supporting bitcoin cash is a major concern.

Conclusion: Bitcoin and Bitcoin Cash have two completely different value propositions. Bitcoin’s clear “Store of Value” focus makes it stand out from the rest while Bitcoin Cash’s “Medium of Exchange” makes it blend in with the rest. Bitcoin Cash has a lot of capital to keep pushing the narrative that it “is bitcoin” but that does not really matter; there are so many alternative “Medium of Exchange” coins.

Litecoin

litecoin

Overview: On of the earliest forks of the Bitcoin code; Litecoin has often been refereed to as the “beta” version of the Bitcoin network. There is a smallish size development community that supports Litecoin and they often include new Bitcoin improvements into their network before Bitcoin.

The largest technical difference between Litecoin and Bitcoin is the speed at which they can process transactions. Litecoin process blocks every 2.5 minutes, this roughly means that they can process ~ 4 times as many transactions as Bitcoin per 10 minutes. It also means that when a transaction is included in a block after 2.5 minutes it is less “final”. This does not mean that it’s less secure; just that it’s better designed for smaller transactions; like coffee.

Assessment:  The creator of Litecoin worked at Coinbase and Litecoin has seen a MASSIVE rise in popularity and price since being added to the cryptoassets that you could purchase at Coinbase.

Concerns: Litecoin is best suited as a “Medium of Exchange” but that is a very crowded space. The creator of Litecoin left Coinbase this summer to work on Litecoin full time but has since sold all his Litecoin. It’s unsure if selling all of the product that you’ve spent YEARS working on is pro or a con.

Conclusion: Until Bitcoin get’s its issues with payment processing resolved; Litecoin is one of the decent “Medium of Exchange”, however, Given the choice for someone to pay me in Ether or Litecoin – I’d rather Ether.

Conclusion

If I was a betting man, I’d bet on Bitcoin and Ethereum. We’ve seen time and time again that developers are the new #kingmakers. Where developers go, so will the general public.

In game theory, a kingmaker is a player who lacks sufficient resources or position to win at a given game, but possesses enough remaining resources to decide which of the remaining viable players will eventually win.

 

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