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Cryptobonaparte’s Outlook on the Cryptosphere and Crypto Exchanges

2017 showed us the potential of the fledgling crypto industry. We saw the total market capitalization rise from $17 billion in January to eclipse at $800 billion by the end of the year. However, so far this year it seems crypto markets had been in a downward spiral- losing over $500 billion in value. Numerous factors can contribute to this volatility including market equilibrium, increasing regulator interest, tax obligations, lower ICO activity, waning sentiment, and significant market sell orders.

Despite this, we see more and more governments and legacy institutions get involved in the crypto space. This bear run is different in several ways than in 2014. VC activity indicates this emerging asset class has more to offer than what’s seen on the surface. Meanwhile, companies like Coinbase, BitPay, and Robinhood are racing to produce value to keep steadfast growth in this young industry. The brain drain from Wall Street and Silicon Valley is climbing. Narratives are also changing again. Whereas there were a fixation and emphasis on ‘blockchain’ over cryptocurrencies in the past months, the interest is now in security tokens. And new exchange registrations are still scarce.

These solid fundamentals keep me enthusiastic and optimistic about the direction in which crypto is heading. It’s an ever-expanding social, interdisciplinary field presenting chances for involvement. Crypto is a melting pot of economics, finance, philosophy, game theory, psychology, networks, politics, cryptography, history, and many other disciplines. It presents an opportunity for continuous research and learning for the eager mind.

Crypto gets compared a lot with the dot-com era, so I think it’s worth mentioning a parallel that I see. When Cisco went public in 1990, it had a market cap around $224 million. It peaked in 2000 commanding a $515 billion market and more than 10% of the entire internet ecosystem. The explosion of the internet can be attributed to Cisco’s routers. Specifically, it addressed the internet’s problems of scaling and interoperability. Today, these same problems can be linked to impeding crypto adoption and integration. Blockchain technology can’t easily scale, rendering it secondary to companies because it can’t operate at the speed they require. Also, Bitcoin, Ethereum, and other crypto networks all speak different languages and can’t understand each other. As networks transition from centralized to decentralized ledgers, technologies will need to be developed to address interoperability and get these different networks communicating with each other.

How I got into Crypto

My passion for operations and logistics led me to pursue a degree in Management Information Systems- the perfect primer for blockchain. I started to get interested in financial markets, specifically forex and stocks, after interning at Bridgewater Associates in 2014. At the time, I found investing very cumbersome and the process riddled with friction. I thought there had to be a way for investing to be more efficient and sovereign. A couple of months later as a junior in college, my roommate, who would later become known in the cryptosphere as Crypto de’ Medici, told me to download the Coinbase app. I didn’t comprehend Bitcoin’s valuation nor the underpinning blockchain technology that powered it. However, I found the idea of a decentralized world currency and this new asset’s volatility greatly intriguing. After reading the whitepaper and studying the limited supply schedule, I knew this was going to be big. I’ve been hooked since.

From Matteo Zago

As you can see above, there are several different blockchain projects competing for share and attempting to disrupt their more centralized counterparts. I find projects that are being developed in the protocol, computation, governance, and platform sectors of the blockchain industry fascinating. Some of these include Golem, Stratis, Raiden, Aragon, and Chainlink. However, to acquire these assets one must access an exchange. As crypto asset markets expand, the crypto exchange sector also increases. It’s key to asset discovery and adoption. We’ve experienced exchanges like Poloniex, Bittrex, and Gemini but there has been a shift to alternatives anchored by the very technology we admire. This has led to the exponential growth of centralized exchanges leveraging blockchains like Binance and Kucoin and an increasing interest in decentralized exchanges like 0x, KyberNetwork, and AirSwap. The appeal of decentralized exchanges is that they don’t rely on a central point of failure. This makes them censor resistant, cheaper, and able to offer a variety of tokens not listed on larger exchanges. I am bullish on this sector and optimistic of the value it will generate for the ecosystem as a whole over time.


Binance (BNB)

Binance has risen to become one of the world’s leading crypto exchange and unicorn in less than ten months. Its parabolic growth can be attributed to fulfilling fundamental needs of the crypto space and leveraging network effects and incentives. Binance’s native token, BNB, has accrued value as a result of this. BNB value also benefits from the fact that the exchange it is tied to is generating a cash-flow with a proven business model. Using BNB to cover trading fees and BNB trading pairs are crucial to demand. Binance positioned itself well by having referral links, charging a premium for coin listings and making teams and communities desire listing with twitter voting contests. The Lamborghini, Tesla, and other luxury vehicle trading contests also attracted whales to the site. As a centralized exchange, regulation risks exist. Binance hopes to address this and other threats by developing an entirely decentralized exchange powered by BNB.

Kucoin (KCS)

Kucoin has grown to become a popular crypto exchange over the past couple of months. It provides access to several projects not available on other exchanges procuring liquidity for them. Its founding team includes alumni from Ant Financial and GF Securities. Kucoin seems to mimic Binance in a few ways (referral model and trading contests) but has differentiated itself enough to grab share. Kucoin’s competitive advantage lies in their security focus, Research and Development lab, and customer service. The exchange’s native token KCS (Kucoin Shares) grants holders of KCS a percentage of the daily profit the exchange makes. Kucoin fills a void in the crypto exchange space and will continue to grow and attract share as crypto valuations soar, markets mature, and more people start trading.

KyberNetwork (KNC)

KyberNetwork is a decentralized exchange enabling instant trading and conversion of cryptocurrency. Smart contacts facilitate all transactions. Kyber Network addresses the liquidity issue of decentralized exchanges by utilizing a network of reserve operators who keep a reserve of tokens available to provide liquidity for transactions. Besides use as an exchange, KyberNetwork enables users to pay anyone in any token and hedge against price fluctuations with derivatives. Cross-chain trading will be available in early 2019. KyberNetwork Crystals are required for reserves to participate in the network and to reward parties who help generate more trading activities. KyberNetwork reserves need to pre-purchase and store KNC before operating. In every trade, a small fraction of the trade volume will be paid by the reserve to the KyberNetwork platform in KNC.The collected KNC is then burned. KyberNetwork is positioning itself to garner share in this crowded sector.

0x (ZRX)

0x is a trustless, open-source, non-rent seeking protocol that facilitates low friction peer-to-peer exchange of ERC20 tokens on the Ethereum blockchain. Developers can use 0x as a platform to build exchange applications. DApps built on the protocol can access public liquidity pools or create their liquidity pool. Projects that are developing on 0x include Augur, Aragon, District0x, Maker, Melonport, Dharma, Radar, Status, and Blocknet. For end users, 0x will be the foundation for different types of user-facing applications. The protocol’s token, ZRX, is used for market participants to pay transaction fees to Relayers and for decentralized governance over updates to the protocol by stakeholder voting. Relayers host and maintain an off-chain order book in exchange for transaction fees. The token serves to allow stakeholders to securely upgrade the 0x protocol without downtime or disruption to the markets. ZRX ultimately aligns financial incentives. I am bullish on 0x as it becomes more and more decentralized, and it addresses the interoperability among DApps.

AirSwap (AST)

AirSwap facilitates decentralized peer-to-peer ERC20 token trading based on the Swap protocol on Ethereum smart contracts. It solves issues of counterparty discovery and pricing suggestions. AirSwap facilitates the use of an ‘Indexer’ instead of order books via an off-chain peer-to-peer network – a differentiator in this segment. It also allows takers to request quotes from makers and then they can negotiate a price privately. AST gives traders the ability to add their ‘intent to trade’ and gives traders voting power to manage roles of Oracles within the platform. As the ERC20 market grows, traders will seek an exchange that allows them to swap their tokens efficiently.


Contributed by Cryptobonaparte

You can follow me on twitter @cryptobonaparte and find me at the Crypto Mountain.

Disclaimer: This article should not be used as an investment or financial trading advice and reflects the personal views of the author. Please conduct careful due diligence before investing in any digital asset. The author invests in digital assets and may have positions in the aforementioned cryptocurrencies.

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