Saving time in the search for different metrics, with the aim of gathering this information, processing it and being able to have a clear perspective of how to proceed. Given the expectations generated, undoubtedly helps in terms of investment in crypto assets in the decision-making process that we carry out every day as a regulated investment fund. Excellence and good results are based on active management, teamwork and a complete understanding of the sector and the assets we work with, and we have no other way of experiencing this internally at BELOBABA.
Investing in the short, medium and long term in pursuit of different objectives requires us to build a model based on strategy, methodology and time. The art of investing successfully in tokens and cryptocurrencies is not only about buying low to sell high, but it is also essential for diversification to know when and how to work long, short, options, indices and decentralised finance, among other things.
In this article I want to focus on being able to explain and make it simple to understand, which has taken me many hours of study and many hours of travel, to be able to foresee why events happen and how fast they happen around the price of a token or cryptocurrency.
Look at it this way,
Blockchain / infrastructure / network let’s say is the base layer, which grows and captures value thanks to everything that is built on top of it. Therefore, how it is configured from the start can be the key to its future success, and therefore, studying and analysing in detail the technical side of many blockchains will help you determine if at some point they will not be able to meet their growth, without having to make drastic and dangerous moves, before they become obsolete and die.
Networks or blockchains do not have to reach the end user as everyone says or believes (that is not the profile they have to reach). Networks or blockchains are built to capture the interest of leaders or entrepreneurs, with an innate talent in the form of a developer, programmer or builder. These types of people are capable of creating solutions to real problems that may occur at least 6-8 years from now, leveraging the use of technology to provide tangible value.
Therefore, for a blockchain token or network to work, it does not need adoption as everyone thinks, it needs to have an ecosystem of value that is irresistible around it, together with a customised design and technical characteristics that help to encourage its use in the form of support, grants, audits, consultancy, security or marketing, both for users and for new projects, platforms, protocols that approach and want to work on them.
A protocol, platform, project is the next layer of value, where everything goes faster because its final destination is any type of person. This is where games, wallets, AMMs, aggregators, market places, payment networks, storage, markets (futures, derivatives, margin), etc. are built.
Apps have the power to reach more users than a network or blockchain, and therefore the power to spread their work by getting millions of people talking about it and interacting with it within hours, something that a blockchain takes much longer to achieve. A good app usually offers something very powerful, novel, beneficial, that cures a pain or helps.
Logically, the network will benefit from everything that happens on it, but the process of capturing value is slower, although more constant over time. What we must be clear about is that the application has an end point of no growth, either because another better and newer one comes along or because of exhaustion, problems that any well-designed blockchain lacks.
Now, if we extrapolate all this to the real world, it will help us to understand it much better, to see it with a good perspective. Under this assumption, think about the telephone, we could say that the ANDROID or IOS operating systems are that first layer of value, where the really important thing is to be able to develop more things later. Taking it to the field of cryptocurrencies, we can equate these operating systems to the blockchains we know such as SOLANA, COSMOS, ETHEREUM, POLKADOT, ZILLIQA, TEZOS or AVALANCHE among others.
We continue with phones, and now it is the turn of the second layer, applications such as WhatsApp, Discord or Telegram for example. The applications need ANDROID or IOS to be able to run and execute, as they lack their own architecture or network. Apps, therefore, you will agree with me that they have the ability to reach more users than a network and consequently the power to go viral, making millions of people in hours talk about it and interact with it, something that ANDROID or IOS takes much longer to achieve. Taking it to the field of cryptocurrencies, we can equate these applications to the tools we know today such as Metamask, Uniswasp, 1 inch, Open sea, Axie, etc. among others.
In favour of ANDROID or IOS, we can say that we already know that they work and that they are capable of capturing value slowly but steadily. This data can be obtained and measured in pages such as token metrics, where the capacity to generate cash flows through their native token is shown and valued. The APPs that are created within android or IOS also have this capacity to generate business, but their growth, viability and profitability is not organic, but depends on many other factors and metrics that must be monitored and assessed more closely to determine their future success.
To summarise the above:
Money comes to the token of a blockchain and network in two ways, but always with a common denominator, “PAY PER USE”;
Way 1) With the entry of new capital into the market by external investors/speculators, capital that is distributed according to the dominance of that token compared to the most dominant of the ALTS, which is Ethereum. On the other hand, knowing how fast and how much money is coming in helps you have solid data.
Way 2) How successful it is in attracting new developers, programmers and leaders to build on it, and that this native token is needed to pay transaction fees, never as a reward for a meaningless model.
I leave you with an image for you to apply to everything you have read, for example the success of SOLANA, where it is clear what is NETWORK and what are APPLICATIONS and how the SOL token absorbs all the value of the initial ecosystem it is building. Imagine when you have an ecosystem that is only 50% of Ethereum…