103 - Ecosystems and Cryptocurrencies

Today, Mr Philosopher Black, Mrs Newby Blue and Mr Sceptic red meet in the Pub and start talking about "Ecosystems"...

- Ecosystem, that sounds to me like frogs eating flies and squirrels gathering nuts.

- Yeh, well that´s kind of my idea of cryptocurrencies anyway.

- It kind of makes sense to call ecosystem to what normally would be the stakeholders. You see, cryptocurrency, like Bitcoin, do need a "habitat" to survive and thrieve.

- You mean, they need computers to live in?

- Not exactly. They definetly need infrastructure, such as networks, computers, etc. But, do you remember waht we spoke about here regarding what is value in criptocurrencies?

- Yeah, well it did not make any sense... you are giving value to things that do not have it! Bitcoin is tulip-mania.

- I guess we could say the same about printed paper: nothing but colored stamps. For the moment, I would like to know more about ecosystems.

- Well.. as I was saying, there are a few things that provide value to any criptocurrency, and that is linked to the concept of value. First of all, is the trust of the users. There are many types of uses and all of them provide value.

- Oh, anyway, most people are just speculators...

- Even speculating is a value. Some currencies are a vehicle to invest. Lately, ethereum and the ERC20 tokens allow easy investmenting for the masses.

- And many scams!

- Surely, that too. But you see, these people, entrepeneurs and investors are part of the ecosystem. They provide value to everyone by using the cryptocurrency.

- Oh, yep, I think I can see your point there, just like normal money is used to invest.

- Correct. Also, you have the exchanges. Having the support of large exchanges, or at least one, makes a lot of difference. The easier it is to trade, the greater the network effect we spoke about in the value of cryptocurrencies. Also, they are very powerfull actors when forks occur, but that is a different story.

-  Oh, I have seen the exchanges list almos anything nowdays... just look at Etherdelta and the ERC20s. It just does not make sense to have so many tokens listed!

- Mmm... it does make sense, just as it makes sense to list millions of items in eBay or Amazon. But anyway, there are many other actors in the ecosystem, such as the miners.

- Everybody is talking about mining and how people go crazy about it.

- Is just a waste of time I heard, to much work for little profit.

- We should speak about mining some day, but regarding the ecosystem, the miners play a significant role when deciding where a criptocurrency is going to go when updating and deciding which chain are they are participating in. Have you seen the typical windows service packs and updates?

- For sure, and also the Android Apps upgrades. Sometimes they are good and sometimes bad.

- Well, in the cryptocurrency space the software upgrades can be quite controversial, because they inevitably favour some people and damage others. Miners support the version (they call it fork) that is best for their interest.

- I think that miners do nothing I should be removed from the ecosystem.

- At the end of the day, you need to have a distributed network, that is the essecence of a public ledger technology, and , for that, you will need to provide an incentive for the nodes and the validators. They are rewarded in several ways that we could talk about some other time, like Proof of Work, Proof of Stake, Proof of Importance,...

- And who else is there?

- We still have to list the users of the currency, the development teams and, in some cases, the hardware manufacturers.

- This seems like a jungle where everybody runs arround in circles without knowing where all this is going.

- Oh, it is quite the opposite. The ecosystem is highly "political" in the sense that there are  new initiatives continously and all the actors try to act in their best interest. Typically, the users want ease of use and security. Investor want high returns. Hardware manufacturers want to jump into the business, but some of them are unsure as of using their powerfull brands in projects that they do not control nor understand fully.

- Well, this is leading us nowhere...

- The conclusion is that when you consider how "good" is a Cryptocurrency you need to evaluate what actors are influencing it and how. Right now Bitcoin is heavily influenced by large miners, wereas Ethereum has a strong development team and leaders influence.

- But, is this not an endless fight?

- You see, that is precisely why this is an ecosystem. Not everyone in there agrees nor wants the same thing, but surely they all depend on each other to make bitcoin and other currencies strong.