Do you see ADA as a reliable store-of-value, global reserve currency safe haven yet?

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Is ADA a Reliable Store-of-Value, Global Reserve Currency, Safe Haven Asset Yet?

I can keep my gripe no longer. The recent Silicon Valley Bank implosion and cascading effects has given me pause [1, 2]. Bitcoin and Gold are considered store-of-value safe havens, and their price appreciation spike is reflecting the flock to safety.

Honest question though, do you see ADA as a global reserve currency safe haven? Is it a resounding yes for you?

Do you think of ADA first when the banks are burning down?

I personally have a cash pile in the bank saved for a house downpayment to be used in a year or two. I would feel safer putting that into gold or bitcoin because it’s vital for my family if I had to de-bank, and that’s just being honest.

(But Sir, ADA has increased with a price spike too since the recent banking crisis)

Fair point, but if you look at the ADA/BTC ratio or ADA/AUX gold ratio, it’s still losing value (and ETH/BTC has been flat).

Don’t get me wrong, I’m heavily invested in ADA financially and socially, and have been in since 2018 and not planning on going anywhere. But the question needs to be asked:

Culture of Hodl, or Payment System?

I’m not concerned about the price, I’m concerned about the culture.

Do We as a Cardano Community have a Hodl Culture?

We have the hard money of 45 billion ADA cap and a deflationary issuance curve. We have an amazing trustless and permissionless proof of stake rewards system for compounding savings. We have a relatively fast, secure, and low fee payment system as a utility for a parallel system.

So what gives?

I believe it’s the culture. The Cardano Community is less concerned with ADA as a hard money currency store-of-value, and more about NFT flipping and Payment Systems.

Did a ton of folks take ADA profits and convert to fiat this year? Do Project Catalyst fund reward recipients cash out ADA from the Treasury immediately upon receipt? Do ISPOs covert their ADA rewards into fiat to fund their projects? Does the Cardano Ecosystem have enough utility to even use ADA for something real yet? Are ADA-to-ADA transactions for Goods and Services encouraged and common? Does Crypto Twitter even regard Cardano as a store-of-value by reputation?

The fact is, there is significant “cash out of ADA” sell pressure and culture. There is significantly less hodl or using ADA as a parallel ecosystem “saving” pressure.

Remember, staking rewards are also going down, and also going to major commercial, super high leverage (low pledge) stake pool Groups who will sell out Cardano in a second. We will be the empty bag holders.

Early Technical Days, But Still

In reflection, I think it may take a solid decade before the Cardano technology is stable, it’s still very early. That being said, Bitcoin had a hodl culture since day 1.

Personally, I’m waiting for peer-to-peer full nodes (finally here) and Governance to settle down before touting this gripe more loudly. For now, I’m giving ADA the benefit of the doubt. Not to mention DeFi and Smart Contracts are just getting off the ground really.

A Return to ADA Hard Money Hodl Culture

In my opinion, We as a Cardano Community need to refocus our culture back to ADA as a hard money currency first, and financial operating smart contract & governance system second.

Without immutable hard money, XRP can out perform us as a payment system. SQL can out perform us as a database and “smart” contracts. Bitcoin can out perform us as a store-of-value. It’s the combination that makes us special, secure, trusted, and useful.

We are Bitcoin + PoS + Smart Contracts (+ Governance), a Blockchain 3rd Generation System. But somehow, I feel we lost the hard money decentralization part.

And don’t let the Bitcoiners bully you into believing bitcoin is a better store of value. It has more years under its belt and is stable, but arguably way less decentralized, and missing the compound savings part!

(But Bitcoin has Austrian Economics)

Have you actually read Austrian Economics? It’s core thesis from Human Action by Mises, the Founding Father of Austrian Economics, touts that you need hard money and entrepreneurs providing a goods and service. Well that’s Cardano’s ADA and Stake Pools. If you don’t like the direction things are going, you can take your Liquid Staking to a new Pool who is doing better work. That’s Human Action in a nutshell.

Do you know what a Bitcoin Stake Pool is? It’s an insider private investor in MARA getting closed door KYC Equity Stock and Dividends. Hell, you as a public investor can buy their MARA bitcoin mining stocks thru a KYC Cartel Banking/Brokerage System, but you still don’t get the mining reward dividends automatically, trustlessly, and permissionlessly!

Behind the scenes of a great Bitcoin mining pool, especially for public or private investors, there’s still capital and energy planning, management, and sustainment costs of entire teams. Publicly listed miners have immense pressure to provide the best human goods & services. Cardano is much less energy and much more trust and human action.

With ADA, you hodl the appreciation, get non-KYC dividends, and exposure to not only hard money but the entire Cardano Ecosystem Work Force directly. That’s a much better value proposition. Anyone who has read Austrian Economics and is not completely brain washed can immediately see how Cardano is better aligned than Bitcoin as a store of value. I know, I read most of the Austrian books to try to kill Cardano, but Steelmanning the argument has actually had the reverse effect! I’m a more hardened ADA Hodler now. Hell, Bitcoin wants to be Cardano with their side (drive) chain initiatives and NFTs into their metadata [3, 4].

The only downside to Cardano still is the Governance Genesis Keys. But even still, there’s now actually 4 guys who sign Bitcoin’s code [5]. Cardano Governance at a minimum should be better than Bitcoin’s off-chain Governance.

So this leaves my final question:

Do you trust your own ADA as a hard money currency?

1 ADA = 1 ADA.

Sincerely,
-TheStophe

References

[1] https://www.cnbc.com/2023/03/16/svb-signature-bank-failures-yellen-says-us-banking-system-is-stable-and-deposits-remain-safe.html
[2] https://www.cnbc.com/2023/03/15/financial-shares-fall-as-credit-suisse-becomes-latest-crisis-for-the-sector.html?&qsearchterm=credit%20suisse
[3] https://www.drivechain.info/
[4] https://www.coindesk.com/tech/2023/02/17/bitcoin-nfts-challenge-the-blockchains-largest-use-case-money/
[5] https://coingeek.com/btc-core-maintainer-marco-falke-resigns/

Edits

  1. Added paragraph “Behind the scenes of a great Bitcoin mining pool, especially for public or private investors, there’s still capital and energy planning, management, and sustainment costs of entire teams. Publicly listed miners have immense pressure to provide the best human goods & services. Cardano is much less energy and much more trust and human action.”
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Thanks @ccgarant - to answer your question, I was content to remain vested in Level 1 smart contract cryptocurrencies including Ada the whole way down: from September 2021 to not-long-ago. As I see it, and resolved ahead of time: such events are the crypto base of our wealth remaining constant as the rest of the world’s parasitic (and unsustainable) banking & investment systems fluctuate.

I’ve also seen that the principles of Austrian Economics will apply to the parallel economies that will be created, at least in some instances, by permissionless smart contract cryptos… though I would admit for Cardano that the marketing imperatives of stake pools and the currently closed system of governance are obstacles to this.

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Thank you for bringing this up @ccgarant.

In my opinion $ADA has a chance in becoming the hardest and most sound money ever created.

Why do I believe that:

  1. After the implementation of Ouroboros Genesis and MVG (minimal viable governance) there will be no properties left were BITCOIN is superior to CARDANO. The problem is a lot of protocols in Web3 space have claimed a lot of things in the past, therefore I think it is difficult to push this narrative without having the protocol actually implemented and governance working to show the world.

  2. In order to maintain a hard capped supply of the token the network has to at least generate enough revenue to pay the miner/SPO’s for maintaining the security and decentralization of the network.
    Here is were Cardano has a huge advantage over Bitcoin, first, the same or higher level of decentralization and security can be achieved with Cardano at a much lower cost.
    And second, with bitcoin pushing only for the HODL culture they are missing out on a lot of revenue in form of transaction fees Bitcoin can only sustain its hard capped supply by an ever increasing price, which is apparently not possible.

We are on a perfect path to create the most sound money ever, just three things missing.

  • Ouroboros Genesis
  • Governance
  • enough revenue to cover the Chain security

1 ADA = 1 ADA with 45 * 10⁚ max supply

Baz

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Great post TheStophe! Personally, I agree with Baz’s assessment. Cardano is on the trajectory to become a global reserve currency safe haven IMHO.

There are a few minor things missing, then we “just” need the crypto community to mature up to see the value proposition of Cardano. As an SPO, I am also very happy that we finally have Peer-2-Peer networking. I am also very happy we finally get decent dev toolings with Aiken and OpShin. The strength of our community is really starting to show.

That NFTs do not really fly on Cardano yet is IMHO a sign of maturity not weakness of our community. I never understood the value proposition of owning the hash to an image of some monkeys butt, so I’ll pass until the NFT scene gets their sh*t together and actually builds something with utility, I actually want and need.

As long as Doge and Solana are anywhere near the Top10, we are still overall very early IMHO.

For the longest time, I refused to even own BTC, because when I first used it in 2017, I hated the experience of high fees and slow transactions.
In the last bull in 2021, with ADA staking rewards, I finally again bought some BTC for longterm hodling.
I didn’t do so only for the strong store of value narrative BTC still has, but also for wanting to own some of the still undisputed king, to be able to cheer with the BTC crowd when BTC jumps ahead of all other tokens. However, I didn’t want to own too much BTC, so that when the king is toppled, I won’t lose all my crypto gains.

Clearly, investing in crypto beginning in 2017 is among the top financial decisions of my life. Of course, I have a vested interest in investing in hard “money” in the end as well.

Long term, I see BTC either going to $ millions per BTC or be pretty much devalued / dead. Both outcomes are very much possible IMHO.

BTC is boring, it is extremely conservative, governance is non existent and hostile to change. Ordinals was a hack not endorsed by BTC core and the core BTC team is for sure already thinking how to kill Ordinals again. The pure hodl mindset of BTC with no utility other than store of value is poison for the future. After a few more halvings of mining rewards, who will pay the miners to keep the network alive? Not enough will use the network to generate enough transaction fees to cover miners cost. Only when BTC keeps exponentially rising in value this has a chance of working long term. But will it?
The king rests too much on its laurels, this could very well be what will eventually be it’s undoing. Who doesn’t change, dies eventually. Crypto is still a very nascent market, in search for its killer use case, do we really believe a pretty much static chain can cover the future killer use cases we don’t even know yet?

I still refuse to own Ethereum, as it is botched together and badly designed from a technical standpoint, long term I see no competition here to Cardano.

Overall, I see the least risk with Cardano even today and see much higher potential for long term store of value. I bet big on that obviously, but feel confident doing so, and more confident with each development step Cardano takes.

Let us make a simple thought experiment: Let’s assume today you can put all your assets either in BTC, Ethereum or Cardano, then you are cyrogenically frozen and conserved for 100 years with no way to change your decision in the time you are under. After 100 years you are revived again and can access your funds. Where would you put your assets, knowing what you know today?

For me the decision is clear, I would put it into Cardano. I agree with Baz, that we have to show, not tell. So we must first implement the final building bricks to be pretty much unapproachable and can’t be ignored even by VCs anymore. Personally, I see a bright future for Cardano and am fully prepared to play the long game through all ups and downs until we get there.

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See, I think it is much worse than this because the reward to attack the BTC network goes up in direct proportion to the price. However, the percentage of the BTC market cap paid to miners each year halves with each halving (assuming transaction fees are relatively minimal).

Consider two scenarios:

  1. BTC price is unchanged following the halving. Miner revenue halves so many miner’s leave and start doing other stuff with their massive computers. This results in a lot of surplus mining hash power “doing other stuff”. This surplus mining power is now available for cheaper hire which lowers the cost of attack.
  2. BTC price doubles following the halving. Miner’s are now earning the same amount following the halving so there is no incentive for them to leave. However, the incentive to attack the chain has just doubled because if you can pull off a double spend attack the possible reward has doubled. Therefore an attacker can afford to spend twice as much on the attack.

As the price goes up and the halvings continue eventually a point is reached where the incentive to attack the BTC network greatly outweighs the rewards paid to miners to keep them committing all that hashing power for the good of the BTC community.

I don’t know when it will break, but the final outcome seems inevitable to me.

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Awesome reply! Thanks so much! I also agree - p2p and genesis spool up are my top 2 next things on the checklist. So glad p2p has arrived. Cheers!

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Really good food for thought…interesting.

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