Bitcoin VC: Beware of 'meme-based' cryptocurrencies

Senior Writer
Yahoo Finance

There are currently 19 cryptocurrencies with market value above $1 billion, but unless you’re deeply steeped in the crypto space, you’ve likely only heard of the top four at most: bitcoin (BTC), ether (ETH), ripple (XRP), and bitcoin cash (BCH).

As Nick Tomaino, a Coinbase alum who now runs crypto VC firm 1confirmation, phrased it last week at Yahoo Finance’s All Markets Summit: Crypto in San Francisco, “How I describe most of these coins is they are meme-based currencies. In the past year, there’s been so much interest and fervor in this space that if you create a coin and have a good meme, you could have a billion dollars in market value.”

Take EOS: It is the No. 4 coin by market cap, at more than $6 billion, and its blockchain only went live one week ago—and it’s already having problems. Scroll down Yahoo Finance’s handy index of the top cryptocurrencies and you see coin after coin that all have specific stated purposes—but it’s unlikely most of the buyers who have pumped up their prices actually know those purposes.

The No. 7 coin Tron (TRX) aims to be a blockchain for the entertainment industry; No. 26 Waltonchain (WTC) is a blockchain for managing supply chains, named for Charlie Walton, the inventor of RFID technology; No. 31, Basic Attention Token (BAT), applies crypto to digital advertising, hence the name. Keep scrolling and it gets sillier: Dogecoin, named after the popular Shiba Inu meme; Dentacoin, for use by dental offices; Unobtanium, so named for its scarcity compared to bitcoin; and Trumpcoin, created by Trump supporters.

Is the plethora of quickly-launched, meme-based cryptocurrencies a problem? Yes and no, Tomaino argues.

“Why is that a bad thing in the short term? Because a lot of people are probably going to lose a lot of money,” he said. “Why is it a good thing in the long run? Because for every person that just cares about getting rich quick, there’s also a person that becomes more deeply interested in the technology. And that’s going to help the space in the long run.”

Nick Tomaino of 1confirmation (center) and Dan Held of Picks & Shovels (far right) speak at Yahoo Finance’s All Markets Summit: Crypto in San Francisco on June 14, 2018. (Jeremy Waldorph/Oath)
Nick Tomaino of 1confirmation (center) and Dan Held of Picks & Shovels (far right) speak at Yahoo Finance’s All Markets Summit: Crypto in San Francisco on June 14, 2018. (Jeremy Waldorph/Oath)

Indeed, the crypto market price surge at the end of 2017 is what stoked mainstream interest in the space, but bitcoin and blockchain entrepreneurs are now hoping that interest will remain—beyond mere price speculation.

“Certainly if the price was zero, none of us would be in this room,” said panelist Dan Held, who sold bitcoin price app ZeroBlock to wallet company Blockchain in 2013 and now runs Picks & Shovels, which provides crypto portfolio tools to hedge funds. “I got involved in the space in 2012, so I’ve been through a few of these [price] cycles before. I think this one was really exciting because we saw mainstream finally come into the space. Before, it was very hobbyist, very niche. I think that represents a fundamental shift in the type of people that are coming in to build products… So I’m really excited in terms of this next wave, what’s going to be built, and what crypto assets will rise and fall. And I think one thing we can bet on is that it’s going to be highly volatile.”

Watch Yahoo Finance’s All Markets Summit: Crypto here.

UPDATE, 6/22/18: An earlier version of this story stated that Unobtanium took its name in part from the movie “Avatar.” A lead producer on the Unobtanium project says that’s incorrect; we’ve updated the story.

Daniel Roberts covers bitcoin and blockchain at Yahoo Finance. Follow him on Twitter at @readDanwrite

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