Pt. 2 — Why PoWH3D, an Ethereum Dapp, might be a better store of value than Bitcoin.
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THIS ARTICLE IS SOLELY AN ANALYSIS OF THE MARKET. THIS IS NOT TRADING ADVICE OR INVESTMENT ADVICE. I OWN A SMALL PORTION OF P3D AND P3C THAT I PURCHASED WHILE WRITING THIS ARTICLE
It’s been a little over five months since I last wrote about Proof of Weak Hands (P3D) and a picture of the contract balance is worth a 1000 words:
If you are unfamiliar with the rules of the P3D game, I suggest you check out my first article which explains them. As you can see, the price has exploded since then, validating the fact that more and more people are starting to think that P3D is a very good store of value. With the launch of the Fomo3D short and long games, P3D has effectively fought off the first wave of clones, and has a consistent revenue stream to feed dividends back to investors. This is a key evolution since Fomo3D Short and Long are really just variations of the same original P3D contract idea. Very similar to a mathematical fractal.
What we are witnessing is the first instance of, what I am going to henceforth call a Robotic Trust or, trust, for short. The P3D contract is what is called the core. The core contains the main incentivization engine that allow new participants to invest in the growth of the trust and receive dividends. In the case of P3D, this is the original Proof of Weak Hands contract.
Fomo3D Short and Long are both what I am going to call actor contracts. The actor contracts feed the core of the Robotic Trust with a steady stream of dividends. The actor exists solely to service the investors in the core, and if left alone would die without the core. In the case of Fomo3D, the product is the creation of a decentralized lottery that gives dividends out to participants. This is just coincidentally similar to the original P3D contract, but it doesn’t have to be. We are going to call this a loose actor. It’s loose because it could technically be launched on its own without a core, but because it is connected to the core of the P3D robotic trust, it benefits greatly from the exposure and marketing of core investors. A strict actor is a contract that would absolutely not function without a core, we’ll talk about this later in the article.
The third level of the Robotic Trust which doesn’t exist yet, but will soon, is known as a partner contract. A partner is a third party dapp that is completely disconnected from the core and actor contracts, but chooses to deposit funds into the core to gain exposure and marketing of the core community. A partner can join another Robotic trust at any time and is only tied to the core out of mutual self-interest. In my opinion, when we see P3D gaining serious partner contracts (Decentralized Exchanges, 3rd-party games, etc.)is when we will see the ecosystem really explode in value. Team Just is currently working on an SDK to facilitate this, and in my opinion the next great leap in P3D value will come when we start seeing the first partner contracts come into being, kicking off a chain reaction of investment mixed with a healthy dose of FOMO.
Ask yourself if the whole practice of trans-fee mining in Asian exchanges sounds a little like this already…
Exploring Strict Actors
Earlier I said a strict actor is a contract that would absolutely not function without the core. The first example of a strict actor in the wild exists in the P3C (P3D on Ethereum Classic) ecosystem in the form of a contract known as RainMaker. RainMaker acts as a custodian of over 11,000 P3C tokens and has no ability to sell or transfer its P3C, it can only ever reinvest whatever dividends it has back into the P3C core and acquire more tokens. As P3C goes through boom bust cycles, we can see RainMaker gaining even more tokens and always reinvesting, further smoothing out the floor price of P3C, and increasing stability in the trust. RainMaker in this case, is a perfect example of an antifragile element that props up the core. As Nassim Taleb defines antifragility: “Some things benefit from shocks; they thrive and grow when exposed to volatility, randomness, disorder, and stressors” — Antifragile
Whether or not strict actors or loose actors will be more helpful for their respective cores is unclear, and it will take many trial and errors before we get a definitive answer.
Also, P3D has the potential to disrupt the entire exchange space…
We can also applaud the inadvertent creation of the first zero fee market maker, something V. himself believes is impossible. The P3D contract mathematically guarantees liquidity for the exchange of your tokens. That means that there is absolutely no way that if you want to sell your tokens you wouldn’t find a buyer. The contract will always buy them from you. The rate you are getting might not be fair, but you will always have a buyer. The same cannot be said of a traditional exchange: imagine trying to sell Enron stock after it collapsed. There are so many added benefits of the P3D exchange model as well. If a company were to use a P3D model, there would be no need to list on exchanges, or funding rounds since the contract is always accpeting new funds and providing a fair way to distribute dividends.
There is also the added benefit that high frequency speculators are automatically punished with a 20% fee that goes to long term investors when they buy and sell. This is good, because long term investors actually care about the success of the project and are more likely to participate in governance or advertise for the robotic trust. One of the biggest problem with the world today is the lack of long term thinking, Saifidean Ammous diagnoses this as being a problem with “high time preference,” and I’m inclined to agree. A trust penalizes short-term thinking.
This also removes the ability to do OTC trading, wash trading, or any other exchange shenanigans that victimize smaller investors who lack insider knowledge.
Going public with the P3D contract.
Elucidating further on the idea: I believe the Robotic Trust model can be applied to all companies or cooperatives (non-profit as well), creating a smooth growth curve from creation. Imagine, you launch a lemonade stand trust by deploying a core PoWH contract. You put up the initial capital, and then get some investors to also buy in early. You liquidate some of your first tokens to pay for startup costs. As the company grows and makes dividends, you use those dividends to buy more tokens from the contract, repaying your investors through the dividends generated. New investors, can also choose to buy tokens, exit, or collect dividends whenever they want. There is never a need for an actual exchange or liquidity event like an IPO or Series-{A-Z} of funding. Investment is open to all with no discrimination in price. No fears about opaque or misleading dilution.
Conclusion
I haven’t been this excited about Smart Contracts since the DAO back in 2016, so I’m very excited to see where P3D goes. I predict up, way up. It’s worth noting that Team Just also happens to be the most professional team in the entire industry. Anonymously running a multi-thousand person discord channel, a network of dapps, and making constant UI + backened improvements. I can’t think of another team worth backing more than Team Just.
Lastly: When you are explaining P3D to someone ask them to imagine social security without any restriction on age or nationality. Then once they’re sufficiently confused, explain P3D to them. After a few tries they might get it…
Misc Predictions
- I’m really excited to see where the futures markets on Augur goes with P3D. I think for the P3D community to grow sustainably, there needs to be a platform for investors to hedge the risk of hacking, or short the project. Augur markets represent the perfect venue for this.
- I’m also very interested to see if someone comes up with a coherent strategy to trade P3D. I’m personally a fan of Technical Analysis in markets with very little fundamentals (i.e. most of crypto), so it’ll be interesting to see if traditional charting techniques will work with P3D.
- P3D is really, at its most basic, an insurance contract. Your insurance payment is the fee you pay to enter and leave. The risk you take is that the price might go down when you need to liquidate. The upside is you can never have an insurance agent reject your claim, and you know that your funds are always present, no matter what. That’s pretty valuable in my opinion.
- P3C on Ethereum Classic and P3D on Ethereum both benefit from different underlying economic models. The ETC community has voted on fixed supply (210 million ETC) and is much more concentrated in fewer holders than ETH is. How this affects the growth of either contract will be interesting to watch. I personally am invested in both.
Special Thanks to:
- Team Just for coming up with all of these contracts in the first place.
- The P3C team for reaching out after my last article and helping formulate the idea of a strict actor.
- Crypto Wealth for inspiring me to write this article thanks to his Youtube videos.
- @RhysLindmark, @IMmsGNU, @kacperwikiel for the interesting discussion on Twitter.
