Source: www.makeuseof.com

Just as true test of stocks/shares is how they perform in the bear market against their relatives, the true test of utility tokens would be analyzing how they performed during the current crypto bear market starting from Jan 2018 (point of maximum overall crypto marketcap) to now and learn from their trends.

Bear markets are the times when hype can no longer support the price of asset and on the other hand, it has to additionally defend itself against the overall negative market sentiment even after having good fundamentals. Just as we tend to be irrationally positive during bull markets, we become irrationally negative during bear markets.

This is the reason why even companies like Amazon were negatively affected in 1999–2001 dotcom crash, although it survived the crash and became stronger with time. As they say, what doesn’t kill you makes you stronger! And there were other big startups like Webvan and Pets.com which got busted during the dotcom crash because hyperlocal delivery or pet ecommerce as ideas were too early for the time!

So, what’s the scenario with crypto tokens which are going through the current crypto bear market?

Let’s evaluate the price trends of three poster children of utility token ecosystem — BAT, REP and BNB.

i) BNB -

BNB started out with a network value of $15 million in June 2017 when it successfully completed its ICO before product launch.

Launching the exchange product soon after, it reached a marketcap of $2.2 billion and BNB price of around $22 in Jan 2018 before starting a journey of decline along with rest of the crypto tokens due to overall negative sentiment towards the industry. It then settled at its bottom in Dec 2018 with a marketcap of just $600 million and BNB price of $4.6.

Source: coinmarketcap.com

But the current scenario is again turned positive. It now has a marketcap of around $3.2 million (40–50% greater than Jan 2018 marketcap) and BNB price is again around $22 which was its local peak in Jan 2018. So, BNB has been able to again reach its Jan 2018 peak price, which hasn’t even happened with Bitcoin yet which reached around $20,000 in Jan 2018 and is still hovering around $10,000. Infact, BNB even reached a price around $39 three months back before correcting back again.

Now, how can a particular crypto company’s token outperform the largest cryptoasset Bitcoin with its largest network effects and maximalist supporters, and that too in bear market, when Bitcoin’s dominance against other altcoins has gone up tremendously as most shifted to Bitcoin as a safer option!

Because BNB token has real usecase/utility within the platform and this utility kept on growing in the last 2 years with increasing userbase and more trading volumes. And there is demand pressure for buying, holding and using BNB because of benefits like discounted trading fees, ability to participate in IEOs, acceptance in other portals for payments etc.

The value of token depends on demand pressure to buy existing available supply at market price pushing supply price further upwards and Binance has been working diligently on new possibilities for creating demand.

But, with so many exchanges now coming up, the future growth of Binance is still uncertain, however it’s quite clear why BNB has been able to perform well in the last couple of years!

Learning: increasing traction/users with actual usecase beats everything else!

ii) BAT -

This is a very interesting case. It did its famous ICO in mid-2017 when over $35 million were raised within seconds. The Brave Browser Project was started by creator of Javascript and founder of Mozilla browser, Brendan Eich; so the hype was expected. Brave Browser already had million+ users, so there was traction as well. Brave browser was a great product — no ads and much smoother and speedier browsing experience — and its traction was deserved.

Now let’s look at the price trend.

In Jan 2018, BAT reached its highest marketcap of around $870 million and BAT price of $0.86. Currently, the marketcap is hovering around $280 million and BAT price of $0.20.

Source: coinmarketcap.com

In comparison to BNB, looks like something went wrong for BAT! So, what exactly went wrong? Multiple things actually:

a) Firstly, BAT is not a part of core user experience on Brave. A Brave browser user may not necessarily know or participate actively in BAT economy. This creates challenge for BAT as a utility token within Brave. Even with having 10 million+ users now for Brave, what really matters for BAT is the traction inside BAT economy which is going to be a %. Whereas on Binance, core user experience is trading and BNB improves this experience with reduced fees and thus proves its utility much more strongly.

b) Even with a large traction within BAT economy, it faces another fundamental challenge from demand-supply perspective, which is highly unbalanced as of now. Let’s look at each.

Supply side — Publishers earn in BATs as a function of time spent by users on the publisher platform. This additional supply creates downward price pressure on BAT as new supply enters the market to sell.

Demand side — From advertisers who would buy and use BATs for advertising on Brave. But the team has been quite slowly progressing since its ICO two years back and even now Brave ads are available to certain countries only. Also, not all would opt for watching ads in which case, advertisers get access to only a portion of the Brave browser audience.

Learning: Utility token usecase should be native to user experience and there shouldn’t be too much delay in execution!

iii) REP — This is again a very interesting case. A case where a need for decentralized global betting/prediction market was felt and a Dapp on Ethereum seemed like the perfect solution!

The team raised $5 million in mid 2015 through ICO to build the product.

But when we look at the reality today, there’s not too much traction on Augur which really puts into question whether there’s even a demand for decentralized betting currently. Just 14 daily active users after 4 years of ICO!

Source: www.dappradar.com

Now this is not to say that there’s never going to be a decent demand for decentralized betting, it might arise 10 years down the line, but is it an urgent need? Probably not!

This puts Augur in the same club as Webvan/Pets.com during dotcom bubble in 1999. Now in 2019, there are pretty big companies built on both these ideas — hyperlocal delivery and pet-based ecommerce, but 1999 was possibly too early for this market?

REP reached a peak of $107 in Jan 2018 and Augur’s marketcap reached $1.18 billion in the same month. And now the marketcap is around $118 million and REP around $10–$11.

Now it may look like a 90% decline which is pretty bad in itself. But, with 14 daily active users, what even justifies the current network value of $118 million? Irrationality and sunk cost bias! Or probably, REP has found a better usecase as a gambling token on exchanges than it was originally meant for, like most of the other tokens listed on exchanges we see today.

Learning: Traction matters most!!!

With the above analysis in hindsight, next time you come across a new utility token out in the market, consider the following parameters to evaluate it:

i) What stage is it in — pre-product, beta phase, or large userbase and is the raised amount in sync with the stage — e.g. should be low for pre-product

ii) Whether utility of token is core to the user experience or not, e.g. BNB vs BAT

iii) Whether it has a demand side which looks willing to buy, hold and use the utility token within the platform — this is mandatory for price support

iv) Whether it sees a good growth rate if it has been launched already

That’s how professional investors evaluate equity investments and that’s how we should act to evaluate any new utility token project!

And what does the above analysis make of other utility tokens than BAT/BNB/REP, mostly built on Ethereum till now? Probably pure trash, no actual usecase or looks real but very far in the future! Time to have a relook at your altcoin portfolio without any sunk cost bias.

Now, finally let’s see where does Masmic Attention Token (MAT) fit in, in all of this?

Current status -

We have reached a userbase of 60k+ and growing rapidly (> 30%) with every month.

10% of total token supply is offered during presale starting Oct 1 at discounted price and the actual MAT market will launch in Feb 2020. The initial circulating supply will start with tokens bought during presale, with a maximum cap of 5 million MATs.

MAT is native to Masmic just like Binance/BNB and unlike Brave/BAT. Which means use of MAT is going to be a core component of product when launched. Demand pressure is going to be created due to rebate associated with MAT based bounties which will drive buying, holding and using MATs.

And the team’s focus will be — increasing traction supporting actual usecase!

For learning about how Masmic Tokenomics works, click here to read the article.

Please note, none of this should be construed as an investment advice. This is only for educational purpose and you should do your own research before making any decision!