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What Cryptocurrencies Pay A Dividend?

The following article covers a token or element in the cryptosphere. The cryptosphere is new and exciting, but changes rapidly and often in ways that do not benefit users. By the time this article is published, changes may have already occurred. Most tokens in the cryptosphere are complete scams that are get-rich-quick-schemes for insiders. Often, we cannot know this beforehand and only later discover this. A person should only trade with money that they’re willing to lose because losses are guaranteed. If you choose to participate in purchasing a token in the cryptosphere, you should do so with the full expectation of a loss and you should also expect it to change in a manner that does not benefit you. There are very few good ideas in the cryptosphere. Finally, by reading this post, you agree that you’ve read our disclosure.

Introduction

For the sake of keeping the terminology simple on this page, one should realize that dividends do not exist in the cryptosphere, but rewards do in the same manner that a chicken or watermelon plant pays a reward through a form of yield. A chicken may pay yield with eggs, but eggs are not officially recognized currencies; in the same manner, a token may say that it pays a reward, but this reward is only as valid as Main Event tokens. Also, all rewards is incredibly high-risk, in that there’s no guarantee that what is being rewarded will retain its value – it does not have the power of stability like government fiat. In general, while the cryptosphere uses the name cryptocurrency, most of these are actually tokens in that they are not recognized by any government and could easily collapse to 0 tomorrow without any intervention. Think of a token that you receive from an entertainment place, like Main Event, that allows you to redeem them for items – both the items and token are heavily restricted. For this reason, the term “cryptocurrency” is very inaccurate in describing what it is. These tokens are as valid as Main Event or Peter Piper’s Pizza tokens.

By contrast with government currencies, a total collapse is less likely with government currencies because governments will try to intervene when their currency begins to fall (while not impossible, it is less likely to occur); for an example, in 2014-2015, the Russian Central Bank raised interest rates to 18% to prevent the Ruble from declining too much. On the other hand, we have seen issues where central banks do not intervene much, or where their intervention fails (Zimbabwe) and the result is an absolute loss for citizens.

Due to the nature of change with cryptocurrencies, we will only feature 2 on this page since it’s too much work to keep up with changes. In the future, we may feature more.

LBRY (LBC)

LBRY may offer the ability to receive rewards relative to how one uses its platform, provided that the team iterates in a manner which favors this use.  In the past, one could have bid on one of the main domains that was featured on the start-up page, like lbry://one and offered that spot for rent to anyone selling a digital good.  This use generates reward through a rent-like setup, like a billboard.

Advertising isn’t going anywhere.  The LBRY team would be wise to include an advertisement spot and a best seller spot on every page for every category.  In the long run, this is the only organization that makes sense: the opening page (right now Home) could show the best sellers in all categories with advertising spots as well. A user could select a category, which would have its own page with the top sellers and advertising spots. A “landlord” wanting regular rewards would reserve a top advertising spot, like:

lbry://gardening/one

lbry://humor/one

He would rent this spot out to anyone with a digital product. Whether he takes a set fee or takes a percent of every product that is sold, both he and the producer win. In the case of a percent, he could choose to switch to someone else if the product doesn’t sell. In the case of a set fee, he could choose a set time.

This does assume LBRY developers use an intuitive design: an opening page and category pages. At the current time, there’s too much noise on their opening page and adding category pages will help reduce this noise. As for the producer-consumer balance, an opening page and category pages with each page featuring both best sellers (consumers like) and advertised products (producers like) creates equilibrium. I agree with anyone who would argue that the developers might miss this design. While possible they miss this, at this current time, I think the development team has shown creativity with their design. It would be a huge blow to LBRY to build a non-intuitive design that neither benefits producers or consumers.

Risks. Some of the risks:

  1. Since a person is reserving spots with a wallet, he must practice excellent digital security.
  2. This assumes the developers build creative ways for many people to make and earn LBC.  LBRY offering flexibility and creativity, outside of what most would think of, will be the only way ideas like this can happen.  Developers must think about the vision of people they may not normally consider.
  3. The person who does this will probably take a big risk early – like owning 1 million or more LBC. This type of risk is above what most people would do, which is why the risk will have a massive payout if LBRY succeeds and innovates in a manner that allows him to earn yield this way.
  4. It’s possible that advertising spots don’t perform at all. While unlikely, this is still a risk.
  5. The LBRY project could change in a manner that is detrimental to early investors. We continue to see this in the cryptosphere and this is a major risk with any project.

One point to consider here when thinking about which spots will command the most value in terms of advertising: the 80-20 rule suggests that only a few categories will be heavily profitable (like humor), so for investors willing to take this risk, accumulating a significant amount of LBC may be required. I would fully expect that top advertising spot in humor to have significant competition, assuming the LBRY developers build in this functionality. The risk-reward ratio may look like:

Cary risks less than $43,000 to purchase 5,000,000 LBC for retaining a top spot (he was a student, so he bought at the right time). He rents out one of the top spots and with 5 million LBC, it is highly unlikely that anyone will compete with him for that spot, since LBC’s supply is fixed at 1 billion LBC. Users begin to rent the spot and this yields him 100,000 LBC per month or 1.2 million LBC per year. On an LBC-only basis, it would take over 4 years for Cary to recoup his LBC principal, which on a yield basis is 24%. Whether this becomes a good investment is heavily related to other items mentioned above this.

DigixDAO (DGD)

At the current time of this writing, Digix asserts that they will allow quarterly rewards to be claimed by holders of the DigixDAO and from their site, this reward will be in the form of Digix Gold Tokens. Digix terms this a quarterly reward and makes it clear that one must claim the reward, in order to have access to it. This is key for many reasons and the most obvious is that if one does not claim the reward, then they get nothing (by contrast, one does not need to claim yield from a REIT fund). From their site:

DGD holders get to claim rewards on transaction fees of DGX. Transaction fees are at 0.13% of balance sent, capped at 1 DGX per transaction.

One should be aware of the risks with Digix, so this is not a guaranteed gain or loss. Digix points out that they make fees from the Digix Gold Tokens and that these fees from people holding gold tokens are paid to DigixDAO holders. Digix also allows users to do independent audits of the gold holdings. In addition, it’s probable that Digix honors these rewards, that they will also pay out quarterly rewards for other ideas they develop through their DAO that may have trading fees. At this present time, this is all experimental and to my knowledge, no one has received rewards yet. If Digix Gold Tokens become popular, then DigixDAO could be a huge winner. In addition, if Digix continues to develop ideas, the tokens may have other awards that holders can claim, if they choose.. In a sense, the risk on this project is high, but it’s also the lowest it will be if Digix continues – as the early bird always get the worm if an idea succeeds.

Risks. At the current time, Digix has taken more time than expected to develop its idea. This is not a major concern because smart money prefers an idea to be well-developed than the opposite, but they do over promise and under deliver, which raises concerns. This is an area they need to improve – rather than promise an early date, delay it back and over deliver. To be fair to Digix, almost every cryptosphere project has this problem.

Digital assets carry significant risks; do you know what these risks are and how you can reduce the likelihood of them affecting you? In the Millionaire Guide To Digital Security, we cover updated best practices with digital money. A 100% return means nothing if it’s hacked.

Warning

The following article covers a token or element in the cryptosphere. The cryptosphere is new and exciting, but changes rapidly and often in ways that do not benefit users. By the time this article is published, changes may have already occurred. Most tokens in the cryptosphere are complete scams that are get-rich-quick-schemes for insiders. Often, we cannot know this beforehand and only later discover this. A person should only trade with money that they’re willing to lose because losses are guaranteed. If you choose to participate in purchasing a token in the cryptosphere, you should do so with the full expectation of a loss and you should also expect it to change in a manner that does not benefit you. There are very few good ideas in the cryptosphere. Finally, by reading this post, you agree that you’ve read our disclosure.

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