With the crypto market bubble bursting before our very eyes, and Bitcoin’s price tanking the entire alt market, we don’t yet know where the dust will settle. Surely there will be projects that can’t survive a market which is strangling them for funding and community interest.
Despite the ongoing hash wars and Bitcoin price drops, there is one coin that is well-position to fly high over the next 12 months built on solid technology, a strong community, and a well-endowed foundation for ongoing development funding.
Timing Is Everything
The Tezos ICO fundraiser occurred in July of 2017, well before the crypto bull run later that year. When a tradable coin finally did launch in June of 2018, it was well after the great Bitcoin fall from $19k to roughly $6,300.
As a result, the Tezos price and market cap never became inflated by the massive gains a year ago. Tezos holders were angry about this at the time, and maybe rightfully so since the project was delayed by half a year. However, it’s hard to argue that anything good would have developed from creating a group of Tezos holders who bought in at the height of the 2017 market, as exists in many other crypto communities to this day.
Bitcoin and Ethereum Lose Profitability
As prices go down, Proof of Work mining becomes much less profitable. According to some analysis, it can cost anywhere from $4,700 to over $10,000 to mine a single bitcoin depending on electricity costs in your geographical region.
Couple electricity costs with scarce mining hardware and an environment of increased regulatory scrutiny and it becomes more and more obvious to see how Proof of Work coins will always be at a disadvantage to wild price swings in relation to mining.
For Tezos, as the price goes down, baking becomes less profitable, but it’s much harder to actually lose money baking Tezos than it is to lose money mining Bitcoin or Ethereum.
Tezos baking rewards can be earned by running lightweight devices, even as light as a Raspberry Pi, which uses a minimal amount of electricity to function. As a result, if the Tezos price gets ridiculously low, like pre-ICO levels, it still remains profitable to participate in the network.
For example, if you baked only 10,000 Tezos coins and the current XTZ price was near ICO levels of $0.41, you’d still easily net a profit at the end of the year. If a Raspberry Pi costs around $5 on average in electricity costs and you earn 5.51% return on baking your 10,000 coins, the lowest annual returns possible, you’d wind up with around 550 new XTZ in rewards which would convert to about $209. Subtract your electricity costs and you’re still in the black. In reality, the ROI depends on the number of circulation coins being baked, current returns sit around 9%.
Proof of Work miners must, at some point, make a decision concerning how long they can lose money by mining Bitcoin or Ethereum at a lower price point. Let’s not pretend either one will remain at these present-day lows since they assuredly won’t, but a down market in the meantime is putting a crunch on miners.
Development Funded For Decades
Tezos, as a project, is also extremely well-funded from the Tezos Foundation which is sitting on a pot of nearly $500 million according to recent disclosures back in early October.
Much of that figure was and still is being held in crypto such as Bitcoin and Ethereum, so the total holdings may have slipped to around $300 million with the recent market drop.
Even so, as Ryan Jesperson, Tezos Foundation President, has stated, the foundation has been working to diversify holdings and create long-term sustainable funding for the Tezos protocol into the foreseeable future.
Not every coin that came alive in the past two years can tout such a war chest to keep development and community efforts alive and well for years to come.
Crypto Staking Devices Will Drive Wider Use
With Ethereum poised to adopt a Proof of Stake algorithm sometime in the next 2 years, the advent of home crypto mining boxes will become more prevalent. These boxes won’t be much for mining PoW coins like Bitcoin, but they will make it extremely easy for even the least technically inclined person to become involved in projects like Tezos.
The crypto boxes will have their own algorithm for determining which coin(s) are most profitable to stake with which will provide users a pipeline into Tezos baking. Tezos will not be the only Proof of Stak option, of course, but it will continue to proliferate with a thoroughly decentralized network and plenty of development dollars flowing into projects that make it more and more accessible to the everyday user.
We don’t yet know which coins may or may not make it out of the crypto winter we’re wandering in right now. There are plenty of other coins beyond Tezos that stand a good chance of weathering the crypto storm and perhaps becoming more relevant as the market contracts and devours some of the weaker projects.
However, looking at things from this vantage point, it’s reasonable to say that Tezos is standing in a better position than many of its competitors.