A Successful Crypto Token Failure: Revisiting The First-Ever Altcoin “Mastercoin”
In 2013, JR Willett goes on Bitcointalk forum and presents his idea which is a supplementary protocol for Bitcoin that would leverage the Bitcoin blockchain and add more features to it.
So, this is how we got the first ICO, Mastercoin, later branded as Omni that raised $500k in BTC in July 2013. Its founder JR Willett wanted to build an asset issuance protocol that could create custom tokens on top of the Bitcoin blockchain and a DEX among other things.
The idea was to extend the block space of Bitcoin to allow for the creation and transfer of the assets.
Mastercoin was also the first utility coin as Willett promised the investors that features inside the Mastercoin protocol would be accessible only to those with Mastercoin tokens.
As Nic Carter shares in his latest thread, “Mastercoin was truly ahead of its time” as another feature that is “a Nubits (or Basis)-style seigniorage-shares style stablecoin,” was also promised.
Short thread on ICOs and value accrual. We have about 7–8 years of history on ICOs, utility tokens, and new value transfer protocols. So let's see what history tells us by looking at the first ever ICO
— nic carter (@nic__carter) March 31, 2019
Leveraging Omni Protocol
A number of projects utilize this protocol with MaidSafe and Tether being two prominent examples.
Stablecoin Tether (USDT) is issued on the Omni protocol that has a market cap of more than $2 billion and is the most traded crypto token after the top cryptocurrency BTC.
“Today Tether on-chain txns add up to about 15% of Bitcoin's txn value on average. Omni has processed $144b in on-chain volume just for Tether, all time.”
Tether has become of significant value for the exchanges and traders to allow the funds to flow freely. It provided the liquidity that wasn't available. Moreover, Tether and by extension Omni, also generate significant value for Bitfinex.
“By creating tokenized ‘eurodollars' based on deposits in banks in Puerto Rico/the Caymans, Finex gave traders the ability to take USD-denominated risk on the exchange and on chain.”
Useless Token with No Purpose: Omni
Mastercoin protocol is now known as Omni Layer and its cryptocurrency Omni has a market cap of $1.7 million that is currently trading at $3.12.
Today these tokens have no purpose and no plan. Though it is a utility token, it is not required for use in sending wrapped assets or wallet creation. And what Willett envisioned in its white paper never came to exist.
Though the Mastercoin protocol is used widely through Tether & other projects the ‘value extraction’ has failed as there isn’t any protocol revenue and the Mastercoin ecosystem ‘failed to materialize’.
In order to accrue value, a token needs a protocol that is used as intended and of course has lots of activity ongoing. Moreover, the value generated from the activity needs to be captured for which Mastercoin failed to create an appropriate mechanism.