Since the 2008 financial crisis, central banks have turned to unconventional monetary policy in an attempt to spur global economic growth. Featuring ultra-low interest rates and unprecedented quantitative easing, trillions of dollars have been released into the financial system and near-zero interest rates have become the new normal. Today, total debt held by global central banks exceeds $18 trillion and multiple countries such as Switzerland and Japan have implemented a negative interest rate policy, charging depositors for holding funds in the central banks.
For over five years, the US Federal Reserve has maintained a target Federal Funds rate between 0.00-0.50%, exerting significant downward pressure on global interest rates and forcing investment capital into exceedingly risky markets in pursuit of yield. The Fed has quadrupled the US monetary base via debt purchases yet the velocity of money has dropped sharply. This means additional dollars flooding into the financial system are not being lent to consumers, but utilized by institutional banks to double down on risky bets in various equity, debt and derivative markets.
Markets have responded well to this influx of capital aided by the global accumulation of debt by central banks. The current bull market has lasted for over seven years, with all three major US stock indices topping all-time highs in 2016. The question is how will central banks normalize monetary policy and begin to raise interest rates? As noted by prominent economists, extended periods of zero (or negative) interest rates could have adverse consequences for the global economy.
In 2009, as central banks took these unprecedented steps to spur economic growth, Bitcoin was anonymously released with the aim of revolutionizing digital value transfer and restructuring the global financial system. The Bitcoin protocol introduced the idea of distributed ledgers, i.e blockchains, an innovative technology that is now being applied in various industries such as record management and distributed computing. Neha Narula's TED Talk, 'The Future of Money' does a exemplary job explaining this disruptive concept.
Over the last few years, other peer-to-peer platforms have been created, building upon and tweaking the attributes of Bitcoin's underlying technology. The Ethereum Virtual Machine (EVM) was released into production, allowing for the formation of decentralized autonomous organizations (DAOs) and the development of decentralized applications (dapps). The ethereum platform aims to become the backbone of the Internet of Things (IoT) economy, which will allow inanimate objects to conduct autonomous transactions via micro-payments.
Per coinmarketcap.com, less than $15 billion is currently invested in peer-to-peer platforms and supporting projects. Within this diverse industry, multiple disruptive technologies have come to market offering innovative services at significantly reduced costs. With close to $70 trillion invested on global stock exchanges, even the slightest reallocation of capital into this space will materially increase market values.
Please take a moment to explore the information provided throughout this site and utilize the links as a jumping off point in your research. Feel free to contact us to discuss the purchase of distributed digital property or ask any questions you may have.
First of all, I would like to congratulate you on having the foresight and technological ability to secure an investment in Digix DAO during the hours-long crowd sale. Thanks to the successful ICO procedures facilitated by the Digix Global team, there are high levels of interest in DGD tokens leading up to the platform's launch. On April 28th, the actions of DGD token holders will begin to reflect in the overall value of the DAO. With that in mind, I ask you to consider the long-term value of the DAO when assessing profit-taking opportunities in the coming months.
In the infant days of this corporate governance experiment, it will be tempting to sell large portions of your investment at 10x, 20x, and perhaps even 30x valuations, but remember these transactions will be forever known by other members of the DAO community. For the first time in the history of venture capitalism, ownership data is public knowledge and available for audit on a blockchain.
Imagine organizing future ventures such as the p2p lending platforms, decentralized exchanges, or virtual nations mentioned in the most recent Progress Update. Founders could potentially devise DGD reputation systems which consider the token age of DGD in a wallet, as well as the quantity. Such a system may become necessary, as a top 50 ICO investor could dump his/her DGD tokens at a substantial gain yet hold the Proposal Badges to influence the community in the future. In other words, there may one day be additional value in holding ICO tokens over DGD tokens purchased in the secondary market.
As DigixDAO builds the industry standard in digital gold platforms, the DAO community must continuously focus on productive efforts to enhance the architecture of the global DGX market and maximize daily DGX transaction volumes, all to the benefit of DGD holders. As DGX gains widespread popularity and traction, DGD tokens could one day become the most attractive asset to own in the global financial system.
On April 28th, remember to keep thinking long term.
While recently purchasing a new domain name on GoDaddy.com, I noticed something interesting about their pricing model which gives great insight into how they value the registration of web domains. In most service industries, customers receive a discounted rate when signing up for a longer service period (think magazine subscriptions), meaning you'd pay less per year for a 5-year subscription than you'd pay for a 1-year subscription. In retail or manufacturing, this would be synonymous to a quantity discount.
Such is not the case in the domain registration space. Wholesale domain registrars such as GoDaddy.com follow an inverted pricing model in which the annual fee for a 5 year domain registration is more than double the 1 year fee. The following pricing data was taken directly from GoDaddy to illustrate this point.
Annual web domain registration fee
1 year - $12.99 per year
2 years - $21.49 per year (65% increase)
3 years - $24.32 per year (87% increase)
5 years - $26.59 per year (105% increase)
Why does GoDaddy allow customers to register their website for one year at a price of $12.99, yet charge double the annual rate to lock down the site for 5 years? Why doesn't everyone just register on an annual basis to get the cheapest price? The value in establishing a long term web presence can only be part of the answer.
With the domain registration market constrained by the supply of marketable domain names, there is no guarantee that these valuable assets will stay cheap forever. What if the price to register the same website is $49.99 next year? Or even $99.99? For the same reason homeowners are willing to buy the land their house is built on, growing businesses are willing to pay more in order to secure their online property and hedge against changes in the price of internet real estate.
Tyler Logsdon is a CPA and Registered Securities Representative located in Newport Beach, California. He is actively employed in the blockchain industry.
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