Lesson learned: What happened to the public chain that predated Ethereum?

Photo by Nick Chong on Unsplash

Which was the first ICO digital currency? Is Ethereum the first public chain? What is the relationship between USDT and Mastercoin 6 years ago?

Ethereum is not the first public chain

Up to now, Ethereum’s position in the blockchain world is no longer in doubt, with the exception of Bitcoin. Ethereum is both the originator of smart contracts and the main battleground for the current hot DeFi.

But Ethereum is not, in fact, the first public chain in the blockchain. Mastercoin, which was launched at the end of 2013, is the earliest public chain. Of course, many people have never heard of this name, but when referring to OMNI, many folks may have a little impression. Yeah, there’s a version of USDT that’s OMNI.

7 kinds of USDT

When it comes to USDT, everyone knows that. However, nowadays, USDT actually has seven versions based on seven different blockchains: OMNI, Ethereum (ETH), Tron, EOS, Liquid, Algorand, SLP. And OMNI version of USDT is the oldest, which at one point accounted for more than 50% of the USDT released.

But now, USDT has reached $16.9 billion, of which OMNI version of USDT accounts only for less than 8%. From 50% to less than 8%, Omni’s decline began seven years ago, in 2013.

OMNI is the earliest public chain

I found a screenshot of the top 10 market values of digital currencies in December 2013. How many do you know?

At that time, there was no public chain capable of supporting smart contracts, and there was only coin but no token because Ethereum had not been released yet. But the experiment with public chains, smart contracts, and digital assets was already underway, and it is OMNI (originally called Mastercoin).

Top 10 Digital Currencies by market value as of December 29, 2013

In July 2013, the development of Mastercoin was put on the agenda. Ethereum founder Vitalik even wrote an article to introduce Mastercoin — “Mastercoin: A Second-generation Protocol on the Bitcoin Blockchain”, which was published in Bitcoin Magazine on November 4, 2013. In addition, Changxia, the blockchain forerunner and preacher in China have also translated this article. It was written and translated by two influential figures in the blockchain field, which shows the innovation and influence of Mastercoin at that time.

Mastercoin launched crowd-funding on July 29, 2013 (before the invention of the buzzword ICO), with an exchange ratio of 1BTC:100MSC. In the end, Mastercoin raised a total of 5,120 bitcoins, about $500,000 at that time. MSC became the focus for a while after its release, with a price as high as 0.24BTC and a market value as high as $110 million, ranking the 4th in the market value of digital currencies at that time.

Mastercoin made two innovations, the first is the crowd-funding method, which is now known as ICO today; The second is the first underlying public chain, which real supports smart contracts. To be specific, Mastercoin is an “open source and completely decentralized asset platform based on Bitcoin”. With the help of Bitcoin blockchain, Mastercoin realizes protocols with functions similar to smart contracts, user currency and decentralized point-to-point trading platforms.

In other words, the blockchain practices of smart contracts, digital assets, and decentralized exchanges (DEX) have been here since 2014. So STO or DEX, both are not something that’s going to come out in 2020, they are just an explosion after the infrastructure is built.

Unfortunately, the good times do not last long. Due to a series of objective or subjective reasons, such as the overall bear market of digital currency, the technical architecture of Mastercoin itself, and the management problems of the foundation, Mastercoin went to zero at the end of 2014. Though in the great bull market of 2017 it had once revived, it is doomed to die. Although the token MSC price began to zero, as an underlying public chain, Mastercoin has an important reference value.

OMNI (Mastercoin) market value change from 2014 to 2020

On July 10, 2014, USDT based on OMNI chain was officially released by Tether, claiming a 1:1 link to the US dollar. USDT was born in the fight against digital currency by regulators and banks in various countries and grew with the support of Bitfinex and Poloniex, the head exchanges at that time. It gradually gained a firm foothold, and with the subsequent launch of OKEx, Huobi made it an important means for Chinese users to transact.

USDT is to OMNI what Token is to Ethereum. The only difference is that more people know USDT than OMNI. The market value of USDT is higher than that of OMNI. Thus, how to assign value to token has become a problem that all subsequent coin and token initiators have to think about.

Currently, USDT is the largest stable coin with a market value of about $16.9 billion, making it the third-largest digital currency by market value. In this sense, the underlying blockchain on which USDT was launched, OMNI, did not fail. Without OMNI at that time, there would be no USDT today. Thanks to Ethereum’s explosion of public chains, issuing tokens such as USDT has become easier and it is easier to use. However, USDT based on OMNI is gradually getting weak, and due to the characteristics of bitcoin blockchain, the transfer is slow and expensive, which does not meet the requirements of liquidity.

One day, the OMNI version of USDT will also die out, possibly being replaced by the ERC20 version of USDT, or by several other USDT. Ethereum is by far the most successful, but how it will cope with the fierce competition of the future is a question. After all, if Bitcoin is digital gold, Ethereum is more like an operating system or development tool, and experience shows that no operating system or development tool stays young forever. Now a new generation of public chains, such as Polkadot, are challenging Ethereum.

The death of Mastercoin may have some implications for Ethereum in the transition to 2.0 and for the new generation of public chains:

1. One step ahead makes one a senior; three steps ahead makes one a sacrifice. Innovation is important, but innovation doesn’t keep you alive. Although Mastercoin is more innovative than Litecoin, Litecoin is alive, but Mastercoin not.

2. It’s important for developers to tune in and listen to the right ideas. In fact, in 2013, Vitalik was working with the Mastercoin team, and Vitalik suggested some improvements to the project. But when he sent the document to Mastercoin’s founder J.R.Willet, he politely thanked him, saying the idea was interesting, but it would take a long time to actually make it happen. “Screw you. I can do it myself.” The perfunctoriness of the other side made Vitalik determine to do it himself, and it turned out that the proposal, which J.R.Willet disregarded, is a genius with a $100 billion market cap. Ethereum’s success must have drawn lessons from Mastercoin.

3. Technical success has nothing to do with project success. The value of tokens in digital assets does not necessarily feedback on the value of tokens in the underlying public chain. In some cases, the digital assets above the public chain do not have an absolute symbiotic relationship with the underlying public chain. USDT has a market value of $16.9 billion, while OMNI currently has a market value of $2.69 million. This is definitely a rare case. This case, perhaps for investment institutions and individuals to participate in the public chain track investment has a high reference. Where the moat of Ethereum is, it is worth thinking about.

4. In the blockchain world, new species have a high mortality rate. Don’t be cannon fodder.

Photo by Warren Wong on Unsplash

Article from NiuBit

Translated by Yang(Mengyan Finance)

To translate some latest policy and issues on blockchain and fintech happened in China