With the emergence of hundreds of digital currencies on the market today, investors continue to evaluate which projects and teams are worth having faith in. For proponents and investors, potential for adoption is one of the most reasonable metrics for judging a project. Many look to partnerships as an indicator of a project’s merit and where it stands in comparison to the rest of the landscape. However, partnerships can often create a skewed view of a project’s potential for success. This uncertainty is due to a lack of precedent for valuing digital currencies, as the industry stands in an asset class of its own where the community is constantly exploring ways to determine value.
Amidst clutter in the digital currency industry, projects need to find ways to make themselves stand out and attract investors. Gone are the days of only a few “altcoins” existing on the market, as in today’s landscape a new team and a new project is always just around the corner.
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As a consequence, innovative projects are constantly at a risk of being overlooked or lost in the crowd. Partnerships allow projects to garner attention and prove to the public that the underlying technology has the potential for significant impact.Partnerships are an important part of adoption, as once companies adopt new technologies, the public is often soon to follow. Partnerships also serve to indicate trust, as companies are essentially “vouching” for the projects they choose to align themselves with. While there is nothing inherently wrong with a partnership between a digital currency and a company or platform, projects sometimes take advantage of the situation to give themselves a competitive advantage that is not always based on merit. To the defense of these projects, they are in a constant race to stay on par with their competitors, which are often employing the exact same practices.
In a March 15th, 2018 press release, automotive blockchain startup company, carVertical announced a partnership with BMW. While the news was undoubtedly significant for the company, later reports stated that the ‘partnership’ was not taking place as advertised. The controversy broke when BMW took to its official USA Twitter account in order to deny carVertical’s claim that the two companies were in a partnership agreement. https://twitter.com/BMWUSA/status/976111962047303680?ref_src=twsrc%5EtfwInstead, BMW stated that carVertical is merely using one of its services, and that the two companies are not partnered in the way that carVertical seemed to suggest.Following the media attention directed at carVertical, the project’s team published a Medium post outlining its reasoning for calling the arrangement a ‘partnership.’“We confirm that carVertical and BMW group have entered into contractual relationship concerning exchange of vehicle generated data,” the team stated. “Under the Conditions of Use, carVertical has a right to receive data from BMW group and an obligation to pay a fee for this data.”In their response, carVertical stated that the confusion comes from how the team decided to use the term, citing a binding service exchange between the two parties. Throughout the post, carVertical continues to use the term ‘partnership’ despite BMW suggesting that their arrangement more closely resembles a goods and services exchange.
If nothing else, the carVertical situation is evidence of a lack of clear definition with the term ‘partnership’ as the term has been weakened over time. CarVertical and BMW display a shifting opinion on how their relationship is defined, and critics accuse the project of creating a false impression for investors. This presents one of the significant risks with investors using partnerships as a display of merit, as the definition of a ‘partnership’ can often be moulded to make projects appear to be at a higher standing than they actually are. A similar example at the beginning of 2018 involved IOTA and Microsoft, following false reports that the two companies entered a partnership agreement to create an IoT marketplace. The news drove IOTA’s market cap from ~$4 billion CAD to ~$17 billion, before crashing. IOTA later stated that the media and proponents blew its announcement out of proportion, and that the team is in not is not in a formal partnership arrangement with Microsoft. Further, Waltonchain was recently involved in a similar situation after the currency’s price skyrocketed following a now-deleted partnership announcement with Alibaba Cloud. It is currently unclear if the partnership is legitimate, and the currency’s price has since dipped.
Ultimately, partnerships are significant part of the adoption process in today’s digital currency landscape. Companies cooperating for the betterment of services and to promote innovation is a good step for the industry. However, when handled without care, partnership announcements can place investors at risk and artificially drive a currency’s price.While keeping an eye on partnerships in the space is becoming common practice, partnerships cannot be used a sole metric of value, as doing so hurts not only investors, but the industry as a whole.Image credit: bluediamondgallery
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