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Holo Is an Intriguing Crypto, but Investors Should Be Cautious

Ever since Bitcoin (CCC:BTC-USD) introduced the concept of the blockchain and cryptocurrencies, this digital ecosystem has been on a long-term quest for credibility. Beyond the influx of institutional investment funds, the crypto industry may have found the next biggest pioneer in the form of Holo (CCC:HOT-USD).

Cryptocurrencies flying through the air
Source: Wit Olszewski

Late last month, the U.S. Patent and Trademark Office granted the peer-to-peer (P2P) network a patent for its unique infrastructure. As our own Vivian Medithi pointed out, the architecture that underlines the Holo crypto coin, Holochain, “doesn’t rely on cryptominers or a global ledger for validation, making transactions quicker and more efficient.”

This fact alone makes Holo and its innovation a paradigm shift in itself. Prior advances in the decentralized space involved improvements to the original blockchain concept, such as Ethereum (CCC:ETH-USD).

In this case, investors clamored for ETH tokens because of the improved architecture’s myriad applications, mainly doing away with proof-of-work protocols.

In the Bitcoin blockchain, miners must perform “work” in the form of solving increasingly complex problems in order to earn the right to validate transactions and thereby earn digital reward tokens. Ethereum and others forwarded the concept of proof-of-stake, where community engagement is valued much more highly than brute computing power.

Cardano (CCC:ADA-USD) is the first proof-of-stake blockchain platform founded on peer-reviewed research, according to its website. As demonstrated by ADA’s extremely profitable run, improvements to the blockchain can yield lucrative results.

Naturally, this bodes exceedingly well for the Holo crypto coin because it’s not just an improvement, it’s a different concept altogether.

Since the holochain system relies on a series of host computers to provide storage and processing power for the decentralized applications (DApps in crypto parlance) that use the architecture in question, it eliminates the extreme energy consumption of Bitcoin mining by distributing the resource requirements over a wider canvas.

Plus, as the patent receipt implies, holochain works. So, what can go wrong?

Decentralization Isn’t All That It’s Cracked Up to Be for Holo

A cursory look at the price chart for Holo and it’s difficult not to have the urge to open your wallet. When the crypto was at its low point, it was trading hands at fractions of a fraction of a penny. At time of writing, each token is worth two pennies.

Percentage-wise, that’s serious profitability. Still, you should think carefully about the fundamentals before wagering big money on Holo. And frankly, you shouldn’t wager any amount of money you would be uncomfortable losing in the crypto space.

Principally, while P2P applications and the broader decentralization concept are all the rage, they may also be overhyped. I think this is a classic case of “be careful what you wish for.” A perfect example is the recent Coinbase (NASDAQ:COIN) initial public offering.

You see, everybody loves decentralization and sticking it to Uncle Sam – which, come on, that will never happen! – until they realize the pitfalls of the model. Prior to the IPO, the New York Times ran a story regarding how everyday Coinbase users suffered nightmare situations, such as being locked out of their accounts or worse yet, having their account attacked and drained.

Stuff happens, as you know. But when it does, we usually cry to the government or some authority – a centralized authority. However, when you walk in the wild, wild west of crazy crypto land, it’s caveat emptor to the extreme.

As the Times stated, “Many laws that protect people’s money and require banks to maintain tight security do not apply to digital currencies.”

Now apply this concept to DApps that specialize in uncensored content. That sounds great in principle. But let’s be honest folks. When you hear cries about censorship, it usually comes from people who want to say the vilest things without consequence or accountability.

That’s the issue with decentralization – you must take the good with the bad. And one can make the argument that decentralization is worse than centralization because of the lack of accountability and protection when things go awry (as they inevitably do).

But Should You Buy It?

Nevertheless, the above are long-term issues that may not have a bearing on the immediate price action. After all, people are going nuts over anything virtual currency-related. Therefore, it’s well within reason – in this emotionally charged context – that Holo could move substantially higher from here.

I will say this. If you’re planning on buying Holo (and yeah, I know it’s tempting), do so with a pump-and-dump scheme in mind. The token has already gone volatile following the printing of a bearish head-and-shoulders formation. So the current rally could be a short-lived dead-cat bounce. Adding to concerns is that all euphoric market movements eventually correct.

Above all else, treat Holo as a gamble. That means spin the wheel responsibly if you decide to even do it.

On the date of publication, Josh Enomoto held a long position in BTC, ETH and ADA.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.

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