XYO (CCC:XYO-USD) is an interesting player in the altcoin world. And it’s had one of the strongest movements among cryptocurrencies in 2021. At its current price of $0.061, OXY has climbed over 26,000% year-to-date. That’s what can happen in the short-term with altcoins, which have effectively become the new penny stock of this generation of investors.
I make the comparison to penny stocks for a reason. It’s helpful, for me at least, to think about these individual altcoins as penny stocks. In doing so, it keeps the risk-reward relationship in proper perspective. And it also reminds me that (ideally) there should be something to the price movement other than the madness of crowds.
However, as compelling as that short-term movement is, I have concerns about the long-term story. Specifically, I wonder if it could be creating one problem to solve another.
Improving the Smart Contract
Smart contracts are becoming an increasingly accepted way for two parties to conduct transactions without a trusted third party. However, many such systems lack transactional privacy and are ripe for fraud.
I believe that, in theory, XYO has a business model that could make a case for owning the XYO token. The business premise is that “Industries and the customers they serve need trusted, tamper-proof data about location.” The XYO network uses “a network of devices that anonymously collects and validates geospatial data…The validation of this data is a key part of this network protocol…”
More to the point, the XYO network “provides resources … to create secure location-data ledgers.” And the company provides many potential case studies that define how industries and their customers would need trusted, tamper-proof data about location.
A Grownup Game of Seek and Find
Specific to the XYO token, the company has a COIN app that can be embedded on a smartphone. The app then collects data from your phone’s GPS, camera and other sensors. As Ian Bezek described it, “XYO can use this as ‘eyes and ears’ for the network out in the real world. It asks people to go to certain locations and verify or photograph items.”
Once users complete their task they are awarded points that can be converted into XYO tokens. Several other InvestorPlace writers provide good descriptions of how the XYO network operates. I wanted to credit Bezek because he analogized it to Pokémon Go, which is exactly what I thought of when I heard about the process.
I appreciate sound marketing so I can relate to the company’s case studies. And, once again in theory, it offers a compelling solution to problems. The question businesses will have to ask is how often do they experience those problems? And is there enough of a cost reduction to use this solution as opposed to systems that are already in place?
Some potential applications such as those regarding hospitals and national security resonate with me more than others. For example, it’s a convenience to know that my luggage can be independently tracked on the blockchain. But it wouldn’t prevent my luggage from getting misplaced to begin with. And does the benefit of being able to precisely track my luggage outweigh the concern about having a permanent and immutable record of my travel? I’m not as sure.
XYO Is Bucking a Trend
That leads me to this simple point. For XYO to flourish, concerns about consumer privacy will have to abate. I don’t think that will happen. There’s a reason why Mark Zuckerberg and Tim Cook won’t be exchanging gifts this year. Apple (NASDAQ:AAPL) is taking steps to protect customer privacy. That was a shot across the bow at all social media companies, such as Zuckerberg’s Meta Platforms (NASDAQ:FB) aka Facebook and Instgram, as well as Twitter (NYSE:TWTR).
I understand that social media is different from a smart contract. I also understand the point of view of those like my InvestorPlace colleague Mark Hake who state correctly that Google currently sells our location data without any form of compensation. And I also understand that with the XYO COIN app, customers are opting in to share their location data.
None of that means that consumers are less concerned about their privacy. That’s why I’m not quite as sure the XYO token has the audience it believes it does. Nevertheless, the XYO network could be something at some point. But there’s enough uncertainty surrounding it that I would be hesitant to put more than the smallest amount of capital at risk.
On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Chris Markoch is a freelance financial copywriter who has been covering the market for seven years. He has been writing for InvestorPlace since 2019.