Market Analysis

The Cryptocurrency Market

The cryptocurrency market has been growing since the first bitcoin block was mined. Though there have been ups and downs in price, adoption is ever increasing, and there are no signs that this is slowing down. With institutional investors coming on board in the West, and heavy adoption across emerging markets, crypto appears to have a strong future.
As of 2021, there was an estimated global crypto ownership of 3.9%, with more than 300M users.[1] By the end of that same year, the total market cap had reached a high of $2.5T, closing out at $2.0T. [2] Some reports from 2020 estimated a CAGR between 11.1% and 30% over the next several years, though their estimations seem to have been too conservative based on today’s numbers. [3, 4]
Chainalysis states that by the end of Q2 2021, global crypto adoption had grown by over 2300% since Q3 2019, and over 881% in one year. [5] The reasons for increased adoption differ depending on geographic location.
In emerging markets, many turn to cryptocurrency to preserve their savings in the face of currency devaluation, send and receive remittances, and carry out business transactions; in North America, Western Europe, and Eastern Asia, by contrast, adoption over the last year has been driven largely by institutional investment. [5]
Owners Demographics as of early 2021 were as follows: [1]
  • 79% male, 21% female
  • 58% are aged under 34
  • 82% have a Bachelor’s degree or higher
  • 36% have an annual income over US$100k
Walmart is getting into the space, Google has created a blockchain division, the U.S. government is starting to get serious about the digital dollar. All of this points to the fact that this is a nascent technology that will be as ubiquitous as the Internet, probably within a decade. Paideia intends to be ahead of that growth curve.

Ergo Potential Market Growth

Number of wallets growth on Ergo

Cardano grew from just over 100k wallets to just under 1M in 2021 [6], without any defi, and no smart contract support until Q4. Ergo reached 100k wallets in Q1 of 2022 [7], and has a functional DEX called ErgoDEX. On one single day, the official Ergo wallet had 13000 downloads [8]. A similar growth trajectory would indicate an exponential increase in use and investment in Ergo in 2022. One explanation for the Cardano growth was total assets locked for staking rewards. Ergo, being a PoW chain, doesn’t have staking at the protocol level, but as of the release of this document, Ergopad staking has been the first staking contract available on the Ergo blockchain, and more will follow now that the code is available and open source, adding to the TVL in this ecosystem.

Market cap growth potential compared to other chains

We compare Ergo’s market cap to other DeFi capable blockchains and try to make fair comparisons of those chain’s advantages and disadvantages when compared to Ergo. This is an exercise to demonstrate the future growth potential of Ergo as a blockchain. It can illustrate the potential market value that Paideia will have access to (and be a part of creating, by offering project launch tools).
At the time of writing, Ergo has a market cap of $166M, significantly lower than any blockchains compared in the table below. Ergo has all the same functionalities, plus more, which indicate enormous potential in market share growth. If Ergo were to capture even 1% of Ethereum’s market share, that would place it at a market cap of $3.15B, which is an 18x growth in price.

Why is Ergo not there yet?

Until recently, Ergo’s DeFi was in its infancy, but is now growing rapidly. Ergo’s first dApp connector wallet was released in February 2022. With this functionality, the Ergo ecosystem has grown, and several dApps have appeared to take advantage. Ergo has more than one NFT marketplace now, a functional dex and more on the way, staking, yield farming coming in Q3, cross-chain bridges that don’t require third party custody, working metaverse projects and NFT-based games, and many more dApps just around the corner including an online casino where the users can be both the gambler and stake their funds as the house.

Ergo vs Others Blockchains

Market Cap
How does Ergo do it
Advantages over Ergo
  • High gas fees make smart-contracts not useful
  • The accounting model poses significant security risks. Unanticipated exploits happen all the time.
  • No gas fees. Even at $100B valuation, tx fees would be $1.1 USD
  • eUTXO model allows all transactions to be simulated and confirmed to work as anticipated, before submitting to the blockchain
  • First mover advantage
  • DeFi is more mature at this moment
Binance Smart Chain
  • Essentially the cheaper, more centralized Eth. All the same disadvantages, just with a lower gas fee, at a cost of centralization. Validators chosen by Binance.
  • Decentralized
  • Validation via PoW
  • First mover advantage
  • Haskell is sometimes considered inaccessible, or built for academics
  • Proof of stake doesn’t have an economic tether. Impossible to fair-launch PoS. Must buy tokens off other holders, can’t generate yourself like PoW
  • DeFi is not working as well on Cardano yet as it does on Ergo (It’s catching up quickly, though)
  • Ergo is built on Scala, which is used by Twitter, Netflix, and AirBNB. More accessible and more devs in the industry
  • PoW has economic mechanisms similar to the supply of Gold, loosely tethering the value to the cost of generating new coins.
  • DeFi works well with decentralized off-chain bots
  • PoW offers security guarantees that PoS cannot
  • PoS is considered better for the environment
  • Network has reliability issues and has actually gone down more than once
  • Completely centralized and VC backed/owned. More than 50% of tokens owned by insiders.
  • PoS with insider selected validators
  • Runs EVM so has all the same disadvantages of Eth
  • Network is decentralized and runs itself
  • 4% of overall distribution reserved for Ergo Foundation. Fair launched with no VCs
  • PoW with miners consisting of anyone who can run a GPU mine.
  • Runs Ergoscript. No gas fees, low tx fees. Security audits are a lot easier and more predictable on eUTXO
  • Hype
There are other competitors which are developing DeFi, but none of them have the same fair launch and decentralization as Ergo. Many claim to be faster, but this always comes at a cost, either to security or decentralization. If you run a blockchain that is centralized, it negates the purpose of crypto, which is to avoid third party control entirely. If you launch a PoS network, the coins must be sold or given to specific individuals. There is no way to fair-launch a PoS currency.
Blockchain Insider Ownership vs Ergo
In terms of speed, the Ergo Foundation and other development teams are actively working on Layer 2 solutions to be built on top of Ergo which will allow for fast transaction speeds in situations where this is beneficial, along with many other important functions that a side-chain can perform. The Ergodex uses off-chain decentralized bots to process and submit transactions, allowing full DeFi functionality on an eUTXO-based blockchain. Ergopad has created their own fulfilment bots, making access to smart contracts fast and easy for the end user.
Ergo can do everything other blockchains do, but offers better underlying tech that, when properly utilized, adds an extra layer of security that users will not need to think about. Ergo is beginning to capture market share by offering more secure, auditable DeFi functionality, with no gas fees. Users who value these features on a PoW-backed blockchain will migrate quickly as Ethereum moves to PoS.

Developer code updates

Ergo developers are far more active than the average. Stack, a crypto investment analysis platform, tracks the github repos of hundreds of blockchain projects. Ergo devs pushed 2,877 commits in the past year, vs. an average of 928 across the projects that Stack tracks. [9]

User Base

Cryptocurrency has broad market segments, as anyone who has access to a cell phone or computer can use crypto in some way in their day-to-day lives. Some of the market segments include day-traders, long-term investors, miners, developers, gamers, shopkeepers (someone who sells goods or services for crypto), and fund managers.
The platform will be marketed not just to developers, but also to individuals who are less technically minded but who want to create an organization. Paideia will be designed so that the end-user does not need to know how the blockchain works or why it was chosen as the underlying technology behind the platform.

Primary Users

The primary user of Paideia who will create a DAO will be someone looking to launch a crypto project, and raise funds from the community to aid in the development of that project. Often this will be someone who has some development experience, but that’s not necessarily always true. The typical user will likely be entrepreneurial, and will be focused on marketing and building their project. If they needed to focus on writing code to manage their DAO and distribute their tokens, it would take time away from their own project.
The Paideia toolset will remove this barrier to entry, allowing users to focus on marketing and developing their products. The removal of these pain points will be Paideias greatest selling feature. In addition, creators and entrepreneurs will appreciate the low fees, as starting a comparable project using Ethereum based DAO toolsets costs upwards of $1500 in gas fees before you even distribute the tokens.
The primary user who will vote and discuss proposals in Paideia will be crypto speculators of any kind, whether they are long-term investors or day-traders or anything in between, if they are interested in investing in a project that launches with a DAO behind it, they will be the primary target user for Paideia. These users will appreciate the ability to discuss proposals directly on the platform, and the ease of submitting votes to the blockchain with minimal fees.

Secondary Users

In addition to these primary users, we have identified some secondary users that will be able to take advantage of Paideia’s tools:
Organizations of any kind that want to share governance with a group, including people who haven’t used blockchain before, if the barriers to entry remain low. For example, a hobby club that wants to rent a collective space could pool their funds using the Paideia toolset and vote on expenditures.
Startups that have VC funding and need a simple way to manage it could submit their funds and create a voting token for the executive team, allowing different directors to propose fund uses. For example, a marketing director could request some funds for a marketing campaign, outlining all the details, and this could be voted on by the approved directors. Then, the funds would be released and the invoices could be shared directly on the Paideia platform.
Developer groups that need to share raised funds could use the toolset to manage their funds, making a proposal for things like hosting services, software purchases necessary for group development, etc.
Projects that want to kickstart funding from the community, and potentially need a tool to discover the fair market price could use Paideia’s interactive token offering system where price discovery would take place based on market demand.
Investment groups that want to pool resources to invest in higher staking tiers or meet minimum investment requirements that they cannot meet as individuals could use the toolset to send funds to those blockchain projects, ensuring all stakeholders received their fair dues. The proposals could reserve funds and pay out based on smart contracts. This would mean the group would not need to rely on an individual to manage a shared wallet, and would prevent any individual from taking the pooled funds for themselves.
P2E gaming guilds could pool resources to buy an expensive character or upgrade in a game. If they work shifts to earn funds, they could manage the distribution of those resources with the Paideia platform.