Have You Invested In Any Tokens Recently?

The only tokens I ever bought were New York City subway tokens. They cost 20 cents in 1965 and enabled you to travel almost anywhere within the primary four boroughs of the city. Was that a great deal? You bet!

Today there is a new kind of token in which people can invest. But you can’t hold it in your hand. A client recently asked my opinion about one that she said was trending on social media. It’s called US Water Resources (symbol $USWR). The promoters assert that the use of data centers for artificial intelligence (AI) will require huge amounts of water for cooling. They imply that by investing in $USWR you will be able to capitalize on the scarcity of water supplies in the U.S. as the data centers are built. Trading is managed using a cryptocurrency blockchain ledger similar to the ones used by Bitcoin and Etherium.

Sounds interesting? There’s just one problem with it. Despite its name, it has no connection with the U.S. government and does not own any water resources. As such it has absolutely no intrinsic value. Why would anyone want to pay money for something that is not anchored to any asset and has no value other than what the originators and social media promoters claim it’s worth?

Evidently some people do. There are around 1 billion $USWR tokens in circulation right now. According to Coinbase.com its price is $0.0008027 as of this writing. That means investors are holding over $800,000 worth of $USWR. I cannot find any reliable sources that can tell us how many individual investors actually paid money for it nor how much of that $800K remains in the hands of the originators or early investors in the token. After all, they’re the ones who stand to gain the most if they can convince others to buy it.

If $USWR doesn’t sound like the kind of investment you’d go for, how about a token that was originally conceived as a joke? Dogecoin (DOGE) was created by two software engineers as a parody of Bitcoin. As a cryptocurrency it’s no different than $USWR. DOGE investors own nothing but a piece of digital paper. Yet its popularity wildly surpasses that of $USWR. Investors today hold over $10 billion worth of DOGE according to Coinbase.

What about Bitcoin? Is there any difference between the three? Not much. What is common to all cryptocurrency tokens is the blockchain methodology for maintaining them. While the value of cryptocurrencies may be dubious, blockchain technology is highly innovative. Today, blockchain is being used far beyond cryptocurrencies to improve security, transparency, and oversight in industries such as logistics, healthcare, and banking. Could it be the cachet associated with blockchain that encourages people to invest in tokens that don’t represent anything of tangible value?

There’s nothing new about the media promoting investment schemes beyond traditional stocks & bonds. That’s been happening for decades. In the cryptocurrency space we now have large financial institutions and even politicians (read: $TRUMP) getting involved. That certainly adds a layer of respectability to that marketplace. But it doesn’t change the fact that there’s nothing supporting the value of any of those so-called tokens except good story telling. It’s prudent to clearly understand how an investment works before putting your money into it. Which is why I’m sticking to subway tokens.*

*For cost and efficiency the NYC Transit Authority has long ago replaced metal tokens with cards. But I still miss them.

Sources:

https://bitcoinfoundation.org/news/altcoins/uswr-crypto-revolutionary-water-investment-or-just-another-solana-memecoin/

https://finance.yahoo.com/news/memecoins-show-94-cross-ownership-203056583.html

https://online.stanford.edu/popular-blockchain-use-cases-across-industries

https://en.wikipedia.org/wiki/Dogecoin