This concept and the digital innovation that underpins them are no longer relevant in crypto quakes.
Crypto is not doomed, but I won’t be accused of being alarmist. Rumours of a crypto-armageddon are exaggerated. Coinbase, the largest cryptocurrency company in the world, used the provocative title to advertise earlier this year at Superbowl. It stated that “Crypto has died, long live crypto”. They didn’t know that just weeks later, other crypto companies would be fighting for survival, as they laid off their employees and withdrew offer letters. As an emergency liquidity measure, some players stopped Bitcoin withdrawals. The crypto market plummeted to a third its peak value. These crashes brought out all the sceptics. The tech pundits who had predicted the rise of Web3, crypto, and blockchain began to mutter about their impending doom. My view is that neither crypto nor blockchain are dead.
Before I tell you why blockchain is still as strong as ever let me briefly explain the crash of crypto. Many pundits blame the crash on global geopolitical conditions and economic conditions. They include a continuing war, disruptions to supply chains and labour markets, and high inflation. What is most surprising about this crash is the fact that these disruptions are precisely what crypto, and especially Bitcoin was meant to protect against. Bitcoin, like gold, was what you bought in times of trouble for real-world economies and countries. Theoretically, Bitcoin or crypto should have risen, or at the very least, remained largely stable. It is fascinating that the crash was not caused by economic or political uncertainty but rather because of a real-world financial phenomenon: fraudsters and hucksters. Terra Luna, a stable coin with 3% market share, was actually built on hype and crashed to zero. This triggered a crypto-confidence crisis and an economic shakeup only fuelled it.
This is not a new phenomenon. The 2000 internet bubble burst with hyped companies going bankrupt, bringing down the entire dot-com sector. These firms weren’t the internet. Online businesses survived, and today they are the global leaders in social networks and mobile payments. Map platforms, ecommerce, and e-commerce run our economies, and our lives. Maria Bustillos stated in The New York Times that Crypto is only one part of the larger blockchain universe. Both its skeptics as well as its fans must see Crypto as a technological experiment and not a scam or a speculative way to riches. Eight years later, the collapse of big banks was due to the weight of complex mathematical instruments such as collateralized debt obligations or (CDOs), which were created by bankers who live in a parallel universe. The 2008 crash was valued at around $10 trillion. The current crypto meltdown is about a fifth of that. Many banks were destroyed in the aftermath, but banking survived. The same will happen with blockchain and crypto. Nearly 20,000 crypto coins were created and very few will survive. Bustillo says that the crypto market is volatile not because cryptocurrency’s underlying technology, but because of the unstable and sometimes dangerously unstable intersection between regular money and emerging technologies.
Blockchain is working to solve problems in the less glamorous areas of financial services, supply chains, large enterprises, and energy. Shippers and retailers are using it to unravel complex supply chains. Itinerant workers may find it easier and cheaper to send money home using blockchain-based solutions. Blockchain-based experiments can be used to verify educational and other qualifications. This makes it easier to share and store them, and may make it more affordable to get education loans. The blockchain-based energy grids aim to provide cheap energy to areas that are not served. The technology is being tested by governments to create secure identity systems. It may also be possible to create fraud- and tamper-proof transaction records. Blockchains’ decentralization is being used to create distributed business models such as Helium, which is a Wi-Fi network for people that is not owned by any one telecom company but shared among others. Blockchains aim to reward creativity and online art with NFTs. They also power parallel worlds such as the metaverse, which are not yet proven, and lay the foundation for a creator economy.
Some of the largest structures in crypto have collapsed and the crypto world is now quaked. This is not the end, but the tectonic plates that make up the infrastructure are slipping and sliding to try to release creative energy. Blockchain and crypto continue to exist.