Preface: this is merely a snapshot of my thoughts at the moment. Most if not all of this is subject to change as the space pans out. I’m a huge fan of crypto and think it’s really cool from an engineering and ideological perspective. Take the following with a grain of salt. I’d be more than happy to chat with anyone who has anything to say in response to this!
Introduction
Now that I’ve been interested in crypto for a bit now, I think I’ve gone through a couple phases. [0]
Phase 0: Ignorance. Didn’t even know enough to be skeptical or interested.
Phase 1: Interest. I didn’t have any preconceived notions of the space so I started out learning with an open mind.
Phase 2: Blind bullishness. Fell down the rabbit hole. This stuff is the future. It’s revolutionary and I can’t help but express it to the people around me. They don’t totally get it (or care really), and I can’t help but think, can’t they see the future is decentralized??? Learning about it all the time.
Phase 3: Taking a step back. Realized crypto is not this decentralized utopia that I once naively believed. More accurately, I just started to pay more attention to the flaws and limitations. Pulled back and started having more thoughts and opinions about what’s important and what’s just hype. Reentered my body from open accessible permissionless nirvana. Recalibrated my personal goals and interests with regards to crypto.
I’m working my way through phase 3 at the moment. This snapshot is a glimpse into some of those thoughts and opinions. Mainly it’s my brain organizing different aspects of crypto and me typing them out onto a computer.
Good and Bad
Good: Internet native money. This can genuinely help countries without sound money. Cryptocurrency tears down the barriers for entry to banking systems — and really just ways to hold sound money, or at least non-hyperinflationary currencies from other countries — for people outside of select countries. There are still obstacles of user experience and internet access.
It also allows the possibility for a global currency, which could eliminate the costs and inefficiencies that come with having to exchange currencies between countries.
Bad: NFTs. They are not all bad, but overall I would say the culture around them has had a net-negative impact on crypto. The summary of my opinion is that NFTs are more of an implementation primitive than a revolutionary application. I think of them more as another kind of token, i.e. a transferable asset that acts as a public verifiable marker for applications to interface with.
It is good in the things it enables, of which the creator economy has had particular hype. I’m not sure it totally revolutionizes monetization for creators, but it does give them a very solid new avenue (outside centralized services that milk their talents!): digital collectibles.
The problem I think is that they’re getting too much hype. Most NFTs actually function like normal tokens, not particularly utilizing the uniqueness. NFT communities are mostly built off of the fact that you own any NFT in a collection, with the only unique aspect being the particular image or digital asset associated with it. In this way, most of the NFT-community building hype is really centered around the functionality of fungible tokens.
I would also attribute the least creative ideas in crypto to be riding off of NFTs, which hurts crypto’s image. NFTs are the easiest way to turn an uncreative product idea into something ~innovative~. This in part supports my belief in NFTs as an implementation primitive; a good product is one thing, NFTs help accomplish the products vision. A lot of projects will be something totally mediocre…minted as an NFT!! Then people hype it up without thinking twice. [1]
Good: Stablecoins. IRL money will probably coexist with cryptocurrency for at least a little while, and stablecoins help bridge the two economies by allowing people to feel more secure holding crypto. Decentralized stablecoins are of course helpful for getting closer to crypto values amidst this bridge but centralized stablecoins help nonetheless.
Good: DeFi. The financial primitives enabled by blockchain are extremely cool. I would say defi is the use case to most take advantage of decentralized tech at the moment. It also combines really well with global accessibility, i.e. now people from anywhere not only have access to sound money, but also passive income wealth building tools. In these ways defi is a huge win for crypto.
My main caveat with defi is really with finance in general. Advanced finance that tends more towards price speculation seem to be much less impactful. It feels like the amount of money earned doesn’t really reflect the human value it contributes. I’m curious about projects like UXD, which uses perpetual futures — an advanced primitive that surrounds price speculation — to make a capital efficient decentralized stablecoin, because in this way these advanced primitives are serving greater purposes. Although, I lack the knowledge to really consider the importance of what more seemingly esoteric financial tools support like capital efficiency and fluid market dynamics. [2]
Mix: Decentralization. Upon being blindly bullish, my gut instinct was that you could just take anything and make it better by making it decentralized. But that’s not really the case. Also most people don’t care, and the need doesn’t feel that urgent.
Open protocols and source code are great for developer experience. It’s so cool to be able to use and learn from code underlying the big applications in the space. It helps the space progress faster, and it should increase security in the long-term.
Composability is great for similar reasons. You can built on top of applications much easier and faster, and that’s only helpful for the ecosystem.
For centralized tech companies, it’s worth noting the benefits of decentralization, but as long as they don’t mess up in a way that really makes a difference to users, mass web3 adoption is a ways away. Being at the mercy of whatever side effects that centralized tech companies want to include in their services is one of the most concrete downsides in my opinion, but even then their impact is debatable. Is it Facebook’s algorithms that trigger political strife, or is it the general nature of the internet allowing general access to mass exposure to anything you please, of which people naturally tend toward sensational content? Are content discovery algorithms screwing over underrated creators, or would similar dynamics play out even if anyone could create their own discovery platforms? [3]
Notes
[0] A basic timeline of my interest in crypto. I’ve been interested in crypto for close to 10 months now. My dad first started talking to me about Bitcoin back in March-April 2021 and I read the whitepaper and started exploring around then. I’ve been actively learning with a community at Illini Blockchain since the end of August.
[1] Didn’t think was totally necessary to include but…NFTs are another thing that brings the focus back to the money for an outside perspective. Imagine you’re a normal person and hear this kind of ugly monkey picture sold for a crazy amount of money. It makes crypto seem like a scam or something sketchy or some esoteric rich people thing. But that’s not at all what it is.
[2] Defi doesn’t help crypto’s image. Defi has contributed to a large proportion of the demographic of crypto being ex-traders and finance bros, which isn’t a great look when your core values include accessibility for everyone.
[3] Main idea with discovery platforms is if the underlying data is open, people could create discovery mechanisms to compete with centralized platforms, and creators that otherwise couldn’t would shine. I wonder if this would actually be true, or if viewers would gravitate towards discovery platforms that offer similar mechanisms to the ones that exist today. It’s worth the experiment, and at least the new discovery platforms will be motivated by something besides profit.
