Title: “Preserving the Niche: Why Mass Adoption Would Dilute Crypto’s Essence”
Article:
In my opinion, it may be better for cryptocurrencies to remain a niche market. The biggest crisis in the crypto space so far has undoubtedly been the rapid collapse of FTX. Once hailed as the world’s third-largest cryptocurrency exchange, it was later revealed to be Sam Bankman Fried’s personal “piggy bank.” Its demise sent shockwaves throughout the industry, causing a significant drop in Bitcoin prices and the downfall of several companies.
By the end of 2022, the once-popular and trusted cryptocurrency firm was exposed for its blatant fraudulent activities, suggesting that it was all just a facade to cover up deceit. While the situation has improved since then, concerns remain that other companies in the industry may follow suit. For seasoned cryptocurrency investors and observers, such occurrences have become the norm. Ever since the Bitcoin market crash of 2014, followed by the failure of Mt. Gox and its subsequent rebound, the industry has been accustomed to these cyclical fluctuations.
But is it not strange for a mature industry to consider these “booms and busts” as the norm? From my perspective, any widespread adoption of blockchain or B2C applications depends on the price of their tokens, or else the industry will constantly face the risk of imminent collapse.
This is where the problem lies. The biggest issue with the development of cryptocurrencies, to a large extent, is their growth. The alternating excitement and despair every four years or so, seen during market hype and contraction, are a result of the pursuit of mass adoption in the crypto world.
The process is clear and can be seen as a textbook case of “irrational exuberance,” as economist Robert Shiller puts it. The promise of reshaping everything from money to the internet itself has sparked people’s interest, leading them to buy into the decentralized dream (or, for many, the promise of quick money). Popularity drives up prices, which, in turn, fuels more investment until something collapses.
Blockchain technology was initially designed to mitigate or replace problems that could lead to failures, which often exist to make cryptocurrencies more accessible and usable. Many believe that the general public may not want to self-custody their cryptocurrencies. However, if it’s not self-custody, the core essence of cryptocurrencies like Bitcoin would be lost. Measures taken to make cryptocurrencies more user-friendly or widely accepted often become the root cause of failure because they deviate from the decentralized and self-custody principles of blockchain.
Alex Thorn, the Director of Research at Galaxy Digital Investment Bank, said, “The risk with mass adoption is that newcomers don’t understand the core principles of Bitcoin: decentralization, self-custody, and hard money. If newcomers don’t learn, understand, and embrace these core beliefs, these characteristics may cease to exist over time.”
There must be a balance between decentralization and widespread adoption. Mass adoption implies complying with laws (which often contradict the values of cryptocurrencies) and creating simple entry barriers. If cryptocurrencies become too mainstream, their truly useful features may be compromised. Nathan Schnieder, a media studies professor at the University of Colorado Boulder and author of “Governable Spaces,” said, “Integration into the mainstream financial system will ultimately erode the important features of this technology.”
This perspective is echoed by Paul Dylan-Ennis, a lecturer at University College Dublin, who states, “Cryptocurrency is a subculture that cannot accept being a subculture. Most of our problems stem from how ‘welcoming the next billion users’ will erode core features.”
The “killer app” has always been there. Developers, founders, and investors have spent 15 years and billions of dollars searching for blockchain’s “killer app,” but ironically, it has existed all along.
Satoshi Nakamoto and those who truly followed him have built tools that can be used freely and aren’t easily taken away.
That is the essence of cryptocurrency.
This is why hardly anyone uses Bitcoin to buy coffee, but many use XMR to purchase various items on the dark web. If you observe how cryptocurrencies are truly connected to the real economy, you will find that they are primarily applied in niche areas. Examples include the black market or gray industries, stablecoin remittance channels, and circulation among cryptocurrency enthusiasts.
Please note that these are significant markets. However, today, as cryptocurrencies seem to be on the verge of a breakthrough, these use cases appear insignificant compared to the speculative use of cryptocurrencies. In speculative use, capital flows in and out, jumping from one coin to another or from one protocol to another, creating a cycle that drives up prices.
There’s nothing wrong with that. Gambling, to some extent, is also a use case. But if people want cryptocurrencies to be used productively, developers, founders, and investors should build products for those who genuinely need censorship-resistant currencies and tools. It is almost certain that this is a limited audience.
This is just my opinion, and many may disagree.
Other perspectives:
Molly White, the author of “Web3IsGoingGreat” and “Citation Needed,” believes, “Cryptocurrencies have already become mainstream. While some projects are still niche, with events like Brian Armstrong and Sam Bankman Fried’s incidents and the launch of Bitcoin spot ETFs by BlackRock and Fidelity, I think the ship may have already set sail.”
Privacy advocate, educator, and Monero user SETHforPrivacy has a different view. He says, “Unfortunately, most people haven’t yet recognized the necessity of Bitcoin and are unwilling to take on so much personal responsibility. Therefore, we must focus on improving Bitcoin to help those who have already realized its necessity today.”
Alex Gladstein, the Chief Strategy Officer of the Human Rights Foundation, states, “It is decentralization that allows cryptocurrencies to truly go global. The only reason Bitcoin can rise is because it embodies the most cyberpunk qualities, not belonging to anyone and being operated by users rather than governments or corporations.”
Emmanuel Awosika, an Ethereum advocate, expresses, “We believe everyone wants products that offer privacy, resistance to censorship, and protection against state attacks.”
Awosika adds, “We should explore how to promote cryptocurrencies to as many people as possible.” Similarly, Roko Mijic, known for “Roko’s Basilisk,” believes that it is actually “scale” that gives decentralized tools power, as demonstrated by Bitcoin’s resilient mining network distributed globally. “You can’t resist censorship in a small-scale cryptocurrency network because governments will simply destroy the entire network.”
Justin Ehrenhofer, the founder of Moonstone Research, agrees with this viewpoint, stating in Chicago that money is only useful when widely accepted. Therefore, “we should focus on building systems that attract external users.” However, he also adds, “the spirit of cryptocurrencies has degraded with mass adoption, as regular users store their wealth in custodial exchanges.”
The real question, in my opinion, is: Who is more important, the core values of cryptocurrencies or their widespread application?
