Title: The Paradox of Cryptocurrency: Striking a Balance Between Mass Adoption and Core Values
Cryptocurrency is best served by maintaining its niche market status. The industry’s biggest crisis to date has undoubtedly been the rapid decline and collapse of FTX, which was once the world’s third-largest cryptocurrency exchange. This event had a significant impact on the entire industry, leading to a sharp drop in cryptocurrency prices and affecting numerous related businesses.
At the end of 2022, it was unclear whether the concept of cryptocurrency could make a comeback. The apparent fraudulent behavior of one of the seemingly most consumer-savvy and trusted cryptocurrency companies seemed to validate the widespread belief that it was all just a cover for scams.
However, as of today, the situation appears to have improved, despite concerns that the industry is repeating past mistakes and may face punishment once again. For experienced cryptocurrency investors and observers, this has always been the norm. Ever since the Bitcoin market crashed and subsequently recovered after the collapse of Mt. Gox in 2014, cyclical fluctuations have become a part of everyday life in the market.
But isn’t it strange that this increasingly mature industry considers these cycles of rise and fall as the norm? In my opinion, the widespread adoption of any blockchain technology or consumer application depends largely on the token prices – or the entire industry – not constantly facing the risk of imminent collapse.
The biggest challenge in the development of cryptocurrency is its own growth. The extreme optimism during market highs and extreme pessimism during lows occur in cycles that repeat roughly every four years, which is the consequence of cryptocurrency’s pursuit of widespread adoption. A Rough Process of Adoption
This process is a clear example of what economist Robert Shiller describes as “irrational exuberance.” The promise of fundamentally changing the core values from currency to the internet itself sparks interest. People are drawn to the idea of decentralization or, for many, the hope of making quick profits. As popularity rises, prices increase, further stimulating more investment – until something goes wrong.
Almost invariably, what fails are the things that blockchain was originally designed to replace, things that were designed to make cryptocurrencies more easily accepted and used by users. There is a prevailing belief that the “masses” may not choose to self-custody their assets. But what’s the point of assets like Bitcoin if there is no self-custody?
Alex Thorn, Head of Research at investment bank Galaxy Digital, expressed concern that “as the user base grows, one risk is that new users may not understand Bitcoin’s core principles, such as decentralization, self-custody, and sound money. If these newcomers do not learn, understand, and support these core principles, the protocol features that enable these principles may not be maintained over time.”
Adopting cryptocurrency means adhering to laws (which often conflict with cryptocurrency values) and establishing user-friendly login methods (which may be vulnerable to attacks). There is a tension between the goal of decentralization and mass adoption. If cryptocurrency becomes too large, it may undermine its true value. Nathan Schneider, a media studies professor at the University of Colorado Boulder and author of “Governing Space,” pointed out, “Just being integrated into the mainstream financial system would mean losing many of the important opportunities offered by this technology.”
Paul Ennis, a lecturer at University College Dublin, expressed a similar view, saying, “Cryptocurrency is a subculture that is unwilling to admit it is a subculture. Many of the problems we face stem from discussions about ‘bringing the next billion on board,’ which has led to a degradation of our values.”
The “Killer App” Already Exists
Ironically, developers, founders, and investors have spent 15 years and billions of dollars searching for the “killer app” of blockchain, but it has already existed. Satoshi Nakamoto and those who truly followed in his footsteps have created a digital tool that can be freely used and is difficult to take away.
This is the essence of cryptocurrency.
That is why, even though hardly anyone uses Bitcoin to buy coffee, many people use privacy coin Monero (XMR) to purchase various goods on the dark web. When you observe how cryptocurrency connects with the real economy, you will find that it mainly plays a role in specific areas, including the black market or gray market, stablecoin remittances, and activities of hobbyists.
It is worth noting that these markets are substantial in size. However, today, when cryptocurrency seems to be on the brink of a breakthrough, these uses seem insignificant compared to the speculative use of cryptocurrencies, where capital is invested, jumping from one currency to another or from one protocol to another, creating a circular economy.
This is not necessarily a problem. Gambling is also an application. But if people want cryptocurrency to be used more productively, developers, founders, and investors should focus on developing products for those who genuinely need censorship-resistant currencies and tools. Essentially, this means that only a small portion of people will be interested.
This is just my opinion, and many may disagree. Other Perspectives
Molly White, author of critical cryptocurrency news outlet Web3IsGoingGreat and “Citation Needed,” believes that cryptocurrency has already gone mainstream. In a private message, she stated, “Although there are still small-scale projects in niche markets, the trend of cryptocurrency going mainstream is irreversible when Brian Armstrong and Sam Bankman-Fried are in Congress discussing with each other, and BlackRock and Fidelity launch Bitcoin ETFs.”
Privacy advocate, educator, and long-time user of Monero, SethforPrivacy, holds the opposite view. He states, “Unfortunately, most people have not yet recognized the importance of Bitcoin and are not willing to take on so much personal responsibility. Therefore, we must focus our efforts on improving Bitcoin for those who truly recognize this need today.”
There is also an argument that decentralization is precisely the reason why cryptocurrency can achieve global adoption.
Alex Gladstein, Chief Strategy Officer of the Human Rights Foundation, said, “The only reason Bitcoin has been able to rise globally is because of its most cypherpunk attribute: it doesn’t belong to anyone, it is run by users, not controlled by a nation or a company.”
However, it is not entirely clear what the general public truly wants. Emmanuel Awosika, an Ethereum enthusiast, exemplifies, “While we think everyone wants privacy, censorship resistance, and the ability to resist state attacks, some people are satisfied with products that solve their problems and offer a good user experience.”
Awosika adds that not everyone needs, let alone wants, privacy, censorship resistance, and maximum decentralization, but “we should strive to get as many people as possible into cryptocurrency.”
Similarly, Roko Mijic, famous for “Roko’s Basilisk,” believes that it is actually the scale that empowers decentralized tools, which is particularly evident in Bitcoin because Bitcoin miners are spread worldwide, making it difficult to attack. “In a small-scale crypto network, you cannot resist censorship because governments can easily destroy the entire network,” says Mijic.
Justin Ehrenhofer, founder of Chicago-based Moonstone Research, echoes the same sentiment, pointing out that a currency is only useful when widely accepted. Therefore, “cypherpunks should focus on building systems that attract outsiders.” However, he also adds that with large-scale adoption, the spirit of cryptocurrency has degraded, as ordinary users store their assets on custodial exchanges.
The real question here is how important the core values of cryptocurrency truly are.
