Building on yesterday’s blog, it is very easy to portray the whole cryptocurrency marketplace as a scam, Ponzi scheme, Wild West and a place where you tread carefully as it is a minefield. In some ways, it is. There are plenty of things out there designed to just rip you off. There are also techie people who have good ideas but with poor execution. Maybe Luna and Terra were examples of those. I am sure that not every crypto entrepreneur has created a platform out there to rip everyone off. Most of them are doing this with sincerity but flawed designs.
Nevertheless, this means there are many things out there – whether flagrantly unlawful or frightfully flawed – that will lose the average Joe or Jane a lot of money. Does the average Joe or Jane care? Who knows, but what I do know is that all of this flak that the cryptocurrency market receives is unwarranted.
There are things happening to change the global financial construct.
THIS IS THE KEY POINT!
Bitcoin, for all of its haters, has changed things. Ethereum, supported by large numbers of corporate and financial developers due its’ smart contract capability, has changed things. Other currencies building on these concepts, such as Cordana and Polygon, are changing things further. Eventually, you end up with blockchain-based cryptocurrency worlds that support global trade and Web3.
OH JEEZ, HOW DID WE MISS THIS?
You missed it because you weren’t looking, you didn’t understand it, you trashed it as something irrelevant and you didn’t take it seriously.
This came home to me as I read a New York Times article focused upon Cory Klippsten. Cory was telling everyone that Luna was a scam, Celsius was a “massive blowup risk,” and then, when those crypto projects collapsed a few weeks later (causing a crash that has wiped out about $1 trillion in value), he declared that “Crypto is a scam”.
The thing is that Mr. Klippsten differs from most crypto haters in one crucial respect: He runs a Bitcoin company.
Cory goes on to say some other interesting things:
“The only future for non-Bitcoin crypto is to seek to be co-opted by banks and governments and become part of the existing system”
DeFi vs CeFi (decentralised finance versus centralised finance, if you prefer): it’s your choice. This point was emphasised by Jimmy Song, a crypto podcaster:
“Bitcoin is decentralized, digitally scarce money. Everything else is centralized. There’s a world of difference between a censorship-resistant, self-sovereign money versus a gambling vehicle.”
There’s the rub. Not every crypto scheme is a scam. Some are, some aren’t. Sorting out the wheat from the chaff is your job today. Tomorrow, there will be a regulatory system in this space. I’ve always said you cannot have money without government. The crypto folks always interpret that as “you cannot have money without a national government”. I’ve never said that. I’ve just said you have to have governance over money to create trust. That governance can be the network, and that’s the point being made by many experts here. If the cryptocurrency community can create a global network that is censorship-resistant, but with strong governance, then self-sovereign money can, will and does exist.
If that is the case, what are banks doing about it?
Interestingly, many are gearing up to be crypto exchanges, crypto vaults and crypto services. For all the denigration and fear of cryptocurrencies, the banks and regulators are now stepping up to the mark.
This point was emphasised for me when I saw that Bank of America was underlining concerns about Ethereum yesterday.
As the so-called “Merge” approaches, during which the Ethereum blockchain will transition from proof-of-work to proof-of-stake, Bank of America has released a research report delving into the matter. In it, the bank noted how Ethereum had lost market share to other blockchains like Solana and Binance Smart Chain due to its inherent scaling limitations.
As banks produce research reports analysing the ups, downs, ins and outs of the crypto markets, they need to be taken seriously … after all, this is the future folks!