Is Crypto Useful?
I don't care if you love or hate crypto. I just want you to do it with the right arguments.
Hello, Hypers!
The big AI hype is making us forget about the previous crypto hype. This is a common phenomenon about hypes. It happens all the time with musicians, shows, and technology.
However, there are bands, shows, and technologies that beat the passing of time. They are not just a hype. Maybe the best example of this phenomenon is The Beatles. No matter how old their albums are, no matter if they parted ways decades ago, it doesn't even matter that some of their members have passed away, people of all ages keep listening to Hey Jude and While My Guitar Gently Weeps. We still love The Beatles, and they continue inspiring thousands of musicians around the globe today. The Beatles Hype seems to be eternal.
The products that are able to provide value anytime are the ones that transcend time: a Beatles’ song, a chapter of The Simpsons, or the microwave. This Tuesday I want to talk about whether crypto is one of those things. Is crypto something more than just hype? In other words: Is crypto useful?
Disclaimers and Scope
Before digging deeper let me clarify some important points:
I’m a crypto advocate. That means I believe in a subset of the entire crypto ecosystem. It also means this post will be biased for sure. However, I’ll try to be as objective as I can.
In this article, I won’t explain the Economy, Math, and Engineering behind crypto. I have written some articles about that in the past and probably I’ll write more in the future. If you are interested, read this one and this one.
No matter if you hate or love crypto. If you are open to hear yet another opinion on this topic and share your ideas, then this article is for you. With that clear, let’s get started!
Crypto is a Huge Universe
If you have been a Hyper for a while, you know we like to be rigorous (but we are a lot of fun too!). So, the first step is to define what is Crypto. For the scope and intent of this article, let’s say that crypto is all the technologies and communities around public blockchains.
I think the word public is very important here. Blockchain is an old technology. Many companies use private blockchain-based software. Here we won’t talk about this technology. We are interested in the blockchains that can be used around the world by anyone like Bitcoin, Ethereum, Solana, etc.
Still, this space is huge. It includes thousands of applications from value transfer to decentralized social media. At first glance, one can say that it is very unlikely that all this universe will be useful. At least, I think that way.
But this is completely natural. We don’t need every aspect of crypto to be useful as long as a significant part of it remains useful. For example, not all the branches of AI are equally useful. However, AI has proved to be a powerful field of study.
As we are talking about usefulness, we need to focus on the problems that crypto solves (or claims to solve). Simplifying a little bit, we are going to focus on two main problems: decentralization of money and decentralization of the Internet.
Decentralization of Money
As I said, in this article I won’t talk about the Economy behind crypto. But to understand the problems crypto claims to solve, we need to talk a little bit about the Economy. I’ll try to make it short.
Money is a pillar of any economy. It is a technology that allows us to transmit and store value. Good management of money is vital to preserve its function in the economy. For example, if a country prints a lot of money but the production of goods remains the same, then the money loses its value. This is known as inflation.
Central Banks are the managers of money. They decide how and when money is produced and loaned. This centralization of the management of money along with other characteristics of the current financial system, has caused some crises in the past. Deficient money management was one of the causes of the 2008 economic crisis, for example.
Bitcoin was born one year later, in 2009. Bitcoin proposes a decentralized system with a predictable and immutable production of money. Everybody can participate in the network. It allows us to send and receive payments without any intermediary. For example, when you want to send money to someone, you need banks. They keep records of how much money each person has and they transfer that money from one person to another. With Bitcoin, we don’t need to rely on any organization, we just send money to our friend and that’s it.
So, at least in theory, Bitcoin is a solution to overcome the centralization of money. To be in control of our assets and to be safe from the mismanagement of organizations like central and commercial banks.
Before analyzing whether this is useful or not, let’s talk about the other problem.
Centralization of the Internet
Again, I’ll try to keep it short. The Internet has become the place where we do everything. We work, buy, hang out, and have fun on it. But the thing is that all those services are provided by just a handful of companies.
Imagine Google goes down. Or that they shut your account down because of the country you live in or any other reason. You’d probably be losing a lot of accounts in many services, you’d be out of YouTube (if you are a Youtuber this means you’ll need to find a new job), you’d be forced to use another application to drive to that unknown place, and also say goodbye to your calendar and your daily routines.
These companies are necessary for our lives. Think about social networks. How many people and companies depend on social networks to achieve success? I won’t enter on the specific topic of how wrong the social network business model is. Elon is showing us some of its consequences.
Blockchains like Ethereum, are an alternative to this status quo. In essence, they are a computer distributed around the world. Nobody owns these computers, nobody can ban us. Therefore, we can use any of the applications running on these computers anytime, anywhere. We own the content we create in these applications. Nobody can change the terms and conditions unilaterally. Does that sound good?
Analyzing the Claims
Now that we know the problems and the crypto proposals we can judge the usefulness of those proposals. I would like to talk about the proposal itself first. That means I won’t consider the implementation of the proposal in the first place.
In the case of Bitcoin, I love being in full control of an asset. I can send it to anyone without asking for permission or having to trust any intermediary. Also, despite being very young, Bitcoin has proved to be a good value storage. Yes, it is volatile, but it is hard to find any other asset that has been appreciated so much in such a short timeframe. Of course, this is not an investment advice. I’m just writing facts about the history of Bitcoin. None of us know what is going to happen in the future.
However, using Bitcoin as money is a whole different thing. Personally, I wouldn’t pay for a coffee with Bitcoin. The reason is in the above paragraph. I appreciate Bitcoin too much to spend it. Also, we would need a reliable system to make Bitcoin scalable and that will mean sacrificing some security and/or decentralization (yes, Lighting Network included). Also, I’m not entirely sure that using this type of currency is beneficial for the Economy in the long run. Yes, fiat money has been causing some troubles but it brings some benefits too.
I like to think of a hybrid solution for money, that combines the strengths of fiat and crypto. But that would be another article :)
Regarding the decentralization of the Internet, I think it is a good idea. We have witnessed new ways of managing companies, new investment opportunities traditionally reserved for a few rich guys, new games, new applications, and new business opportunities.
Of course, we have also witnessed many scams and failed projects. But I’m confident that the decentralized Internet will keep growing. The projects that have proved to be valuable remain profitable. There are specific niches in which crypto can definitely improve the status quo. For example, read this article published here in Under the Hype some weeks ago.
The decentralized Internet has the challenge of scalability. Decentralized applications should be faster and easier to use. During the last two years, a lot of improvements in this field have been made. But there is a much harder problem: adoption.
People will migrate to the decentralized internet if they consider centralization a problem. Also, they should be convinced that the crypto proposal effectively solves that problem without creating another bigger problem (like scams for example).
Conclusion
Is crypto useful? For me, yes. There are applications of crypto that are delivering value right now. I think my life is better since I included some crypto in it. Of course, the crypto universe is vast and there are parts of it that won’t be as useful.
But no matter if you don’t think like me. No matter if you think crypto is not that useful. What I really want to do is to show you that the question is not so easy to answer. The only sure thing is that crypto is not just a big scam but it probably is not the bright future we dream of either.
Maybe crypto is not that Revolution or that beautiful Strawberry Field. It might not be the rockstar some people tried to sell us. But it can deliver a lot of value. That’s enough for me to consider it more than just hype.
I hope you have enjoyed this post. Tell me if you’d like me to write more about crypto here in Under the Hype. As you probably know, I wrote a book in Spanish about it and I’m currently translating it into English. All paid subscribers will receive this new version for free. If you are interested in this topic, this is a great opportunity to learn. Also, you’d be greatly supporting my work.
See you next Tuesday!