Cryptocurrency is an application of blockchain technology that creates uncensorable, open-access, and immutable global shared ledgers, often for monetary purposes. However, the significant crimes and failures of 2023 mostly tried to use financial engineering to convert the future value of these systems into current U.S. dollars. Finance professionals often used the same fragile, nested, and interlocking leverage that caused the 2008 financial crisis. In other cases, they engaged in outright fraud, acting off-chain without transparency and rules. These individuals were often mistaken as part of the cryptocurrency industry, but it would be more accurate to consider them opportunists and freeloaders who redirected genuine public interest in crypto to their unsustainable schemes. Like much of contemporary finance, these professionals were extractive rather than additive. They were not builders but rather a group of inexperienced vampires attempting to insert their underdeveloped blood funnels into anything that appeared to be a source of money. The significant failures of these finance vampires and w economic conditions mean that 2023 in the cryptocurrency world will be very different from 2021 or 2022. Hedge fund gamblers and token-promoting hype men will stand relegated to supporting roles as the skilled super-coders who create crypto regain the spotlight.
However, 2023 will also differ from previous "BUIDL eras," during which large groups of nerds were often free to pursue whatever seemed interesting. There will still be some of that, but intelligent leaders will be directing their teams more closely toward specific goals: building accessible and reliable User Interfaces for use cases with real-world demand and then (hopefully) generating revenue from users. The general public now has a broad understanding of what crypto is. The task is to sell it as a tool rather than a speculative investment.
This will involve, among other things, less speculation on new tokens, particularly the tokens for fresh "layer 1" blockchains. Instead, there will be a comparable enlargement in attention to services that influence existing, trusted chains and ecosystems to build services with actual demand that genuinely require the benefits of blockchains: cross-border fluidity, digital permanence, undesirability, and decentralized management.
Across many sectors of the economy, the role of finance in the 21st century has become catastrophically distorted. Instead of risking capital to generate long-term profit by building productive industries, the capital game has evolved about timing bubbles and choosing narratives that will deceive naive investors (retail or otherwise) into becoming bag carriers. Meanwhile, the pumpers head off to the White Lotus with the cash. This is not a problem specific to crypto, especially not over the past three years. The list of overvalued, underdeveloped, and sometimes just plain fraudulent companies is long: Clover Health (a 2020 Chamath SPAC joint on the verge of delisting), Meta Platforms (rebranded around an app with no users), Nikola (an electric vehicle fraud that raised $3.2 billion), Tesla (once pumped, now dumped), Theranos ($700 million in venture capital, another scam).
The task is to find out how to sell cryptocurrency as a tool rather than a speculative investment. This will involve building accessible and reliable front ends for use cases with real-world demand and then generating revenue from users. It will also include less speculation on new tokens, especially the tokens for new "layer 1" blockchains, and a greater focus on services that influence existing, entrusted chains and ecosystems to build services with actual demand that genuinely require the benefits of blockchains: cross-border fluidity, digital permanence, undesirability, and decentralized governance.
This shift towards practical, revenue-generating use cases will require the cryptocurrency industry to mature and move beyond the hype and speculation that has dominated in the past. It will also require a change in mentality from finance professionals, who will need to focus on building and supporting the development of the industry rather than just betting on its future value.
Overall, the future of the cryptocurrency industry looks bright, but it will require a shift in focus toward building and supporting the development of the technology rather than just speculating on its potential value. With the right approach, the industry has the potential to revolutionize the way we handle transactions and create new possibilities for global commerce and communication.