Today is a crucial and dangerous time for cryptocurrencies. In my twelve years in this space, I have never seen the conditions we are experiencing now, even in our most bearish cycles.
Individually, these signals would be puzzling. Together, they are signs of a major potential crisis. What happened to the requests for public services or the incorporation of the next billion?
The first big concern is that fewer and fewer builders are seeking smart contract audits, which has come up again and again in my conversations with auditing companies (and as evidenced by the recent Yearn smart contract exploit). This is a typical standard procedure before the launch of any decentralized application (dApp). It’s not because they’re happy to launch without it: it’s because new dApps don’t exist. Builders (developers, founders who want to launch apps that people want to use) are either waiting for the environment to improve or abandoning cryptocurrencies. They are not interested in creating applications that are, frankly, easy or simply replicating what already exists, such as financial applications, tokenized funds, etc.
Second, there is very little encouragement, support or funding from investors for utility applications, which are much more difficult to build and (typically) more time-consuming. Unless an app has the potential to earn 1000x returns in a short period of time in some sort of DeFi scheme, it simply will not be funded or “backed,” forcing creators into a corner. In other words: If you’re a blockchain-savvy founder and you have a great idea, you might find yourself in an impossible position from the start.
Instead, investments in our space are currently focused on the pure pursuit of short-term profits, such as memecoins, insider knowledge manipulation, multi-layered DeFi protocols without sufficient transparency, and overly leveraged trading. And where money goes, attention goes, which is why we hear less and less about blockchain-based products or use cases. Instead, we are overwhelmed with headlines and podcast episodes about ETF inflows and outflows, DAT performance, trading tips, etc. This only serves to further mislead and confuse retail investors who are buying into these scams, which are not made for amateurs, without understanding the devious behavior that occurs behind the scenes.
Worst of all, many of our industry “leaders” are perpetuating this focus on the pursuit of profits over true blockchain-based use cases. They could be pushing for the entire global monetary system to be migrated on-chain for greater efficiency and transparency, or the use of blockchain and cryptocurrencies to actually improve our societies, such as incentivizing sustainable actions or healthier behaviors. But instead, they are adopting (and creating platforms for) a new, more dangerous generation of intermediaries.
It is these intermediaries and their financial products that have introduced harmful and intentional complexity and obfuscation into our previously transparent markets. And in doing so, they have unlocked an incredible new level of greed and theft.
Consider the recent October 11 sell-off: We still don’t know the full impact of what happened, except that retail investors continue to pay the price while powerful people negotiate their own recoveries.
Cryptocurrencies and blockchain were invented to exterminate financial oligopolies and democratize access to a new era of the Internet. Instead, we have allowed the reinvention of manipulative middlemen and welcomed them back with a small shapeshift as the potential ‘saviors’ of Web3.
Web3 got its name because blockchain is truly the next generation of the Internet. If we look at the fundamentals of the technology itself, blockchain is considered the crown jewel of humanity’s technological evolution. If used correctly, AI will make us more productive and blockchain will improve the relationships between different parties and how they work without barriers. Together, they could reshape the world as much or more than the Internet.
But instead, we are stuck watching DATs, ETFs, leveraged trading, and DeFi liquidations, and a small number of people make outsized profits on the misery and loss of millions of people. Cryptocurrencies have not yet fulfilled their promise of matching the radical transformation of the World Wide Web, with decentralized principles at its core.
As I watch these months go by, I keep remembering a scene from the movie. The big short. Investor Mark Baum, increasingly frustrated by the irrational and greedy behavior of the market (and the players in it), says: “What bothers me is not that fraud is unpleasant. Or that fraud is cruel. For fifteen thousand years, fraud and short-sighted thinking have never, ever worked. Not once.”
You are right. Every penny of profit made by squeezing the crypto ecosystem only alienates the builders and stops the progress of this amazing technology. In exchange for the chance to make short-term profits, these crypto brokers are destroying the value of the underlying asset they are speculating on. But ultimately, everyone in the industry will pay for it, including those who love this technology and believe in its potential.
For those of us who want to use cryptocurrencies to improve the world, we must start calling out this behavior for what it is: short-sighted, selfish, unwanted greed. We need to do something to save our beloved industry and focus on creating more real public services and putting it in the spotlight, creating innovative applications for the next billion users, and the projects and protocols that harness the undeniable potential of Web3.
Let us all begin the fight for usefulness, while there is still fight left in us.
