Before you "too long didn't read" and skip down to flame me in the comments and downvote, consider that there might be some crossed wires. And if I was a betting man, and by being in crypto I am, I'd have to bet that it has something to do with semantics. By the time you read this one of two things will occur. Either you'll largely agree with most of what I have to say, or we'll be fighting over the definition of a new(ish) word. A word like "Cryptocurrency" for example.
That said, lets get right into the meat of it. Any word you use to describe cryptocurrencies can invoke a number of similes that although they bear resemblance to the subject, do not fully describe it. In order to get through this we first need to agree that whatever word or phrase we use, cryptocurrency, digital token, public blockchain, etc, we're ultimately talking about the same thing. In this article I'll be referring to all public blockchain powered systems as cryptocurrencies. Whether they're intended to operate similar to a currency (bitcoin/ethereum) or not (EOS). The truth of it is these blockchain powered systems tend to mix a bunch of financial assets together as a means of incentive so don't take issue with the "currencies" part. It's a rough comparison at best. Also, I'm not going to be so interested in the things cryptocurrencies are like as much as I'll be focused on the things that are unique to them.
Undoubtedly, some specific trigger is determined in your mind that makes the title of this blog especially irritating. And this may surprise you, but I bet we'd agree that whatever imaginary future you have in mind when you think of cryptocurrency adoption, is almost certainly a murky possibility at best. Certainly not inevitable. I would agree, for example, that cryptocurrency completely replacing modern fiat and the entire banking system is a long shot even in the eyes of most knowledgeable yet fanatic hopefuls. I'd even go as far as to put a full damper on that and say that's impossible through even our grandchildren's lifetimes. The fact is that the banking system exists and works rather well considering it's considerable drawbacks. Banking exists because in order for a modern economy to work (before cryptocurrency anyhow) we absolutely had to have a trust system in place so you could store value without it being stolen. Hiding gold bars under the mattress wasn't going to cut it. Even with cryptocurrency, banks will always exist in some form or another because with enough value people don't find the idea of losing their private key or password very appealing. Consider that many people leave their crypto in an exchange (against good advise) much like they leave money in a bank. And damn it all if exchanges are a hell of a lot like a bank. If you can put $50 million in a bank now as an average (not anti-government paranoid) person and expect it to be there when you need it, reason suggests that this is unlikely to change to a system where simply forgetting a password, or worse, having it stolen leaves you having $0 in an instant. This illustration also has the benefit of being an example that shows a crude simile and why that doesn't work. Cryptocurrencies aren't currency in the sense that they are like fiat. I'll explain more later, but the idea that crypto will replace fiat is based on the assumption that it's in all ways better than fiat, and it's not. Even if things go very well for crypto it won't be for some time.
The point is there are many such "ultimate crypto worlds" that the faithful have dreamed up to have critics raging about how impossible those visions are.
What about Bob Banker saying that cryptocurrency is a ponzi scheme and it's going to $0 and will be valueless? Firstly, bless them, for they are accountants and understand little about product. They see a pattern in numbers and relate it to other patterns but are usually not gifted with understanding utility of a product. That's why CFOs shouldn't (and generally don't) make decisions about the direction of a company's product. They, and their department, is there to tell a company to restrict themselves to spending a certain amount of money if they want to stay a company. They're, by their very nature, supposed to be skeptical of wild bets. And to be honest, from their perspective, they're 100% right. At the current moment in time the entire crypto industry is a bubble. It is driven by complete speculation. And by the pattern thus established this is a ponzi scheme where the first investors are making money off of current investors for no reason at all other than that public opinion is that something in crypto will be valuable. And those investors could be wrong. However, some of the speculation is based on the realistic idea that eventually the utility will be there. And I contend that this is the correct wager.
If we agree up to this point then keep in mind the following principles with the rest of the article.
Hopefully, your blood is back to a gentle simmer and maybe more of a viscous goop than a curdle. But let me warn you, if we disagree it will be in the next statement.
Feeling that rage yet?
What Bob Banker and the religious fanatics lack is a more finite understanding of the utility that cryptocurrencies bring into the world. Their view is either too narrow missing the forest for the trees or so broad that they don't see any trees at all. There's a fair bet that you and I, dear reader, still have a fuzzy impression of what cryptocurrencies can do. And we aren't alone, most of the developers of cryptos only have a fuzzy idea of exactly how crypto might turn out in real world use. What we all need is a more stable and reasonable sources of understanding and time for understanding to be gained. In my opinion, if you want some of the most sane, reasoned, and sound advice you can get today listen to people like Jerry Brito and Vitalik Buterin. Generally speaking, people developing utility for the crypto world have a pretty good grasp of what is currently possible and what might be possible. A few of them have more complete ideas than others. There are no certainties. So if there's one thing you and I should do to broaden our understanding of crypto to something more realistic; we need to listen to people who understand its utility and possible utilities very well. If there's one litmus test for who not to listen to it's straight investors. Investors are more like accountants. Ex-Stock traders, "expert" technical analysis people, etc. Their opinions are mostly based on hooey, tea leaves, and magic numbers. If you have the inclination to post a comment quoting this trader or that trader don't. I won't respond, they are not the basis for anything in this article. Even if they agree I don't care. When the fortune tellers are right it tells you nothing about why they were right so they're not a good place to start with reasonable arguments. There is very little science to guessing numbers and less understanding.
By proxy, many economists (though not all) fall into this category. Economists who focus on price and numbers aren't as interesting or valuable as long term predictors as those economists who understand that utility drives demand and demand drives numbers. To tell the good from the bad a good sniff test (I find) is to see if they compare cryptocurrency to the Tulip bubble without describing why the Tulip bubble was such a clusterfuck. The Tulip bubble went wrong because the value of Tulips was placed entirely on them being pretty and desirable. Obviously this is nothing but speculation, not for the short term, but for the long term. Tulips were never going to be used in stew, or as a fancy new way to cure a hide, nor did anyone even speculate they'd ever have any other use of any real merit whatsoever. The only thing they did and do was look pretty. Even at the height of the bubble that's all anyone thought they were ever going to do. Unless an economist is willing to tell you why everything that cryptos is done better by normal products then they're evading the reason the Tulip bubble was such a disaster and potentially making an apples to oranges comparison. Often when you bring up Tulips crypto fanatics love to bring up how all that gold does is look pretty... Not so. A history lesson is in order. https://en.wikipedia.org/wiki/History_of_money The gist is that once upon a time gold fulfilled all of the merits of being useful as a currency and it did so better than most anything else. Historically is a key word. That is at the time, it was/is relatively scarce, easily divisible, is easily measured, could be assayed, and was easily transferred and transported. Once you earn a place in the world's mind as a global currency you tend to stay that way and thus we have the gold of today. To get where it is gold had to be more than pretty. Now reading down that list you see a number of things crypto has in common. Maybe, but it also fights against established currencies that do a pretty damn good job of being currencies and have other features as well. There are a lot of reasons why but I don't think crypto will become the new dollar any time soon. But namely, look at all the crap paper money and plastic had to go through to finally usurp precious metals. And precious metals are still tradible as valuable currency! There is solid reason to predict fiat isn't going anywhere. Not in any future any of us alive today will see.
The short version of the last paragraph or so, is to listen to people actually building products. They generally have good reasons why they've left their jobs and invested fortunes in something many people are screaming at them is futile. Bitconnect was a scam, you can tell because the money has gone away and so have the "developers". Ethereum, EOS, and many others are not scams though they may still fail. They earn that status by the nature of the people developing them aren't running away with their fortunes. And they do have fortunes. The point is, they believe in it enough to risk it all just to continue their work. For most of us that are sane it takes strong reason to back up that kind of faith.
Think of it this way, most people will say that they'd likely quit their job and work less if they won the lottery. Crypto has made some unbelievable lottery winners and the ones worth listening to are the ones who put it all back in on black and continue to work their asses off. I'm not saying they're right. It's just they have skin in the game AND a good understanding of the product they intend to bring into the world. They'll know more about how it's supposed to work than random tenured economists who make money on journal articles and sooth saying investors trying to make a buck reading your fortune. In comparison to a gold rush, metaphorically economists are roughly like geologists, investors are still tarrot readers, and few of the crypto developers have found gold. Who do you bet has the best information regarding finding more gold? The tarrot cards, the geologist, or the guy who just sold enough gold to live off of the rest of his life but is going back out? Who are you going to take more critical advice from regarding the ultimate state of the gold rush?
All of them require a measure of salt, but I think there is more truth behind the successful gold digger's story than the others pontificating from comfortable armchairs.
Brief version, get better sources of information. If you read the following few paragraphs and learn something, then you've missed something your sources have told you or you have bad sources. I, by no means, am any kind of crypto expert. If you know less than me, or worse your sourced experts know less than me, then to put it into Game of Thrones terms, "you know nothin', Jon Snow."
So, hopefully by now you've gotten the hint that I'm certain there is utility in crypto even though you say your damn sure it won't replace money. So what is it good for?
To understand utility you have to know that ultimately utility translates to something the subject can do very well or uniquely that other things cannot do. Everything that has value first must have utility in the eye of the person who values it. The act of appraising is guessing the average value of something in the eyes of those people (the market) that would find it useful. The entire argument for my title rests on cryptocurrency having utility and not only as some tinker toy but it has to do something so great it can't be ignored forever. And as a matter of fact, I believe it does several things quite well. This assumes you know a few things about cryptocurrencies and the basis of their operation, blockchain. Watch these as a preface:
Where most people seem to get hung up is that these things seem insignificant. They seem like tiny trivialities. But they have an engineering butterfly effect because giant gobs of the way we work and interact are based on these things not being possible. So in order to get your mind to accept that these are important after each tidbit I'll list a few industries that might be interested to have this technology available to them.
Cryptocurrencies can be immutable. That is, they are better than "writing in stone". A public blockchain, not being wholly owned by one party, must operate by community agreed rules in order to operate. One of the most basic rules is that when data is written it's incredibly hard to change venturing near probabilistic impossibility. We have weasel words here because the word "impossible" is almost always hyperbolic. It can be assumed that very few things that follow the rules of physics are impossible, but we can safely assume that writing something in a well accepted blockchain means it will remain there, unperturbed, for as long as the blockchain community majorly wants it to be there. The more members participating in the blockchain, the less likely they'll agree that any data should be deleted or changed. In comparison with other storage mechanisms it's virtually immune to intentional or unintentional data loss. Almost all legal contracts would benefit from this kind of immutability. The nature of this feature means that for a one time fee, that's usually tiny, you have perpetual storage that provides public veracity at least as long as it holds any value at all. One can easily imagine a insane savings and utility for governments in storing public legal information. In fact Honduras and Estonia are headed down this path. Honduras is storing land deeds in a public blockchain and Estonia is operating a government blockchain. These, I believe, are both centrally managed so one could argue that there are some issues with true immutability but the point is the utility is enticing enough that whole governments are pivoting to try to harness the technology.
"Trustless" is now a thing. The definition is a little counter intuitive, but cryptocurrencies allow you not to have to trust an actual fallible human or group of humans. Although, humans can create broken code, the idea is that eventually a bit of code could be made that allows you to trust the code rather than a human being and thus, the code would be more trustworthy in perpetuity than any person or company ever could be. That means if a smart contract is written that works well enough, for all perpetuity it could be trusted to faithfully execute in a predictable manner for pennies. There is a great deal of overhead cost associated with trust systems like banks and stock brokers. That's one of the reasons they're so expensive. The idea is with enough people given incentive (paid well) to double check the others that no single failure could bring down the system. The issue comes with making it financially feasible. Generally, in a traditional trust system, the cheaper the overhead is, the less trustworthy. "Trusted" companies and banks fail all the time because of breaches in business etiquette that evade the trust system we rely on. That's why million dollar deals often work with teams of lawyers writing out the specifics and not a public notary signing off. With cryptocurrency you could pay a notary price to buy the best lawyer on the planet ever and sign a immutable agreement that's better than being written in stone and all of that without having to trust another living person to execute your agreement faithfully. That's not hyperbole, it's simply a translation of what's actually possible. This is why the industry is going insane with developers risking everything to be the first company to do it. This, of course, assumes that the "lawyer" has been coded into the system properly. And this is one of the utilities we're speculating on. That eventually, there will be smart contracts good enough to eliminate many thousands of various trust agreements. The point is, with cryptocurrencies this is absolutely possible and it wasn't possible before. Cryptocurrencies can supersede trust systems in ways never before possible.
For the previous reasons, cryptocurrencies can run the overhead of a virtual company and operate as a Decentralized Automated Company or DAC. Because of things like "smart contracts" programming in a blockchain can take the place of management and oversight of a work system (company) and make an "automated company" possible for the first time ever. That is, a company that's owned, operated, and managed by its own consumers and employees. If that's hard to wrap your head around, it's ok. All of us are struggling. Any company that has large amounts of digital overhead can move the majority of that overhead onto a blockchain and be run this way. Whether or not they should is another questions. Some of the more interesting cases come from companies that end up being almost necessary monopolies. Consider Amazon and Alibaba. They don't really offer a true product per se as much as they offer an experience in networking between product makers and consumers. No one wants to buy from the second largest or second most efficient network. We all want the best price for the crap we think we need. So we're going to go to the place that has everything we can think of at the cheapest prices available. At the same time vendors don't want to exposed to the second largest markets, they want their products to be available to the most people. This recipe makes for a natural monopoly. And the worst part is, currently this is all under a central governance model. If there are rules in place that unfairly treat customers or companies, you may not know that such arrangements are made, and even if so you are unlikely to be able to do anything about it without hurting your ability to get stuff or sell it. Cryptocurrencies can sidestep a great deal of these maladies. While they couldn't avoid the monopolistic tendencies they can avoid some of the negative effects. For instance, it's possible to have such an Crypto-Amazon technically owned and operated by the consumers and marketers who use it. The product marketing would require less overhead because it's all run by an autonomous company, thus consumers and manufacturers would get a better deal in negotiating the sale of goods. At the same time it would be easy to install a governance model that allowed consumers and product manufacturers to vote on how best to organize such a network and to decide what rules would allow participation. And if ever governance is too harsh, if the system should ever be broken or trust is broken for any reason, the absolute worst case would only be a fork or make a Crypto-amazon2 very much like cryptocurrencies split off today. In almost all ways cryptocurrencies used in this way offer a more malleable way to perform those functions. They don't fix everything, but they make a bunch of things more efficient and more resilient. Again the factor is time. This is a ground-up approach. It can't be simply bolted on to Amazon. To take advantage of the features of a cryptocurrency fundamental changes to the model would have to be made. And, for that matter, fundamental changes to cryptocurrency. I'm sure governments would have a problem with people being allowed to easily purchase illicit goods, so some restrictions would have to be naturally in place. The faith part comes in that eventually these caveats can be worked out.
The really weird shit comes from cryptography. ZK-Snarks, zero-knowledge proofs, ring signatures, etc. This is quantum dynamics level information manipulation. Some of these things challenge the way we perceive reality. For instance, without going into specifics you can damn sure research yourself, there are cryptographic methods that can allow you to prove you are the member of a group without giving away your identity. When I say proof, I mean absolute, in that provided you were vetted to become a member of this group, there is no way that you could produce this crytographic signature without being a member or by faking the system. Furthermore, there are ways to make this proof a one time use token, whereby once verified it can never be used again. The effect seems subtle, even trivial. I would forgive you for thinking "who the hell cares?". But imaging voting systems, medical research, medical records, personal information, even down to credentials on resumes, and product verification. These offer ways to allow you to sell your private medical information without disclosing your identity, or give it away for research, to vote in a digital system more securely, to sell your market researchable private information without giving up more privacy than you want. Product trains (especially high tech goods from china) are notorious for "ghost run" fakes and frauds. With a system like this a consumer could conceivably be more sure that the product they were purchasing really came from the place they think it came from. All of those ideas and more are currently being developed on cryptocurrencies. You could say "well they could just fraud their way through the vetting process and then what?!" Well that's always been the case. Crypto doesn't solve everything but it does eliminate weak links. The part it would take care of is a quantum leap ahead in metaphorical strength from where we are today. To discount cryptocurrencies in this way would be like saying we developed a gas tank that never ran out of fuel, but it's useless because the fuel line to the engine could still be cut.
Lots of critics will try to get you to admit that it's "blockchain" the software concept that has value and not "cryptocurrency". This is an attempt to split twigs in my opinion. Usually the implication is that a blockchain can be privately owned and retain it's utility and this is abhorrently false. There is nothing a privately owned blockchain can do that can't be done better by just regular private software. In the context of private ownership, blockchain is simply a way to provide a little bit of redundancy but there are many ways to solve that problem more efficiently than a blockchain, hashchain, or any other fancy new chain. To be clear, I don't think private blockchains are useful, and therefore they won't stay valuable. They are true tulips in that they're just pretty sounding.
In order for many of these features to be true utilities they require that the specific cryptocurrency or blockchain hold a great deal of public trust. In order to do that cryptocurrencies do a variety of things including, exposing core operation to the general public for scrutiny ( stay open source), invite community feedback and governance, and give strong value incentive for participation that follows the rules. Chiefly this tends to make the more trustworthy blockchains fully publicly owned and operated. Central management subverts the trustless feature by its nature. Without trustlessness you lose immutability, the trust required for DACs and smart contracts in perpetuity, and ultimately your market. And because of that, there end up being very few things a private blockchain or cryptocurrency can do that can't be done better by normal software. Probably nothing. At least nothing I can think of.
Now, I've only mentioned the unique features. There are plenty of things that cryptocurrencies can do as well as other things, namely they can be a currency, act as a security, or hold the use of a service as value (be a token). But uniqueness drives the grand sum of utility. The features that will drive adoption will be features you can't reproduce in any other way. If you ask me these are some pretty amazing unique abilities. One of the problems with adoption, actually, is that they're so fundamental they'll require a whole lot of re-inventing the wheel to incorporate into our existing economies and that takes time and effort. This is illustrated pretty well by the show Silicone Valley in which the protagonists make a storage compression algorithm so amazing that general consumers have no idea what it does and end up not using it. Industry experts and engineers love it but consumers don't understand how important it is. Cryptocurrency is currently suffering from the same type of malady. It will languish so long as it's unique abilities are not well executed. And thus we get to my weasel phrase.... "with enough time". The brief premise is that the unique features of publically owned cryptocurrencies are so valuable that they can't be ignored forever. They are solutions to problems we didn't know we had and once we start down the rabbit hole it'll be like the smart phone. We won't be able to imagine a world without them anymore. Some time in the future someone will be using an application powered by cryptocurrency. They'll think back to the days before like we think back to the rotary phone or the time we had to use an encyclopedia or make a run to blockbuster for a date night. And they'll wonder how it even worked at all to do it the way we used to. In the meantime we wait. The killer app is out there somewhere forward in time. As ever, the revolution will not be televised. And just like the point of the original poem, if you want to be a part of the revolution you need to start by becoming one of the rebels.
In closing here are a few tidbits that may capture more than I could about the current fervor.
Pre Crypto Jeff Bezos Ted talk. This deals with adoption and the dynamics behind disruptive technologies and their adoption. He gives a history lesson on economic paradigm shifts in the past and many crypto advocates see strong similarities between his examples and the crypto industry.
Jerry Brito Vice interview - This is a very good summary of crypto. They talk about bitcoin but by proxy this applies to many altcoins and the crypto industry in general.
Vitalik Buterin Love him or hate him the kid knows stuff. A meritorious quality of his is that he's openly skeptical of his own product. He's well recorded for openly questioning Ethereum's public valuation several times over. Though you would have a point by saying he's not an economist, you'd be foolish to ignore his vision for what cryptocurrencies can do from an engineering perspective and/or how best they would accomplish those goals (their utility).
Nick Szabo A definitive authority. If you haven't listen to or read any of his ideas then you haven't even scratched the surface of why very intelligent people are echoing the topic of this article. Do yourself a favor and listen to the entire thing and I promise you'll walk away much more knowledgeable than you are at this moment.
Don Tapscott More of a general approach. The engineering details aren't there but his vision is reasonable. This is a great video to use as a beginner's crash course.
