What: Crypto winter before the next wave
We are in a crypto winter, and it is understandable since so far, crypto has mostly been used for speculation, not solving problems in the Real World. However, the key crypto-related technologies (blockchain, smart contracts, decentralized applications, tokenization) have the potential to remake industries (starting with Finance) and release enormous amounts of trapped value.
If we look beyond the headlines, we can see that many applications that are already solving real problems in the Real World. If we look at the long-term trend (beyond the current volatility), we can see these technologies are categorically better and create fundamental changes for how to solve many existing processes (see examples below). In fact, this stage reminds me a lot of the conversations around Amazon (remember Amazon.bomb?) and the technology sector in 2000 after the Dotcom bubble burst (and follows the Gartner Hype Cycle almost perfectly, just as we navigate through the Trough of Disillusionment).
Who: 2 Cryptos: Traders vs. Builders
A key insight is that there are two cryptos: financial crypto (Wall Street people, focused on trading and short-term profits) and tech crypto (Silicon Valley/engineering/entrepreneurial people, focused on building products that solve real world problems); where most people see things that don’t work, the tech crypto community see a list of things to be fixed.
They key to make this work is to look for pools of trapped value where we can apply breakthrough technologies to reimagine existing processes. We start with simpler specific (and broken) use cases, and then keep on improving and adding more complex and valuable processes.
How: Real World applications are already here, if you know where to look
We can already see many examples of applications working in the Real World – they are just not as publicized as trading and exchanges. As of today, Crypto and related technologies are already solving problems for lots of users: sending remittances, holding savings in a stable currency in unstable economies, making Real Estate accessible, global financing for Emerging Markets, financing agriculture, accessing global sources of capital, borrowing against Real World Assets, among others.
What these applications have in common is that they are mostly in underserved markets where solutions with current technologies are not cost-effective or too cumbersome. And as technology keeps getting improving, we can move on to more complex problems, like settling securities trading instantaneously, tokenizing Real World Assets and adding liquidity to private markets, and so on.
Also, we can look at other metrics that show adoption of these new technologies:
• Decentralized Finance has held up even after the implosion of many centralized exchanges
• Stablecoin usage keeps growing and now the transaction volume is higher than Mastercard and American Express
• Developers keep building new applications
• Energy requirements have gone down dramatically for the Ethereum blockchain
• And more
Crypto and crypto-related technologies are here to stay; if we look beyond the hype we can see it already working in specific industries. The key is: Focus not on going from 0 to $30B from one day to the next, but on building the products that people need.
#blockchain #crypto #defi #web3 #finance