Has the promise of cryptocurrency failed?
Crypto was promised to be the bane of fiat currency, evil central banks and centralised control over financial transactions. The more I understand it, the more it seems technically feasible and very much possible but practically difficult due to opposing forces.
The globally coordinated push for CBDCs (central banking digital currency) by central banks, government regulations on decentralised currencies as well as the loss of trust of investors and public in crypto seems to have put power right back into the hands of the already too powerful.
Will we ever see a world where currency isn't controlled by the powerful central banks and governments? Is it possible for decentralised currency to make a comeback at all?
Talking product sense with Ridhi
9 min AI interview5 questions
Pick your poison- Fiat currency controlled by central banks backed by private equity and rich people Vs Cryptocurrency controlled by tech bros backed by private equity and rich people
Both are bad. More inclined towards (2) than (1) because (1) has centuries old power dynamics and structures built in that are hard to overcome. (2) would atleast give us a shot at overcoming some of the power structures and equalising, although this too comes with a small chance of success.
@Elon_Musk well put
One thing that continues to bug me is when it'll go from being an 'investment' instrument to get rich fast, to actually being a currency that is used for at least a few transactions a month/year
That hasn't happened at all. And I'm sure governments will continue to be a hindrance in that happening.
Wonder if someone has any data around this?
+1, really interested in understanding this more.
Sir, Crypto is stupid when it comes to transactions. Because it doesn't differentiate between a 1Rs transaction vs 1Crore Rs worth transaction. It treats both as the same, needs the entire Blockchain to authenticate both and requires the same effort, energy and latency to get settled. That is the big drawback.
If I am paying you 20Rs, its inconsequential, but if I pay you 5Cr, I would want the bank to OTP the shit out of me, get their local branch manager to be physically present, need the super expensive stamp paper and the entire presence of 2-3 regulators to oversee so that either of you and me doesn't back out.
What's money transactions anyway? Transferring a store of value that the society has from one to the other. Fiat does it better than Crypto due to sheer customisation of the process.
It seems to not have found credible use cases. The technology is still pretty sound IMO
No.
Fundamental understanding of crypto as a currency is wrong , it is an entirely Digital asset class .
Crypto asset class is at very nascent stages and in 10,15 years we will see crypto products and services use by everyone of us.
Why do you think it is not worthy of being a currency? We came from using salt and pebbles to paper money as currency. Volatility can be resolved (atleast for 1 out of 1000s of cryptocurrencies).
Go to coingecko , check category section, there are different categorisation of crypto - Layer 1 , DeFi, CEX tokens, etc. Every legit crypto asset falls under either of these categories. One example is Ethereum under layer 1 , which has ETH token where applications are under on top of Ethereum network.
“Centralised control over financial transactions” - I think the question is why the governments would want to lose any of it
It seems like crypto was mostly used as currency on the dark web, NFTs, etc.
None of the mainstream use case.
It’s a very ideal end case, but some ideals you don’t ever get to
I understand the pessimism in your thoughts. But we've had sufficient examples of revolutions in history where govts and the elites have had to let go of power - from our own independence struggle to suffrage movements. I'm hopeful that we see the optimistic scenario play out for atleast 1 cryptocurrency (and also AI too on a sidenote).
Now that the web3 bubble has burst, what do you think is the biggest issue that is harming the prospects for serious cryptocurrencies?
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No government in the world will be happy to give up their power to control the currency. Exception being El Salvador which is now facing a crisis because they adopted Bitcoin at a higher price and as it fell, well so did whatever amount the government and their people had purchased.
As a currency, it is too volatile. The main reason that currencies of large economies aren't as volatile is because the "evil" central banks intervene. If there is too much inflation, they can raise interest rates, open market operations to reduce Liquidity etc. and vice versa.
As a storage of value, it is well known that you shouldn't be keeping your money as cash or in a savings account because of inflation which btw is quite necessary for economic growth (controlled inflation). Rather wealth should be stored in real estate, fixed income instruments, equity etc.
If crypto is unable to fulfill these two things, what is it then ? A failed idea maybe which people thought of as a get rich quick scheme.
Moreover, people keep talking about whales, so however decentralisation there is, power would automatically flow towards the more influential and rich anyways.
Interesting perspective. As someone who likes to understand economics, my perspective on the stability of currencies is slightly differing. Most fiat currencies are stable because of the law of large numbers apart from the central bank interventions - specifically the Federal Reserve since a ton of currencies peg their value to the USD after Bretton Woods. Since USD remains stable due to money printing, many other currencies remain stable. But we are still seeing a lot of fiat currencies fail (Venezuela, Argentina, Zimbabwe etc.) so it's not like fiat is immune to failures.
I speculate that once we have general acceptance in large numbers for cryptocurrencies, we will see stability there too. Also, cryptocurrencies too have interventions like crypto burning and crypto issuance which are undertaken very similarly to the monetary policy measures by central banks.
I do agree with your opinion that if general acceptance of anything is high enough, it will become mainstream.
Gold is a great example. Even though there are some industrial applications, they are quite limited and won't justify the price. It is just because everyone thinks it is a safe haven (even central banks who buy tons of it) it is used as a store of value across the world.
It is just that the whole crypto story has never been too convincing for me.
Crypto has made solutions to a problem that never existed.
It has been here since decades and is only and purely used for gambling and scamming, it has created more problems.
I’m seeing people making 40-50LPA who just sit and google topics in the name of “RESEARCHER”
Why? Because it’s backed by scam money.
If banks vanish today it’ll be the end.
If crypto vanishes today, nothing will change.
True, if crypto vanishes today then nothing real will change in today's world but a lot of potential would dissappear. If internet would've vanished in the 1980s, not a lot would've changed in the world then but we now know what we would've lost.
I agree people are being overpaid but using that argument to devalue an entire technology is an L take IMO.
The last two lines can be used to support a opposite view also 😀In the sense - If banks vanish, it can cause damage whereas cryptos being decentralised nothing changes — things remain stable
How does one solve for anonymity in the crypto currency system? Money, considering it drives the world and the associated malpractices (such as terrorism etc), needs to be traced to ownership in an audit trail
I don't have an answer to the first problem. But with fiat too, we have the (massive) issue of counterfeit currency and illegal cash.
Digital currency takes illegal cash to another level. All terror and black market activities are anyway being done through crypto. Remember when the Bitcoin bubble was at its peak, crypto wallets were hacked and money was stolen.
All I'm saying is, I don't see a case of crypto being adopted as a legal tender purely for security reasons.
Conspiracy theory angle (purely a figment of my imagination)- Also, the people in power need an illegal currency system for their illicit activities. The moment crypto becomes legal, how do you conduct illegal activities. Need an avenue for that too