Blockchain and cryptocurrency were ironically first designed to disrupt the very institutions which are most excited about it. Will crypto ever be the democratizing and enfranchising force it often promises to be?
At the Global Blockchain Forum earlier this month, the question on everyone’s mind was whats next for cryptocurrency, when and how will we see mass adoption?
The events of last week, including Tether’s semi-collapse and the massive market distortion showing just how tenuous Crypto’s value is without a viable, robust set of products which are seeing adoption.
The critical question for crypto right now is how it can get to mass adoption. While many crypto investors are still excited about blockchain’s use as an investment vehicle as institutions like Fidelity are coming on board, if these investments are to hold value crypto must develop technology which gets in the hands of users who aren’t just investors. Roubini controversially brought these issues against crypto in his testimony to Congress, and until crypto can prove itself as a viable technological product, the simple fact is that these criticisms will continue to come, which only worsens the public image of cryptocurrency, forestalling adoption.
Furthermore, many in the crypto industry have expressed frustration over the centralization of cryptocurrency, and what they view as the development of blockchain technology to merely digitize the banking status quo, replacing one middle man with another.
These problems elucidate two direction crypto mature which do not exclude each other. On the one hand, it seems inexorable that the mainstream banking sector will adopt blockchain and crypto given how invested such companies as Mastercard, Goldman Sachs, and countless others who are looking to capitalize on the potential it has for increasing efficiency and secure communication between the institution. The most telling development is perhaps Ripple, which has consistently been called out for centralization and against the spirit of a democratic blockchain technology has headed up a lobbying group in Washington, and is in talks with the US Presidential Administration.
Ripple's pursuit is only one model of moving crypto into the hands of consumers, and while traditional institutions will certainly be able consolidate their effective control over the financial world, it does not mean that mass adoption can’t also be built from the ground up in order to fulfill (at least partly) the original goals of Bitcoin, which was to disrupt the very institutions which are now pushing for the regulation of blockchain. The current technology space is large, and can accomodate a lot of actors and products.
The fact that both Bill Clinton & Bill Gates endorse #Ripple leads me to believe I want to stay wayyy the hell away from it. Maybe I’m totally wrong on this. If I am, please correct/enlighten me to the benefits of $XRP and whether or not this is a “centralized shit-coin”— Charlie Murphy (@CharlieMurphE) October 19, 2018
In a panel on the future of crypto in banking, Sonny Singh of Oracle gave a lukewarm response to the question on if crypto should even be working so hard to fall in line with the financial institutions it was supposed to disrupt, stating, ‘I don’t think the banks are going anywhere soon,’ describing them as a ‘necessary evil’ for crypto adoption. Alex Mishinsky, who is developing the Celsius payment protocol for the express purpose of disrupting centralized banking with peer-to-peer payment networks asked what the point of replacing ‘one toll collector to another’ is, noting that it doesn’t ‘solve’ anything, but rather just improves the banking system’s own technology, reifying their station as the way people pay for goods and services, and to store value. Mashinsky made a plea to return to the spirit which produced Bitcoin, a system which was supposed to bring financial ‘power to the people’ in the form of decentralized transactions and stores of value.
While its obvious that the traditional banking institution will be a part of crypto’s future, this doesn’t necessarily preclude crypto’s ability to deliver new technology which brings financial benefits to those who don’t have access to them in the status quo. For one thing, the simple fact of the matter is that traditional financial and banking institutions have such a powerful grasp on the way that those, especially in the developed world, pay and transfer value, that it will be hard to move the mass of people who use traditional banks into a totally new paradigm.
Singh responded to Mashinsky’s questions by noting that the use of blockchain for trading ‘doesn’t solve world hunger, but it gave it brand recognition,’ which has borne out with traditional institutions like Fidelity getting on board with crypto technology, and many getting excited about the opportunities these create. Mashinsky made clear that crypto will need time and concerted effort to really change the way that people think about payments, but Singh posits that in fact the financial institution will lead to exactly this, through increased penetration and acceptance of the technology as a viable technology for transactions.
On the other hand, there are regions in the world that not only are not a part of the traditional banking infrastructure, but in fact have unique needs which distributed ledger currencies could actually solve. In the developing world, there are millions who are underbanked or unbanked who would benefit not only from any form of accessible accounting, payment and fiduciary storage system but in particular a decentralized one.
Crypto startups like AKoin and Crowd Bootstrap are examples of potentially disruptive uses of crypto which are tailored for the needs of the developing world, which could see adoption before the traditional banking infrastructures of the developed world become implemented as nations become industrialized or otherwise become economically competitive.
Really damning comment showing what @TheBlock__ sees as their identity: they want OUT with the OG crypto ppl who stand up for freedom and cypherpunk values, and they want IN with overregulated US based firms violating user privacy. Dangerous mentality. Bitcoin ethos isnt broken pic.twitter.com/lGSJqmk77p— Whalepool (@whalepool) October 20, 2018
Furthermore, decentralized exchanges like Kraken and others are continuing to develop, and are not necessarilly going to be beat out by the banks. Rather, they can provide a separate service for those looking for less institutionalized payment protocols which also offer increased privacy, or offer an alternative banking infrastructure to those who wish to maintain control what their money is actually used for. For example, if someone doesn’t want to support a bank’s investment in fossil fuels, or mining operations of dubious ethics, decentralized exchanges which operate on peer-to-peer systems could be remarkably attractive.