Crypto-Casino or Crypto-World ?

Are you part of a new era of decentralized currencies and applications that will change the world as we know it or are you playing a crypto-bubble-game with no future.

Well… There is probably something in the middle of those two statements right now.

If faith and logic decide to get together at some point, we’re in a new era. And we should get there eventually, yet remains the question of when and how. Because for now, we’re in experimental mode. Let’s put the current situation into a simple perspective, focusing on bitcoin.

The main problem of bitcoin is that it’s broken and hard to use by design.

A quick case about what a bubble is before we jump to what makes bitcoin so weak: A bubble bursts when people realize that the underlying asset on which was supposed to be based the value of what they bought doesn’t actually exist. The value of Internet companies could only be realized as more and more users were browsing and buying online, The real estate value grew on the back of people who were taking loans they could never repay in a lifetime and that bankers hid in derivated products that they even leveraged several times.

The issue with bitcoin is that its value is growing alongside an insane use of electricity and in the meantime, the underlying isn’t growing as bitcoin is still very much under-used in real life transactions for goods and services. There is a velocity of circulation in a closed loop of investments where only more and more buyers come in… until they don’t anymore.

The volume of total transactions being insanely uncorrelated to the volume and growth of real life transactions, bitcoin is certainly in a weak position. And if I had to summarize the three biggest weaknesses of this protocol:

  • It takes ages and a lot of electricity to process a transaction, bitcoin simply doesn’t scale as a decentralized protocol.

  • It’s highly volatile and unstable, there is no case for the real economy at this point. There could be one if the protocol was acting differently or if a consensus of major merchants were accepting it on a small portions of all their transactions.

  • It’s only sovereign in the cloud, you would need more countries accepting it as a legitimate currency of some sort to make an appealing case around it.

As much as Internet is real, decentralized applications and currencies are real too. There is a case for crypto-currencies, no doubt about that. But what time is it in the crypto-world ? Well, it’s probably around noon, we’re halfway there. So what will it take ?

  • The technology doesn’t scale at the moment and blockchain-free applications will eventually become new standards to build scalable, fast and secure decentralized applications.

  • The distribution and growth model of crypto-currencies must evolve to allow more and more people to join the network without creating a bubble.

  • Merchants and authorities need to make a real life case out of these assets to make it more stable and truly useful.

You can buy bitcoins if you want, you can even make a profit or a small fortune in no times, but only until it bursts.

The Internet world bursted once. So will the crypto-world. Until it becomes more mature.

Keep calm and only invest money you’re ready to lose.

And btw, if you’re building a smart and simple protocol that will allow the network to effectively grow alongside its value, please ping me :)