jakiro
Author:Nic Carter, Partner of Castle Island Ventures; Compiled by: Bitchain Vision
No man can serve two masters; for either he will hate the one and love the other, or else he will be loyal to the one and despise the other.You cannot serve both God and mammon.
Matthew 6:24
Ken Chang recently published an article titled “I wasted 8 years in the crypto industry” article in which he bemoans the capital destruction and financial nihilism that seems inherent in the industry.
People in the crypto community love to laugh at these types of “rage exit” articles, gleefully recalling the spectacular exits of figures from history like… Mike Hearn or Jeff Garzik (and noting how much Bitcoin has risen since).
But most of Ken’s article is correct.He said:
Cryptocurrency claims that it helps decentralize the financial system, which I completely believe, but in reality, it is nothing more than a super system of speculation and gambling that is nothing more than a replica of the existing economy.Reality slapped me hard in the face.I’m not building a new financial system, I’m building a casino.A casino that doesn’t call itself a casino, but is the largest, 24/7 online multiplayer casino ever conceived by our generation.
Ken pointed out that VCs have poured billions of dollars into supporting the new L1, and we don’t really need that much.That’s true, even if he distorts the incentives a bit (VCs are just conduits for capital – by and large, they will do whatever LPs are willing to tolerate).Ken condemned the proliferation of decentralized exchanges (DEX), prediction markets, Meme currency issuance platforms, etc.Indeed, while you can theoretically make the case for these concepts (except for meme distribution platforms, which simply don’t hold up), it’s inarguable that they proliferate simply because market incentives prompt them to do so and VCs are willing to fund them.
Ken said he entered the crypto industry with passion and idealistic motives.These motivations will be familiar to anyone involved in the crypto industry: He sympathizes with Ayn Rand-style libertarianism.However, instead of practicing liberalism, he created a casino.Specifically, he is best known for his involvement in the Ribbon Finance project, which developed a protocol that allowed users to deposit assets into a vault and earn profits by systematically selling options.
I don’t want to be too harsh, but it’s true.I will also do some deep reflection.When the conflict between principles and work became unbearable, Ken finally realized pessimistically: Cryptocurrency is just a casino, not a revolution.
One thing that struck me about reading Ken’s article was that it reminded me of an article Mike Hearn wrote nearly ten years ago.Hearn wrote:
Why did Bitcoin fail?The reason lies in the failure of the community.Bitcoin was originally intended to be a new, decentralized form of currency that abandoned the shortcomings of “systemically important institutions” and “too big to fail.” Instead, it has turned into something worse: a system completely controlled by a few people.Even more worryingly, the Bitcoin network is on the verge of technical collapse.The mechanisms that were supposed to prevent this from happening have broken down, so there is little reason to believe that Bitcoin can be any better than the existing financial system.
The details are different, but the argument is the same.Bitcoin/cryptocurrency was originally conceived as a decentralized, cypherpunk practice, but ended up becoming a casino, centralized thing.Both sides agree: it is ultimately no better than the existing financial system.
Hearn and Ken’s argument boils down to the following statement: Cryptocurrencies start out with a purpose but end up becoming something else.So we end up in a debate about the ultimate goal or purpose of cryptocurrencies.But what exactly is the ultimate goal of cryptocurrency?
Five goals of cryptocurrency
In my opinion, it can be roughly divided into five camps.They are not mutually exclusive.For example, I personally identify most with the first and fifth camps, although I have some sympathy with all of them.But I’m not overly biased toward any one camp, not even the hardcore Bitcoin camp.
1. Restore sound currency
This was the original dream that most, but not all, early Bitcoin holders shared.The idea is that over time, Bitcoin will pose a competitive threat to the monetary privileges of many countries and may even replace their currencies, returning us to something like a new gold standard.This group generally believes that everything that happens in the cryptocurrency industry is a red herring and a scam that rides on the coattails of Bitcoin.Needless to say, Bitcoin’s achievements as a sovereign currency have been limited, but as an important monetary asset, it has achieved impressive results in just 15 years.Bitcoin holders who hold this view remain in a state of disillusionment and hope, however unrealistic, that hyper-Bitcoinification is coming.
2. Encode business logic into smart contracts
This is exactly the view espoused by Vitalik Buterin and most Ethereum supporters: since we can digitize currency, we can also express various transactions and contracts in the form of code, thereby making the world more efficient and fairer.To Bitcoin advocates, this is pure heresy.But in certain respects this view certainly succeeds, especially when considering contracts that are easy to express mathematically, such as derivatives.
3. Make digital assets a reality
This is my best summary of the “Web 3” or “Read Write Own” philosophy.This concept is not unreasonable. It believes that digital assets should be as real as physical assets.However, the implementation of this idea – such as NFTs and Web 3 social platforms – are either completely wrong or, to put it mildly, ahead of its time.Despite the billions of dollars being poured into it, few today would defend the idea.However, I still think it has merit.I think most of our online woes stem from the fact that we don’t really have our own namespace and have no effective control over who we interact with and who can see our content.I believe that eventually we will regain control of our online assets, and it will likely have something to do with blockchain technology.But at present, the time is not yet ripe for the realization of this concept.
4. Improve capital market efficiency
This is the least ideological of the five categories.You won’t see many people specifically interested in securities settlement, COBOL, SWIFT, or wire transfer windows.But for better or worse, it does power an important branch of the cryptocurrency industry.The idea is that Western financial systems are built on outdated technologies that are extremely difficult to update due to path dependencies (you don’t want to easily replace the core infrastructure that supports trillions of dollars of settlement every day) and are in dire need of upgrades.Such updates must come from outside the system and require a completely new architecture.Most of the value here is in efficiency gains and possibly some consumer surplus, so it’s not that exciting.
5. Expand the coverage of global financial services
Finally, there are those with good intentions who see cryptocurrency as an inclusive technology that will give countries in the Global South access to low-cost financial infrastructure, in some cases, for the first time.This means giving them the opportunity to self-custody crypto assets, or more commonly stablecoins, access to tokenized stocks or money market funds, obtain bank cards linked to their crypto wallets or exchange accounts, and have an equal footing in the world of internet finance.This is indeed a real phenomenon, and its apparent success has restored the confidence of many theorists whose enthusiasm has faded.
pragmatic optimism
So which one is right, the idealist or the cynic?Or is there actually a third unknown truth?
I could go on and on about how bubbles always accompany major technological changes, that bubbles actually promote the building of useful infrastructure, and that cryptocurrency is especially speculative because it is a finance-related technology, but that’s mostly just self-soothing.
My real answer is: pragmatic optimism is the right attitude to have, and it’s the attitude you have to stick to whenever you feel pessimistic about the cryptocurrency market.Speculation, mania, and arbitrage should be understood as inevitable, if unpleasant, externalities of building useful infrastructure.It has a very real human cost that I don’t want to downplay.The normalization of meme coins, mindless gambling and financial nihilism, especially among young people, is depressing and harmful to society.But this is an inevitable (albeit negative) side effect of building permissionless capital markets.I don’t think permissionless capital markets will happen without blockchain.You have to accept that this is an inevitable consequence of the way blockchain works.You are under no obligation to participate.
All in all, cryptocurrencies have an ultimate goal, and it’s perfectly fine to be idealistic about it.It is this power that inspires thousands of people to devote their lives to this industry.
It just might not be as exciting as you think.
The world may not see widespread circulation of Bitcoin.NFTs do not revolutionize digital ownership.Capital markets are moving closer to blockchain, but very slowly.We haven’t tokenized much beyond the dollar.No authoritarian regime has ever been overthrown with the help of ordinary people’s crypto wallets.Smart contracts mainly involve derivatives and have little other use.Currently, applications with real product market value (PMF) are limited to Bitcoin, stablecoins, DEX and prediction markets.Indeed, much of the value created is likely to be captured by large businesses, or ultimately returned to consumers in the form of efficiency gains and cost savings.
The challenge, therefore, is to maintain an optimistic attitude based on realistic possibilities rather than indulging in blind fantasies.If you believe in an Ayn Rand-esque libertarian utopia, the gap between your expectations of cryptocurrency and reality will eventually disappear.As for casino-style operations, unrestricted token issuance, and rampant speculation, they should be viewed as ugly warts on the belly of the industry that are difficult to remove.If you think the costs of blockchain technology outweigh the benefits, you have every reason to be disappointed.But from my perspective, things are actually better than ever.We have more evidence than ever that we are on the right path.Keep the end goal in mind.
