Original title: "Mass Adoption Would Ruin Crypto. Keep It a Niche"
By Daniel Kuhn, Associate Editor, Consensus Magazine
Compiled by: Chris, Techub News
I think it’s probably better for cryptocurrencies to remain niche.
The biggest crisis in the cryptocurrency space so far has undoubtedly been the rapid collapse of FTX. At the time, the exchange, which later turned out to be Sam Bankman Fried's personal "secret coffers", was the world's third-largest cryptocurrency exchange. Its collapse sent shockwaves through the entire industry, causing not only a sharp drop in the price of Bitcoin, but also dragging down a series of companies.
In late 2022, the revelation of blatant fraud by what was once the most popular and trusted cryptocurrency company among consumers seemed to confirm that it was all just a cover-up for fraud. Today, things are better, but people still worry that companies in the industry will repeat the same mistakes. For veteran cryptocurrency investors and observers, this situation has always been normal: since the Bitcoin market crash in 2014 and the failure and subsequent rebound of Mt. Gox, the cyclical fluctuations of the market have been accepted as part of "life."
But isn’t it strange that a mature industry would accept this “boom and bust” cycle as the norm? In my opinion, the mass adoption of any blockchain or B2C application depends on the price of its token, or the entire industry is not always at risk of impending collapse.
That’s the problem. To a large extent, the biggest problem with cryptocurrency is its growth. This alternation of euphoria when the market is excited and despair when it shrinks every four years or so is the result of cryptocurrency’s pursuit of mass adoption.
Reckless Popularity
The process is clear, a textbook case of what economist Robert Shiller calls “irrational exuberance.” The promise of reinventing everything from money to the internet itself sparks interest, people buy into the dream of decentralization (or, for many, the promise of quick money), enthusiasm drives prices higher, and higher prices, in turn, drive more people to invest, until something crashes.
Blockchain technology was originally designed to mitigate or replace some of the potential failure issues that often exist to make cryptocurrencies more acceptable and usable. Many people believe that the public may not keep custody of their own cryptocurrencies. However, without self-custody, the core meaning of cryptocurrencies such as Bitcoin is lost. Attempts to make cryptocurrencies easier to use or more acceptable are often the source of failure because they deviate from the original intention of blockchain decentralization and self-custody.
Alex Thorn, head of research at Galaxy Digital investment banking firm, said, "The risk with adoption is that new entrants don't understand the core principles of Bitcoin: decentralization, self-custody, hard currency, etc. If new entrants don't learn, understand and accept these core beliefs, these features may no longer exist over time."
There must be a balance between decentralization and mass adoption. Popularization means complying with the law (which is often contrary to the values of cryptocurrency) and creating a simple threshold for use. If cryptocurrency is too popular, you may destroy its truly useful features. Nathan Schnieder, a professor of media studies at the University of Colorado Boulder and author of "Governable Spaces," said that "integration into the mainstream financial system will eventually cause the important features of this technology to be lost."
This sentiment was echoed by Paul Dylan-Ennis, a lecturer at University College Dublin, who said that “cryptocurrency is a subculture that has failed to accept that it is a subculture. Most of our problems stem from how ‘getting the next billion users’ will lead to the decay of core features.”
“Killer apps” have always existed
Developers, founders, and investors have spent 15 years and billions of dollars searching for blockchain’s “killer app,” but the irony is that it already exists.
Satoshi, and those who truly follow him, have built tools that can be used at will and cannot be easily taken away.
This is what cryptocurrency is all about.
This is why almost no one uses Bitcoin to buy coffee, but many people use XMR to buy various items on the dark web. If you look at how cryptocurrency is really connected to the real economy, you will find that it is basically used in niche areas. For example, the black market or gray industry, stable currency remittance channels, and circulation between cryptocurrency enthusiasts.
These are huge markets, mind you. But today, just as cryptocurrencies seem to be on the verge of a breakout, these usage patterns pale in comparison to the speculative use of cryptocurrencies, where capital moves in and out, jumping from coin to coin or protocol to protocol, leading to pump and dump behavior, essentially creating a circular economy.
That’s fine. To some extent, gambling is a use case. But if people want cryptocurrencies to be used productively, developers, founders, and investors should build products for those who actually need censorship-resistant money and tools. That’s almost certainly a limited audience.
This is just my opinion, many people disagree.
Other Views
Molly White, author of Web3IsGoingGreat and "Citation Needed," believes that "cryptocurrency has become mainstream. Although some projects are still niche, with the events of Brian Armstrong and Sam Bankman Fried, and the launch of Bitcoin spot ETFs by BlackRock and Fidelity, I think the ship may have sailed."
Privacy advocate, educator, and Monero user SethforPrivacy sees it differently. He said: “Unfortunately, most people do not yet realize the necessity of Bitcoin and are not willing to take that much personal responsibility, so we must focus on improving Bitcoin and helping those who have realized its necessity today.”
Alex Gladstein, chief strategy officer of the Human Rights Foundation, said, "It is decentralization that makes cryptocurrency truly global. The only reason Bitcoin can rise is that it is the most cyberpunk. It does not belong to anyone and is operated by users rather than countries or companies."
“We think everyone wants products that provide privacy, censorship resistance, and protection against state attacks,” said Ethereum advocate Emmanuel Awosika.
Awosika added that “we should explore how to bring cryptocurrencies to as many people as possible.” Similarly, Roko Mijic, of “Roko’s Basilisk” fame, believes that it is actually “scale” that gives decentralized tools their power, as evidenced by the fact that Bitcoin is difficult to attack because miners are distributed all over the world. “You can’t resist censorship in a small-scale crypto network because the government will just destroy the entire network.”
Justin Ehrenhofer, founder of Moonstone Research, agreed in Chicago, noting that currencies are only useful if they are widely accepted, so “you should focus on building systems that attract external users.” However, he added that “with mass adoption, the spirit of cryptocurrency has degraded somewhat as regular users store their wealth in custodial exchanges.”
I think the real question is "Which is more important, the core values of cryptocurrency or the widespread adoption of cryptocurrency?"
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