[ DEC 28, 2021 ]

First off, nobody has any idea what’s going to happen. Let’s be clear about that. These are musings—nothing more.

I see the current crypto hype as three distinct phenomena—with descending levels of longevity.

1. The Ideas
2. The Tech
3. The Hype

The ideas

I think the ideas are most likely to survive for decades, which are:

• A digital replacement for reality where the other 80% can find meaning away from meatspace (metaverse)
• A shared, decentralized computer (Ethereum/et al)
• Removing the middleman (de-$FOO)
• Decentralized finance (defi)
• Smart contracts
• Digital validation of ownership (NFTs)
• Decentralized and autonomous organizations (DAOs)

The tech

The next most fragile in this list is the technology itself. So, blockchains. Bitcoin. Ethereum. NFTs built on top of current blockchains. Etc.

There’s no way to know if the current iteration is stable, or if it’ll completely fail in a few months/years, cause a new Dark Ages for these ideas, and be resurrected in 5-20 years when the tech or society is ready.

Many of the ideas above can be implemented using existing, non-crypto technologies, so there’s no reason to assume that crypto is an inevitability.

The hype

The most fragile of all these is the hype, which is not sustainable. The number of companies being formed right now that are raising billions of dollars in “value”—all based on mania and FOMO—is completely insane.

There’s no way the top of this doesn’t blow or slide off within 1-3 years. Even if this first iteration IS THE ONE, we’d still see consolidation at the top that removes 60-95% of the players from the board.

The predictions

There are obviously more than two options.

• OPTION 1 — We get it right the first time with Bitcoin/Ethereum, and society is reshaped in the image of decentralization, smart contracts, and digital ownership. Many lucky entrepreneurs become owners of billion and trillion-dollar companies in the course of the next 10 years. Massive consolidation happens, and something like 2-5% of the coins/chains survive.
• OPTION 2 — The whole thing fizzles out in the next several months to a couple of years. Either regulation, performance issues, or vulnerabilities basically kill off Bitcoin and Ethereum, and they take down the entire ecosystem with it. It’ll be like the AI Winter of the 1970’s, except for crypto. But the ideas above survive, and they start getting implemented in 5-10 years using traditional, non-crypto-based technologies. Somewhere around 10 years later another hype cycle may start around crypto, depending on how successful the implementation of the ideas was using non-crypto tech.

I’m personally betting on #1, but I’d not be surprised at all if #2 happened.

The only thing I’m highly convinced of is that the Ideas will not die. I believe they’ll keep re-emerging as themes regardless of whether they’re implemented using crypto or traditional technology.