Azeem's commentary: The lost pony
Here we are, 14 years into the crypto era. There is one proven use case: financial speculation. This doesn't have to be its destiny.
Crypto didn’t get to the moon in 2022.
And getting to the moon is, perhaps, the wrong analogy. A better one came from a conversation I had with Kevin Werbach, a long-time friend and Wharton professor who has written the book on blockchain.
Kevin said
the absence of scaled use cases beyond financial speculation is a huge issue. The Web3 argument is that all that capital is borrowing against future cashflows, to overcome the network effects of incumbency.
However, that still presupposes that there is a pony in there, under a reasonable time horizon. That claim becomes less convincing over time without successful examples.” [My emphasis.]
I agree with Kevin that “[i]t doesn’t disprove the argument that blockchain is fundamentally valuable and generative.” My view is that blockchains themselves may well turn out to be valuable for many different types of applications. I also agree that the lack of these today “raises big red flags about the massive market valuation.”
Other measured voices
This week Vitalik Buterin, the creator of Ethereum, posted his reflections on what excites him about crypto. Note, I really rate Vitalik as a brilliant thinker and creative - Ethereum is a real achievement. He has very challenging economic ideas. Take, for example, his views on how to fund public goods, or how to think about governance systems that foster plurality. He also led a distributed team that pulled off one of the most impressive software engineering achievements in history: the Ethereum merge. His truly standout track record speaks for itself.
There are five things that he is excited about:
Using Ethereum and derivatives as a type of money, including for payments and stablecoins of various ilks,
DeFi for prediction markets, creating synthetic assets that map to real-world assets and creating a kind of layer for inter-asset swaps,
Providing identity tools, like ENS,
Fostering decentralised autonomous organisations which can be more robust and interoperable than other systems. Perhaps surprisingly, Vitalik also suggests that decentralised systems can be more efficient than other schemes, which is counter-intuitive, but read his argument and come to your own conclusion,
And finally, building hybrid applications that might take advantage of crypto’s in-built robustness; for example, the Minimal Anti-Collusion Infrastructure which is a “base layer for bribery-resistant, secure, and private digital voting.”
But I was underwhelmed by his honest analysis.