Deputy Editor of Consensus Magazine: Mass adoption will destroy cryptocurrencies

Original Title: “Mass Adoption Would Ruin Crypto. Keep It a Niche”

Author: Daniel Kuhn, Deputy Editor of Consensus Magazine

Compiled by Chris, Techub News

I think keeping cryptocurrency niche may be better.

The biggest crisis in the cryptocurrency field so far is undoubtedly the rapid collapse of FTX. At that time, this exchange, which later proved to be Sam Bankman Fried’s personal ‘treasury’, was the third largest cryptocurrency exchange in the world. Its closure caused shockwaves throughout the industry, not only causing a significant drop in Bitcoin prices, but also bringing down a series of companies.

In late 2022, the blatant fraud uncovered by the once most popular and trusted Crypto Assets company seemed to confirm that all this was nothing more than a cover for fraud. Today, the situation has improved, but there are still fears that there are companies in the industry that will repeat the mistakes of the past. For veteran Crypto Assets investors and observers, this has always been normal: since the Bitcoin market crash in 2014 and the failure and subsequent Rebound of Mt. Gox, cyclical Fluctuation in the market has been seen as part of “life.”

But a mature industry considers this cycle of “boom and bust” as normal. Isn’t this attitude strange? In my opinion, the large-scale adoption of any blockchain or B2C application depends on the price of its token, or in other words, the entire industry will not always face the risk of imminent collapse.

That’s the problem. To a large extent, the biggest problem with the development of cryptocurrency is its rise. This alternating frenzy and despair every four years or so in the market is the result of the pursuit of widespread adoption of cryptocurrency.

Widespread Regardless of Consequences

This process is clear and is a textbook case of what economist Robert Shiller called ‘irrational exuberance’. The promise of reshaping from currency to the internet itself has sparked people’s interest, and people buy into the dream of decentralization (or for many, the promise of making quick money). Popularity drives up prices, and rising prices in turn drive more people to invest until something collapses.

Blockchain technology was initially designed to alleviate or replace some potential failure points, which are often present to make cryptocurrencies more accessible and usable. Many people believe that the public may not self-custody cryptocurrencies. However, the core significance of cryptocurrencies such as Bitcoin would be lost if it were not self-custody. Measures that attempt to make cryptocurrencies more user-friendly or more acceptable often lead to the root of failure because they deviate from the original intention of decentralization and self-custody of blockchain.

Alex Thorn, research director of Galaxy Digital Investment Bank, said, ‘The risk brought about by popularity is that new entrants do not understand the core principles of Bitcoin: decentralization, self-custody, hard money, etc. If new entrants do not learn, understand, and accept these core beliefs, these characteristics may cease to exist over time’.

Decentralization and widespread adoption must be in a balanced state. Adoption means complying with laws (which is usually contrary to the values of cryptocurrency) and creating simple usage barriers. If cryptocurrency becomes too widespread, it may undermine its truly useful features. Nathan Schnieder, a media research professor at the University of Colorado Boulder and author of ‘Governable Spaces,’ said, ‘Integration into the mainstream financial system will ultimately cause the important features of this technology to be lost.’

This view is echoed by Paul Dylan-Ennis, a lecturer at University College Dublin, who said, “Cryptocurrency is a subculture that cannot accept itself as a subculture. Most of our problems stem from how ‘welcoming the next billion users’ will lead to the decline of core features.”

The killer app has always been there

Developers, founders and investors have spent 15 years and billions of dollars searching for the “killer app” of blockchain, but ironically, it has been there all along.

Satoshi Nakamoto and those who truly follow him have built tools that can be used freely and are not easily taken away.

This is the whole point of cryptocurrency.

This is also why almost no one uses Bitcoin to buy coffee, but many people use XMR to purchase various items on the Darknet. If you observe how cryptocurrencies are truly connected to the real economy, you will find that they are mainly applied in niche areas. For example, in the black market or gray industries, as remittance channels for stablecoins, and in the circulation between crypto enthusiasts.

Please note that these are all massive markets. However, today, as cryptocurrencies seem to be on the verge of a breakthrough, these use cases pale in comparison to the speculative use of cryptocurrencies, where capital flows in and out, jumping from one coin to another or from one protocol to another, causing pumps and essentially creating a circular economy.

No problem. In a sense, gambling is also a use case. But if people want cryptocurrencies to be used productively, developers, founders, and investors should build products for those who truly need censorship-resistant currencies and tools. It’s almost certain that this is a limited audience.

This is just my opinion, and many people disagree.

Other Views

Web3IsGoingGreat and the author of “Citation Needed”, Molly White, believe that “cryptocurrency has become mainstream. Although some projects are still niche, with the events of Brian Armstrong and Sam Bankman Fried, as well as BlackRock and Fidelity launching Bitcoin spot ETFs, I think this ship may have set sail”.

Privacy advocate, educator, and Monero user SethforPrivacy has a different perspective. He says, ‘Unfortunately, most people are not yet aware of the necessity of Bitcoin and are not willing to take on so much personal responsibility. Therefore, we must focus on improving Bitcoin and helping those who have already realized its necessity today.’

Alex Gladstein, Chief Strategy Officer of the Human Rights Foundation, said, “It is decentralization that enables cryptocurrency to truly go global. The only reason Bitcoin can rise is because it embodies the most cyberpunk characteristics - it doesn’t belong to anyone and is operated by users instead of governments or companies.”

Ethereum advocate Emmanuel Awosika said, “We believe that everyone wants products that protect privacy, resist censorship, and combat state attacks.”

Awosika added, “We should explore how to promote cryptocurrency to as many people as possible.” Similarly, Roko Mijic, known for ‘Roko’s Basilisk,’ believes that it is actually the ‘scale’ that gives decentralized tools power, which is verified in Bitcoin’s difficulty in being attacked due to the distribution of miners around the world. ‘You cannot resist censorship in a small-scale encrypted network because the government will directly destroy the entire network.’

Moonstone Research founder Justin Ehrenhofer agreed with this view in Chicago, pointing out that currency is only useful when widely accepted, so we should focus on building systems that attract external users. However, he also added that the spirit of cryptocurrency has been degraded with mass adoption, as ordinary users store their wealth in custodial exchanges.

The real question is, who is more important: the core values of cryptocurrency or the widespread application of cryptocurrency?