It would be better for cryptography to remain niche.

The biggest crisis in crypto so far has undoubtedly been the rapid decline and tremendous fall of FTX. At the time of the collapse of what turned out to be Sam Bankman-Fried’s personal piggy bank, it was the third largest cryptocurrency exchange. Its disappearance sent shockwaves throughout the industry, bringing down not just prices but also a litany of companies.

Note: The opinions expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc. or its owners and affiliates.

This article is excerpted from The Node, CoinDesk’s daily digest of the most important stories in blockchain and crypto news. You can subscribe to get the full content newsletter here.

At the time, in late 2021, it was unclear whether crypto as a concept would ever recover – the blatant fraud of what was, until then, one of the most experienced and consumer-trusted crypto companies seemed to confirm the widespread assumption of what all of this it was just a ruse to cover up fraud.

Today, things are improving, although there remains widespread fear that the industry is repeating old mistakes and headed for another punishment. For investors and veteran crypto watchers, this is and has always been normal: since bitcoin (BTC) 2014 market crash, following the failure of Monte. Gox, and subsequent recoveryThe cyclical nature of the market has long been an accepted part of life.

But isn’t it strange that this maturing industry has normalized these boom and bust cycles? It seems to me that mass adoption of any blockchain or consumer application depends on the price of its token – or the industry itself – not always being at risk of imminent collapse.

And that’s it. To a large extent, the biggest problem with the growth of crypto is the growth of crypto. This whiplash between euphoria when markets rise and despair when they shrink, every four years or so, is a result of crypto’s quest for mass adoption.

The process is clear, a classic case of economist Robert Shiller “irrational exuberance.” Promises to reinvent everything, from money to the internet itself, arouse interest. People believe in the dream of decentralization (or, for many, the promise of quick money). Popularity drives up prices, which reflexively it increases further as more and more people invest – until something breaks.

Almost always, the things that fail are the things that blockchains were built to mitigate or replace. And these things, almost always, were built to make cryptography palatable and/or easy to use. It is not an uncommon opinion that “the masses” are unlikely to engage in self-custody. But without self-custody, what’s the point of something like Bitcoin?

“The risk with increasing adoption is that new entrants are not aware of the fundamental principles of Bitcoin: decentralization, self-custody, hard money, etc. Their reality may not remain in the protocols over time,” said Alex Thorn, head of enterprise-wide research at investment bank Galaxy Digital.

Adoption means following the law (which is often at odds with crypto values) and creating easy-to-use logins and on-ramps (which can be compromised). There is a tension – if not direct competition – between the goals of decentralization and mass adoption. Grow encryption too much and you risk destroying what it is truly useful for. “Just being integrated into the mainstream financial system cedes many of the opportunities that matter for this technology,” said Nathan Schnieder, professor of media studies at the University of Colorado at Boulder and author of “Governable Spaces.”

It’s a point made by University College Dublin professor Paul Dylan-Ennis, who said that “crypto is a subculture that cannot accept that it is a subculture. Most of our problems result from how talk of “integrating the next billion” makes us fall back on our values.”

There is a certain irony in the fact that developers, founders and investors have spent 15 years and billions of dollars looking for a “killer app” for blockchain, and yet one already exists.

Satoshi Nakamoto, and those who truly follow in his footsteps, have built digital instruments that can be used in any way and cannot (easily) be taken away from you.

And that. That’s the point of encryption.

Mind you, these are huge markets. But today, as in other periods where it seems like crypto is about to emerge, that use pales in comparison to the speculative use of crypto, where capital comes in, bounces from coin to coin or protocol to protocol and causes the number to rise. – essentially creating a circular economy.

And that’s okay. Gaming is a use case to some extent. But if people want crypto to be used productively, developers, founders, and investors should build for people who have a real need for money and censorship-resistant tools. Almost by definition, this is a limited audience.

This is just my opinion. Many disagree.

Molly White, author of crypto-critical news services Web3IsGoingGreat and “Citation Needed,” argues that crypto is already popular. “There are individual projects that are still small and niche, but with Brian Armstrong and Sam Bankman-Fried rubbing elbows in Congress, and BlackRock and Fidelity launching bitcoin ETFs, I think that ship has probably sailed,” she said in a message direct.

Privacy advocate, educator, and monero superuser SethforPrivacy sees things differently. The “unfortunate reality is that most people do not yet realize the need for Bitcoin nor are they willing to take on so much personal responsibility, and as such, we must focus our efforts on how to improve Bitcoin for those who do see the need.” today,” he said.

There is also the argument that decentralization is precisely the reason why crypto will go global, so to speak.

“The ONLY thing that makes Bitcoin’s global rise possible is its most cypherpunk attribute: it is owned by no one and operated by users, not states or corporations,” said Alex Gladstein, chief strategy officer at the Human Rights Foundation.

However, it is not exactly clear what the masses want. Ethereum advocate Emmanuel Awosika, for example, admits that “while we believe *everyone* wants privacy, censorship resistance, and protection from nation-state attacks, some people welcome a product that solves a problem and has a good user experience.” user”.

While not everyone needs, much less wants, privacy, censorship resistance and maximum decentralization, Awosika added: “We should explore the possibility of getting crypto into the hands of as many people as possible.”

Likewise, Roko Mijic from “Roko’s Basilisk” fame, argued that it is actually scale that gives decentralized tools any power, which is obviously true as Bitcoin is difficult to attack because it has miners spread all over the world. “You cannot resist censorship within a small-scale crypto network because the government will simply take down the entire network,” Mijic said.

Justin Ehrenhofer, founder of Moonstone Research in Chicago, echoed this sentiment, pointing out that a currency is only useful if it is widely accepted and therefore “cypherpunks should focus on building systems that attract foreigners.” However, he added that “with large-scale adoption” there has been a degradation in the spirit of crypto, as the average user stores their wealth on custodial exchanges.

I suppose the question is: how valuable are the fundamental values ​​of cryptography?

Fuente