Crypto is dead, long live crypto (-:

Disclaimer, the opinions in this article are mine and not linked to the work I do for ThreeFold.

Many draw parallels between the crypto industry and the 2002 dot-com bubble. In the early 2000s, every company aimed to be a unicorn or risked irrelevance. The focus was on eCommerce, SaaS, and how the internet would revolutionize every business model, which it eventually did. However, a cleanup phase was necessary. The dot-com bubble saw many overhyped companies go bankrupt, making it nearly impossible for startups to secure funding for about two years. This cleanup allowed a new wave of companies to emerge with realistic product offerings that were carefully developed and tested. Regrettably, these offerings were highly centralized, leading to the current state of the internet where our data is not secure, and we feel exploited by large corporations. This has contributed to the rise of another overhyped revolution — “crypto.”

In the realm of crypto, numerous projects are overvalued relative to the benefits they offer. For many, their product is merely the potential upside of their token’s price. This has resulted in various negative and hazardous side effects. Similar to the dot-com bubble, a significant cleanup is needed within the crypto space. Personally, I don’t believe we have reached the bottom yet. Without being pessimistic, I still observe exceedingly high valuations for projects where the only product is the token price and hype.

Blockchain technology represents a crucial milestone for global progress, as it enables consensus-driven voting, efficient digital currencies, smart contracts, and importantly, Decentralized Autonomous Organizations (DAOs). Decentralization is the logical next step for humanity’s evolution. Blockchain technology holds the potential to transform industries that have exploited our data and money for enormous profit, offering a more equitable and secure alternative.

While I do not think blockchain alone can revolutionize the internet, it undoubtedly serves as a vital tool in facilitating change. The most significant use case for blockchain today is in decentralized financial services, where instantaneous global value exchange and lower entry barriers are now possible. True financial inclusion on a global scale is achievable, and regulated blockchain services will play an essential role in making this happen.

Centralized Exchanges

In my personal view, the existing centralized exchanges are predominantly problematic. Money should not be considered a product by itself, and creating it out of thin air can lead to the erosion of norms and values. Businesses should refrain from engaging in speculative or leveraged trading, and the use of AI-driven bots and artificial market-making should be avoided. Many of these exchanges resemble contemporary casinos, where users stand little chance of winning. The interfaces are complex, making it easy for users to make mistakes. Bots work against them, and larger financial institutions have a significant advantage. Ultimately, someone has to bear the consequences. Regulations may provide only a partial solution, or perhaps not a solution at all, as users need to understand the inherent risks associated with these often questionable financial institutions.

For example, ThreeFold was recently delisted from Liquid, following its acquisition by FTX. We invested over a million dollars in the listing process, including $350,000 for the listing itself, as well as legal and marketing expenses. We were notified last week, and our community became aware of the situation this week.

Update April 2023, being delisted ultimately was a good thing for ThreeFold because liquid blocked all accounts and so far everyone lost their money.

A member of our community wrote me a message which puts it quite well:

```I don’t get it. TF has spent a huge amount of time and money selecting an exchange together with the community. Then you’ve spent tons of money to make the listing a reality . I remember you were almost in tears to get this done, investing even private funds.

I thought the crypto World was there to improve the monetary system and counter the ‘’evil’ established order, but all I see are even more and bigger thugs. Months ago I posted/warned on Telegram about the change in Terms where Liquid declares any AUM as assets of the company. Nobody reacted, but this already should have been the reason for any project to delist on its own initiative. It was in any case reason for me to withdraw my tokens which I finally did when I read all the reports of Exchanges blocking transactions.

I had a couple of fintech startups, and the idea of having AUM booked as assets of the company would be unspeakable (though banks do pretty much the same). What a bloody criminals all these people are. 🤮```

What we need are not exchanges, we need proper financial regulated institutions who keep our money safe, who don’t speculate with our money themselves, who support digital and fiat currencies. To me it’s very normal that we have to pay a monthly fee for a service like this. If we get something for free, it means we are the product.

The good news.

We are actually very close to a better digital and financial world. The current financial situation as well as the state of crypto is the ideal soil for growth and better alternatives.

We need:

• Reliable blockchain technology as backend for money, identity, smart contracts and DAO’s.
• A new internet infrastructure which acts as a truly decentralized backbone for our future digital life.
  Where we together build and co-own the internet.
• Web 4 which is a combination of web 3 and a digital twin, giving birth to a peer2peer decentralized alternative set of experiences to the current facebooks, amazons, googles, …
• We need regulated financial institutions supporting both digital and fiat currencies. These entities should make use of blockchain technology and provide a straightforward and extremely secure user experience. Ideally, these firms will not need to offer interest-bearing products, which may result in debt, nor reinvest your money through leveraging. Instead, everything can be structured in alternate, more secure, and eco-friendly ways that benefit the planet and its inhabitants.
• The ability for thousands of companies to get the required technology and licenses to become such a financial institute for their own communities.
• A set of digital regulated sandboxes where companies and people can work together in all freedom but complying with a set of tax and legal well documented and pre-defined rules.

This is not just wishful thinking, but a vision that a dedicated group of individuals and initiatives are actively pursuing. We believe it is possible to make this a reality, reaching millions of people worldwide. All the essential components do exist. It’s just a matter of integration and scaling up, while being fully regulated. Best of all, this needs to be a grassroots movement that is open-source and designed to benefit everyone.

Our search for good blockchain technology.

Over the years, we have explored numerous blockchains and even developed one of the earliest proof-of-stake blockchains, originating from the SIA chain. This experience has given us a profound appreciation for the complexities involved in creating a dependable blockchain platform and fostering a supportive community around it.

There are three categories of blockchain projects:

• Smart Contract Runtime based blockchains. Ethereum introduced the concept of smart contracts, which are self-executing contracts with the terms of agreement directly written into the code. This enables automation, trustless execution, and reduced reliance on intermediaries. Such a blockchain delivers a good middle way between the toolbox or money blockchain approach described below.
• Blockchain toolboxes, such as Parity Substrate and Cosmos, enable rapid development of custom blockchains while offering ultimate flexibility. This approach has several benefits but necessitates a certain level of scale and technological foundation. It facilitates the creation of a decentralized network of interconnected blockchains, fostering seamless communication among them. These blockchains are the most flexible and potentially the most decentralized.
• Blockchains that prioritize monetary applications, rather than attempting to be a Swiss army knife, focus on well-defined use cases that enable greater scalability and user-friendliness. Other essential criteria for such blockchains include energy efficiency, customization through accessible smart contract languages, and robust security. While these blockchains might offer less functionality and flexibility compared to those based on smart contracts, their ease of use fosters a more straightforward initiation process, potentially enhancing their safety.

We initially chose Stellar, a blockchain that is often overlooked despite its reliability, speed, cost-effectiveness, and focus on monetary features. It’s surprising that this blockchain hasn’t gained more prominence in the industry. As part of ThreeFold, we selected Stellar as our starting point years ago, and it has not disappointed us.

Today, we are working on integrating with dozens of blockchains to become a part of various ecosystems without favoring any specific one. We are developing the required technology to make this seamless integration possible.

Advantages of Web3 and Blockchain:

• Stablecoins, such as gold-backed tokens or USDC, are readily available for transactions. The option to use physical gold as an example is remarkable, offering greater flexibility compared to traditional fiat currencies.
• With the help of decentralized finance (DeFi), exchanging currencies has become more straightforward, eliminating the need to deal with complex order books or mechanisms typically found on centralized exchanges.
• Easy onramp with debit/credit cards (up to couple of thousand of USD).
• For handling larger budgets, select an appropriate onboarding platform, which could be a centralized exchange (CEX) or a specialized service catering to this specific need. Complete the Know Your Customer (KYC) process and transfer the funds to the chosen platform.
• Transitioning to the digital realm significantly simplifies your financial life. Transferring or exchanging money becomes more convenient and reliable, with low transaction fees and instant processing. Using a decentralized exchange (DEX) offers full transparency during transactions. In contrast, relying on a centralized exchange can be more complicated and pose greater risks.
• Digital assets can be potentially much safer than those held in a bank or a central exchange. Banks often use your money for various purposes, which can create uncertainty about its safety. As for central exchanges, many of them have questionable moral standards, making them even riskier than banks. While there are reputable exchanges, it’s best to use them only when necessary — for instance, to access greater liquidity for popular currency pairs or as an on/off ramp for your digital assets.

Warning

• Your private key serves as the access key to your financial life, so it is crucial to safeguard it and ensure it is never lost.
• Don’t trust all stable coins e.g. USDT is not properly backed, USDC seems to be ok see https://www.circle.com/en/usdc or MCAU for gold (https://meld.gold/)
• Ensure that there is sufficient liquidity on the decentralized exchange (DEX) you use, as inadequate liquidity may result in higher costs for exchanging. It is often more advantageous to execute a series of smaller trades and wait for favorable prices to return. Patience is key when waiting for liquidity to improve.
• NFTs present an innovative method for storing value, but it is important not to get swept up in the hype, as they are not a guaranteed path to wealth or a means to print money. When used appropriately, NFTs, like blockchains, can be a powerful and valuable tool.

Shortcomings

• Alternative liquidity-providing mechanisms are necessary, as current AMM DeFi pools, while innovative, are insufficient for certain use cases. These pools are not suitable for large exchange trades due to significant price impacts. The algorithm used is relatively basic, but alternatives are emerging, such as peer-to-peer transactions and new-style DAO-owned liquidity pools. In the meantime, on-chain order book trading can be utilized, despite its limitations and susceptibility to manipulation (e.g. AI-driven bots). However, it is neither better nor worse than a centralized exchange.
• Many public blockchains are not as decentralized as we might think.

Conclusion, there is no longer a need for companies to list their digital currencies on centralized exchange platforms, as everything can be done on a chosen public chain. Centralized exchanges can still facilitate the onboarding of popular digital currencies like USDC, which can then be transferred to the user’s preferred blockchain platform. Furthermore, we believe that modern platforms possess the potential to serve as alternatives to traditional banking services, requiring only a shift in mindset to realize their benefits. For use cases that demand more sovereignty or custom functionality, building on technology stacks like Substrate or Cosmos, or deploying an Ethereum-based chain, may be necessary. These can be implemented on top of the ThreeFold Grid, offering impressive scalability, functionality, and sovereignty.