Charting Crypto’s Course

Cryptocurrencies are nearly eleven years old now, and an impressive ecosystem has formed around them. The total cryptoassets market cap is well north of $100 billion. Billions of dollars of crypto are traded daily. Millions of users have installed a crypto wallet. Major US financial institutions CME and ICE make markets in crypto derivatives.

Yet, despite the incredible advancements, there remains a lot of work to get where we want to be. As an industry, we’re looking forward to global democratized access to financial products, banking the unbanked (and unbanking the banked), and mainstream applications.

In this post, we’ll take a look at crypto’s trajectory and what efforts are underway to make the visions turn into reality.

What’s needed?

If cryptocurrencies are going to succeed, they’ll need to do so because they are a success in the free market. This requires offering the best product market-fit in a particular segment of the market. Usually, in the absence of a sanctioned monopoly, the best experience, price, or a cost/benefit sweet spot is what the market prefers.

Each market is different, and cryptocurrencies are already solving problems for a few resourceful and tech savvy folks in particularly oppressed parts of the world like Venezuela. Challenges such as volatility, liquidity, transaction costs, and lack of convenient user interfaces prevent them from becoming ubiquitous in more market segments. An aspiring freelancer in a developing country is more ready to jump through difficult hoops than someone in the first world with plenty of financial opportunity and access.

Crypto enthusiasts have long held beliefs that removing middlemen and counterparty risk from transactions will make them cheaper and faster. It can make previously impractical or impossible transactions possible for the first time. Micropayments as reward for content creators or marketplace access for sex workers and freelancers in oppressive countries are often cited as example areas that are ripe for disruption. As crypto takes over in relatively niche areas, we can expect the infrastructure to mature much more rapidly with wide use and become even more user friendly.

Developers (& their tool chains)

Today the internet’s impact is readily apparent. Facebook, Amazon, Netflix and Google have taken over massive swaths of people’s attention and wallets. Over the years, these companies introduced countless products and features that serve the needs of the general public and that has turned them into the largest companies in the world.

The Internet

What’s easy to forget though is the 1990s and 2000s when the internet was a much more empty and intimidating place. Much like the crypto landscape today, the internet was hard to use. Before the web browser, people were siloed into proprietary experiences, and it just wasn’t obvious how all this tech would become useful.

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Early on, developers used C/C++ for server infrastructure and Java servlets on the client. Development was difficult and without references of successful applications, progress was slow. Adobe Flash made media and interactivity easier, but was riddled with security vulnerabilities and has now been largely replaced with HTML5. JavaScript took at least a decade to become ubiquitous on the front end. JavaScript now powers many backends as well with the popular Node.js that was first released in 2009.

Today’s services rest on top of a massive foundation of prior art, libraries, standards, and best practices. These standards evolved to meet the increasingly innovative developer community’s demands. Low level protocols such as TCP/IP, UDP, HTTP, SMTP, FTP as well as higher layer protocols such as WebRTC or BitTorrent took time to develop.

Crypto’s early days

Crypto has proven that it’s possible to store and send value seamlessly using only computers and open protocols. This is impressive, but it is difficult to access, similar to the early bulletin boards that populated the internet in the 80s. It requires determination and possibly technical chops to debug issues along the way. Who doesn’t remember the blue screen of death when using Windows 95?

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Right now, developers across crypto are building out all levels of the technical stack. Many teams are focused on the bottom of the stack. Firming up these foundational layers is necessary before significant amounts of investment in end user applications and interfaces can be justified.

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Deficiencies in the stack limit the ability for digital assets to be used cheaply and conveniently. Today crypto offers the best value in select market segments that have extremely limited options. But, just like the early internet solved problems only for the most dedicated, we can expect the technology to improve and the cost/benefit tradeoff to become more and more attractive.

What to look for?

We’re in the early innings of digital assets. Digital assets are a promising technology, but still require a lot of maturing before they will be able to meet the larger needs of the world’s population. Ultimately, for crypto to succeed it will take developments at all layers of the stack.

Written by

co-founder @scalarcapital, burner, #bitcoin enthusiast, previously growth eng @coinbase

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