What Will It Take for Crypto to Boom Again?

Jordonk
Jordonk
Nov 4 · 8 min read

Let’s face it:

Crypto is dead.

Last year we saw a frenzied market soar to insane new heights before crashing off a cliff. ICOs that once raised $20 million in the blink of an eye now struggle to raise $1 million. Projects started failing left and right, their Github’s turning into ghost towns.

Regulators are cracking down. They’re driving out little investors and jamming the current system down our throats again. KYC, AML and centralized choke points are the norm.

Only accredited investors, aka already rich people, can invest and make more money from their money. Instead of allowing people to decide what to do with their own cash, regulators think the bus driver, the teacher, and the dock worker are too stupid to invest, so we better protect them from themselves.

As for trading, well, unless you’re an expert trader you’re probably bleeding out slowly or just holding on for dear life.

Last year anyone could throw a dart and make money trading. This year, after a painful ten month slide that saw 80% of crypto value vaporized, I’ve seen many of my trading students tapping out, their bank accounts on fire and their self worth plunged into the toilet.

But the worst part is that crypto hasn’t lived up to the hype.

Facebook and Google are still mega-monopolies and they’re not in danger of getting decentralized or democratized any time soon. The primary use case for crypto is still speculating or printing money out of thin air to fund new projects before a single line of code is written or a single customer signs up.

We’re not buying coffee with our fancy digital money or shopping on Amazon.

The unbanked are still unbanked.

And the vast majority of my money still comes through direct deposit, not smart contract.

Maybe you were one of the folks who thought “this time is different?” It’s not a bubble. It’s a new world order!

All we need to do is decentralize everything and we’ll throw off the shackles of eons of financial servitude and high step it into a bold new world of abundance and opportunity, a new dawn for mankind, a transformation of consciousness, a radical awakening of the species that’s happening right here and right now!

Well, you were wrong.

And you were right.

A bubble is a bubble and nothing can change basic physics. What goes up must come down.

But you were right too.

Crypto will change the world.

It’s just going to take longer than you expected. And nothing is ever all good or all bad. The dream of a brand new world where smart contracts create objectively fair systems is a pipe dream and it always will be because people still need to write those smart contracts and those people will always be flawed.

You can count on three things in life:

Death, taxes and people doing the absolute dumbest and worst things in the name of truth and light.

You can’t correct for the human element no matter how hard you try.

But does that mean we should stop trying? Does it mean the Dr Doom’s of the world are right and blockchains are nothing but overhyped, glorified databases and crypto is only good for drug dealers and scam artists?

No.

We live in a world of duality.

Something can be both overhyped and world changing.

AI failed to achieve any of its goals for fifty years and then suddenly it was powering everything from driving directions, to search engines, all while understanding your voice, and driving cars around busy city streets. Just like AI, crypto will reach a tipping point where the hype recedes and it starts to do real things that matter.

What will it take for the technology to live up to its potential, prove Dr Doom and the other doomsayers wrong, and become so useful that we can’t imagine what life was like before it?

In other words, what will it take for crypto to boom again?

Let’s dive in and have a look.

The Past and the Future

You don’t have to hate crypto or be blinded to its potential like Dr Doom to look at what’s not working.

Critical thinking is our best friend in life. Without critical thinking we can’t fix a damn thing. So let’s take a hard and honest look at crypto and see what’s not working so we can start thinking about how to fix it.

This isn’t the first time I’ve faced the problems in crypto. In my article, The Five Keys to Crypto Evolution, I talked about the major problems the crypto faithful need to solve for the technology to really take off.

Not one of those problems has been solved yet.

Blockchains don’t scale to Visa heights, there’s no killer app, we haven’t eliminated centralized choke points or any of the other things I listed there. And every single one of those observations still stand although Radix, the Lightning Network, and a few other projects are making strides on scalability. For this radical new technology to have any chance of changing the world we have to build a better mousetrap, not just deliver the equivalent of betamax and hope people will give up their DVRs.

Take killer apps, for instance. Try walking your mother through signing up for an exchange, getting KYCed, setting up two factor authentication, transferring money from her bank account, buying crypto, and downloading it to a wallet.

Now imagine you have to do all that just to run some crappy app on your phone.

It’s never going to happen.

I’d rather run two miles on broken glass than do all that just to get an app that gives me better restaurant suggestions.

Today, if you want to try out Instagram, you go to the app store, click install and a minute later you’re browsing pictures of shiny, happy people who are much cooler than you. Instagram doesn’t need any crypto to do anything at all. It makes its money from the surveillance device you willfully purchased, that’s in your pocket right now. It’s better known as your smartphone.

Your phone does advertising better than any advertising system of the past. It listens to your every word and uses AI to figure out what ads to show you, like that backpack or jacket you just talked about with your best buddy. That blows away billboards on the side of the road or flat text ads in the newspaper. Advertisers of the past never knew how many people bought a Coke after driving by that billboard twenty times but they know exactly how many ads you clicked on Facebook.

Until we have crypto apps that not only do everything Instagram does but does it better, all while creating a superior economic model to replace or augment that advertising juggernaut, not to mention giving you brand new features you can’t live without, the crypto app world is going nowhere fast.

That’s a tall order but that’s what we’re up against.

But that’s not even the worst of it. Ever since I wrote that article I’ve thought more and more about the problems facing crypto and they’re even bigger than I imagined.

That’s the bad news.

The good news?

I realized we’re missing something very simple that will help the community get to the next level faster.

And it’s something I never expected.

We have to look to the past, not the future.

Baby and Bathwater

I say we have to look to the past because we’ve done one of the dumbest things possible:

We’ve thrown the baby out with the bathwater.

Instead of looking at what worked before, we’ve tried to reinvent everything from scratch. That’s not only stupid, it’s impossible.

We can solve half the problems in crypto right now by simply stealing what worked from the past and making it work for the future.

Let’s start with ICOs.

ICO’s were an innovative way to quickly crowdsource funding for radical new ideas. They cut across legal jurisdictions, let every-day investors throw their money into the ring, instead of just accredited investors, and they didn’t require a bank account or a lot of crazy paperwork.

Those are real innovations despite all the scams and crappy projects out there. It’s essential to separate what works and what doesn’t whenever you look at the current state of the art.

Of course, it didn’t take regulators long to catch up with the innovations and destroy them. Soon projects were running scared, doing their best to comply with shifting regulations, KYC/AML, FACTA, and hoping they didn’t get indicted after raising twenty million dollars for a pipe dream.

Even worse, many investors lost their shirts as projects went belly up and their founders disappearing to foreign beaches with all the cash. The protections that regulatory agencies offered investors, like demanding transparency and making sure companies didn’t make outlandish claims of future rewards, started to look a lot less old fashioned.

ICOs had other problems too.

Certain types of coins are impossible to fund with an ICO. Most utility coins will never rise in value.

Why? Because utility coins will disappear into the background of applications and trade machine to machine. Think of them as programmable money for bots. They’re designed to buy and sell goods transparently behind the scenes without any human interaction whatsoever.

It’s crazy to think those coins will ever be worth as much as a deflationary coin like Bitcoin, which is fundamentally designed to rise in value as it grows more and more scarce.

And that’s not the only other kind of coin that sucks for funding with ICOs.

Stablecoins, designed to hold their value by tying that value to a basket of external factors or assets, don’t hold much value for investors. We all want a simple stablecoin to rival Tether but who’s going to spend their hard earned Bitcoin and Ethereum on an asset that not only won’t rise in value, it’s specifically designed not to rise in value?

The answer is a simple one.

Don’t bother selling your coin directly to the public, sell a security token instead.

(Oh, and create an LP, aka a Limited Partnership option, that doesn’t give the investors a security token, just rights in the company. Traditional, old world money investors love LPs because they understand them inside and out and security tokens still scare the living hell out of them, even though in five to ten years nobody will want a pure LP unless they’re insane, because it offers less liquidity and less rights than a properly designed security token.)

That’s right. Create a company and follow the rules that actually worked. Give people the investor protections they crave, and voting rights, and a share of profits.

Then use that company to issue the kind of coin you really need to power your application.

Jordonk

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Jordonk

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