I already indicated in an article published in the October 2019 issue of the Swiss print magazine Netzwoche that DeFi is one of the trending areas in crypto. Fast-forward one year, some of the key metrics grew by more than 2,000% during this period. In fact, most of this growth happened in Q3/2020. While this sounds like the adoption of crypto we all have been looking for, let me explain what is happening and why everyone should seek expert advice before making any moves into uncharted waters.
Bitcoin was invented as digital money, but in the world of innovation, things do not always play out as initially planned. As Bitcoin is facing many issues in its transition from a prototype to a real-world application, we should explore alternative use cases for this ingenious invention.
While many Bitcoin maximalists fall for the classic selection bias trap and see in Bitcoin the perfect money, the truth is certainly somewhere else. Assessing Bitcoin based on the three main functions of money (1) medium of exchange, (2) unit of account, (3) store of value, it reveals a very lopsided picture.
Bitcoin is going crazy. The price is skyrocketing and there is no way this market behavior is rational. Some call it a bubble, but I personally think this is not accurate. I prefer to call it a hype or the simple (over-)appreciation of its future potential. Today’s utility value of Bitcoin is comparably low. A condition that could change quickly once some technical upgrades are in place.
During my many years in crypto, I experienced the whole price speculation part more as a distraction. Nevertheless, the current hype also has some upsides:
As a long-term member in the crypto space, I have visited countless events and talked to hundreds of people about Bitcoin. Beginners often talk about the protocol’s limit of 21 million bitcoin, as this is usually among the first knowledge items they picks up. We can’t deny that fact that there is a limit. But what many people don’t understand, is what the limit does and the (ir)relevance it has.
What makes Bitcoin valuable is a topic on its own and I am not touching it here. What is certain, is that the limit of 21 million bitcoins is much…
Blockchain Entrepreneur Since 2013