Crypto Prices Are Volatile Because Nobody Is Using Blockchain (Yet)

If we want prices to stabilize, we better get building.

Wheee! Photo by EK_0143 Via Flickr (CC0).

Bitcoin is swinging wildly again — and out come the usual voices. Mainstream critics calling bitcoin a giant bubble. Longtime players claiming there’s nothing to worry about, they’ve seen this before. Average users throwing up their hands and declaring ‘nobody knows (bleep).’

Let’s develop a better analysis.

The blockchain is real. But the dizzying price fluctuations in crypto are here to stay, and there’s an explanation for which there is no quick solution.

In short, if nobody is actually using blockchain, then its intrinsic value is the trading value.

To put it another way, if we don’t have real activity, with real substance — people building communities on blockchain, using decentralized software in their everyday lives; if we can’t get beyond the current single use case of trading — then volatility will persist because the price only reflects sentiment, and no real underlying value.

Let’s put the blockchain world into a bit of perspective. If you follow the headlines, you get the sense that everything is growing like crazy: from newly minted bitcoin billionaires to analysts comparing blockchain innovation to the birth of the World Wide Web.

In reality, blockchain remains small. Here’s a vivid comparison: On most given days, the funds raised by every new blockchain company, combined, is just a fraction what a single firm like Apple generates in revenue over that same duration.

That means the amount of energy flowing into blockchain is just a small stream against the larger ocean of tech. But what’s more important is how that energy is used.

What if just a tiny portion of the proposed use cases for blockchain technology were successfully implemented?

Some of blockchain’s most-hyped innovations right now — such as stable coins and decentralized exchanges — continue to focus on trading. We should get beyond that and develop everyday ways to use smart contract platforms. Or create open-source frameworks for developers to code apps with great user experiences. Above all, we need the decentralization movement to become more diverse, more coordinated, and to create applications that can be used by everyone.

Once real usage arrives, then we can start talking about challenging tech incumbents. Then the value of blockchain companies will be able to rival one of today’s digital superpowers. Then we’ll have something real to analyze and compare.

This would be enough to stabilize the prices. But we have a long way to go.

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Chris Tse (@christse) is a technologist and designer who has been working to humanize blockchain technology since its early days. In 2014 he founded Cardstack, where he leads a team of blockchain architects and open-source contributors to build the experience layer of the decentralized Internet. He is also a co-founder of blockchain companies Monegraph and Dot Blockchain Media, and has more than a decade of experience leading R&D and innovation teams for Fortune 500 companies. Chris has a degree in Computer Science from Columbia University.