Why I Believe In Crypto Adoption
The last couple of months have been brutal. Markets are in free-fall and the collapse of Luna, Celsius etc have sent shock-waves through the market. A lot of people have lost a lot of money.
Friends and family have asked with trepidation how I'm doing. Some with sympathy, most with a healthy dose of schadenfreude.
I do personally invest in crypto, but fairly conservatively and with a long term time frame. So I'm not too concerned with wild fluctuations in pricing - that's just part of the ride. But I am concerned with crypto usage – how many people are actually interacting with smart-contracts (not just buying bitcoin on Coinbase). Because if people stop using crypto then it's kind of… useless.
So as prices have plummeted, infrastructure has broken and usage has slowed, I naturally find myself questioning my belief in the value and purpose of crypto. I’m now more aware than ever that crypto pricing is currently almost entirely driven by speculation, rather than fundamentals. And that centralised crypto organisations, masquerading as decentralised infrastructure, are often just a way for financial institutions to take retail investors for ride, without the scrutiny and regulation that traditional financial markets set.
But what I also know is that the conditions for crypto innovation to continue are rife, and I believe the likely outcome of this is crypto adoption. And while I don't know in what form crypto adoption will look like exactly, I struggle to see a future that doesn’t involve crypto adoption in a meaningful way. And this is why.
Many of the smartest people I know are either building in crypto, figuring out how to be involved in it or playing around with it at the weekends.
To be clear: dedicating your time to build things in crypto and actually using crypto are very different from just investing in crypto (or even worse – talking about crypto 😩). We all know plenty of dumb people who do that…
Having been to multiple global crypto conferences, I know that the calibre of people building in this space is exceptional. This observation is supported by a larger trend: there is a brain drain in talent leaving big tech like Meta, Google, Apple etc to work in crypto. The same is true of people leaving TradFi to DeFi.
This may come as a surprise, but many people I know building in crypto don't actually care about becoming rich. Some already are, yet they don't choose to sit on a beach for the rest of their days. They choose to keep building and improving on existing crypto products, because they love what they do and really do care about what they are creating.
Chris Dixon has a framework for predicting future adoption of trends: "what the smartest people do at the weekend is what everyone else will do during the week in ten years".
If you believe that talent is what shapes the future, then it would be odd to bet against crypto playing a big part in the world we will live in. Even if the version of crypto we have today does not achieve mass adoption, a version of crypto is likely to if the brightest minds in the world are all focused on creating it.
Venture Capital funding remains.
In previous cycles, most projects ran out of funding and investors lost interest in crypto. This cycle, VCs have huge war chests they are yet to deploy. Sure, most projects will still fail, but many projects will be able to continue accessing funding over the coming years. This adds to the above point - well funded crypto protocols building valuable products will continue to attract the best talent.
Andreessen Horowitz has just raised a $4.5bn fund to deploy into crypto. That is… so much money to fund start-ups in crypto. As long as people are still funding talent to experiment in crypto, innovation will continue to occur.
Crypto user experience is terrible, but improving.
It takes such a long time to learn how to interact with crypto. The first time I staked in a pool, I was up until 4am trying to figure out all the steps. It is unintuitive and any small slip you could lose your money forever.
But this is changing. Coinbase Wallet, Instagram NFTs – all of these new products are brining crypto to the masses with slick user interfaces people already understand.
Despite all the market panic, fully decentralised protocols have functioned seamlessly.
Uniswap, Maker, Aave, Compound etc have been unaffected. Unlike Celsius, BlockFi etc, these are protocols that run entirely on code, without the need for humans to authorise transactions. And the amazing thing is they will continue to function forever, so long as the Ethereum blockchain continues.
Lehman Brothers stopped functioning after it went bust and all its employees stopped working there, because it needed employees to run. Obviously. But truly decentralised protocols don’t need humans to carry out their core functions. Yes, humans vote on changes, and make upgrades. But their core apps just run.
This cycle has created a strong culture around more than just money.
NFTs are the poster-child of crypto culture. They have sucked in a completely new user base.
Artists, musicians, videographers – these are not your typical crypto bros. But the last cycle has sucked them in, and they seem to be staying for the culture that they have created around the space. NFTs have provided the perfect on-ramp for people to access a world of crypto which is a million miles away from the stereotypical crypto options traders or the jacked up libertarian bitcoin types.
Serena Williams, Justin Bieber, Neymar, Madonna, Jimmy Fallon, Paris Hilton and Tom Brady all own Bored Ape Yacht Club NFTs.
You might look at this image and think “sorry mate, how is this in any way culture?!” Well it’s a community, and a very cool, exclusive, sticky community it turns out. And if cool communities don’t create and influence culture, then I don’t know what does.
Crypto is endlessly fascinating.
This may sound unimportant, but people are drawn to what they are interested in. I have a 'day job' outside of crypto but I find it so damn interesting that I launched a blog about the thing. This by no means secures its success, but the fact that it's so intellectually stimulating does guarantee that people will continue dedicating a huge amount of brain power to it over the coming decades, regardless of market cycles.
Innovation is incremental. If people want to work on something because it is interesting, new insights and applications emerge as people stay the course.
There is no end to intellectual rabbit-holes you can go down with crypto: new systems of ownership, decentralised-science (DeSci), DAOs as political structures, crypto as global currencies etc. The possibilities for smart-contract applications and the effects they could have on the world are endless. This does not mean most applications will succeed - most will die. But it's the possibilities that are exciting and engaging.
I do not know whether prices will go up or down. But what I do know is that the conditions to support crypto's success are rife.
The combination of top global talent + abundant ecosystem funding + proven resilience in decentralised applications + improving UX + fascinating problems to solve + fun/vibes/culture = perfect conditions for crypto to grow and play a big role in the future.