As I said, I'm a skeptic of cryptocurrencies not for what they are (actually I mined my first bitcoins – which I then spent on a beer in Amsterdam – using a raspberry I), but for what they have become. So, now that everyone is writing about the funeral of cryptocurrencies, my question is: do you think cryptocurrencies will die, or what they have become will die?
The distinction is important. The world had just emerged from the wreckage of the Credit Crunch and Lehman Brothers, and was thrust into the Greek sovereign debt crisis, when I read about this invention. I chatted on IRC for some time, and I liked the idea.
So since I had a raspberry that had a graphics chip, albeit a ridiculous one, I went into mining. We were still in the early geological eras, so I was able to mine bitcoins with some success.
I immediately ran into the fact that no shops accepted bitcoins in payment, so I set them aside. One day, during a trip to Amsterdam (which is not far from here, using the high speed train) I saw that a brewery accepted bitcoins as payment. That's how I bought one of the most expensive beers in the known universe. If anyone was wondering, yes, it was good. She was practically a Belgian. For fifty thousand and broken euros (today it would be only 17,000), after all, at least the foam had to be made.
The technique was simple, the guy printed a qcode on a receipt, you took a picture and off you go.
That said, what was said on the forums back then? Well, bitcoin was designed to combat the speculation that had reduced the financial world to rubble with the credit crunch crisis, and was beginning to consume the world of sovereign debt.
I remember that Satoshi, somewhere, had claimed to be certain that if someone had built a speculative finance on this system, they would have been hurt, one way or another.
And since speculative finance is getting VERY bad these days, I'd say his prophecy has come true, whoever he is.
But after the how, we need to examine the what. What went wrong?
What is exploding today is an exchange. An entity that transforms cryptocurrency X into cryptocurrency Y, and earns by scalping. So far so good, but I would like to point out that exchangers weren't even included in the original architecture. There was ONE coin, the bitcoin. That's enough.
This is due to the fact that everything was based on the fact that the currency in circulation (the M0 ) was destined to become progressively scarce. But if we create other cryptocurrencies we have created other currency, however unrelated to bitcoin: we connect it through an exchange.
But in this way, the circulating increases. While it was expected that it was increasingly difficult to mine blocks. Nice trick, but now you've hurt yourself. And Satoshi had said it.
It's not that I'm here to deify Satoshi, but on the other hand, the exchanges and the myriads of alternative currencies weren't foreseen in the design, and since they contradict a large part of the paradigm (the circulating decreases over time), the bang of which everyone writes is a certified case of FAFO (Fuck Around => Find Out).
Another paradigm was that Bitcoin was not meant to be accumulated as a derivative of the cost of energy, but to be SPENT. It was supposed to be something that made it easier for you to go buy beer. It wasn't born to be a finthech, or even a derivative.
And the mistake of considering it a derivative is simple: when you create a block, you consume energy, which you should do only if the value of the bitcoin is higher than the energy cost. So at the moment we would say a derivative of energy, and everyone has adopted this definition with great pleasure.
But now that the cost of energy is going up, that of Bitcoin is not going up. So it is a derivative up to a certain point, i.e. not at all. Practically decoupled: the cost of energy behaves more like the cost of minting, rather than a derivative.
The problem is that the difference between the two things (derivative or currency) is dramatic: if we take a total value of 10 billion euros in currency, as circulating, we have the currency of a not negligible nation. If we consider it a derivative, well, the plants at BlackRock's receptions make 10 billion derivatives without batting an eye: it's an insignificant amount.
Making cryptocurrencies become exotic OTC derivatives was not a brilliant move: bitcoin could have been worth enormously more if it had been used as currency.
And even this mistake translated into volatility, with the consequent disaster.
But how big is the disaster? Well, the problem is that the FTX "disaster" is 600 million dollars. You may be thinking it's a lot, but if you consider that Elon Musk has lost 36 BILLION on Twitter so far, 600 million euros for the financial markets is nothing.
If we counted how many entities smaller than a billion disappear or fail each day at, or around the NYSE, the NYSE, we honestly wouldn't find this "collapse" so catastrophic. He's just some guy who stole his company's money in the face of investors. As some banks in Italy have done, so to speak.
Why such a fuss? One wonders how interested the press is in portraying the collapse of FTX as a devastating catastrophe.
After all, the press continues to say inaccurate things: FTX was not an "unregulated" market, on the contrary: now the boss will go to jail. He was not an anonymous exchanger in an internal service of the TOR network. It was a company that just filed for Chapter 11, so it was regulated.
Why does the press say that the market is not regulated? Well, because in any case it is a world that it is convenient for many to discredit.
What's good and what's bad? The Hype Curve for WEB3/Blockchain compiled by Gartner can help us.
As you can see if you enlarge the images, the Blockchain platforms are in this moment in the lower part, when all the illusions produced by magical thinking die. And what you need to notice is how much stuff is “falling” in the Trough of Disillusioment.
But if you look at the next part, you find that digital coins, decentralized applications and digital wallets are on the slope of enlightenment. With this terminology we mean that phase in which people and companies say " sure, snake oil doesn't heal paralytics and it doesn't make me rejuvenate, but on the bicycle chain it's the best I've ever seen ".
It is that phase of reflection in which, once the charlatans are dead, someone takes the bottle of miraculous ointment and discovers that it is perfect as a vase for flowers, or someone takes those technologies and says: “well, let's think about it calmly. What can I do about it in the company?”.
This is the phase before the "plateau of productivity, which Gartner estimates (for these three technologies) to be less than two years away from now.
Obviously, a cryptocoin as a production technology could really look very little like the ones we have known. We always remember that electric cars are possible because a completely different sector (that of mobile telephony) has invested heavily in battery research. Otherwise Elon would be making hydrogen powered steam cars. (and they might work really well).
Even the name of the products will be designed to make people forget that they are dealing with a cryptocoin: after all, they could call it "Bonifico In Tasca", and it would work just the same, without being recognized as something that today is read as shady.
My conclusion, that is, is that cryptocurrencies are not dead. In the Gartner cycle, they are moving (painfully for many) out of magical thinking into sanity.
What died is not the cryptocurrency itself, but what it had become. But be careful, because if you use a blowtorch to comb your hair, and the idea doesn't pay, it's not the end of blowtorch: it 's the end of their abuse.
I don't know what blockchain-based commercial products will be called. But of course, when they arrive we will hardly recognize them.
And if they do, then Satoshi was right: if you use them wrong, you'll hurt yourself badly. Otherwise, you pay us for the beer.