When it comes to crypto, all the questions sort of boil down to one: What, actually, is the point of it? Crypto is supposed to be special, i.e., not like other markets — at least if you listen to its boosters. But what if it’s not? It’s felt pretty spectacularly unspecial lately.
The crypto market has been in a bit of a meltdown. The price of bitcoin, the godfather of the space, has fallen by more than half of its 2021 peak, and billions of dollars of value were lost from cryptocurrencies in a matter of hours. Coins that are supposed to be “stable” are looking anything but , and one of the major trading platforms in the space has warned users their money might not always be safe there.
The claims proponents have long made about cryptocurrency — that it’s an inflation hedge, that it’s digital gold — appear increasingly dubious. Well before the current downturn, a lot of what was going on was fishy. Hackers have stolen tens of millions of dollars in crypto, and the sector is rife with stories about various scams . One big trend in the space might pretty blatantly be a Ponzi scheme . The Larry David commercial in the Super Bowl for FTX warned viewers “don’t miss out” on the next big thing — but what that big thing is isn’t clearly spelled out In other words, crypto is having … a time. The type of time that makes you question why anyone is even investing in it.
For a while, the drumbeat for getting into it felt too loud to ignore; the Larry David commercial in the Super Bowl for crypto trading platform FTX warned viewers “don’t miss out” on the next big thing — but what that big thing is isn’t clearly spelled out. Many people in crypto don’t want to outright say the point of the entire endeavor is to try to make money, which, thus far, has pretty much been the thing. (That and some crimes.)
If you’re a little bit destroying the planet in service of a thing that’s mainly a speculative asset and/or isn’t particularly useful, you know it’s not exactly the best look. Plus, you kind of need to say the value here is being derived from somewhere, not spun up out of thin air. So it’s important to say there’s utility to it, even if that utility is ill-defined, to insist that it does something.
In recent weeks, I spoke with nearly two dozen people in, adjacent to, and critical of the crypto space about what they envision to be the purpose of crypto. What emerged was a picture that was simultaneously murky and clarifying, in that there’s not one good answer. Some of what it does is promising; a lot of what it does — even boosters admit — is trash, and trash that’s costing some people a lot of money. This probably isn’t the death knell for crypto — it’s gone through plenty of boom and bust cycles in the past. It would be unwise to definitively say that crypto has no chance of being a game changer; it would also be disingenuous to claim it is now.
Crypto is a solution in search of a problem, or rather, problems. And at the moment, it’s hard not to wonder whether it is, instead, creating more problems than it’s worth. Crypto, explained-ish
To back up a little bit, what we’re going to talk about here is the movement that’s grown out of bitcoin and blockchain starting in the wake of the financial crisis. In 2009, a white paper penned by a person using the alias Satoshi Nakamoto showed up online, outlining an idea for electronic cash that would allow online payments to be made from one person to another without a financial institution or some other third party in the middle. Transactions are recorded on the blockchain , an append-only ledger (meaning new information can only be added, not deleted or edited) managed by a decentralized network of computers. Fans pose for a photo with a statue of Satoshi Nakamoto, the mysterious inventor of bitcoin, after its unveiling in Budapest, Hungary, in 2021. Today, there are thousands of cryptocurrencies out there , the vast majority of which are not particularly notable. The second largest behind bitcoin is Ethereum, which also uses blockchain, but the idea is that people can build apps on top of Ethereum and host smart contracts, like little robots that can execute programs automatically.
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