Cryptocurrencies are dying but long live blockchain technology

Before I’m accused of being alarmist, crypto isn’t doomed. Rumours of a crypto armageddon are vastly exaggerated. The provocative title is taken from a cheeky ad that Coinbase, the world’s largest crypto company, ran earlier this year at the US Superbowl, proclaiming “Crypto is dead, long live crypto”. Little did they know that a few weeks later, they and other crypto firms would be fighting for their lives, as they lay off their people and withdraw offer letters. The crypto market sank to a third of its peak value and some major players halted Bitcoin withdrawal as an emergency liquidity measure. These crashes brought out the sceptics in full force. Tech pundits who had heralded the emergence of crypto, blockchain and Web3 as the second coming began muttering about their impending death. In my view, neither is crypto dead, nor does it presage the eclipse of the technology behind it, blockchain.

Before I explain why blockchain is as strong as ever, let us turn briefly to the crashing house of crypto. A lot of pundits pin this crash on overall geopolitical and economic conditions: a grinding war, supply chain and labour disruptions, and soaring inflation. However, what baffles people here is that these are exactly the sort of disruptions that crypto, especially Bitcoin, was supposed to act as a hedge against. Like gold, Bitcoin was what you bought when real-world countries and economies faced trouble. Theoretically, Bitcoin and crypto should have gone up, or at least stayed largely stable. What is interesting is that the big crash started not because of economic or political uncertainty, but because of another real-world financial phenomena: the presence of fraudsters and hucksters. Terra Luna, a so-called stable coin that had 3% of the total market, turned out to be built on a foundation of hype and collapsed spectacularly to zero. This set off a confidence crisis in the crypto world, and an economic shake-up only fed that fire.

This kind of thing is not new. In 2000, an internet bubble resoundingly burst, with hyped companies turning belly-up, taking the whole dot-com industry down with them. But these firms were not the internet. Not only did online businesses survive, but today they rule the world as social networks, while map platforms, e-commerce and mobile payments run our economies and lives. As Maria Bustillos put it in The New York Times, “Crypto is just one aspect of the larger blockchain universe… and its skeptics and fans alike must learn to see it as a technological experiment, instead of just a blatant scam or a speculative path to riches.” Eight years later, big banks collapsed under the weight of exotic mathematical instruments like collateralized debt obligations (CDOs), dreamt up by bankers living in their own parallel world. The 2008 crash was estimated to be in the region of $10 trillion; the current crypto meltdown is a fifth of that. After that bloodbath, many banks did not survive, but banking did. So will be the case with crypto and blockchain. There were nearly 20,000 crypto coins and only few of them will (and deserve to) survive. “The crypto market is wildly volatile not because of cryptocurrency’s underlying technology,” says Bustillo, “but because of the uneasy and often dangerously unstable junction between emerging technologies and regular money.”

While the arc lights focus on Bitcoin and crypto, Blockchain has been at work to solve problems in the less glamorous world of supply chains, financial services, large enterprises and energy. It is being harnessed to untangle complex supply chains by shippers and retailers. Blockchain-based solutions can make remittances less painful and expensive for itinerant workers who must send money home. Blockchain experiments to authenticate educational and other qualifications, making them less cumbersome to store and share, can make education loans more affordable. Blockchain-based energy grids are trying to take cheap energy to underserved areas. Governments are testing the technology for secure identity systems. Tamper and fraud proof transaction records may be enabled. The decentralized nature of blockchains is being harnessed for distributed business models like Helium, ‘a people’s Wi-Fi’ that’s not owned by any telecom firm but collectively shared. Blockchains are striving to reward online art and creativity with NFTs, while powering parallel (if unproven) worlds like the metaverse and laying the base for a ‘creator economy’.

The crypto world has been quaked and some of its largest structures seem to be collapsing. But this is not the end of the world, just the tectonic plates of its infrastructure slipping and sliding as they try to release creative energies. Blockchain and crypto live on.

Jaspreet Bindra is the founder of Tech Whisperer Ltd, a digital transformation and technology advisory practice

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