Even as Bitcoin continues to attract investors as a proposition for holding on to value, and (with the help of layer 2 technologies) facilitating payments, some persist in painting cryptocurrencies as “pretend technology.”
According to this view, money invested in the crypto sector is wasted, since it otherwise might be flowing into traditional markets (say, the stock market, or the bond market), where it could do some “real” good.
Of course, this view must either discount or minimize the innovation that crypto technology represents.
In doing so, it serves, either intentionally or not, legacy institutions and technologies that would like nothing more than to suppress cryptos, while playing catch-up with the innovations crypto technology has introduced.
You Can’t Simply Buy A Decentralized Permissionless Network
Part of the unique threat that cryptos represent to legacy financial, tech and even government institutions and corporations, is that many crypto projects can’t simply be bought up by “bigger fish.”
The Trends Journal has long detailed the tried and true monopolistic practices of “Bigs Getting Bigger,” which in the tech industry has resulted in just a handful of corporations owning the vast majority of software and digital services used by consumers.
The buy up and merge model has been witnessed most recently in the way that Microsoft quickly expanded its stake with OpenAI off the success of the start-up’s ChatGPT free public preview in November 2022.
By January 2023, Microsoft had become a full “partner” with OpenAI, and had begun integrating the generative language AI into its Bing search engine and flagship Microsoft 365 productivity software.
More recently, tech behemoth Amazon snatched up Anthropic, the company which developed a sophisticated generative AI called “Claude,” which rivals ChatGPT and Google’s Bard AI in sophistication.
Amazon, which began as an online bookseller, has previously snapped up dozens of major companies in far flung retail, tech and entertainment spheres. The following represents just a few of their buys through the years:
- MGM (Movie and Entertainment Company)
- CreateSpace (Platform for Self-Publishing)
- Audible (previously a large independent audiobook platform)
- Comixology (a digital comic distribution platform)
- Whole Foods Market (formerly an independent natural / organic foods company)
- Zappos (online shoe and clothing retailer)
- Ring (Home Security System company)
- Lab126 (a computer hardware company that developed the Kindle device that has become integral to Amazon’s digital book platform)
Other tech corporations like Apple and Google have engaged very similar strategies of buying up start-ups that represent rival, superior technologies, or represent areas into which these mega corporations want to expand.
This modus operandi, which has permitted these companies to gain enormous power, exists in other business sectors as well.
And of course, the COVID pandemic accelerated the wholesale destruction of smaller independent “non-essential” businesses, while large retailers and tech companies kept their doors and pipelines open, and profited.
From this, it should be obvious that one of the most consequential real world value propositions that crypto technology represents, is the way it has incentivised decentralized, permissionless and “ownerless” technology delivery networks.
That’s not “pretend” utility.
On the contrary, that alone represents one of the most consequential and disruptive technological developments of the 21st century.
Yes, before Bitcoin, there were distributed peer-to-peer networks. Napster, a music sharing distributed app, was one of the most famous–and infamous examples. The TOR peer-to-peer file sharing and storage network is another example.
But together, Bitcoin and Ethereum took peer-to-peer digital networks to another level.
And to be fair, these upstarts actually benefited for a period of time by being dismissed as “pretend” projects, by legacy entities.
By the time major tech companies and financial institutions and even governments caught on, the Bitcoin and Ethereum networks had not only become widespread, resilient censorship resistant networks.
They had captured the imagination of a younger generation of coders and programmers who had grown up with the financial crisis of 2007-08, and the increasing consolidation and strictures of “web 2.0.”
Will the Recent Uptick Back Into Cryptos Continue?
A recent research paper published via SSRN, which focused on crypto uptake in the Netherlands, represents what is still a fairly typical take on crypto technology.
The paper, titled “Who Arrives Early and Late to the Crypto Market Party?” casts cryptos as largely being a destabilizing siphon for capital that might otherwise go to “real” economic investment:
This [crypto] market experienced its glory moment in November 2021, with almost three trillion in market capitalization.1 For some, this valuation could essentially be seen as an “opportunity cost” in the sense that funds flowing to the crypto market could have very well been invested in traditional financial markets to finance firms and ultimately benefit the real economy. Despite the growing interest in cryptocurrencies in recent years by investors, its volatile nature as well as being an “implicit” competitor to traditional financial markets, academic research on the drivers of cryptocurrency investing remains limited. This study aims to identify the characteristics of individuals who have invested in this asset class at an early, middle and later stage as financial regulators are particularly worried that inexperienced investors get lured to that market and a collapse may threaten the stability of the financial system.
(“Who Arrives Early and Late to the Crypto Market Party?” 23 Oct 2023.)
Traditional markets are currently in a perilous danger zone, no doubt. But their condition has next to nothing to do with crypto technology.
Rather it very much owes to the financial and monetary abuses of governments, central banks, and monopolistic corporations.
Indeed, Bitcoin is (again) proving to be a persistent challenge to monetary manipulation.
And the Etherum ecosystem, along with Solana, Binance, Ripple and even Hedera (a tech backed distributed blockchain alternative technology), continues to develop as an open software delivery alternative to siloed big tech platforms.
For those who bristle at the power of central banks and governments to manipulate and devalue currencies to endlessly spend and enrich insiders, crypto technology is quite real.
For those who want alternatives to censorious social media conglomerates, and oligarchic tech monopolies embodied by Google Play / Cloud, the Apple Store / iCloud, Amazon Web Services and Microsoft, crypto technology is a path to another kind of future.
Is that alternative path fully realized, at the moment? No. But the possibilities already introduced by crypto technology are real, and showing the way to building that alternative future.
To many, that’s real enough to peg some investment on.