Consensus Magazine Deputy Editor: Widespread Adoption Will Destroy Cryptocurrency

Original Title: 《Mass Adoption Would Ruin Crypto. Keep It a Niche》

Author: Daniel Kuhn, Deputy Editor of Consensus Magazine

Translation: Chris, Techub News

I believe that keeping cryptocurrency niche might be better.

So far, the biggest crisis in the cryptocurrency space has undoubtedly been the rapid collapse of FTX. At the time, this exchange, which later turned out to be Sam Bankman Fried's personal "slush fund," was the third-largest cryptocurrency exchange in the world. Its downfall sent shockwaves throughout the industry, leading not only to a significant drop in Bitcoin prices but also dragging down a series of companies.

By the end of 2022, the blatant fraud uncovered at this once-popular and trusted cryptocurrency company seemed to confirm that it was merely a facade to cover up fraud. Today, the situation has improved somewhat, but there are still concerns that companies within the industry may repeat past mistakes. For seasoned cryptocurrency investors and observers, this has always been the norm: since the Bitcoin market crash in 2014 and the failure of Mt. Gox, followed by a rebound, the cyclical fluctuations of the market have been seen as part of "life."

But isn't it strange that a mature industry views this cycle of "booms and busts" as normal? In my view, any mass adoption of blockchain or B2C applications depends on the price of its tokens, or rather, the entire industry will not always face the imminent risk of collapse.

This is the crux of the problem. To a large extent, the biggest issue with the development of cryptocurrency is its growth. The alternating euphoria during market excitement every four years and despair during contractions is a result of cryptocurrency's pursuit of mass adoption.

Reckless Popularization

This process is clear; it is a textbook case of what economist Robert Shiller calls "irrational exuberance." The promise of reshaping everything from currency to the internet itself has sparked interest, with people buying into the dream of decentralization (or for many, the promise of quick profits), popularity drives prices up, and rising prices in turn encourage more people to invest until something collapses.

Blockchain technology was originally designed to alleviate or replace certain issues that could lead to failure, which often exist to make cryptocurrency more acceptable and usable. Many believe that the public may not be willing to self-custody their cryptocurrencies. However, without self-custody, the core meaning of cryptocurrencies like Bitcoin would be lost. Efforts to make cryptocurrencies more user-friendly or acceptable often lead to failure because they deviate from the original intent of blockchain decentralization and self-custody.

Alex Thorn, head of research at Galaxy Digital Investment Bank, says, "The risk of popularization is that new entrants do not understand the core principles of Bitcoin: decentralization, self-custody, hard money, etc. If new entrants do not learn, understand, and accept these core beliefs, these characteristics may cease to exist over time."

There must be a balancing act between decentralization and mass adoption; popularization means compliance with regulations (which often contradicts the values of cryptocurrency) and creating simple usage thresholds. If cryptocurrency becomes too popular, you risk undermining its truly useful characteristics. Nathan Schneider, a media studies professor at the University of Colorado Boulder and author of "Governable Spaces," says, "Integrating into the mainstream financial system will ultimately lead to the loss of the technology's important characteristics."

This view is echoed by Paul Dylan-Ennis, a lecturer at University College Dublin, who states, "Cryptocurrency is a subculture that cannot accept itself as a subculture. Most of our problems stem from how 'welcoming the next billion users' will lead to a decline in core characteristics."

"Killer Apps" Have Always Existed

Developers, founders, and investors have spent 15 years and billions of dollars searching for the "killer app" of blockchain, but ironically, it has actually existed all along.

Satoshi Nakamoto and those who truly followed him have built tools that can be used freely and are not easily taken away.

That is the whole point of cryptocurrency.

This is also why almost no one buys coffee with Bitcoin, but many use XMR to purchase various items on the dark web. If you observe how cryptocurrency truly connects with the real economy, you will find that it is fundamentally applied in niche areas, such as black markets or gray industries, stablecoin remittance channels, and circulation among cryptocurrency enthusiasts.

Note that these are all huge markets. But today, as cryptocurrency seems to be on the verge of a breakthrough, these uses seem trivial compared to the speculative uses of cryptocurrency, where capital flows in and out, jumping from one coin to another or from one protocol to another, leading to upward behavior that essentially creates a circular economy.

That's okay. To some extent, gambling is also a use case. But if people want cryptocurrency to be used productively, developers, founders, and investors should build products for those who truly need censorship-resistant money and tools. It is almost certain that this is a limited audience.

This is just my opinion, and many people disagree.

Other Perspectives

Molly White, author of Web3IsGoingGreat and "Citation Needed," believes, "Cryptocurrency has gone mainstream. While some projects are still niche, with events involving Brian Armstrong and Sam Bankman Fried, as well as BlackRock and Fidelity launching Bitcoin spot ETFs, I think this ship may have already sailed."

Privacy advocate, educator, and Monero user SethforPrivacy has a different view. He says, "Unfortunately, most people have not yet realized the necessity of Bitcoin and are not willing to take on so much personal responsibility, so we must focus on improving Bitcoin to help those who already recognize its necessity today."

Alex Gladstein, Chief Strategy Officer of the Human Rights Foundation, says, "It is precisely decentralization that allows cryptocurrency to truly go global. The only reason Bitcoin can rise is that it has the most cyberpunk characteristics; it does not belong to anyone and is operated by users rather than states or companies."

Ethereum advocate Emmanuel Awosika states, "We believe that everyone wants products that offer privacy, censorship resistance, and protection against state attacks."

Awosika adds, "We should explore how to promote cryptocurrency to as many people as possible." Similarly, Roko Mijic, known for "Roko's Basilisk," believes that it is actually "scale" that gives decentralized tools their power, as evidenced by Bitcoin's difficulty in being attacked due to miners being distributed globally. "You cannot resist censorship in a small-scale crypto network because the government can directly destroy the entire network."

Justin Ehrenhofer, founder of Moonstone Research, agrees with this view in Chicago, pointing out that currency is only useful when widely accepted, so "focus should be on building systems that attract external users." However, he also adds, "With mass adoption, the spirit of cryptocurrency has degraded somewhat, as ordinary users store their wealth in custodial exchanges."

I think the real question is, "Which is more important: the core values of cryptocurrency or its widespread application?"