2018 was a difficult year for cryptocurrencies.
As I write these lines, the prices of the major cryptocurrencies like Bitcoin, XRP and Ethereum have been the lowest for over a year. The drop in prices, which began in January, has been unstoppable: the limit of the cryptocurrency market has declined from its historical high of around $ 830 billion to just over $ 100 billion. The feeling about encrypted chats, groups and subreddit is sad: everyone expects prices to fall further. Some vocal critics, like Nouriel Roubini, are malicious on what they see as the annihilation of the crypto-bubble.
Perhaps even worse than the drop in prices is the uncertainty about where the crypt will head. Bitcoin (and its derivatives) failed to become the new money (or even the new gold), and does not seem to be changing soon. The vision of Ethereum to become a global and decentralized computer is plagued with obstacles and probably many months away, and the ICO craze that has fueled its growth seems to be over, at least for now. And numerous cryptocurrency projects, even those well funded as ConsenSys and Bitmain, are dismissing staff due to the decline in the cryptocurrency market.
Yet, there is hope in the future.
While the cryptocurrency bubble appears to be completely deflated in most of the charts, if you look closely, the prices of Bitcoin and Ethereum are still very, much higher than they were only two years ago.
In May 2017, the value of Ethereum and Bitcoin increased dramatically, pushing the total crypto capitalization to $ 80 billion. And at that time the experts were mostly in agreement: this kind of growth is not sustainable and the whole space is probably in a bubble. The bubble kept growing, but to be honest, there was no reasonable reasoning behind that growth except greed and the kind of reckless optimism that borders on madness.
This could, of course, mean that prices could fall further. But if you consider the cryptocurrency space as an exciting, new technology playground instead of a big casino, you are probably well aware that even current prices are not earned. Cryptocurrency could one day interrupt finance, online betting, games, logistics and content creation, among other industries, but none of this is yet successful.
The feeling I often see among experts is that the burst of the crypto-bubble, though painful for many, should pave the way for smart people working on blockchain (and related) technologies to create something big. In crypto lingo, it's time to stop thinking about HODLing and start BUIDLing.
Feeling really bad for truly idealistic and good people who have been hit hard by cryptocracy, especially those who risked their human capital and their careers based on the promises of stable careers that others had not promised. At the same time, there is a proof of values.
– (((E. Glen Weyl))) (@glenweyl) December 9, 2018
It's time for BUIDL
So, what is the cryptocurrency space for? Some proponents dream of a world where people have the ability to cut intermediaries and take their finances into their hands. A few years ago, this concept mainly included the ownership of Bitcoin and its use for payments. It has not worked (so far), but space has already evolved.
Nowadays, when we talk about the future of money through the lens of cryptography, we can include much more advanced concepts such as borrowing money or raising a loan, trading derivatives or buying tokenised assets as properties or bonds – all through decentralized, without trust, services without authorization.
Surprisingly, this future is already here; these services all exist today, although some are still in beta development. Dharma is a platform that allows developers to create a variety of loan products, dY / dX is a protocol for decentralized marginal trade and derivatives and two companies called Propellr and Fluidity have partnered to offer Manhattan property in tokenized form .
Because these products and services interrupt anything, however, many more people have to start using them and the underlying blockchain technology needs to mature, both in terms of security that it offers and in terms of scalability (most of these products are based on Ethereum , which must be faster than orders of magnitude to really support them).
The examples above are just a small glimpse of what is being built on blockchain or similar technologies – for an interesting overview of the non-financial applications of blockchain technology, read the tweetstorm of Vitalik Buterin, below.
1. Time for a brief tweetstorm on non-financial applications of blockchain. Because the scalability of blockchain improves and improves and UX improves and the rates decrease as a result, this becomes an ever larger part of the story.
– Vitalik non-donor of ether (@VitalikButerin) 10 December 2018
And many obstacles to adoption are resolved as we speak. For example, the notorious volatility of Crypto has found a solution in a new special type of currency called stablecoin. We are working on scalability problems that are hampering Bitcoin and Ethereum. Lightning Network, which aims to accelerate Bitcoin transactions, is gaining speed recently. Ethereum is attacking the problem from different points of view, especially planning to adopt a technology based on the database called sharding. Projects such as EOS and Cardano claim to be already ahead of these "old" blockchain platforms, and upcoming ones like Dfinity promise an even more advanced approach and faster transaction speeds.
Great players are finally coming
And then there's institutional money. While some fucksters do not want to have anything to do with Wall Street and with pension funds, the ground is prepared to make a lot of money to enter the space, for better or for worse. January should see the launch of Bakkt, an ambitious cryptocurrency market supported by Intercontinental Exchange, Microsoft, Starbucks and Boston Consulting Group.
Given the volume of interest in Bakkt and the work required to get all the pieces in place, we will now turn to January 24, 2019 for our launch to ensure that our participants are ready to trade on Day 1
– Bakkt (@Bakkt) November 20, 2018
And although the SEC has refused to submit proposals for cryptocurrency ETFs throughout 2018 (mainly because these markets are easily manipulated), the encryption markets are slowly maturing. If this trend continues, a positive verdict on the part of the regulator feels like a matter of when, not if (although it could be a Long wait). The SEC has also strengthened its position with regard to the initial unregulated coin offerings (ICO), and while this means that people will probably not try to buy ether to jump on the next ICO at any time, it also brings some degree of order at the often chaotic – and fraudulent – encrypted crowdfunding space.
Much can still go wrong. The development of popular cryptocurrencies could be slower and more complicated than expected. After the horrible year of the crypt, institutional investors may be wary of joining the fray. Regulators could maintain their position lasts for years instead of months. Equity markets could collapse and drag with them encrypted prices (and interest in space), even if the opposite could happen.
Yet, it seems that it has been set in motion too much for the crypt to just wilt and die. VC – some with excellent results – have invested a lot of money in space. A completely new ecosystem of platforms, markets and exchanges has been built for crypts in a few years. And most importantly, a lot of smart people are working on blockchain technology. It may take a while for all of this to be equivalent to something real, but I would be very surprised if all that was revealed were only smoke and mirrors.
Disclosure: the author of this text has or has recently owned a number of cryptocurrencies, including BTC and ETH.