I have a friend who made a significant fortune with Bitcoin. He is one of those enthusiasts who happily distributes the cryptocurrency to others in the interest of spreading adoption.
All of this is good. However, one thing has always infuriated me: his bragging, especially last year, of spreading bitcoin beliefs because the small amount he had distributed to random people over the years now was worth X more times in dollars. He loved it, he said, when they called to thank him.
Why would I have a problem with this generosity of spirit? Because it perpetuated a narrative that speculative gains, measured in fiat monetary terms, constituted the fundamental value proposition of bitcoins for the world.
Implicitly, the story that my friend told these people is not that, as a model for money resistant to censorship and disintermediate, the bitcoin has the potential to allow peer-to-peer exchange without financial institutions looking for income by dictating terms.
Nor has it been that we now have the fabric of digital money, a means of transferring value from anyone, anywhere to anyone, anywhere that does not require a bank account or the approval of some authority.
The underlying message is not that bitcoin is the first digital asset, a valuable representation that can live on the Internet without risk of replication or counterfeiting. Nor is it that we now have an apparently unchanging registration system based on consensus, the first in history that can not be changed by someone in power.
No, his story was simply that if you cling to this thing, it does not matter to understand it, you too can become rich like me.
My friend is not alone, of course. Last year, as a crazy market bubble, not only in bitcoins but also in countless other cryptographic assets, it favored a collective mania all over the world, the language "to the moon" and the mentality "when Lambo?" He allowed everything. He even found his way into the mainstream public.
I will never forget a relative who had not paid attention to the crypt before asking me which coin he should buy. After warning her that she should not have done it, I still started to explain why I had an intellectual interest, not an investor in ASIC-resistant coins. She replied: "I do not understand anything, just tell me what to buy".
This craze was the creation of enthusiastic crypts everywhere. They promoted a blind trust in Midas's touch of their industry. Remember, this was a period when the leaders of a cold tea producer briefly showed that they could produce a miraculous increase in stock price by simply adding the word "blockchain" to the company name.
For a community that likes to declare itself confident because, unlike fiat money, it is supported, not by saccharine people, but by rock-solid mathematics, this encouragement of magical thinking was rather hypocritical. Now that the bubble has exploded well and truly, it's time to banish the voodoo mentality.
The challenge of adoption
Some consider cryptocurrency solely as an instrument for the rich, as a way for the privileged few to keep their property away from the indiscreet hands of the state. If I eventually find out they're right, that's all it can be, I'll stop.
For now, however, I still see this technology as an instrument of the people, and therefore I believe it can only be successful with mass adoption. I do not care how you get there – either through the widespread use of retail or from the back-office use of public blockchain architectures to promote a new decentralized economy – the goal must be to have a positive impact on life everywhere.
Sadly, I think we drastically restored this goal. We managed to hurt public acceptance and trust in technology. It is not irreparable, but it is fair to say that we have a problem when the mainstream is now equivalent to encrypt bubbles, scams and losses.
To be sure, this price correction could still mimic what followed the 2013 bubble – a two-year break followed by a rally in 2016 that brought us to higher and higher highs in 2017. But the risk is that The 2018 crisis has produced more lasting damage to public confidence than those of 2014. This time it was the Regular Joes who lost their shirts, not the bitcoin extraction hobbyists.
The blow to trust is so great that now I regret having written last year that the wave of main interest in cryptography has been constructive. I had argued that although many people would lose a lot of money, the surge in purchases had aroused a curiosity among a much larger group of people, so that a new series of new initiatives would be launched by these newcomers. These were the people, I argued, that they would build the decentralized economy of the future.
Now, while I am encouraged to find that many of the newly activated innovators are still there, I do not think I have justified the lasting social effect of so many others who have lost their shirts.
The angry posts on which someone with Twitter manages @CandleHater this useful thread they are, most likely, representative of the feelings of the masses.
Bitcoin has dropped about 75% from its highs, ether has fallen by around 90% and the overall market capitalization of tokens is less than 80%. Such a brutal collapse will seriously damage trust in the industry.
What are the consequences of this loss of trust?
It means that a hard-line critic like Nouriel Roubini is now, in the minds of people, legitimized, regardless of his simplistic and static vision on the continuous development of technology.
And this means that government regulators, whose obligations belong to those same traditional components, will have a more cautious view of technology and, most likely, a harder line in regulating it. For encrypted startups, this will further exclude them from the markets, make it even more difficult to obtain bank accounts and impose even higher compliance burdens on them.
The good news is that the glow of public opinion will eventually dissipate and that when the spotlight diminishes, the real developers will find themselves in a healthier environment within which to do the work necessary to unlock the potential of this technology. We saw a similar period of constructive construction during the 2014-2016 break.
But whatever the new products are, now they will have more difficulty fighting with acceptance. Whether we like it or not, the message and image are important.
Unfortunately, the Crypto winter is here. If we want to get out of it, there must be something more than a rolled up commitment to technical development. Community leaders – those of us who have a spokesman in social media and elsewhere – also have the obligation to change the message.
The message must be of education. He must openly face the disadvantages of technology with his professionals, as well as the formidable obstacles he faces in terms of downsizing, efficiency and safety.
Let's abandon this ugly obsession for the price. After all, it simply validates the idea that the benchmark that matters is not bitcoin or some other cryptocurrency, but the US dollar.
We made this mess. It's up to us to clean it.
Winter image through Shutterstock