Today is a crucial and dangerous moment for crypto. In my twelve years in this space, I have never seen the conditions we are experiencing now, even in our most bearish cycles.
Individually, these signals would be disturbing. Together, they are signs of a major potential crisis. Whatever happened to calls for utility or onboarding the next billion?
The first big concern is that fewer and fewer builders are looking for smart contract audits, which has come up time and time again in my conversations with the audit firms (and evidenced by Yearn’s recent smart contract exploit). This is a typical standard procedure before a decentralized application (dApp) starts. It’s not because they’re happy to launch without it: it’s because the new dApps don’t exist. Builders – developers, founders who want to launch apps that people will use – are either waiting for the environment to improve or leaving crypto. They are not interested in building what are frankly easy applications or in simply replicating what already exists – like financial applications, tokenized funds, etc.
Second, there is very little encouragement, support or funding from investors for utility applications, which are much harder to build and (usually) take longer. Unless an app has the potential for a 1000x return in a short window of time in some sort of DeFi scheme, it just doesn’t get funded or “backed”, forcing the builders into a corner. In other words, if you’re a blockchain-savvy founder with a great idea, you can find yourself in an impossible position from the get-go.
Instead, investments in our space are currently focused on pure short-term profit-seeking, such as memecoins, insider knowledge manipulation, multi-layered DeFi protocols without sufficient transparency, and over-leveraged trading. And where the money goes, the attention goes, which is why we hear less and less about blockchain-based products or use cases. Instead, we are inundated with headlines and podcast episodes about ETF inflows/outflows, DAT performance, trading tips, etc. This only serves to further deceive and confuse retail investors who buy into these non-amateur delusions without understanding the insidious behavior that goes on behind the scenes.
Worst of all, this focus on profit-seeking over true blockchain-based use cases is perpetuated by many of our industry leaders. They could push for the entire global monetary system to be migrated on-chain for increased efficiency and transparency, or the use of blockchain and crypto to actually improve our society, like incentivizing sustainable actions or healthier behaviors. But instead, they embrace (and platform) a new, more dangerous breed of middlemen.
It is these intermediaries and their financial products that have introduced harmful and deliberate complexity and obfuscation to our previously transparent markets. And in doing so, they have unlocked an incredible new level of greed and theft.
Consider the recent liquidation on October 11th – we still don’t know the full impact of what happened, except that retail investors are still paying the price while people in power negotiate their own recoveries.
Cryptocurrency and blockchain were invented to eradicate financial oligopolies and democratize access to a new era of the Internet. Instead, we have allowed the reinvention of the manipulative intermediaries and welcomed them with a slight change of form as the potential ‘saviors’ of Web3.
Web3 got its name because blockchain is truly the next generation of the Internet. Looking at the fundamental elements of the technology itself, blockchain is the crown jewel of humanity’s technological development. Used correctly, AI will make us more productive and blockchain will improve the relationship with how different parties work without barriers. Together, they could reshape the world as much or more than the Internet did.
But instead we are stuck watching DATs, ETFs, trading leverages and DeFi liquidations, and a small number of people making huge profits on the misery and loss of millions of others. Crypto has yet to fulfill its promise to match the radical transformation of the World Wide Web, with decentralized principles at its core.
As I’ve watched these months go by, I keep being reminded of a scene from the movie The Big Short. Investor Mark Baum, increasingly frustrated by the irrational and greedy behavior of the market (and the actors within it), says: “What bothers me is not that fraud is not nice. Or that fraud is evil. In fifteen thousand years, fraud and short-term thinking have never, ever worked. Not once.”
He’s right. Every cent of profit made by squeezing the crypto ecosystem only drives away builders and stops the development of this amazing technology. In exchange for the chance of a short-term profit, these crypto-intermediaries destroy the value of the underlying asset they are speculating on. But everyone in the industry will eventually pay for it, including those who love this technology and believe in its potential.
For those of us who want to use crypto to make the world better, we need to start calling this behavior for what it is: short-sighted, selfish, unwelcome greed. We need to do something to save our beloved industry to focus on more real utility building and put it in the spotlight, building innovative applications for the next billion users, and the projects and protocols that deliver on the undeniable potential of Web3.
Let us all take up the fight for good while there is still fight left in us.
