There has traditionally been very little investment into the Bitcoin ecosystem, mostly because the community is very conservative and views innovation popular with other chains as suspicious (“shitcoin stuff”). Ordinals wound up paying the miners, which is crucial for the long term sustainability of Bitcoin once inflation ends. This caused a schism in the BTC community, where some want to push a fork that bans ordinals and all the other innovation happening that is “spamming” the chain (like EVM on BTC) and the others wanting to let it flourish.
Unlike with the BCH hardfork, this time wiser heads are going to let it happen, because the core fundamentals around block speed and block size won’t be changing. Stuff the garbage in OP_RETURN and pay the miners, even the maxis don’t think BTC is payment rails anymore, and you don’t need to be cheap for digital gold. Bullish BTC
There is a way to insert arbitrary data into Bitcoin transactions. Ordinals and Runes leverage this fact, then create specialized tools and indexers on top of it to create meta-protocols for fungible tokens and NFTs that have a very clunky base-protocol secured by Bitcoin but a lot of higher-level tooling to make interacting with it easier. It’s a positive step for Bitcoin because it moves the ecosystem of a stagnant chain forwards (if you think that’s important, many btc maxis see it as a toxic development) and creates a plausible mechanism to pay miners post-inflation which had not existed yet.
ETH is insanely advanced because of Layer 2s. Optimism, Arbitrum, zksync, Blast, Base, and many more literally cost fractions of a cent per transaction and their security is the same as Ethereum because they are protected by the ETH layer 1. Google roll up technology, how Optimism works, etc. it is very fascinating.
Solana is the new XRP, they somehow got the normie-aligned faction of crypto (huge retail bags) on board. But it is literally a centralized database - it routinely goes down for hours, because the system is centralized. You can’t join the network as a validator unless you spend enormous amounts of money and colo your server with the foundation’s servers. The major innovation on solana is tons of meme coins. There is money there but I’m not seeing much serious organic development. But they have a lot of capital that will reinvest, so maybe.
So you and I are aligned that ETH is insanely advanced and if tomorrow the world had to choose a "base crypto with Layer 2 on top" to replace credit cards (or whatever the proposed purpose of crypto will be over the next 5-10 years if it doesn't fade away to oblivion), it would be ETH instead of BTC by a country mile, right?
What do you see as cryptos use case being? For example, right now it (stablecoins) helps people (Russia, who is out of Swift) transfer money to US. Isn't that "illegal"? It's #1 function is illegal at the moment, is it not? Next to speculative core of value.
Small payments for coffee and groceries is a solved problem. We don't need to continue re-solving this problem.
Maybe we should think bigger.
What problems cannot be solved by instant, inexpensive, reversible, censorable, centralized databases operated by corporations and governments that you have to trust?
What problems are so big and so vital that only a slow, expensive, government-free, corporation-free, uncensorable, decentralized and trustless source of immutable truth can solve?
And before you reflexively answer with "crime", consider whether every activity a corrupt or authoritarian government defines as "crime" is something that truly free people should not be permitted to do.
If you treat the entire global economic system as made up of "legal" and "illegal" transactions, then the current traditional financial system supports trillion of dollars in illegal economic activity. Drugs were bought with fiat and drug lords ran cartels and narco states before cryptocurrency existed. Cryptocurrency did not invent adverse social behavior and antisocial economic activity.
However, there is a plausible argument that ransomware has exploded in popularity because of crypto, but a counter-argument is that these software flaws were always being exploited by nation state actors, and only the financial incentive of ransomware has finally forced companies to patch and secure their systems, which is short-term pain but long-term benefit to society.
Cryptocurrency is a neutral technology. It is software-based finance. While the system has advanced by insane amounts since bitcoin was created, it still has at least another decade to go IMO before we start seeing real traction with institutions currently served adequately by the existing tradfi rails.
The original people who used crypto were those not served by the existing financial system, and were willing to learn complex topics to use it. These were drug dealers / users and diehard libertarians who despised central banks and fiat currencies.
Mixed within it were the experimenters who just wanted to have fun. Create lotteries, ponzis, strange games of economic incentives, memecoins, and ancillary nonsense.
15 years into crypto, there are actually, truly, real people using crypto to conduct daily legitimate finance. These are people trying to flourish in economic disasters, such as Lebanon, Argentina, Venezuela, Egypt, and Turkey. Check out a neat episode of this podcast:
Their situation is so fucked that crypto is now easy enough, and beneficial enough, where real business between firms, vendors, and consumers is conducted over crypto rails, though it is usually in stablecoins like USDT and USDC.
The next major thing I would keep an eye on is "RWAs" or "real world assets". Many types of tradfi financial instruments will be issued experimentally this cycle on crypto rails.
Finally, while I think Ethereum is the best blockchain because it has the most serious developer community and the largest ecosystem of battle-hardened libraries and projects, there is always room for more. We don't need a monopoly financial system to replace the old monopoly financial system. Let a thousand flowers bloom and we will see what is the best in a competitive market.
> Cryptocurrency is a neutral technology. It is software-based finance. While the system has advanced by insane amounts since bitcoin was created, it still has at least another decade to go IMO before we start seeing real traction with institutions currently served adequately by the existing tradfi rails
Does any part of you wonder "why would large governments/credit card processing companies/banks sit back and let consumers create an alternative currency that cuts us out of the loop"?
> "Credits and credit cards are substitutes. So I think we can forget about existing money and existing banks. And open a system of accounts which would displace money … I don’t believe that we shall ever have good money again before we take the thing out of the hands of the government. We can’t take them violently out of the hands of the government, [then] all we can do is by some sly, roundabout way [and] introduce something they can’t stop."
The relatively gradual development of crypto, with the booms and busts and "told you so's" by tut-tutting academics and People Who Know More, let crypto slip through the gauntlet. I don't believe there is any danger of outright bans anymore given the legal and political successes, most obviously the Bitcoin ETF launch that put crypto into the hands of a much wider set of retail and institutions.
The technology will have to develop more to truly compete, but I believe most of finance will transition to crypto rails over the coming 20 years.
> The technology will have to develop more to truly compete, but I believe most of finance will transition to crypto rails over the coming 20 years.
Why, from the perspective of
we "just got done" recently making banking + Apple Pay + Stripe + all those sorts of things "really good"
Why would we transition away from 'what currently works' for something that will be about the same/equal/maybe slightly worse?
In what way would a crypto transition for actual finance be better than what we have today?
It depends on who/what you ask. When I think crypto finance I think of:
* will every transaction be publicly traceable? Who is this good/bad for? We don't currently have that today.
* will governments really be ok sitting by the wayside + not getting involved and letting their currency take a back seat? Aren't there talks of governments getting into crypto themselves in "stablecoins"? Will it just be another extra layer in the soup/sea of finance processing where it's a wrapper around/from fiat?
Major change from tradfi to defi is that the assets are bearer instruments. There are absolutely tradeoffs here. From the perspective of a merchant, settlement upon receipt is an excellent thing, because chargebacks and related fraud are zero. It's not that you don't have to give refunds or give money back, but it isn't automatic. I would argue this is an improvement because businesses are long-lived institutions that build reputation, while customers are flighty and 1st time customers are common. So flipping the risk of fraud from the consumer to the merchant is logical.
From the perspective of the consumer, there is higher risk of fraud meaning you won't get your money back, plus the risk of losing your keys, but on the plus the government can't arbitrary freeze your funds (unless using a centralized provider or coin that enables this). As I said previously, I still think this is a net-benefit to commerce even with the reduction in consumer power.
For international funds transfers from the developed world to developing countries, the benefits of instant transfer and settlement of funds makes commerce much easier. The costs, risks, and time for this is high.
There are legitimate innovations in defi that are improvements to tradfi. Flash loans, where loans can be received and paid back in a single fill-or-kill transaction, is a unique benefit that was not possible pre-crypto. Automatic market makers (AMMs) pioneered by Uniswap, where a market maker is passive and earning fees without needing servers that manage a limit order book, are very useful (especially for retail) and I think would be a nice backport to tradfi (but the SEC would never, ever let this happen). Non-fungible tokens could be used for one-off instruments that have low liquidity but high market participation - like bonds - and then wrapped in fungible tokens in order to make providing bond market liquidity much easier. While Blur is only for trading scammy NFTs (https://blur.io/) there is no reason their pioneering tech in the space can't be used for real financial instruments.
Governments are like the mafia - they want to be paid a tax on every economic transaction, and in return they provide protection. As long as the government is collecting its share of capital gains and sales tax, they will become addicted to the cash flow and allow it. That's actually what they already do, except with the occasional flare up of chatter to ban crypto entirely, but that happens much more often now in developing countries like India and Nigeria.
So instead of powering homes, farms, and factories they're burning through the energy budget enthusiastically speed running modern finance? But it's OK because it's mostly green power? It's not like Texas or its neighboring states could use that solar and wind to replace some coal plants or anything ...
L2 smells a lot like a hacky way of partially centralizing, to workaround a rotten foundation. I wonder how it will scale once mining takes more energy than whole continents.
VCs rubbing their hands together at the thought of picks, shovels, and financial services does not sound like progress to me.
Well, at least they can use all that waste heat to keep warm in those frigid Austin winters.
Unlike with the BCH hardfork, this time wiser heads are going to let it happen, because the core fundamentals around block speed and block size won’t be changing. Stuff the garbage in OP_RETURN and pay the miners, even the maxis don’t think BTC is payment rails anymore, and you don’t need to be cheap for digital gold. Bullish BTC