Why I am not crazy about most blockchain projects (yet)

New kids on the block(chain) bandwagon are mostly trying to provide solutions for the following use cases:

1. Replace government issued currency with something which people can use to buy and sell items.

Bitcoin moved in first to become the leader of this space. But due to scalability problems it will never be used on a day to day basis. Also due to high volatility in price it is mostly being used as a store of value. No one wants to make the mistake of spending 10000 bitcoins on a pizza again

2. In terms of positioning at least, people have started touting some crypto currencies like Bitcoin as a store of value. Earlier if you distrusted the Govt you invested in gold and other tangible assets instead of keeping money in the bank. Now people are buying Bitcoins, thinking in the long run it would work like any other asset class(land, gold etc). This is even more true for countries like Venezuela which are on the verge of bankruptcy. People would value cryptos compared to their national currency.

3. Something which is neither of the two above, but a platform where people can run smart contracts. Move the middle men and be the tech on which remittance for banks, land ownership records runs etc.

Etherium started in this space and currently it is rallying big. But we have all seen what happens when your code is not foolproof. People lose money due to hacks. Finally someone has to act as the central authority and take a call (example: the Etherium forked sometime back after a hack). So don’t mistake lack of centralisation with lack of authority

4. Something which is the only means of access to some service. Most ICOs run on this premise. Imagine being a journalist in the Middle East and needing a file storage system which your govt cant access. You can store your data using Filecoin. Since you cant pay for Filecoin’s service using dollars, using Filecoin is the only way out.

Instead of being a potential user of Filecoin, you can be a middle class citizen of Indian too, and speculate on the value of the coin just like how you would speculate on stocks. You don’t need Filecoin and are perfectly happy with Dropbox. But you see value in the business, and believe that in the future value of Filecoin will rise. So you buy Filecoins and hodl them.

Replace Filecoin with any other service X with its own token Y. So even if you don’t use X’s service you might still buy Y during their ICO and then hold on to Y till the service scales and becomes mainstream, and then you can sell off Y.

There are no killer apps currently, which demonstrates the power of Blockchain. Virtual kitties don’t count. I agree that it might change in the future though.

When the Internet came into prominence in the late 90s and people started selling stuff online, potential internet users could see the power in sitting at home and ordering groceries. Forget S curves and any other frameworks to understand adoption of a service. E-commerce was something you needed and the only question was when would it happen. Webvan failed but now Instacart is killing it.

If you were a VC in mid the 90s you could not see all the possible use cases of Internet. Maybe not hypothesise an Airbnb or an Uber. But you could see the value of the Internet as an end user.

People did not doubt that the Internet was transforming their lives. It was more around the timeline of transformation and which companies would be the ones to capitalize on it.

For me I don’t care if a service like Dropbox is decentralised or not as long as it works and I can pay a reasonable price for its service. There have been talks of a decentralised Twitter, a decentralised Amazon.

Will a decentralised Twitter be better than current Twitter? I doubt it.

Same with Amazon. After 20 years too people will want lower prices and faster delivery. They won’t care for a decentralised Amazon if they don’t deliver on these two.

Also every decentralised project would somehow move to some kind of centralisation with a few authority figures like all current crypto projects. Your data might be duplicated across various nodes but there will definitely be authority figures who run Crypto projects. I don’t know if it is good or bad.

In case price of Bitcoin stabilises and it becomes more and more mainstream it might genuinely fight as a replacement for gold.

For other cryptos trying to replaces currencies, they need to have a stable value, transaction time has to become far smaller (comparable to Visa, Mastercard etc), transactions/sec have to scale as well as consume far less energy/electricity. Only then they can replace money. I don’t see it happening anytime soon.

For all the other crypto projects, they have to prove that apart from the decentralised aspect they are as usable, safe, reliable as an Amazon or an Uber. Only then people would invest in their ICOs and start using their services. Till now I have not seen many projects take off. After the initial ICO buzz most have failed. So I guess only time will tell how many of them actually create a real use case and convince users to switch from mainstream services.

If you have been thinking about this as much as me, why not join the discussion and leave your opinion? Would love to learn your views too.

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