I’ve thought about writing this article for a long time. There are two things that’ve been holding me back from actually typing it out, either of which revolves around what I think is the key to unlock a crypto future, or what I like to call “the Crypto Dream”. A dream that cryptocurrency/ies will be the dominant medium of exchange in future society. However, given the ever-relentless passion that the crypto community has for the commonly held goal of Bitcoin at 100k by 2020 and the growing adoption of Bitcoin as well as call for buildling instead of hodling, the issues of the crypto dream has only become more pronounced. And as any issue in the technology sphere go, if you don’t address it now, it’s going to bite you later. So in this article, I will lay out what I believe to be the key issues concerning the growth of cryptocurrency in recent periods, and more importantly, why if left unaddressed, they might eventually bust the big crypto dream.
First, a few clarifications
Crypto/blockchain sphere is huge. There are many areas which can easily confuse latecomers or even veterans. So before getting into the body of what I intend to talk about in this article, I want to provide several premises which are important to the understanding of this article.
- Crypto vs blockchain
Everyone knows the hype of the blockchain sphere is highly correlated with the price cap of crypto market, or more simply Bitcoin. Yet while we discuss the future of crypto, it’s important to draw a line between the future of blockchain and the future of crypto. Many blockchains do not have their own currency. Some blockchain networks do not even need a currency to function. And development of a blockchain does not necessarily mean an increase in its crypto price either. In fact, more often than not, when a new update comes of the development of a blockchain network, its price could plunge instead. This is probably why we see more technical analysis in the crypto sphere than fundamental analysis — because it doesn’t work.
So remember, blockchain ≠ crypto. We’re talking about crypto as a currency here, not blockchain development. To some extent, they’re kind of like Thor and Loki — they are brothers, but different. Not the best analogy, but you get my point.
2. Bitcoin vs alt coins
Bitcoin is the flagship of all cryptocurrencies because it’s the most well-known. If there’s going to be mainstream adoption of any cryptocurrency, you know it’s going to be BTC. And yet there is a chasm between Bitcoin and other cryptocurrencies. While Bitcoin is the flagship representative of a decentralized future, other cryptos remain largely the toys of market speculators and developer communities. These alt coins serve different purposes, and some of they will never reach the same adoption rates of Bitcoin. Even though they share the same price volatility, which we will discuss later, they are completely different species.
So remember, when we talk about a decentralized future, there are specific cases to be made. While Bitcoin could truly revolutionize the banking industry and have a great future, not all cryptocurrencies are going to have the same impact. Nor do they originally intend to.
With these premises cleared up, let’s get to the main question.
“Wasteful” and “functionality” are two very big words. Here I will narrow them down to specific contexts that have actually happened in crypto sphere to illustrate.
The most predominant form of cryptocurrency up till the time of writing this article is still utility tokens. These are the currencies that serve a specific use case in particular blockchain ecosystems. These blockchain ecosystems constitute what we now often know as “Internet 3.0” — the Internet of Value — as an supposed upgrade from Internet 2.0 — the Internet of Information — that emerged in the 90s. Here’s an excerpt for a more detailed explanation for what Internet 3.0 means:
“…promising to do for value what the internet has done for information: decentralise control, remove asymmetries, and change the way we transact and interact with everything. From money transfers and asset trading, through healthcare provision and music downloading to collaborating and sharing of resources, blockchain promises to enable, empower and revolutionize. And disrupt.”
So essentially, what the new era of the Internet exactly entails is to decentralize the transfer of value like we did with the transfer of information. It would be like what Amazon did with books, except that this time it’s for money.
However, as those more acute readers have noticed, this type of “revolution” is more one of the governance structure than a change in basic economics.
If we look at the majority of the utility tokens available on the market nowadays, many of them revolve around basic economics — incentive mechanism, and solely for this purpose. Many applications launch a token using a blockchain network and specify to the users of their application that if you want to use the application, you have to use their token. There are three issues with this approach:
(1) Although technically the token in circulation suffices to be a utility token, as it does have exchange value with regard to the services offered on the application platform, it does not differ from a traditional fiat currency in distribution and loyalty points given to returning customers in nature, like mileage bonus that airlines give to customers to score miles.
(2) The platform remains centralized. While the cryptocurrency is launched on a decentralized platform, the application itself is still using the centralized governance approach. No “revolutionary magic” here whatsoever.
So really what happens with this type of applications is that they created a small confined application environment just for the sake of a particular new currency. When people ask does this crypto have real-world use cases, the answer is a confident “yes” — they’ve got an application for it! — yet in reality, it’s just a centralized app wrapped in a crypto tinfoil for name’s sake.
And just like in the airlines mileage program example, we do not lack this type of reward points programs in the existing Internet era. The whole point of creating a cryptocurrency should be to incentivize actors in a blockchain ecosystem to achieve decentralized governance, not to repeat what fiat currency is already able to do.
This is wasteful functionality.
However, there is one more issue with this type of applications, one that is more fatal and is more prevalent than good for the crypto community — acquiring users.
User Experience is Still Key to Product’s Success
A main challenge with the blockchain space right now is that the number of people interested is highly correlated with the price of Bitcoin. This tells two things. For one, the supposed interest is on the speculative market. More importantly, there has not been some shining light of beacon in the field that’s earned the mainstream favor.
To make successful a application that has a token/cryptocurrency functionality into its system is not easy. Actually, one more functionality in an app is one more piece of learning that users have to do. The best developers design the app such that users learn how to use it like playing a game. However, if an app has pieces all over the place, users tend to hit the delete button and look for alternatives. And as we know that many of applications we are building based on crypto and blockchain nowadays are actually competing with existing centralized applications in terms of ease of use, service quality, and functionality, we should only pay more attention to designing a user-friendly app. For all that we know, the following is true:
Users may well care that your application is decentralized and is going to change the world, but if it’s not easy to use, they won’t use it anyway.
This is true of decentralized exchanges and why we often hear that decentralized projects are still in their infancy. And if you look at the success of Steemit, presumably the most successful decentralized platform there is, even though it has blockchain-era functionalities like token economics and decentralized governance, it just looks like an ordinary app and feels like an ordinary app. It’s the market that has the say, not the world-changing thoughts in blockchain enthusiasts’ heads.
However, I will point out what I believe to be a major issue that affects the user experience of applications that use cryptocurrency as a medium of exchange:
Let’s see how this common crypto phenomenon affects the mainstream adoption of cryptocurrencies. If a user logs onto their account, using the services he/she expects of the platform and purchasing products with the platform token just like with fiat, all is well. Except that crypto is not fiat, not even like fiat, at least for now. That’s a lot of modifiers. I know.
As of writing this article in mid 2018, the added functionality of cryptocurrency in an application means that users necessarily have to pay attention to the value of the currency, which fluctuates a lot, often times as much as 10 per cent in a day. This is an added layer of learning that users need to get through.
And who wants to pay attention to market volatility all the time?
Well, traders do.
Which explains why many of the blockchain app users are also crypto traders. But you can’t expect all users to have basic trading skills. Unless the crypto is a stable coin, ordinary users will necessarily suffer from price volatility and even market manipulation, a topic not unheard of in the crypto sphere.
So, unless the crypto-based application designs a way that seamlessly integrates cryptocurrency usage into the user experience, it is a strong possibility that cryptocurrencies will not earn mainstream market adoption, let alone apps based on them. So to our dear crypto lovers: before we rush into the fancy world of increasing crypto adoption rates, think for a moment — what am I using crypto for? Is it just for the sake of doing it, or doing it for good?
I hope this article clarified what I intended to do: to help bring forward issues that stand in the way of what so many of us truly want for the crypto and blockchain space — growth and more adoption. In later articles I will propose my solutions to these issues, specifically on how I believe we could increase the market adoption rates of applications built on crypto and blockchain.