Review: The future of Crypto is boring

Crypto markets still have a lot of puzzles, but they are starting to reveal their secrets. The last few months of chaos show what Bitcoin and other cryptocurrencies are worth: they are advanced tools for globalization, for luxury goods for those with complex and well-functioning markets, not protections against the catastrophic enemies of government.

A common story, especially popular in libertarian circles, has been that when inflation rises and governments seize private wealth, cryptography will be an indispensable refuge. It seems more and more that this story is wrong.

In February, Canadian Prime Minister Justin Trudeau froze the bank accounts of many truckers who went down to Ottawa. That action was soon overturned, but the message was clear: the wealth of political opponents is vulnerable. In addition, payment providers stopped the flow of money to truckers. You might expect this crypto to be used as an alternative, but it didn’t happen.

Since then, the price inflation rate in the US has risen to 7.9%, much higher than expected a year ago. Given the turmoil in the oil and cereal markets, European inflation rates also appear to be on the rise. However, Bitcoin and Ether prices have fallen sharply since November and more since the beginning of March.

Russia’s attacks on Ukraine have increased the possibility of a wider war, perhaps including nuclear weapons. However, this also did not work to the advantage of crypto.

Wealth confiscations have been applied to various Russian oligarchs, especially in Europe, and these policies seem to be well-known. However, a recent rise in the price of cryptocurrencies seems to be the result of a relatively tolerant executive order issued by President Joe Biden on cryptographic regulation.

So instead of thinking of cryptography as a last resort, doomsday, or “Mad Max,” I suggest a more prosaic truth: the future of cryptocurrencies lies in merging with the financial and regulatory establishment, not rebelling against it. If most of the world is going to go to hell, that’s optimistic for cryptography. Crypto will work best with other financial networks, not as a substitute for them.

Consider some possible legal use of cryptography. Perhaps entrepreneurs will build a meaningful network metabersion that transcends national boundaries and enables fruitful interactions, including commercial ones. In many transactions, especially for micro-payments, cryptographic transfers may make more sense than trying to process all trades through current dollar networks. At least there is a promise that cryptography will be faster, more reliable, and more secure.

In this scenario, crypto is most valuable when global trading networks and Internet connections are stable. Right now they are moving in the opposite direction, and as a result the price of cryptography is falling. The reality is that the world of cryptography has been a globalized product from the very beginning.

Or consider DeFi or Decentralized Finance. The real potential of DeF is to lend over long distances, such as sending funds to the most skilled entrepreneurs in Africa or Southeast Asia, or in Russia and Ukraine. As with the metaverse, this is also an unrealized potential, but it has been and continues to be an opportunity. Or imagine dozens of other productive uses for crypto, perhaps underestimated or unimaginable today, just as NFTs weren’t “a thing” until recently. Like loans, these uses will have the best and maximum development only in a stable and globalized world economy.

It is gratifying to see so many people making charitable donations to the Ukrainian resistance. But the real future of cryptography lies in sustainable trade, not temporary transfers. I can’t help but notice that the crypto-innovator Vitalik Buterin comes from Ukraine. A stable Ukraine, or, alternatively, Russia, is likely to bring out these activists to improve values.

To be clear, this is not a skeptical argument against cryptography. If cryptography is good for many different purposes, and not for a single scenario, its value should be expanded with a healthier and more stable global economy. This is a sign of the current decline in the price of the cryptocurrency market.

It is also important to ignore the apocalyptic scenarios for the crypt. Probably a factor as to why they’re doing so poorly.

At some point, maybe – even if that day seems far away now – cryptography can become just a boring financial tool. If that day comes and when it will come, it’s worth remembering that when it comes to financial matters, what you’re looking for can be boring.

(This story was not edited by NDTV staff and was automatically created from a union feed.)

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