I’ve noticed a strange trend in crypto lately.
The narrative has shifted.
I think this is mainly due to big events in the real world.
Inflation is predicted to hit double digits this year, rising interest rates are expected to cause a recession, stock markets are collapsing, taxes are up, and to top it all off there’s a war on.
All of this has reignited the original arguments for Bitcoin.
I covered those arguments in detail here: Everything you need to know about crypto in one essay.
But here’s the key part of that argument:
The core idea behind Bitcoin is that it allows people to send money safely, over the internet, without the need for any central authority to guarantee or oversee their transactions.
Bitcoin does away with the need for central banks to create money and national banks to move it around.
And perhaps most importantly, its supply can never be artificially inflated. There will never be more than 21 million Bitcoin in existence.
So no more Cantillon effect and no more reverse-Robin-Hood economics, with the rich getting richer at the expense of the poor.
At least, that’s the idea
So at a time when inflation is biting, and the powers that be are unwilling or unable to diffuse the cost-of-living crisis, it’s easy to see why people are flocking to that original argument for Bitcoin.
“It will free you from those fools in power.”
That’s fair enough. But it’s not the real reason crypto is important.
Crypto-currency is just one aspect of crypto.
The real revolution is in taking what Bitcoin does for currency – cutting out the middleman, giving the power to users not central authorities – and applying it to… well, everything.
Like I said in that essay:
This is the next internet.
Over the last 20 years or so, many of our major industries and businesses have moved onto the internet.
And some of the biggest companies around today simply would not have existed, had it not been for the internet.
No Google, no Amazon, no Netflix, no Facebook.
Today we take the internet, and all the things it has enabled, for granted.
It’s hard to see any technology having as much impact on our lives as the internet has done.
But crypto might just come close.
In the short time it’s been around, crypto has gone from merely being a currency to creating a new decentralised financial system.
But the biggest thing crypto has going for it is that just like the internet it is a platform that other people can build things on top of.
Only, as we’ve seen, when things are built on top of crypto they are inherently fairer, safer, securer and more efficient.
Within the crypto ecosystem, you don’t cede control over to a central authority in order to participate. …
Over the next few years, we are going to see entire new businesses and industries being built on top of crypto – just like we have with the internet – many of which we can’t even conceive of right now.
And this time around, it won’t just be the businesses that benefit. It will be their users, too.
Many times over the years I’ve equated owning crypto to owning land in the California gold rush, or to owning land where a megacity is being built.
I wrote about that idea quite a lot when I used to work at Southbank Investment Research:
When I started reading about Ethereum, it all clicked. I could see so many possibilities for its use. The idea of smart contracts was a revelation.
I saw Ethereum as being like land. Land that all our computer systems would one day be built on. And land that you could own with a few clicks of your mouse.
In my head it would be the equivalent of owning land in the California gold rush. People would pan for gold (build programs and DApps), many would fall by the wayside, but some would strike it rich. And when they did, they’d massively increase the value of the land they were panning on – or in this case, the network they were building on.
I saw it as like being able to invest in the internet. Not an individual company, but the actual internet – before the internet really took off. That’s a pretty compelling idea.
And, honestly, I still think this is the most compelling thing about crypto. That’s why I mainly do my Deep Dives on platform cryptos (or layer-1s as they’re now called).
But over the last year or so, the idea of crypto being a platform for the next internet has been crowded out.
Today, it’s all about scarcity. Or rather, fake scarcity.
Scarcity is not the holy grail
Back in 2017, when most people thought every crypto was merely a cryptocurrency, like Bitcoin, a compelling argument against crypto emerged.
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