Cryptocurrency: Five Key Pillars to the Path Forward
It’s not a secret that the crypto market has taken a significant and very public hit over the past several months, causing many to start their public calls for the death of crypto – well before the patient has even spiked a fever.
To be sure, too many people spent too much money buying too many new cryptocurrencies that never should have existed, ultimately creating a massively artificial demand that propelled even the most speculative cryptocurrencies.
While the crypto despondent shares confidently, widely, and often that this new technology is determined to fail, I am more optimistic. Rarely is a technology with wide adoption and media attention like crypto pregnant with its demise. We often haven’t seen the valuable applications that capture the mass market’s attention and necessary steps towards creating a crypto future mass adoption.
To bring the promise of crypto closer to reality, five key things need to happen:
We need real interfaces that are easy and secure.
Using crypto now is still a science project. To get people to use the internet, AOL sent a billion CDs to consumers by mail. This obviously wasn't great for the environment or anything else other than propping up the United States Postal Service and getting people onto AOL. But that was the entry to the internet, and it worked. You could make the argument that Coinbase makes it easier, but it’s still not easy for mainstream adoption. The barrier to entry is still too high and the risks are high too. People are getting their stuff stolen every day.
We need more professional, responsibly financed, serious companies operating in the space.
Most of what we’ve seen to date has been short-term investments that are not sustainable. Get-rich-quick schemes masquerading as companies, DAOs, and projects. Amorphous use cases hiding behind inscrutable interfaces. It's still going to take venture capital, people to bet on the crazy people. It's still going to take great execution and great engineers and great content and people who understand customer journeys and ecommerce, doing what we've done in the past with the community.
So building with the community, marketing with the community, empowering the community. Now's the time to take advantage of all that's great about web3, which is everything about web 1.0, web 2.0, commerce, social nets, mobile apps, cloud computing, and a more equitable and frankly exciting business or startup ecosystem.
We need regulation and standardization (and it’s already barreling towards us).
The EU just created a regulatory framework for digital assets that it vows will tame the Wild West of crypto and in the U.S. there is a patchwork of regulations by state. But those are not well understood and hard to navigate, and for the most part, investments in digital tokens are not protected or regulated by any kind of government. What we need is something that instills confidence in consumers akin to what they have for cold hard cash.
We need true interoperability.
If you've ever tried to move from Polygon to Ethereum, or really tried to turn bitcoin into cash, it takes hours. It is much too hard to get anything done. Your identity and your assets need to be able to live anywhere. You're not renting items from Apple or Fortnite. You actually own your items that are digital. That means you need to be able to move them around easily, freely, and securely.
We need old-school utility that is 10X better than existing solutions.
Unless we have real use cases that truly bring value to the masses, the four points above do not matter. Interfaces, legitimate organizations, regulation, and interoperability are means to the ultimate end. That end is utility in the most human sense – something USEFUL that people recognize and value as being useful.
The crypto pessimists I respect the most are my fellow entrepreneurs and builders. We often agree on my first four pillars but disagree violently on the fifth, utility.
The unofficial spokesman for this group is fellow NYC founder Zach Weinberg. Zach and I agree on many things, including his belief shared in a recent tweet that, “The hardest thing to understand about crypto/web3 is the core reasons why it makes money in the short run (massive incentive for making quick money on early token speculation vs. actual long term sustainable use cases).”
Zach thinks this is “the same reasons why [crypto] won't work long run.” This is where he is wrong.
If you look close enough, the applications are alive and well. Just ask artists now making a living selling digital art. Blockchain technologies make it possible for digital content to spread widely and, for the first time, to be owned by one individual. Smart contracts ensure that every time the work is sold to a new buyer, the artist gets a royalty from the sale. Ask any artist or collector active in the $1.6 billion crypto art market whether the technology makes their lives better.
Artists can tap into a global market of buyers and transact with minimal friction and earn royalties for life. Collectors can support and collect artists they love who they would never have met before blockchain technologies made the market possible. The majority of the sales occur on a marketplace that itself is decentralized and run by a committed community of artists and collectors. This is a much more equitable model than the current market controlled by an impregnable duopoly.
Most technology use cases start beneath the surface. Subcultures tinker, play, push and experiment. Time and again, some of these subcultures become a culture and with it, the technology is adopted by the masses. Without the porn industry, the VCR may not have seen the light of day. Without Napster and the early music pirating communities, the streaming industry and Spotify may never have emerged. Without college students tagging each other to create the early social graph, Facebook would never have existed.
Look closely, and you will see many different subcultures tinkering. I expect similar utility breakthroughs as art in the next few years in:
- Gaming – true ownership of in-game items,
- Media – viewers as co-creators and owners,
- Fashion – access to limited-edition physical items and digital twins,
- Real estate – virtual land development,
- Supply chain – true trust and transparency, and
- Membership – formation of new types of membership groups and clubs.
So, yes, Zach and friends, I agree that financial speculation is not a long-term use case. But, if you make an effort to look deeper, it's fairly easy to see that the future of crypto is undetermined. The future of an undetermined technology with wide interest, early use cases and breakthrough potential is exactly the type of technology I want to focus on as a builder and investor.
About the author: Michael Lazerow is the managing director and co-founder of Velvet Sea Ventures. Michael is a serial entrepreneur, writer, and investor whose last company, social software company Buddy Media, sold to Salesforce.com (NYSE: CRM) for $745 million, where he served as chief strategy officer and chief marketing officer, Marketing Cloud.
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