Crypto is in the midst of its worst run ever. Blockchain advocates don’t necessarily sweat it.
The price of Bitcoin remains around $20,000, a price drop of around 70% from its all-time high in November. Crypto exchange platform Coinbase has laid off 18% of its workforce, or 1,110 workers. Celsius Network, one of the largest crypto lenders, halted withdrawals and transfers last week.
Many industry experts have warned that these developments are signs of a “crypto winter”, but some proponents of blockchains – the distributed computing technology that underpins cryptocurrencies, NFTs, smart contracts and more – think there is a silver lining to the declines.
“I’m more bullish on crypto than ever before,” said Jason Yanowitz, co-founder of Blockworks, a financial media company.
Yanowitz compared the current crypto crash to the tech bubble of the early 2000s.
“This is the period we are in now; we are erasing greed and exuberance from the market,” he wrote in an email.
Once the purview of a relatively small and wonky corner of the tech world, blockchain-based technologies have become a global focus thanks to the seemingly overnight riches enjoyed by early investors in some cryptocurrencies. and, more recently, digital art connected to NFTs, or non-fungible tokens, which also use blockchain technology. This boom coincided with a growing group of financial analysts and technologists warning that these markets were looking increasingly unsustainable.
And even some members of the blockchain community argued that the rise and fall of crypto was a false signal, distracting the public from the underlying technological benefits of distributed computing.
Brain Brooks, CEO of The Bitfury Group, a bitcoin mining company that has been around since 2011, told CNN that he sees the recent crypto crash as a necessary part of advancing blockchain technology.
“Forest management is the analogy I think of,” said Brooks, who served as the acting comptroller of the currency during the Trump administration. “At some point, the underbrush has to burn so that the big trees have room to grow.”
Many blockchain proponents point to a bit of a paradox when it comes to the broader crypto boom: what is supposed to be decentralized technology is becoming rather centralized.
Blockchains work by engaging a network of computers to compete with each other in a way that makes it nearly impossible for a single entity to control the system. But for people who use major crypto exchanges, there’s not much difference from a centralized bank holding one person’s assets.
Cleve Mesidor, executive director of The Blockchain Foundation, an educational platform, said that the Celsius crypto exchange is not decentralized even though it handles decentralized cryptocurrencies.
“What happened with Celsius will not impact the future of bitcoin,” she said.
Mesidor added that it’s a concern when a company like Celsius gets attention and struggles, but it’s not representative of the blockchain community.
“As you innovate, you’re going to have problems,” she said. “There are models that don’t work and that’s what we see with these companies.”
More important than current prices is confidence that decentralizing markets is creating opportunities for financial inclusion and addressing economic inequality, Mesidor said. Blockchains are accessible to everyone and a game-changer for minorities, she added.
But blockchain may not be as decentralized as one might think, said Mark Nadal, founder of ERA, an innovation lab focused on building open-source internet applications.
Blockchains still require approval from other members of the chain and are just “slow public counting machines,” Nadal said. There are person-to-person technologies that allow sharing of data without needing the consensus of others, like in a blockchain, Nadal said.
Still, many blockchain proponents seem to lean into the crash, letting the market take its course and claiming that blockchain technology has a bright future.
Even on the doorstep of a crypto winter, it has a silver lining, said Marta Belcher, president and president of the Filecoin Foundation, an organization that funds development projects aimed at improving the decentralized web.
Belcher said she believes cryptocurrencies are here to stay and are the foundation for a better internet – “an alternative to Big Tech that puts people in control of their own data, protects privacy and security of users and permanently preserves humanity’s most important information”.
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