VoxVenti ::

Yes, the phenomenon cryptocurrency is truly amazing and the people advocating and believing in it is even more amazing.
As you can guess I’m not totally saved and blest yet. Been around for a long time and seen many revolutionary ideas
aiming for creating great paradigm shifts. Few has truly change a lot, most have fallen into the endless mainstream of evolution and being just another small step for mankind.

As a causal determinist I trying to have a sober view on the gold at the end of the rainbow. So what is a sober and fatalistic view on cryptocurrencies.

Cryptocurrency itself, hereby called CC is an impressive idea and realization of distributed ledger for digital currency transactions. I really like the technology.

I somewhat agree with some of the benefits highlighted and associated with CC, maybe not what they in reality implicates.

Privacy, Access and Control

CC is a virtual asset being everywhere i.e. on the public distributed ledger, but is encrypted an controlled with the one that has the ability to decrypt the asset.
So given that you have have some CC and you have them kept in you digital wallet and it is encrypted with a private key controlled by you. No one can take the CC away unless they have the encrypted (wallet) data and the private key used for encrypt / decrypt the data with. Spendable CC d
data is in one place, controlled by the one that has the private key.

You can transfer the CC to anyone directly, P2P without any involvement from any middleman such bank or any type of financial institution. The CC network community will see all transaction and confirm them.

CC are kept in wallets. Wallets are easily created by anyone and are just a sources or destination when transferring CC. When creating a wallet it becomes anonymous. It’s just an address, no information about who is behind it or where it is created etc.

So assets are truly in control of the owner and the owner is anonymous.

There a many articles about CC and its envelopment. Google is your friend, you will find a lot about it here

Great, but What Problems are Solved?

For something to be successfully or have a value there must be a need (i.e. simple demand / supply logic).
So bluntly what have the need been so far?

It has been hard to deny that CC has used as payment in shady / illegal business transactions. Quite logical given the nature of CC anonymity and traceability.
Also a convenient tool in money laundry processes. CC acceptance is far more common among merchants dealing with luxury goods to accept CC payments than ordinary retail merchants.

Maybe the sector where CC has gain most traction is trading. The value increase over time has been staggering, just looking at the larges CC Bitcoin (40% market share) between 2010-2022 is easy to see that it has been more opportunistic than the traditional financial markets.

CC has been a notorious volatile segment(s). Volatility is creating business opportunity especially with a trend of positive value increase. Quite a few have been attracted by the new opportunistic investment segment. It estimated to be around 50 million people trading CC. It is estimated that a little bit over 300 million people owns CC. There are estimated to be around 500 crypto exhanges. The total market value is estimated to be around 25 billion USD (22/12 -2022) which is just a fraction of the stock market value 1372 billion USD for the 67 largest countries.

It is estimated that CC to a value of 1 million USD are spent on goods and services is USA per day. In general 38356 million USD spent on goods and services in USA per day.
That implicates that CC has a 0.0026 % “market share”.

What are Some of the Challenges

It is not so that that today’s payment systems are dysfunctional. Already today we almost do all payments electronically with debit or credit cards, Apple / Google payments or whatever. Electronic 2P2 payment system are developing fast, there are many successfully initiative Swish,Google payments, Apple Cash, EMPS, and many more. Today electronic payments are completed and confirmed in seconds. Just think about your latest checkout at the grossery shop.

The average transaction cost for a Bitcon is around 1.5-2.0$, Ethereum 0.5-1$. The transaction cost for electronic debit card is around one dollar.

You will always have to pay for any payment service I can not see that CC have any substantial advantage over today’s electronic payment solutions when it comes to latency, capacity or costs. Rather CC has historically been struggling with capacity issues resulting in long transaction latency. Of cause these issues are being worked on and will be resolved.

Even if the CC technology is considered to be most secure. It is not so that ordinary payments are unsafe, transactions are encrypted and many time 2FA is required. Bank and credit constitutions are fairy generous when it comes to covering frauds and illegal transaction. Would not say that this is something that is being at an unacceptable level, far from.

On the other hand the nature of the CC introduces some challenges. CC trading being a big part of the CC echo system require users to transfer CC assets and funds to wallets / accounts controlled by the exchange due to trust. You can not sell anything you do not have, so show it. And you can not buy anything unless you show the money i.e. delivery-vs-payment .

CC exchanges are not regulated and have not worked hard to become ones. They are often located in places with flexible legislation, generous taxes, none or minimal governance. The obvious reason is to attract all kind of liquidity without any involvement of authority governance.

Transparency around exchanges ownership, financials, routines, development process are diffuse. And not surprisingly there has been a number of incidents where assets has vanished from exchanges when the assets has been transferred from the users to the exchanges for trading. Sometimes pure fraud where the owners has just taken the money are dispersed. Or where exchanges has been compromised through hacking. It is estimated that 2.72 billion USD has been stolen from crypto exchanges since 2012. You can read about śome of the cases here The latest and flabbergasted case is FTX

All scams and stolen CC has raised the question; is CC to be trusted? Do CC have a trust problem? Do you trust Faculty-Brats around 30, low paid developer far far away from the business and trenches. Company / exchange business location with flexible legislation, generous taxes, none or minimal governance?

One of the beauty and curse is the intrinsic value of CC. It is not tangible truly virtual. Still priced are determined by simple demand / supply logic. A not too unusual view is that the CC value is driven by peoples desire to a quick easy profit. Bluntly translate to peoples dreams and hope to become rich, just like for the Klodike gold rush. or catching the Gold Fever i.e .the extreme excitement and greed caused by a gold rush.

A Sober Future View

CC will not die. There will always be a need for people to keep money outside the regulated authority system and that could be substantial values. CC is convenient, easy to move, easy to transfer. Better than gold.

It will not be widely accepted as mean of payments in the retail echo system. Due to

• Volatility the value can fluctuate significantly, which can make them unpredictable and risky to use.
• Limited acceptance, it does not solve any fundamental in today’s electronic payment echo system.
• Not regulated and therefore having a trust issue.

Today there is about 12000 CC in the world and there is about 1000 new every month. Inflation protected? NO!
Most CC will and are imploding. A very few large will continue to exist.

Volatility is going to be relative high going forward. There is a incitement to have high volatility it attracts opportunistic users. This will maintained by interest have large stakes in CC.

The value grows will generally slow down and there will always be a need for having unofficial assets.

Number off people owning CC will not increase dramatically.

There is a fair chance that we will see CBDC, Central Bank Digital Currency not likely to be anonymous. Every governments wet dream is to be able to trace all money transaction in real time. Such CC is likely to get an other level of impact. The funny thing is that the inventors of CCs most likely did not have that in their plan.

Cash payment / physically payments will always be around has been for almost 3000 years and will continue to exist. Internet and electronic payment infrastructure may and will have shorter and longer disturbances for various reason. Mishaps, sabotage, war etc. Everyone have an interest in having some sort of physical mean of payment.

The whole concept around WEB3 is a dark horse. The fundamental idea of users being in control of their data is not an absurd idea. Everything can not be replicated and transferred without control. Some mechanisms will evolve to address these issues. The same sort of underlying technology i.e. blockchain
is likely to be used. But exactly how and when is ruled by time will tell