Michael J. Casey is the chairman of CoinDesk’s advisory board and a senior advisor for blockchain research at MIT’s Digital Currency Initiative.
The following article originally appeared in CoinDesk Weekly, a custom-curated newsletter delivered every Sunday exclusively to our subscribers.
“Crypto in crisis.”
Mainstream press outlets covering battered crypto markets have frequently invoked that phrase in recent weeks. For those of us who’ve followed the cryptocurrency scene for five years or more, the natural retort is: “When hasn’t it been in crisis?”
I would suggest that crisis – or at least relentless, chaotic drama – is the natural state for an open-source technology that engages a diverse, global, leaderless community in exploring an idea that promises to reorganize the fabric of our economy.
The outcome of this grand experiment is unknowable. But if we accept that the prospect of replacing 5,000 years of centralized record-keeping with a decentralized model of computerized consensus is rife with transformative potential, then we must also accept that it will generate wild, impossible-to-measure predictions, along with rampant speculation and hype.
By extension, these will frequently also generate fear and disappointment, and, unavoidably, price volatility.
The other thing you’ll hear from crypto “veterans” – yes, just five years in bitcoinland qualifies you for that title – is that crisis, and bitcoin’s capacity to survive it, is precisely what proves its worth.
The meme most frequently used to describe this resilient quality is that of bitcoin as the honey badger. But I prefer Andreas Antonopoulos’s “sewer rat” analogy: bitcoin as a tough-as-nails subterranean rodent that has proven it can take what the world throws at it.
Our increasingly distributed, fragmented economy needs open, self-healing systems that can withstand threats. The fastest way to build such resiliency is to expose the system to those threats so that it generates self-correcting counter-responses. Bitcoin, unprotected by a corporate IT team’s firewalls, rises to that challenge.
About here you might assume I’m going to smugly argue that the latest round of crypto critics are doomed to the same fate as past naysayers, who were proven wrong by the price recoveries that occurred after prior moments of “crisis.” (These newcomers would include former Paypal CEO Bill Harris, who told CNBC this month that he saw bitcoin going to zero.)
But that’s not what this column is about.
History is not prologue. The fact that bitcoin eventually recovered from the low of $210 it hit one year after its late-2013 peak of $1,150 is no guarantee that it will rebound from its current price near $6,500 and revisit its late-2017 peak of $19,783. And, yes, it could definitely go lower.
Fewer Lambos, more education
Rather, what I’d like to talk about is how the crypto community should use this moment to forget about price fluctuations and instead engage the world in a proper discussion about blockchain technology’s potential.
Let’s have less “to the moon” and “Lambo” talk and more discussions about the promise of peer-to-peer exchange, smart contracts and decentralized applications.
It’s time to ask questions about what we want this movement to be when it grows up. What do we want cryptocurrency and blockchain technology to achieve? And embedded in that is a question about who we are. As it stands in 2018, what does the crypto and blockchain community represent?
Some serious crypto developers might submit that bothering oneself with such flimsy questions of identity is no better than obsessing with price levels, when the most important thing they need to do is write code and develop real, battle-tested functionality.
To be sure, a post-bubble period, when the speculators’ distracting hype has dissipated, is a great time for developers to get work done. It’s no coincidence that Segregated Witness (Segwit) and the Lightning Network were developed during the prior bitcoin price lull. The ERC-20 ethereum token standard was also forged in that period, paving the way for ICO boom of 2016-2017.
But the involvement of others in the advance of this technology must also be acknowledged – even those from the enterprise world, the corporate community that hardcore crypto folks tend to dismiss. The blockchain community’s identity is complex and multi-faceted.
Learning from private blockchains
During the previous bitcoin market hiatus, while bitcoin developers worked on scaling solutions amid a different kind of “crisis” – the block size debate – a wave of non-developer newcomers started getting interested in blockchain technology: lawyers, bankers, supply-chain managers and regulators.
Rising to serve their interests were a variety of permissioned blockchain platforms, including IBM’s Fabric, introduced within the Hyperledger project, and the R3 consortium’s Corda.
Fast-forward to 2018 and, while cryptocurrency investors lick their wounds and wonder what the future holds, permissioned enterprise solutions are marching ahead, moving from proofs-of-concept to real-world implementations.
In just two recent examples, the World Bank teamed up with Microsoft and the Commonwealth Bank of Australia to issue its first blockchain-based bond and Maersk and IBM announced that 94 firms have signed up for TradeLens, their supply chain, shipping and logistics platform.
Many crypto developers dismiss these enterprise-driven private blockchain solutions, which typically employ pre-bitcoin consensus solutions such as practical byzantine fault tolerance and a trusted entity to administer the network, as a retrograde solution that’s not censorship-resistant. Like them, I believe permissioned blockchains will ultimately be proven inferior to permissionless systems, much as the open internet’s greater access to innovation and bigger network defeated private companies’ walled-garden “intranets” in the 1990s.
But I also think the work being done on these permissioned blockchain solutions is immensely valuable.
Until scaling solutions such as Lightning and sharding are working at full capability, permissionless blockchains can’t introduce decentralized applications at scale with anywhere near the ease of permissioned systems, which have fewer governance and computational limitations. In the meantime, there’s a great deal of learning that we can – indeed, need – to take from how these real-world private blockchain implementations play out.
Consider what the TradeLens project might tell us. What standards and practices will shippers, manufacturing companies and customs agents adopt as they integrate smart contracts to coordinate the movement of goods across multiple jurisdictions?
Finding common ground
This cross-community learning is precisely why the “who are we?” question matters.
Believe it or not, across a diverse and even divisive community – public versus private blockchains, BTC versus BCH, maximalists versus everyone else – a common vision does exist. We just need to define that shared identity more constructively than the one that many outside of the community assign to it: that of a nerdy, fanatic cult.
(An aside: one response to Bill Harris’s derisive comment about the “cult of bitcoin’s” false claims – “that it’s instant, free, scalable, efficient, secure, globally accepted and useful” – is to point out that in post-AD Rome, Christianity was a cult. Also, why do people who made their living from the constant improvement of the internet assume that crypto technology is doomed to a static existence? Dismissing bitcoin because of its limited scalability and adoption in 2018 is like attacking the Internet in 1995 because 28 bps modems were too slow to enable meaningful connectivity – as if no engineers see the problem or are working on it. Sheesh.)
How do we get society to go beyond these simplistic representations of the blockchain community? What is the core commonality that matters within this wide tent?
To me it is the common recognition that decentralized consensus mechanisms that enable groups of people to collectively assess the veracity of shared information can help society more efficiently overcome the cost of trust, an age-old human problem. They all see in this new model big opportunities to disintermediate value exchanges of all kinds and, in doing so, to open markets and unlock innovations that produce better outcomes for everyone.
Blockchains are a complex, multifaceted social technology. As such, achieving its full potential requires different types of expertise. Of course, we need a great deal of protocol development, but also UX and application design. And beyond the engineering realm, we need legal reforms, governance solutions, standards agreements, and marketing and education.
Here the 2014-2015 price lull is also instructive. At that time, bankers and lawyers, their interest piqued by the market mania they’d witnessed in 2013, took early moves toward comprehending blockchain technology. In doing so, they spurred a valuable societal debate on the challenges and opportunities it presents.
Even as a few ham-fisted regulatory solutions, such as the BitLicense, emerged and as banks undertook a clumsy, misguided attempt to co-opt “blockchain without bitcoin,” the opening of a mainstream conversation enabled sensible advocates for the technology such as Coin Center and the Chamber of Digital Commerce to establish an invaluable dialogue with policymakers and society at large.
I see potential to do even more at this time, as securities regulators grapple with how to define and manage token markets and as wide-membership industry initiatives such as the Token Alliance come up with useful frameworks for self-regulation.
A time like now, with the bubble burst and the market mania subsiding, is the ideal one in which to undertake this kind of multi-stakeholder engagement.
Lamborghini engine image via Shutterstock