Crypto’s crash does little to shake the faith of some blockchain believers
Crypto is in the midst of its worst run ever. Blockchain advocates aren’t necessarily breaking a sweat.
The price of bitcoin is still around $20,000, down about 70% from its peak in November. Crypto exchange platform Coinbase laid off 18% of its workforce, or 1,110 workers. Celsius Network, one of the largest crypto lenders, stopped withdrawals and transfers last week.
Many industry experts have warned that the development is a sign of a “crypto winter,” but some advocates of blockchain — the distributed computing technology that underpins cryptocurrencies, non-fungible tokens, or NFTs, smart contracts and more — believe there’s a silver lining in the downturns.
“I’m more bullish on crypto than ever before,” said Jason Yanowitz, co-founder of Blockworks, a financial media company.
Yanowitz compared the crypto crash to the tech bubble of the early 2000s.
“That is the period we are in now; we wipe away the greed and exuberance from the market,” he wrote in an email.
Once the target of a relatively limited and confused corner of the tech world, blockchain-based technologies have become a global focus of attention thanks to the apparent overnight riches enjoyed by early investors in some cryptocurrencies and, more recently, digital art associated with NFTs -er, which also uses blockchain technology. The boom has coincided with an increase in warnings from financial analysts and technologists that markets were looking increasingly unsustainable.
And even some in the blockchain community have argued that the boom-and-bust cycle of crypto has been a false signal, distracting the public from the underlying technological advantage of decentralized computing.
Brian Brooks, CEO of 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 pushing blockchain technology forward.
“Forest management is the analogy I’m thinking of,” said Brooks, who was the acting comptroller of the currency in the Trump administration. “At some point the undergrowth has to burn for the tall trees to have room to grow.”
Many blockchain advocates point to a bit of a paradox when it comes to the broader crypto boom: What should be a decentralized technology is becoming quite centralized.
A blockchain works by engaging a network of computers to each compete in a way that makes it nearly impossible for a single entity to control the system. But for people who use large crypto exchanges, there is not much difference from a centralized bank that holds a person’s assets.
Cleve Mesidor, CEO of the Blockchain Foundation, an educational platform, said Celsius is not decentralized even though it handles decentralized cryptocurrencies.
“What happened with Celsius will not affect the future of bitcoin,” she said.
Mesidor added that it is a concern when a company like Celsius gets attention and struggles, but that it is not representative of the blockchain community.
“When you innovate, you’re going to have problems,” she said. “There are models that don’t work, and that’s what we’re seeing with these companies.”
More important than today’s price points is the confidence that decentralization of markets creates opportunities for financial inclusion and to solve economic inequality, said Mesidor. Blockchains, which are accessible to everyone, are a game changer for minorities, she said.
But blockchain may not be as decentralized as one might think, said Mark Nadal, the founder of ERA, an innovation lab focused on building open internet applications.
Blockchains, which still require approval from others in the chain, are just “slow public counting machines,” Nadal said. There are person-to-person technologies out there that allow the sharing of data without the need for other people’s consensus, like in a blockchain, Nadal said.
Still, many blockchain advocates seem to be leaning 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, there is a silver lining, said Marta Belcher, chairwoman and president of the Filecoin Foundation, an organization that funds development projects that seek to improve the decentralized web.
Belcher said she believes cryptocurrencies are here to stay and are the foundation of a better internet — “an alternative to Big Tech that puts people in control of their own data, protects users’ privacy and security, and permanently preserves humanity’s most important information. “
CORRECTION (June 23, 2022, 6:20 PM ET): An earlier version of this article misspelled the first name of the CEO of Bitfury Group. He’s Brian Brooks, not Brain.
