Scams, hacks and rug pulls are causing billions in losses for investors and harming crypto businesses. Exchanges and decentralized finance companies go bankrupt. Rogue states use anonymous crypto currencies to fund military spending. Governments ban certain blockchain solutions and traditional finance are in a shoot-out with the crypto industry. Is this normal for the emergence of new technologies?
The internet started its public journey in the beginning of the 1990s and today 4.4 billion people are estimated to use the internet. When internet was launched to the public a range of problems occurred for users. Spam and viruses were so common that every computer needed antivirus software. Illegal content and pornography basically took over the internet. Later major issues appeared when the old Internet Protocol called IPv4 had to be changed to IPv6 to get more internet addresses. The biggest problem is still that half of the world’s population do not have internet access. The point is that technological developments will go through problems before they are adapted to our needs. Rome was not built in a day.
It’s not easy for the crypto industry to adapt to its own rapid development. Laws and regulations in the crypto space cannot keep up. For example, recently the virtual currency mixer Tornado Cash was sanctioned and caused worries in the Ethereum ecosystem. The problem is that Tornado is an open-source software that use the Ethereum system to make it difficult to trace cryptocurrency transactions. Apparently, North Korea used Tornado Cash to launder $7 billion worth of crypto currency on the world’s second biggest blockchain Ethereum and used the money to boost their military spending. The founder of Ethereum Vitalik Buterin did not see that coming.
Clearly regulation and laws are an essential part of a healthy society but sanctioning a piece of open code is clearly problematic. Privacy is an important part of the crypto space and that does not mean that privacy is equal to illegal behaviour. We do not want others to know about our digital wallet or about our health data that will be stored on a blockchain in the future. We certainly cannot blame blockchain technology in general for creating software that can increase privacy. When Facebook used our internet data in questionable ways to profit, the US government tried to make sense of what they did and to enforce regulation. But we never blamed the internet for how it was used to profit from consumer data the way Facebook did.
The S curve is a way to measure how far a technology is being adopted by society. If we look at where the crypto industry is in terms of adoption in comparison to the dawn of the internet its only 1993 in the crypto space. Do you remember the first time you used Explorer to surf the internet? The S curve tells the story that the crypto space is somewhere in between the innovator and early adopters’ phase of development. Think of the adoption rate like a scale from 1 to 5 and the crypto industry is nearly in the second phase. The fact that there are more than 20000 crypto assets it’s obvious that innovators have centre stage and you and me (early adopters) see opportunities in the field, but the public remains sceptical. Crypto is like an energetic cocky teenager and growing pains are natural.
Have a great day!
Henrik