After a tough year for crypto, the focus must remain on the parts of the industry that work.
It’s been a miserable year for crypto, hit by (or bringing upon itself), catastrophe after catastrophe, with the ultimate meltdown coming in the form of FTX’s collapse, which includes staggering levels of dishonesty, mismanagement, and what many observers would contend is blatant criminality.
On top of all this, there is still speculation that the crypto world has more shocks to come, and that a final (or should that be finally final) capitulation is yet to play out. That one last blow may or may not materialize, but either way, a period of reflection is in order.
Notably, there have been few voices declaring that crypto is dead and gone forever, unlike in previous bear markets. There seems to be a recognition now that the crypto sector is here to stay, although disagreements are common about precisely why it should stick around, and what we should do with it.
To pick itself up from the rubble and start bringing in interest again, crypto must get a better grasp on what it can do that has straightforward appeal to newcomers.
Long-Term Communities
For many new entrants into crypto, the initial appeal is the spectacular increases in price that sometimes occur. This might sound unsustainable, or put one in mind of a get-rich-quick scheme. After all, if the only thing you can do with a new asset is hope to sell it to someone else later, then what you’re buying sounds unlikely to change the world.
However, this is a misinterpretation of why rising prices are important, and it’s too simplistic to throw everything that operates in this way into the Ponzi bin.
In the case of Bitcoin, and other projects that are cleanly constructed or have clear purposes in mind, when buyers who initially came for the rising prices are on board, some proportion of them will go on to learn more about the technology itself, and its true potential, leading them to stay long-term.
Bitcoin, Ethereum and Cardano, in particular, have dedicated communities that hunker down through tough times, and spend a lot of time discussing and working on real applications and technical improvements, rather than simply speculating on prices.
Stablecoins as an Alternative Currency
There are places in the world where trust in national currencies has evaporated, as inflation skyrockets. Additionally, around two billion people around the globe lack reliable access to banking services.
As a result, countries such as Nigeria, Argentina, and Venezuela, where the state cannot provide monetary stability and alternatives are desperately needed, have all seen increased demand for crypto, and in particular for stablecoins. The same is true of Turkey, even after a prohibition on crypto payments that took effect there earlier this year.
Can crypto provide a workable option in which to keep one’s wealth and transact? Faulty legacy institutions cause precisely the kinds of conditions for which Bitcoin was created, and, if enough people around the world recognize its utility, crypto can serve an important purpose.
Currently, it’s stablecoins that are providing an immediate solution for those who want digital access to a means of keeping their earnings afloat, while bypassing banks.
The utility of stablecoins is immediately apparent, and they provide real-world benefits to people who require, to put it bluntly: better money.
The caveat to this is that stablecoin perks don’t apply so pertinently in developed countries with relatively functional currencies and banking systems.
However, even in stable economies, long-term systemic cracks remain (don’t forget that Bitcoin was created in response to a global financial crisis that rocked the world’s top economies), and if crypto becomes visible as an up-and-running alternative, then its benefits should become clear even to those in less critically stressed financial environments.
NFTs: The Great Gateway?
At first, NFTs came across as trivial and akin to a casino, as in, fun to play around with some jackpots on offer, but nothing to take too seriously.
It will be an interesting plot twist, then, if NFTs go on to demonstrate utility and act as a major onboarding route into crypto. Surprisingly (or not, if you’re deeply into JPEGs), this is a real possibility.
Within crypto, NFTs are uniquely capable of garnering attention through visuals. They are the least intimidating crypto product and can create trust and familiarity through growing ties to big brands, known artists, and the gaming and entertainment industries.
There are even times when the crypto mechanics of NFTs take a back seat to the media element. This is a dynamic in which blockchain technology works quietly under the hood, which is what one would expect if decentralized applications were to go mainstream.
Associations with art and design can act strongly in favor of NFTs, in that buying an image comes packaged with an on-chain token and an entry point into the crypto world, within which there are endless diversions.
If Bitcoin enticed people in through its rising price and subsequently made them aware of its technological potential, then a similar mechanism is at play with NFTs. In the latter case, in addition to potential price gains, buyers are pulled into crypto through an appreciation of the artistic collections (or other products) to which NFTs are attached.
What’s more, NFTs can simply have straightforward utility, including tickets and passes, rewards schemes, provenance records, receipts, physical tie-ins, gaming assets, digital real estate, and metaverse avatars, and this is all just at the earliest stage.
Additionally, there is the kind of utility that is intuitive to collectors of any kind. NFTs, take the habit of collecting in the digital realm but show that operating with digital wares does not constrain the prices that scarce items can change hands for.
Is trading digital collectibles a world-changing application? Cynics might rebuff such a claim, but, pragmatically, if NFT trading brings more new participants to the wider crypto world, then NFTs may turn out, when looking back, to have been a highly significant development.
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