Discover more from The·By·Product
Stop the Blockchain, I Want to Get Off
A short essay about the infantile state of crypto, NFTs, and the blockchain
In 2008, Apple introduced the App Store, one year after the groundbreaking launch of the original iPhone. Later that year, the first Android device hit the market. All of sudden, mobile changed everything. Fourteen years later, smartphones have revolutionized everything that we do: shopping, communications, work, finance, you name it--all radically different thanks to 2008's great invention.
There was another invention in 2008...Bitcoin. Unfortunately, 14 years later, nobody has any idea what to do with the Blockchain, except bet that crypto will be worth more in the future. 14 years is enough time for any technology to prove its value. Crypto, it's been fun, time to move on.
When Matt Damon, Larry David and Tom Brady all encourage us to jump in, it is a tell-tale sign that we must stop the madness and move on and should focus on some tech that's far more promising. When the composition of Crypto investors looks curiously similar to those poor folks who lost their life savings in the subprime mortgage bust of 2008, the madness needs to stop. Let's hope the least fortunate members of our society don't get hurt again.
Once upon a time, say back in 2021, one could think blockchain is good for illicit transactions. Just as porn has historically been an early driver of far too many technologies (even books had a porn problem back in the 1500's), maybe illicit transactions could pave the way for legitimate transactions! Unfortunately, we’ve since learned that:
The feds can trace illicit payments made through crypto and bust bad guys (sorry, Ilya and Heather); so it's not so good for doing illegal things after all.
Crypto is very bad at storing value, the most basic requisite for anything involving transactions. Witness the $1 trillion in market value erased from cryptocurrencies in the first part of the year.
Crypto cannot just lose value; it's also great at getting stolen. Beanstalk is a recent example of massive funds getting looted from crypto initiatives.
Transaction costs make crypto pretty bad at legitimate transactions at scale, as El Salvador learned the hard way as it tries to make Bitcoin legal tender.
NFTs are similarly absurd. The idea that there can be a unique digital copy of something that's worth millions was somewhat credible when Wu-Tang Clan sold exactly one copy of <i>Once Upon a Time in Shaolin</i> for $2M. It was worth a lot because of scarcity...there was only one of it, and Wu-Tang promised not to distribute any other copies. NFTs, by contrast, are widely available for anyone to see. I don't have to pay $69M to see Beeble's Everydays... just Google it and you'll see a version that's identical to the NFT edition! The uniqueness is that one copy of it is stamped as "unique." But who cares! Apparently more and more people are starting not to care either. That $2.9M NFT of Jack Dorsey's first tweet is having trouble getting anyone to pay more than a few hundred dollars.
Which leaves us to... the last refuge of people trying to turn the blockchain into something: technology. Crypto may be a problem, the argument goes, but the underlying technology (blockchain) has immense utility. Unfortunately, while the promise of a decentralized internet is compelling, there is a reason most things on the internet become centralized over time...centralized things are easier to use and maintain, and easier to make money from.
Take email. Anyone could theoretically set up their own mail server and run their own email, away from the clutches of "evil" big tech. But it's a lot easier to just sign up for a Gmail account. So email has become more centralized over time, and Google, through advertising and the sale of Google Workspace licenses, has a strong incentive to make centralization more and more compelling. This same fate is befalling blockchain, where centralized services like Coinbase and OpenSea are becoming big players, because they just make things easier.
The same principles apply when building applications and deciding which technology stack to use. The blockchain is a solution for a distributed database. But I have yet to see a use case where developing an application with blockchain would be superior to developing a solution with a centralized database like Postgresql hosted on AWS or Firebase. Except, my centralized product would miss out on the blockchain hype.
So it's time for us all to get off the blockchain bandwagon. In spite of this, I do agree that the idea behind digital currency is a great one. Financial transactions are still too slow and expensive, and I should be able to zap a digital dollar from one place to another instantly. That's why the future of crypto will be exactly that--digital dollars. Fully legal tender backed by the U.S. government, transferable online. Worth exactly $1, no less and no more. And nearly free and instant to move around, certainly much cheaper and faster than ACH or Venmo. Now that's a bandwagon I'd love to jump on.