{"id":5107,"date":"2018-12-27T10:18:34","date_gmt":"2018-12-27T03:18:34","guid":{"rendered":"https:\/\/news.adeptasiaconsulting.com\/?p=5107"},"modified":"2018-12-24T08:56:41","modified_gmt":"2018-12-24T01:56:41","slug":"in-the-winds-of-crypto-winter","status":"publish","type":"post","link":"https:\/\/news.adeptasiaconsulting.com\/in-the-winds-of-crypto-winter\/","title":{"rendered":"In the winds of crypto winter"},"content":{"rendered":"
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Well, it was surreal while it lasted, by which I mean the 2017-18 cryptocurrency bubble. For a while there, Coinbase was #1 in the App Store, Bitcoin was above $10K, and there were more notional crypto zillionaires out there than you could shake a Merkle tree at.<\/p>\n

Those were the crazy days. Now, though, a rude awakening has come. Now Bitcoin is down to $3200 and counting, other cryptocurrencies are down well over 90%, and worst of all, none of the billions of dollars which poured into cryptocurrencies during the bubble have led to anything even remotely like a killer app. Instead the crypto space remains a giant casino of penny stocks, with little to no utility outside of financial speculation. Don\u2019t kid yourself \u2014 this is nothing like the dot-com crash<\/a>.<\/p>\n

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Yes, this cryptocurrency downturn is totally like the dot-com crash \u2014 if half the dot-com bubble had consisted of shares in companies with no web site; Internet growth had been flat in 2000; and no ordinary people had ever used Amazon, eBay, or Hotmail.<\/p>\n

\u2014 Jon Evans (@rezendi) November 21, 2018<\/a><\/p><\/blockquote>\n

What comes next? Not much, at least not soon. I am sorry to report that we have entered the crypto winter<\/a>, as the estimable Michael Casey puts it, and, like that in Game of Thrones, it\u2019s likely to be a long one. Herein please find your guide to the icy landscape ahead, and some predictions of what we\u2019ll find there:<\/p>\n

The Business Side<\/strong><\/p>\n

We\u2019re going to see sizable numbers of both cryptocurrencies, and the businesses built on them, simply collapse<\/b>. In fact we\u2019re seeing that already: Steemit has laid off 70% of its staff, and even mighty Consensys has cut 13%. Of the more than 2000 cryptocurrencies<\/a> tracked by CoinMarketCap, hundreds upon hundreds will wither into disuse until their liquidity turns to ice and their price to zero. Meanwhile, many who run their own blockchains will find themselves increasingly vulnerable to 51% attacks. In the winter, only the strong survive; the weak are culled.<\/p>\n

We\u2019ll also see more infighting<\/b>. The schism within a schism which has marked Bitcoin Cash of late is only the beginning. A rising tide has room for many ships, but they\u2019ll have to fight to survive this ebb. Which blockchain will become the default for smart contracts \u2014 Ethereum, EOS, or Tezos? It\u2019s hard to see all three remaining relevant. (My money\u2019s on the first and last.) Which will be the privacy-preserving cryptocurrency: Monero, ZCash, or an upgraded Bitcoin? Here it\u2019s easier to see room for all three, but it\u2019s by no means guaranteed.<\/p>\n

Meanwhile, as the winter leads to widespread losses, regulators will grow ever more intrusive, trying to minimize or stop future losses due to fraud or negligence. We\u2019ll see more regulatory tightening, more fines, more bans, and, I predict, at least one case of serious criminal fraud<\/b> by a major player in the cryptocurrency world. Will it be Tether? Will it be an exchange? Who can say? But I\u2019d be extremely surprised if that didn\u2019t happen.<\/p>\n

Let\u2019s look to the brighter side. I predict we\u2019ll also see two welcome new interesting developments; at least one interesting and unexpected use case<\/b> for cryptocurrencies in the developing world, and at least one more from a major tech player. (Facebook would be a pretty good bet, but it\u2019s not the only one.) These will not lead to a massive upswing in the whole space though. Which is good, because the way all cryptocurrencies trade in lockstep is one of the most compelling proofs that they\u2019re not currently not even close to a real market.<\/p>\n

That said, trading will continue to thrive<\/b>, because traders love volatility \u2014 but exchanges will shrink their short-term aspirations as their fees plateau and\/or decrease. What\u2019s more, trading will increasingly focus on a smaller number of cryptocurrencies with real tech\/biz differentiation, eg ZCash, Monero, Tezos, and Binance Coin. (Say what you like about Binance \u2014 I don\u2019t like them much either \u2014 but their token, unlike almost all tokens, has an actual business model.)<\/p>\n

While this all happens we\u2019ll see increasing Bitcoin dominance<\/b>, as a \u201cflight to quality\u201d continues; clearly, if only one cryptocurrency were to survive, it would be that one. Meanwhile, its hashrate will continue to decrease, which is good for the world, as that means less electricity consumption.<\/p>\n

Businesses will not adopt private blockchains en masse, or really at all<\/b>, because if you want replicated write-once-read-many databases whose contents are cryptographically signed, it\u2019s easier to just \u2026 use replicated write-once-read-many databases whose contents are cryptographically signed, rather than a spectacularly inefficient blockchain. What makes blockchains interesting is their permissionlessness.<\/p>\n

Conversely, ether will continue to shrink in value<\/b> until\/unless a dapp actually takes off, which seems unlikely in the near future. I know this sounds harsh, and technically I\u2019m a fan of Ethereum \u2014 my own pet crypto projects are built on it \u2014 but its value proposition is built around dapps, and no dapp hits means no value. Unlikely, but not impossible; we\u2019re seeing green shoots of on-chain security tokens, the most likely near-term prospect for actual meaningful usage of Ethereum smart contracts. I predict that at some point during the crypto winter some bright startup will make its own equity, and its own cap table, into an on-chain Ethereum security token.<\/p>\n

The Technical Side<\/b><\/p>\n

Technically, the crypto winter will consist of a lot of grotty, important work being done underneath the snowbanks: infrastructure, scaling, privacy, usability, identity, etcetera. I predict that Ethereum\u2019s transition to Proof-of-Stake will be slow<\/b> and hesitant: it\u2019s essentially a whole new consensus algorithm, and one which substantially more complex (and therefore with a broader attack surface) than Proof-of-Work. I also predict that even the most interesting and useful dapps (eg FOAM, Grid+, and Augur) will see slow if any growth until their fundamental usability issues are solved.<\/p>\n

I do think that will sort of<\/i> happen \u2014 that a de facto, painful, hard-to-use but viable \u201ccrypto suite\u201d of tools for true believers<\/b>, especially digital nomads, will arise. This will include a \u201csovereign identity\u201d protocol, a social network, a decentralized exchange which includes peer-to-peer fiat-to-crypto, data storage, maybe even email \u2014 all decentralized, all relatively hard to use, but adopted by a tiny hardcore minority. I furthermore predict that this suite will be roughly evenly split between \u201cbuilt on Ethereum\u201d and \u201cbuilt on Blockstack.\u201d<\/p>\n

I also believe there\u2019ll be a great deal of technically fascinating cross-chain (eg Cosmos, Polkadot) and second-layer or off-chain (eg Lightning, Plasma, Celer) work done, laying the groundwork for future connectivity and scalability. This will happen along with decentralized work which is not actually crypto-related, eg Scuttlebutt and IPFS, and that which is only tangentially related, eg Blockstack. In general there will be a great and welcome increase in projects\u2019 code-to-prose ratio<\/b> now that empty prose is no longer rewarded by lucrative ICOs.<\/p>\n

And, my final prediction: cryptocurrencies will become seen as a weird alternative space for the 1% of hardcore traders, believers and techies, like Linux desktop users \u2026 until we finally emerge from the crypto winter. When will that happen? Not next year, and probably not the year after that. What will cause that emergence to happen? Here\u2019s my most outr\u00e9 prediction of all: something entirely new, something so weird and unexpected<\/b> that we can hardly even imagine it right now.<\/p>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Well, it was surreal while it lasted, by which I mean the 2017-18 cryptocurrency bubble. For a while there, Coinbase was #1 in the App Store, Bitcoin was above $10K, and there were more notional crypto zillionaires out there than you could shake a Merkle tree at. Those were the crazy days. Now, though, a […]<\/p>\n","protected":false},"author":4,"featured_media":5106,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false},"categories":[6],"tags":[],"acf":[],"yoast_head":"\nIn the winds of crypto winter - Adept Asia Consulting<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/news.adeptasiaconsulting.com\/in-the-winds-of-crypto-winter\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"In the winds of crypto winter - Adept Asia Consulting\" \/>\n<meta property=\"og:description\" content=\"Well, it was surreal while it lasted, by which I mean the 2017-18 cryptocurrency bubble. 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