The last week of cryptos has brought about a fundamental change in the perspective: nobody is talking of crypto market bullishness. Some very good DeFi (Decentralized Finance) coins have been butchered so much that now they are hugely undervalued. You can buy them at December 2020 prices. In my another blog, On Cryptos, I have identified DeFi as the biggest potential of cryptos. In the same blog and another blog, Future of bitcoin, I have drawn a bleak future for bitcoin. However, at the same time, I reiterate that cryptos have a bright future. The lurking threat to cryptos was/is bitcoin and lots of damage has already been done because of this one shitcoin — I am not willing to categorize bitcoin in its present avataar as any better than dogecoin. It is clear that bitcoin rose so much YoY because of oversupply of fiat currencies. Oversupply remains leading to the threat of hyperinflation, but that doesn’t help bitcoin anymore. It had no utility except being perceived as a store of value, but now when its blockchain, Bitcoin, itself is under attack, the perception of it being a store of value has fallen to ground. In its entire existence of a decade plus, it has never really posed any threat to fiat currencies. Ironically, the only threat it has posed is now when El Salvador has decided to make it a legal tender, but, of course, now is also the time when it is under the threat of extinction. It is foolish to believe that nations won’t organize to launch a fierce attack on a currency that challenges their existence. The very existence of bitcoin is dependent upon Bitcoin, the blockchain. All bitcoins exist only on the blockchain, and if the blockchain is blocked, all bitcoins are lost forever. What stops a military power like US or China from directly attacking bitcoin miners, putting them into jail, confiscating their property, etc, and putting a full stop to all mining activity. What China has done till now is not even the tip of the iceberg. It is disheartening to believe that an idea as brilliant as a global currency running on a blockchain in a trustless manner is stillborn, but that’s the fact and the earlier it is accepted, the better it is.
However, that doesn’t mean other cryptos are equally useless. Even PoW (Proof of Work) crypto currencies like XMR have a definite utility. XMR is not challenging fiat currencies too loudly; it is not as highly valued as other cryptos; it is growing gradually; and it is a ditto copy of cash, which is under serious attack from the imminent digital fiat currencies. So, XMR will definitely survive. NANO is another cool concept. NANO is based on directed acyclic graph (DAG); it has no transaction fees; it has no rewards for nodes; it has open representative voting; it is clean and green; it has deep penetration as it was distributed free; and though it doesn’t offer the privacy of XMR, but it is the most convenient medium of exchange. So, the idea of a global challenger to fiat currencies is not dead, but it is nowhere near execution. Such big ideas can’t be forced. They have to grow gradually through mass adoption. bitcoin never saw any mass adoption, but its value flew to the sky. Such discordant between reality and romance can only exist if it is supported by propaganda machinery of states. Yes, if many other nations like El Salvador adopt bitcoin, I agree bitcoin can become the global reserve currency. However, I have converted all my bitcoins to ETH (reason follows below) and won’t invest in it again till I find it has become promising enough as a global currency or that the blockchain, Bitcoin, has been exploited for some other use cases than as a repository of aspired global reserve currency. As far as it being a store of value is concerned, I think that notion has received a serious jolt. It might re-establish the status again, but I find gold a better store of value. As far as bitcoin as a speculative asset a la the meme coins is concerned, I better stay away from it because I am a poor trader/gambler.
However, I am not out of cryptos. I have a finance background and am convinced that DeFi has a bright future. Presently, it is under cloud because of the repeated attacks on bitcoin; however, there is no occasion for it. DeFi has no dependence on bitcoin. It is definitely not necessary to have a successful global crypto currency to justify DeFi. In fact, stable coins have emerged as backbone of DeFi. Digital fiat currencies can easily adjust in these ecosystems competing with or replacing stable coins. I am unable to comprehend why the crypto traders have not yet realized it. Of course, bitcoin trading should have been replaced by DeFi promoting coins like ETH, SOL, ADA, DOT, MATIC, BNB, etc. In any case, I have converted all my bitcoins to ETH. ETH has the ability to provide stability as good as that of bitcoin if not better. I have an intuition that ETH will replace bitcoin soon, as soon as next month. I also have a conspiracy theory that new and old bitcoin hodlers have converted lots of their bitcoins to ETH or other coins recently. If true, DeFi promoting altcoins will soon get dehyphenated from bitcoin, and bitcoin may be lost into oblivion (unless Bitcoin, the blockchain, adapts to new use cases). Such will serve two purposes for the nations. First, any threat whatsoever to fiat currencies will evaporate, and secondly, their digital fiat currencies will get a ready platform to exploit in the form of DeFi: traditional banking will take years to promote digital currencies — the digital money experiment in India through de-monetisation has failed badly. So, DeFi will definitely succeed, today or tomorrow, unless private banks are more important than nations — my short stint in a private investment bank two decades ago doesn’t make me think so though things might have changed.
I am not sure of NFTs & Decentralized Internet (through decentralized data sharing) but am pretty sure that Enterprise Solutions through DLTs will also succeed. However, most of it will happen in a centralized manner. I am not convinced that such can be called as the part of crypto world. Nevertheless, the securest blockchain in the form of Bitcoin does exist in the crypto world. Why shouldn’t enterprises and governments exploit it to register their important data through sidechains? Bitcoin is indeed the safest place to store data. Presently, it is under attack, but I am sanguine that the bitcoin miners are resilient enough to overcome this threat. If bitcoin starts getting used for storing data on Bitcoin, transaction fees would be enough to justify its existence without any mining. Then, bitcoin may also become a sustainable store of value but in no different mold than that of ETH or ADA.
bitcoin has made many people rich. It can also make them poor, very poor, especially if they keep escalating their commitment. However, presently, altcoins are making me poor. The problem is that my engagement with cryptos is limited to investment. Probably, if I had technical skills to engage in innovation, I might not have worried too much about riches. Whatever the future of cryptos, it will not make me rich instantly, nor will it make so anybody else. I would instead recommend gambling for riches, which definitely offer better opportunity than shitcoins. Anyways, poverty is only a state of mind (or is it?).