The bigger players also failed to understand peer-to-peer crypto. PayPal and Venmo (owned by PayPal) claim to support crypto since early 2021. But a closer look at their services reveals that while the platforms allow US customers to buy, sell or trading crypto – investing, basically – they can’t pay for purchases or send crypto to other users. If “the future of money is here”, as Coinbase claims on its website, there is apparently not much that ordinary people can do with money in the future.
Despite the fact that it is difficult to spend cryptocurrency, it is still quite easy to lose it, and as the industry develops, the losses also increase. Without the protections put in place in traditional financial systems (such as Know Your Customer or KYC protocols, which require identity verification for financial transactions), fraudsters cost cryptocurrency investors – primarily individuals like targets of all these advertisements – more than 14 billion dollars in the last year, almost double the amount lost the previous year. The losses keep piling up. In late March, for example, Sky Mavis reported that a hacker had stolen a then-valued $625 million cryptocurrency from the blockchain behind its paid game AxieInfinity.
Even if their wallets are not hacked or their crypto assets liquidated, individuals are exposed to the risk of extreme volatility in the crypto markets; Bitcoin’s value has dropped more than 20% in a single day multiple times in the past six months alone.
“I worry about access; I worry about abuse,” says Afua Bruce, social policy and technology expert and author of The technology that comes next. “When we develop new technologies, we have to determine which communities we are building for. Can they use it? What does sustainability look like? How does this actually strengthen the communities we say we are building for? I don’t know if these questions have been asked and answered for the blockchain.
In fact, the crypto industry’s relationship with its community appears to be a predatory one. The “we” of “WAGMI” is a small group of predictable actors who get rich from the risks taken by ordinary people. Indeed, in December 2021, 0.01% of Bitcoin holders controlled 27% of the currency, a far more skewed ratio than for US dollar ownership, which is not a flattering statistic to begin with. And because they are not backed by any real assets, cryptocurrencies increase in value as demand increases. As more individuals choose to buy, VCs and crypto executives see their own portfolios move up and to the right. There are many uses of marketing in technology: it can spread awareness of a new technology or help build a user base before monetization. Both of these things happen in crypto. But if marketing persuades enough people to turn real money into cryptocurrencies, it can also literally pay the industry bills.
Crypto companies have already made members of their management teams into billionaires, like 30-year-old FTX CEO Sam Bankman-Fried, who started his short career in traditional finance and is now worth around $24 billion. dollars. Bankman-Fried is currently the richest American in crypto, but there were six other “crypto billionaires” on Forbes’ 2021 list of richest Americans. And that’s only in the United States; Binance CEO Changpeng Zhao, who has found a new base in Dubai since China banned crypto, was worth $96 billion at the end of 2021 (but had fallen to $63 billion by early April). While the Web3 pitch may promise an egalitarian utopia, the current distribution of crypto wealth aligns more closely with late-stage capitalism. “Capitalism is very happy to sell a real product and make a small profit out of it,” says David Golumbia, crypto critic and author of The Politics of Bitcoin. “But it’s even nicer to sell a rip-off. Never underestimate the power of big money and fraudulent verbiage to persuade lots of people to do something. And as more individuals buy into the vision the ads portray, the wealth of these crypto billionaires continues to grow.
“Never underestimate the power of big money and fraudulent verbiage to persuade lots of people to do something.”
What happens next in regulation will significantly shape the future of mainstream crypto. Last year, Facebook shut down its fledgling cryptocurrency – Diem, formerly known as Libra – after serious regulatory scrutiny. It probably won’t be the last to leave. Federal agencies have recently taken more aggressive action against some crypto exchanges for offering what they consider to be unlicensed investment products, and in October 2021 the US Department of Justice established a task force to examine how crypto markets facilitated illegal activities like money. bleaching. In March, President Biden signed an executive order directing financial agencies to create a comprehensive regulatory strategy for crypto, and like many other countries, the United States is planning to create a regulated digital currency, called CBDC (for “digital currency of the central bank”). They are not cryptocurrencies at all but could offer similar levels of efficiency. Currently, many crypto exchanges attempt to limit volatility by using private stablecoins, a class of cryptocurrency pegged to a real asset like the dollar. If the United States creates a CBDC, it could compete with these coins or even prompt the government to ban them altogether. FTX CEO Bankman-Fried himself predicts that the decisions of the US Federal Reserve will be the main drivers of the crypto market in the coming months of 2022.
Yet regulation has its limits, as we have seen in traditional banking. With so much money pouring into crypto and so many powerful Silicon Valley players invested in its success, the industry could find a way to thrive even with serious restrictions. Five years from now, Web3 startups may still be figuring out how crypto can benefit everyday people, but we’re all likely to feel the environmental and societal effects of this tumultuous time for a long time to come.
While mainstream crypto still looks like a pioneer town with gold panning and snake oil merchants, the non-consumer landscape presents a very different picture. Already, companies such as corporate banking, pharmaceutical giants, film development companies, and international shipping companies are using blockchains for greater transparency and efficiency. Such efforts could bring old, slow, and sometimes paper-based processes into the digital age, and even help industries meet new regulatory requirements.
One example is Ripple, a company with over 500 employees in nine offices around the world. Like a much larger version of Paymobil’s crypto money transfer service, Ripple uses its own blockchain token as a bridge between currencies, enabling hundreds of corporate clients including Bank of America, Santander and SBI Remit in Japan, Reduce transaction costs caused by time zone differences and manual settlement processes.
Contrary to the sweeping rhetoric of its crypto contemporaries, Ripple uses the speed afforded by digitized currencies to enhance legacy banking processes, not replace them. In keeping with this attitude of reform, not replacement, RippleX CEO Monica Long sees regulation and even CBDCs as part of the evolution of blockchain for business – and financial operations more generally – over the course of of the next few years. “Clients and consumers will benefit from improved infrastructure, user experience, regulatory clarity and interoperability as crypto becomes a critical part of the new normal in finance,” he said. she.
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The use case that has transformed the industry the most so far, though perhaps the one that has sizzled the least, might be the MediLedger network and its custodian organization, Chronicled. In 2013, the US government passed the Drug Supply Chain Security Act, stating that by 2023, the pharmaceutical industry must create a digital system to track prescription drugs to prevent counterfeiting. Healthcare and life sciences are notorious for legacy, non-interoperable systems, and legal requirements demanded a whole new way of doing business. Chronicled CEO Susanne Somerville wondered if a private blockchain — a closed, permissioned system, unlike public blockchains like Bitcoin — could provide a secure, shared environment in which pharma players like Pfizer and Gilead could work together. . After years of working on rules and business goals, Chronicled launched the MediLedger Network, a group of large pharmaceutical companies, in 2019. Chronicled provides them with a range of services, such as an anti-spoofing index of verified product IDs and access to real-time public price updates. These narrow solutions may not be what people typically associate with blockchain technology, but they are essential within the pharmaceutical industry. “Almost everyone thinks of these super lofty ideas, and it’s hard to get there,” Somerville says. “But there are a lot of less sexy things that are actually fundamental.”
Blockchain uses by Ripple and MediLedger could mean safer medicines and faster money transfers for everyday people, without requiring anyone to create a digital wallet or exchange coins. As for mainstream crypto? If the industry’s deafening talk of a financial revolution sounds too good to be true, that’s because it is. Until it can offer affordable everyday uses for new coins and extensive protections against fraud and scams, we’d all be better off sticking to cash and traditional banking systems than joining the parade of boosters. of crypto scrolling across our screens and our cities.
Rebecca Ackermann is a San Francisco-based writer, designer, and artist.