But those who have followed cryptocurrencies closely in 2022 have seen the contagion spread from one failed crypto company to another.
This was the year when the cryptocurrency began to look like just another financial instrument, writes Bloomberg columnist Joshua Brushtein.
At the beginning of the year, there were two dominant opinions about the potential of cryptocurrencies. The first was that cryptocurrencies are a radical new financial system and that you can get rich with them. This turned out to be true, at least for a while.
The second version – that there is something special in the technology underlying cryptocurrencies that could become the architecture of a better, fairer Internet – did not materialize.
There is no doubt that cryptocurrency is finance , and some people have actually used it to get rich. Of course, this whole game has been a shaky playground for financial speculation, and the people who made crypto fortunes did so in large part by extracting money from a larger group of people who ended up being poorer. But that’s how financial systems often work.
The idea behind the crypto internet, or web3, is based on the premise that blockchain — the ledgers that verify ownership of cryptocurrencies — is also a good way to keep track of the data needed to run social networks or video games.
Because these ledgers are distributed across many computers rather than being centralized on a server network controlled by, say, Amazon.com Inc. or Microsoft Corp., web3 proponents envision a world free of the bad qualities of the internet, dominated by big technology.
The conditions were right for web3 to take off. A handful of web3 projects kicked off in 2021, mostly based around buying non-playable tokens as a way to join the club of people who are NFT optimistic or love video games.
Meta Platforms Inc. continued to stumble into 2022; there is a disappointment in Apple Inc. and Google. And you can’t blame anyone for interpreting Elon Musk’s purchase of Twitter Inc. as a performance designed to demonstrate the dangers of centralized control over important Internet services.
The cost of all these services was inextricably linked to the hype of financial speculation around cryptocurrencies. This makes it difficult to tell whether these products were perceived as attractive on their own merits or simply as a chance to get rich.
The most generous interpretation of web3 that I often heard from web3 developers and their investors was that the speculative energy was a red herring that would eventually fizzle out, leaving useful services in its wake. A more cynical point of view is that web3 was a mirage.
The hope of building a blockchain-based internet was helpful as it created the illusion that there was more to crypto than gambling. This, in turn, could attract people who are not gamblers.
The extent to which web3 services have fallen, along with the value of most cryptocurrencies, makes the cynic’s case all the more convincing. Those who have closely followed cryptocurrencies in 2022 have delved into the details of strange financial instruments and traced how contagion is transmitted from one failed crypto company to another. As for new, breakthrough web3 services, there were not so many of them.
People in cryptocurrency are accustomed to this kind of skepticism. The usual answer is that, yes, there have been many scam projects fueled by get-rich-quick dreams, but now everything is clean and the real work is going on.
Perhaps the future of cryptocurrencies as the backbone of new technology products is yet to come, with at least one notable NFT release this month. But for someone trying to create web3 now, it will be difficult to convince people that cryptocurrency is not quite what it seems.
