The bad incentives of crypto die

Jill Gunter is a co-founder of the blockchain company espresso systems . Before that, she was a risk capital who concentrated on crypto. She started her career as a trader at Goldman Sachs.

Charlie Munger is very quotable. Some of the things he said and who have remembered me are "crypto is an investment in nothing" and "crypto is like a venereal disease". Ouch.

munger's assessment of the crypto industry, as it has developed in the past five years, honestly does not seem really unfair to me. The Hindenburg of Sam Bankman-Frieds FTX is only the youngest in a long series of digital-asset disaster that has burned investors.

However, these disasters are not due to the fact that the underlying technology was fundamentally bad or broken or evil. Rather, they are the result of another Munger maxim: "Show me the incentive and I will show you the result."

Since the beginning of the crypto industry, the incentives have only taken care of money. These incentives have unfortunately prevented the industry from focusing on creating an actual real use.

In many cases,

earning money means “creating its own currency” literally, as Munger crypta also mockingly called. While some looked at Bitcoin and said: "Wow, someone invented digital gold", many people just looked at it and said: "Wow, someone just invented their own money. I could do that too."

Dogecoin is a renamed reef on the code base of Bitcoin, which is now worth almost $ 10 billion on paper. It is one of the earliest examples that someone creates their own token. Perhaps the man who created Dogecoin as a joke has become a loud crypto skeptic.

after years of study I believe that cryptocurrency is naturally a right, hypercapitalist technology that was primarily developed to enlarge the wealth of its supporters by combining tax avoidance, reduced regulatory supervision and artificially forced scarcity.

-jackson palmer𝘔𝘖𝘝𝘌𝘋 𝘛𝘖 14. July 2021

The "old coins" such as Dogecoin, which were created in the early days of the industry, gave way to the initial coin offer hype (ICO) from 2017 and 2018. These ICOs brought tens of billions of dollars of non -dilapping capital through the creation, output and sale of token, often created or delivered without a functioning product. Some of these companies held their promises and achieved significant returns, but many others. . . How should I express that? You don't have.

This is an industry in which one person copy a code, place the image of a good dog on a yellow background and create an apparent market value of $ 90 billion (at all-time high). If this is the incentive, what did we expect in relation to the result?

na sure In the crypto world, it was used to create money out of nowhere, be it in the form of dog coins or monkey jpegs instead of creating permanent benefits and real consumer value. If you can earn hundreds of millions of dollars with the sale of digital pictures of primates, you will not spend time for many people to ask difficult questions about the benefit of your offer. If you get away with a gauge, you won't stay to try to create value.

There are many who copy crypto today as "dead" because despite over a decade of its existence and tens of billions of funds that have flowed into space, there was no significant mainstream benefit. However, this is not quite fair: only a fraction of this time, energy and this money was spent on a sensible search for benefits. The incentives around the cryptoma markets have been poisonous for years: produce tokens; Climbing number.

But not everything is bad. I would argue that there has already been a bit of real value in the middle of the fraud and the gel screwing something that is created by serious projects. While these efforts often stayed under the radar and resisted the temptation to receive a quick payment or sponsor sports teams, they have made progress to uncover actual applications for crypto technology.

At the same time when Dogecoin was developed as a joke (initially a funny one!), Zcash achieved breakthroughs in applied cryptography to enable blockchain users privacy. Ethereum collected funds in 2015 before it had a full product, but has its promise to create an open, decentralized developer environment with contracts enforced by code.

Many other projects have made progress in providing an infrastructure that is suitable for more general crypto applications and developed the applications themselves. This happened despite the incentives of the industry. This helps to explain why crypto fractions that are not so money-motivated tend to be dominated by ideologues (that is, Weirdos) and hardcore enthusiasts (that is, nerds).

among the crazy and nerds of crypto the mood has been mixed in the past two weeks. On the one hand, there is real depression that the victims of the FTX case has been caused so much damage, paired with a feeling of disgust about the state of the industry, which competes with Munger. On the other hand, there is optimism because the party has been over since last week. The incentives have changed.

The hole of speculation, which has been sucked in in recent years, time, money, users, intelligence and builders, finally closes. Perhaps there is an opportunity to concentrate on the construction of products with real benefits - something that Munger could actually approve?