Wow! The cryptospace has gotten used to volatility of various degrees of magnitude, but this recent November through January run-up followed by massive decline has been a doozy.
…cue the naysayers!
It’s a bubble! It’s worthless! It has no value!!! What? Are you crazy? The only people who have benefited got in early! It will all go to zero anyway!
And now, the predictable “See!?! I told you so!”
Mind you, the naysayers have been plentiful and loud throughout the rise and fall (and now, as of this writing, slow recovery) or the market. In fact, the Bitcoin community has been tracking that cryptocurrency’s death announcements for years at BitcoinObituaries.com. The critics are plentiful and relentless now a’days, the maintainers of that website can’t even keep up with all the negativity anymore.
Without fail, revolutionary innovation breeds naysayers. History is full of collective “BAH!”s for everything from movable type, to the telegraph, to the telephone, to the credit card, to email, to the internet (especially ecommerce). Open source was openly mocked! VOIP calls. Streaming music. Streaming videos! All these technologies were poo-pooed and dismissed as impossible, impracticable, or useless at some point in time. Yet history, obviously, has proven the naysayers as naive and lacking in foresight.
“Can’t scale!” “Unnecessary!” “Insecure!” “No value! Only used by criminals!” Sound familiar? I remember pounding my fist in 1988 after experiencing the internet (pre-web), email, and chat and saying, “No no! This will change the world. Holy cow… You have no idea! How can you not see it!?!” Could I paint a perfect picture of that future? Nope. But boy was it obvious to me that the world just shifted with these innovations. Obvious to me and a rather small segment of humanity. We are at this same phase with cryptocurrencies.
Sure, we have the Segways of the world that enjoyed only modest success compared to their hype [1]. And indeed, we have had a few precursors to Bitcoin that many people embraced and watched fail. This author even plunked down $100 US fiat into DigiCash back in the day (early 1990s). I knew it was not a complete vision. I just thought it was cool and the ideology focused on individual freedom was very compelling. But I knew something was coming. That something, was Bitcoin.
In 2008, the Bitcoin whitepaper [2] was published. Most of you didn’t hear about it at first, but that same community of people —that community that grokked the potential of the internet, email, chat, open source, and public-key cryptography; that community that founded the Free Software Foundation and the EFF [3]; that same community that used jargon like “grok” liberally— they immediately saw it for what it was —something revolutionary.
DigiCash relied upon centralized servers. Everything was cryptographically verifiable, and nodes throughout the network propagated transactions, but … it was still very centralized. It hadn’t solved the problem Bitcoin solved: propagation, validation, and settlement of transactions without relying on a trusted 3rd party. DigiCash still needed “a bank” and served as a centralized clearing house. Bitcoin is bankless. No central authority needed. Math is the authority.
Next came the follow-on innovators. At the time of this writing, the two most significant are arguably Ethereum and Dash. Though now there are a tremendous number of outstanding (with a balance of not so outstanding) projects in the wild.
Ethereum aims to become a world computer. A giant execution engine focused on smart contracts. Dash took the great ideas of Bitcoin (unbelievably robust value settlement technology) and added a host of innovations: blindingly fast, doublespend-safe, transaction execution [4]; faster settlement; better scaling today and a comprehensive plan to scale further; decentralized governance of the project; optional privacy; and more [5]. And Dash has so many innovations in the pipeline: slick integration APIs; a savings function for hodlers; and a heads-down effort to make it all so much easier to use (PayPal-like). Imagine a censorship resistant PayPal! Wow. Partner services are noticing. In January 2018 alone, nearly 20 Dash integrations and partnerships have been announced.
Whereas Ethereum wants to become a world computer, Dash aims to be the best way to transact value from point A to point B… No bank needed. No Visa needed. No PayPal needed. All decentralized.
Whoa.
You can have a currency without a federal central banking entity?
Yup! And, truthfully, currencies independent from a federal government have been attempted many times in the past [5]. All that was needed was a network of people who accepted the currency for goods, services, or exchange. This gave it value. Now, with the advent of the internet, cryptography, and the blockchain, we can have independent currencies but with global reach and no central point of failure.
You can transact without centralized servers to do all the accounting and settlement?
Yup! And this has never been done before Bitcoin. The network of nodes and miners validate and true-up the ledger of accounting called the Blockchain to make sure that transactions, once settled, are irreversibly true.
You can transact using digital devices without a card company to stitch everything together?
Yup! And it settles faster, and more accurately —globally— than any technology from the legacy banking system [4].
And it has value? But what about that volatility?
Value is obtained through trust, agreement, and utility. The network is trusted because it is trustless. You trust the algorithm and cryptography, but it requires no trusted authority —trustless and censorship resistant. Your transactions and the network can’t be stopped nor truly regulated by a government or banking oligarch.
Volatility is a factor of immaturity for the most part. Cryptocurrencies are still in their infancy. As the sector matures, cryptocurrencies will become more prominent. They will be “everyday”. Mundane. Dare I say “boring”. Volatility will decline and valuation will stabilize. Today… there is short-term volatility risk. I purchased my first Bitcoin at under $200 US fiat. Wow! Expensive! Or at least, at the time, it felt like it was. Today, I’d have to exchange over $8000 US fiat to obtain a single Bitcoin. When I acquired my first Dash, it was valued at approximately $4 US fiat. Today it trades for over $500. Will it always trend upwards in value? No. Will it all go to zero? I’d be remiss if I said it wasn’t possible. But it won’t. Will it trend upwards? Almost certainly. As it expands in popularity and usage, it will continue to increase in value (supply and demand). As it becomes ubiquitous, its volatility will decline.
Ignore the naysayers. They are simply wrong.
To paraphrase Warren Buffett, who is, ironically, a vocal critic of cryptocurrencies, “The [cryptocurrency] market is a device for transferring money from the impatient to the patient.”
Stay patient through the volatility and the maturing phase of this market. Dash’s fundamentals are extremely sound and illustrate a future that is downright exciting. Cryptocurrencies are here to stay. The Internet delivers democratized communication and dissemination of content. Cryptocurrencies extend that promise and democratize finance and asset value exchange. You are sovereign.
Notes
[1] Segway from hype to failure to modest success: Wikipedia, an article on disillusionment, all about the hype cycle.
[2] “Bitcoin: A Peer-to-Peer Electronic Cash System”, by Satoshi Nakamoto, October 31, 2008. Found here and here and many other places. Bitcoin.com has a nice layman’s explanation as well, found here. First implementation was released in January 2009.
[3] The Free Software Foundation was instrumental in the effort to proliferate open source. The Electronic Frontier Foundation is a staunch defender of your individual sovereignty. Side-note: With a sad heart, the cypherpunk community mourns the recent loss of EFF founder John Perry Barlow.
[4] All about Dash as a superior mechanism for executing, clearing, and settling transactions: “Dash and the Crypto Confidence Gap”.
[5] For a nice write up on Dash from a current feature-set perspective, check out “Dash Celebrates Fourth Anniversary, Industry-Changing Innovations”.
[6] The Ithaca HOUR is a great example of an early effort to introduce an independent currency. In this case, very specific to the local economy of Ithaca NY (USA).
