Cryptocurrencies would be better off remaining a niche.

The biggest cryptocurrency crisis so far has been, without a doubt, the rapid decline and tremendous fall of FTX. At the time of the collapse of what turned out to be Sam Bankman-Fried’s personal piggy bank, it was the third largest cryptocurrency exchange. Its demise sent shockwaves across the industry, bringing down not just prices but a host of companies.

Note: The opinions expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc. or its owners and affiliates.

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At the time, in late 2022, it was unclear whether the cryptocurrency concept would ever recover: the blatant fraud of what was until then one of the most reliable and consumer-friendly cryptocurrency companies seemed to confirm the widespread assumption that all of this it was just a ruse to hide a fraud.

Today, things are improving, although there remains a pervasive fear that the industry is repeating old mistakes and is headed for another punishment. For veteran cryptocurrency investors and observers, this is and always has been normal: since the days of bitcoin (BTC) 2014 market crash, following the Mt. Gox bankruptcy, e subsequent reboundthe cyclical nature of the market has been an accepted part of life.

But isn’t it strange that this maturing industry has normalized these boom-and-bust cycles? It seems to me that the mass adoption of any blockchain or consumer application depends on whether the price of its token – or the industry itself – is not always at risk of imminent collapse.

And that’s the point. To a large extent, the biggest problem with the growth of cryptocurrencies is the growth of cryptocurrencies. This whiplash between euphoria when markets rise and despair when they fall, every four years or so, is the result of cryptocurrencies’ quest for mass adoption.

The process is clear, a textbook case for economist Robert Shiller “irrational exuberance.” Promises to reinvent everything from money to the Internet itself pique interest. People believe in the dream of decentralization (or, for many, the promise of easy money). Popularity drives prices up, which reflexively it drives them up further as more and more people invest, until something breaks.

Almost always, the things that fail are the things that blockchains were built to mitigate or replace. And these things, almost always, were built to make cryptocurrencies attractive and/or easy to use. It is not an uncommon opinion that “the masses” will probably not self-guard. But without self-custody, what’s the point of something like Bitcoin?

“The risk of growing adoption is that new entrants are unaware of the core tenets of Bitcoin: decentralization, self-custody, hard money, etc. If new entrants do not learn, understand, and espouse these core beliefs, the characteristics that make them these realities may not remain in the protocols over time,” said Alex Thorn, head of corporate research at investment bank Galaxy Digital.

Adoption means respecting the law (which is often at odds with cryptocurrency values) and creating easy-to-use logins and logins (which can be compromised). There is a tension – if not a direct competition – between the goals of decentralization and mass adoption. Grow cryptocurrency too much and you risk destroying what it is actually useful for. “Just bending to the dominant financial system ends up giving away a lot of the opportunities that matter with this technology,” said Nathan Schnieder, a professor of media studies at the University of Colorado Boulder and author of “Governable Spaces.”

It’s a point echoed by University College Dublin lecturer Paul Dylan-Ennis, who said that “cryptocurrency is a subculture that can’t accept being a subculture. Most of our problems stem from how talking about “onboarding the next billion” makes us decay our values.”

There is a certain irony in the fact that developers, founders and investors have spent 15 years and billions of dollars searching for a “killer app” for blockchain, yet it already has one.

Satoshi Nakamoto, and those who actually follow in his footsteps, have built digital tools that can be used in any way and cannot (easily) be taken away.

That’s all. This is the whole point of cryptocurrencies.

Mind you, these are huge markets. But today, as in other times when cryptocurrencies appear to be on the verge of breaking out, this use pales in comparison to the speculative use of cryptocurrencies, where capital comes in, jumps from coin to coin or protocol to protocol, and causes the number to rise – essentially creating a circular economy.

Alright then. Gambling is a use case to some extent. But if people want cryptocurrencies to be used productively, developers, founders, and investors should work for the people who have a real need for money and censorship-resistant tools. Almost by definition, this is a limited audience.

This is just my opinion. Many disagree.

Molly White, author of the critical crypto news stories Web3IsGoingGreat and “Citation Needed,” argues that crypto is already mainstream. “There are individual projects that are still small and niche, but with Brian Armstrong and Sam Bankman-Fried rubbing shoulders in Congress and BlackRock and Fidelity launching bitcoin ETFs, I think the ship has probably sailed,” she said in a direct message.

Privacy advocate, educator, and monero superuser SethforPrivacy sees things differently. The “unfortunate reality is that most people do not yet realize the need for Bitcoin nor are they willing to take on as much personal responsibility, and as such we must focus our efforts on improving Bitcoin for those who do. Today,” he said.

It is also argued that decentralization is the very reason why cryptocurrencies will go global, so to speak.

“The ONE thing that makes Bitcoin’s global rise possible is its most cypherpunk attribute: it is owned by no one and is run by users, not states or corporations,” said Alex Gladstein, chief strategy officer at Human Rights Foundation.

However, it is not exactly clear what the masses want. Ethereum advocate Emmanuel Awosika, for example, admits that “while we believe *everyone* wants privacy, censorship resistance, and protection against nation-state attacks, some people are fine with a product that solves a problem and has good UX.”

While not everyone needs, let alone wants, privacy, resistance to censorship and maximum decentralization, Awosika added: “We should explore the possibility of putting cryptocurrencies in the hands of as many people as possible.”

Likewise, Roko Mijic, of “Roko’s basilisk” fame, argued that it’s actually scale that gives decentralized tools any power, which is evidently true as Bitcoin is difficult to attack because it has miners spread across the world. “You can’t resist censorship from within a small-scale crypto network because the government will simply destroy the entire network,” Mijic said.

Justin Ehrenhofer, founder of Moonstone Research in Chicago, echoed this sentiment, pointing out that a currency is only useful if it is widely accepted, and therefore “cypherpunks should focus on building systems that attract outsiders.” However, he added that “with widespread adoption” there has been a degradation of the spirit of cryptocurrencies, as the average user stores their wealth in custodial exchanges.

I guess the question is, how valuable are cryptocurrency fundamentals?

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