Ethan Buchman, co-founder of Cosmos, a blockchain-based company Cosmos is trying all he can sound like a stoic. From January to now, the fall in prices for cryptocurrency has erased away 80% of worth of the tokens called atom which are the foundation of Cosmos and cut $10 billion off their value.
“Some people are shaken Some people are afraid,” Buchman says of the price drop in tokens that are used to safeguard the network. “But other people see it as an chance to increase their stake on the beliefs they hold dearly.”
“It can be a terrifying time for all (when markets fall),” adds Joseph Lau co-founder of another blockchain-based company called Alchemy. Lau insists that fall in crypto prices doesn’t suggest that all projects that are involved are in danger, or that the developers who work on them will cease to be interested. The drop in prices does not mean that crypto projects won’t gain “traction in the longer term” Lau says. Lau. The people who work on them “are developing regardless of what their prices are”.
If Lau or Buchman prove correct the cryptocurrency revolution may be stopped right in its tracks. The market’s collapse this year -as part of a larger withdrawal from risky financial assets in the wake of increasing prices of borrowing — can significantly reduce the motivations that have made crypto one the most popular areas of the world of technology.
The tech booms of the past are not identical. But the market’s fall and the assertions that it will not halt the cryptocurrency revolution remind us of another pivotal event in the recent history of tech which was the dotcom boom as well as bust around the turn century.
Both bubbles were created by a technology believed to be revolutionary which would undermine control over internet activity by the government and business establishments, ushering into a decentralized online world that would allow power to flow towards the users. In the case of crypto it was a concept that started as an idea of digital money in the form of bitcoin has grown into a trend that is now known as Web3. It is believed that the blockchain technology, that is used to record and track cryptocurrency assets, will be used to support the next generation of web services that are controlled by the user that can take on the internet’s giants.
Definitions DeFi
Decentralised finance is a broad name for a set of crypto asset-related initiatives that seek to eliminate the centralised intermediary such as banks or exchanges in order to offer financial services. They make use of a different type of distributed applications, also known as DApp DApp which is used to provide common services like loans, savings accounts and trading currencies.
There are also similarities in the financial crises. The worth of all cryptos reached its peak in November of last year before plummeting to around 70%, slashing around $2 trillion from their value. Bitcoin is responsible for around 42 percent of the remaining $900bn in circulation, is the most talked about however, a variety of other digital assets comprise the crypto market. In the 8 months since dotcom stocks reached their peak in the the early 2000s the publicly traded internet companies are believed as having lost $1.7tn which is 60% of their value.
Stephane Kasriel, the head of financial and commerce technologies who is responsible for blockchain initiatives at the social media company Meta is one of those who think that, when the dust has settled, crypto hype, similar to the dotcom bubble, could prove to be the unintentional precursor to the more steady and long-lasting technology revolution.
“A majority of these technologies experience the same hype-cycle,” he says, beginning with excitement and speculation that is followed by a crash. However, he says, similar to the web at beginning of the century, the blockchain technology behind it is one that “solves an actual problem for individuals” as well as will remain “useful to the world generally for a long period of”.
“Risky, flawed, and not tested’
It’s not a widely believed conviction. The exact definition of what “something” is or what applications it could serve that aren’t already feasible using the technology of today isn’t entirely certain. To date, crypto technology has been utilized primarily for speculation in financial markets as well as criminal activities, decentralised finance, also known as DeFi (which is not regulated) and also the creation and trading of exclusive digital tokens, also known as NFTs which have seen the cycles of booms and crashes.
“A majority of the language used [about decentralisation] is almost an exact copy of the discussions we had back in the early 1990s” claims Martha Bennett who at the time was the head of advanced technology at UK insurance company Prudential. She also identifies an important difference between the first days of the web and Web3 today: “We already had lots of use by 1995we had email and we had plenty of information available online. But with Web3 there is none of this.”
Bennett who currently studies the latest technology in the field of Forrester Research, says it is likely to be too to be able to tell if something useful or lasting can last. There is a growing group of tech critics world claim that — in contrast to the dotcoms, the crypto technology behind it does not have any redeeming characteristics in any way.
A group comprising 26 computer scientists as well as academics wrote to the members of the US Congress in May, to warn them that blockchain technology is “risky as well as unproven”. Bruce Schneier, a computer security expert and one of the authors claims that any app designed to run on blockchain would be more useful as well as cost-effective and secure when it is based on other technology: “Whatever it is you’re doing, it’s safer with no blockchain” Schneier says.
The cryptocurrency boom gained its strength from the latest technology along with anti-establishment social movements and financial incentives, which merged in a time of loose money to create an explosive mixture. Now that the boom appears to be ended, the crypto market is in a new and challenging phase.
The case for cryptocurrency as well as Web3, Phil Libin, an engineer in the field of computer science and ex-chief executive at Evernote the note-taking application, outlines the factors that led to the bubble by “80 percent greed, 20 percent ideology, and zero percent technology”.
Definitions: Ethereum
A blockchain that was co-founded by Vitalik Buterin, a Canadian-Russian computer scientist. Ethereum stands at the center of Web3 efforts to transform Blockchains to be more than the database of changes. Its technology is able to hold assets, and allows developers to program functions for selling and buying into smart contracts, and can be used as the foundation of the majority of DApps that deal with finance. Ether the token that is used to represent Ethereum is the second-highest frequently traded cryptocurrency.
The enthusiasm for cryptocurrency in the tech industry is based on the conviction the blockchain and its free distributed databases that can theoretically easily be and continuously updatedcan provide a new basis for online activities. Blockchains that are public use specially-designed “consensus mechanisms” to allow users to confirm that the updates are true. The blockchains that are popular with users -and the cryptocurrencies that are that are used to verify updates will form the basis for an entirely new set of online services where consumers, not government or corporations can decide.
But even Web3 users acknowledge that current blockchain technology is far from adequate for providing for mass-scale internet-based services. The Ethereum network which is the heart of a lot of Web3 activity, is able to handle just 30 transactions per second however, newer, faster networks like Solana are still proving their worth. It is difficult to navigate for people who are not experts and is plagued by unanswered security, privacy and privacy concerns.
The majority of supporters believe it is due to technological insanity, rather than a fundamental fault. Juan Benet, chief executive of Protocol Labs, whose Filecoin network functions as a decentralised market place for computer storage, compared the current blockchain technology to the early times that cloud computing was a reality. Cloud computing was an area of interest within the tech industry in the 90s, he claims but it “took twenty years to develop” prior to it being viewed as a viable option. Similar technological “maturation” is expected in the field of cryptos, He believes.
However, in the process the decentralisation concept thought of by crypto enthusiasts is in danger of becoming diluted to the point that it is difficult to differentiate its use from that of the technologies it’s trying to replace.
A widely-publicized switch may be to see “proof of working” mechanisms (which require “miners” working together in solving cryptographic puzzles in order to validate new blockchain entries and consume huge amounts of energy) substituted by “proof of stake” systems (where individuals who already have a cryptocurrency can control how the system is run). According to the definition the systems that use proof of stake transfer the most power to the most wealthy and weaken the concept for distributed power cryptosystems were supposed to protect, according to Libin.
The latest tech infrastructure built on blockchains is created to make them more easy to use and to handle a wider range of transactions. However, it is also threatening to compromise their decentralised character. This could result in a new group of powerful companies acting as “gatekeepers” who control access to technology in the same manner as the Big Tech companies rule today’s internet, according to Bennett for Forrester.
Read more crypto news over on cryptela.com
Web3 vs Big Tech
Any attempt to centralize Web3’s distributed computing platform could be a continuation of the internet that preceded it. The open communication protocols upon the basis of which the internet operates stop any government or organization from imposing control. But the system has also left ample opportunity for private businesses to create empires on the foundations that claimed however, they failed to provide the promise of a more democratic world online.
This is a reason why, in spite of the claims which casts Web3 as a serious threat to the current Internet giants, companies like Meta are taking a dip into the pond of blockchain.
“It’s ever been a mix of centralised things as well as things that are centralised” Kasriel says of the technology that the social media company, which was previously called Facebook was constructed. The company’s future plans include the creation of an electronic blockchain that allows software developers to maintain control over the content they intend to upload to Meta’s network.
Definitions: Proof of work vs. evidence of stake
The proof of Work systems are where teams called miners are able to compete in solving cryptographic challenges to verify transactions which result in reward in the form of cryptocurrency. These systems, including bitcoin, have been criticized due to the massive amount of energy that is required the process of calculating the outcome. The proof-of-stake systems random choose one person to verify transactions within a pool of individuals who are already holding this cryptocurrency, and who have “staked” their assets, or shared them as collateral with the networks. It is less powerful as compared to proof of work however it places control on the most wealthy cryptocurrency owners. Ethereum is currently in an in-between phase of long-distracted change in its transition from proof-of-work to stake.
The company doesn’t require the blockchain to achieve this Kasriel says. Kasriel. In terms of technology, it can achieve the same effect in different ways. The fact that you can give up control to the blockchain could help dispel those who aren’t confident in Meta to safeguard his interests. says.
Yet the critics like Schneier say that the weaknesses that the tech has are enormous that it’s of little application. If the idea of an online decentralised world is found to be mostly false, then there’s no reason to endorse the technology.
If there are serious doubts about the long-term viability for the tech behind Web3 but there is less doubt about the effects that the cryptocurrency explosion has unleashed. The combination of optimism and greed has proven equally powerful as the euphoria which ruled at the height of the dotcom bubble. According to those who support it the massive amount of people who have already committed to the field is making it difficult to ignore.
“A common sense rule on the web,” says Avichal Garg at Electric Capital, an investment company that specializes in Web3 startups, “is that if 100mn people are using something, it’s worth keeping an eye on.”
Create Amazon for Web3 Amazon for Web3
The core of the current frenzied pace are digital tokens and cryptocurrencies that are incorporated into blockchain networks. The ability of individuals to attribute value to them — be it due to the fact that, like bitcoin they’re believed to have certain characteristics similar to money, or that they are integral to the internet, which could someday support new digital economies that are decentralisedthis has led to the explosion in the market for cryptocurrency.
The rising worth of the digital currency has provided an opportunity to fund blockchain-based projects like Cosmos and to attract new talent to the field. The blockchain has also attracted people to the first services for consumers which are built on blockchains. This includes so-called “play in order to win” games, where players are given the opportunity to earn tokens can later be sold.
The new financial incentives may solve a recurring problem faced by new online companies according to Vinod Khosla who is an experienced Silicon Valley venture capitalist: how to draw enough people to help get a brand new service going which triggers the effects of networks that make online services effective as more people begin to utilize the services.
Some critics argue that the use of tokens to stimulate interactions online provides users with a financial incentive to perform actions that were prior to being free of commercial incentives. This could result in an “financialisation” of online services , which turns each interaction into a chance for make money.
Ryan Wyatt, a former director of gaming at YouTube who is now the head of the blockchain gaming company Polygon Studios, says this critique does not be true to the vast variety of the online world. Of the millions of gamers online, only a few are required to take part in games that are based on blockchain for they to be successful according to him.
However, while the increasing prices of digital assets served as an enormous attraction on the way up and now that prices are declining, there is a chance that they will be an important obstacle in the direction of a downward slide.
The collapse in price will affect the financials of blockchain-related companies which have profited from the increasing worth of the tokens they own. Many companies sell tokens in order to generate cash, and then store their reserves in cryptocurrency, which leaves them vulnerable to a fall in cryptocurrency prices.
Some supporters still insist that a fundamental change in the demands of users is taking place and is a trend that will last longer than the bubble. Generations of internet users have been altered by crypto claims Wyatt who believes that people do not want to be a part of online services that do not give them any form of control or share of the profits.
Organizations such as Cosmos and Alchemy assert that the crashing of prices for crypto have not affected the will of developers creating their networks. According to their skeptics they believe that the fact that it’s difficult to determine the future benefits of the technology that powers cryptocurrency and Web3 is not an issue. In the end, many of the technologies that make up the modern world of online such as Facebook’s social media platform to the mobile internet powered through iPhones to the iPhone as well as Amazon Web Services’ cloud computing platform were not seen in the dawn of the day until after the dotcom crash.
“If the time frame is 10 years for us to experience what’s known as the Amazon of Web3 is fine,” says Wyatt at Polygon Studios. “That’s an enterprise worth billions of dollars which would be on-chain. I would imagine we’d be pretty content with this.”
