When Bitcoin (BTC) launched in 2009, it was motivated by the distrust of financial institutions and their fees and the inflationary practices by central banks during the Great Recession. Bitcoin was supposed to usher in an era of decentralization, financial inclusion and democratization.
Yet more than a decade later, with Bitcoin prices surging, we’re witnessing the digital asset being hoarded by large, centralized financial institutions, risking the principles behind its creation. Bitcoin is now in danger of being predominantly in the domain of the financially included — exactly the types of institutions that the creators sought to avoid in the first place.
Meanwhile, in the context of other potential applications of blockchain on which Bitcoin and other cryptocurrencies are built, Big Tech has matured in its midst, with many seeing the problems of anti-competition and the abuse of power that come with its size. Problems such as economic and financial control, data privacy, disinformation and the general usurping of users are the symptoms of structures that we have let become too powerful.
It is 2021, and we risk never fulfilling the promise of adoption that will be possible with these technologies. While the community has been preoccupied with profit-making from crypto, we have the opportunity to create even more massive value as an industry. The potential is not today’s crypto market capitalizations but the billions of users and trillions of dollars of market potential that are this technology’s true promise.
Skepticism of the mainstream
As an entrepreneur who was around for the last technological disruption of the internet, I played a role in one of the internet’s most dominant categories: social networks. As a co-founder of LinkedIn, I’m struck by a similar kind of idealism that pervaded the Internet 1.0 era, but I also see the chasm between those in this new art and those who have yet to experience its benefits and question its existence.
Crypto and blockchain remain in their infancy many years after their creation. There are some hundreds of millions of Bitcoin and Ether (ETH) wallets, while the internet boasts 4.7 billion users. Even under an optimistic assumption of 250 million wallets and one user per wallet, crypto’s user base represents only 5% of internet users. The recent ascendancy of crypto’s market cap to $1 trillion is only 1% of the worldwide public stock markets’ total market cap, which stands at $90 trillion. Most blockchain projects today still have woefully limited adoption, and their tokens are subject to volatile speculation.
With the exception of Bitcoin, which is finally being endorsed by the experts, and decentralized finance, which in its current speculative state has the potential to demonstrate real-world value, this community knows its fair share of skeptics. The mainstream still wonders whether crypto and blockchain are solutions in search of a problem when centralized solutions seem to be working just fine at scale. The industry still has not captured the imagination of the mainstream nor shown signs of mass adoption.
Putting the ideals aside, I believe decentralized technologies can fix the vexing problems of Big Tech and finance in the years to come. To do this, we need to adopt a more pragmatic, business-minded approach to our industry. This mentality might run counter to the sensibilities of our entrepreneurs in the community. I’ve seen too many efforts that don’t work on products that are relevant to the mainstream. Nor do we measure success in terms of traditional key performance indicators such as product-market fit, user bases or revenue. We still talk about utopian concepts and the size of our communities that speculate on tokens but don’t mostly use them.
Appeal to mainstream audiences, not just enthusiasts
As an industry, we need to work on solutions that appeal to the mainstream, with a focus on applications or decentralized applications. We should figure out the applications before investing too much more in infrastructure projects that abound in the ecosystem.
Today the world’s top companies provide applications for end-users and are not infrastructure providers. Take a look at the top 50 internet companies: Almost all of them offer solutions to a large addressable market of users that have big active user bases. What’s more, for the ones offering infrastructure solutions, they started by bringing applications to market first. Only after these applications achieved some form of scale did these companies offer infrastructure tools. The most notable examples include Amazon and Amazon Web Services (in 1994 and 2006, respectively), Facebook and Facebook Platform (in 2004 and 2007), Google and Google Cloud (in 1998 and 2008), and LinkedIn and Confluent (in 2003 and 2014).
These companies fulfilled a need first for ordinary users, and only after their infrastructures were scaling did they launch their own tools. By then, these infrastructure technologies solved real-world needs, and they were also conveniently battle-tested. Sure, there were also plenty of infrastructure companies created during the first internet era, but can we name any of them today?
Our industry might have gotten it wrong when it focused on infrastructure from the beginning. Just because Ethereum won critical attention early on, it shouldn’t have resulted in so many other infrastructure projects.
We should be emphasizing the creation of more decentralized applications. Let’s identify and focus on use cases that have large addressable markets with pain points and opportunities to provide solutions. We should then strive to work on achieving product-market fit. Let’s also be bolder and look beyond financial use cases. There are plenty of mainstream opportunities, including better versions of Big Tech applications, and new use cases yet to be discovered. With working solutions for real users, we should work backward to technologies that will be truly useful to develop.
Our solutions have to be 10 times better than existing (centralized) solutions
Those decentralized solutions have to be noticeably better than existing centralized solutions. Decentralization promoted for its own sake is not enough, as the benefits for users have to be clear and tangible to convince them to switch and adopt the decentralized versions.
Digital assets such as Bitcoin are already on their way to demonstrating their superior characteristics as a hedge over traditional currencies, and DeFi has the opportunity to truly reach the underserved in financial services with its borderless capabilities. Many more types of services need to be developed.
While the industry will discover which solutions will be better than their centralized counterparts, the topic that we should be passionate about is digital identity and reputation. The category of social media platforms that have so dominated the first internet era and make billions of dollars of revenue (Facebook: $70 billion, Twitter: $3.5 billion, YouTube: $15.1 billion) and even more in market cap (Facebook: $805 billion, Twitter: $40 billion) depends on user data that consists of user identities.
These platforms make money knowing their users’ behaviors, interests and other aspects of their identity. Yet, monetary incentives between platforms and users are in conflict, with the platforms reaping all of the monetary benefits from user data while user identities are held hostage. The bargain in return is for users to continue to use the platforms for free. Since their rise, we’ve also been facing serious existential challenges from disinformation and data breaches.
Decentralized approaches hold the promise to address the vastly inequitable distribution of value from user identity and reputation. The overall value of user data can be more equitably distributed, with the worth of identities transferred to users. The better the reputation someone has, the more economic opportunities they can access. Think influencers but democratized to everyone, for everyone has a reputation. And there are additional benefits for users, such as control over the circumstances under which to share their identity data. There’s also the potential of a decentralized solution to disinformation.
Services have to be convenient and accessible
Finally, it’s necessary to make the benefits of this technology more accessible and convenient by making decentralized products much easier to use. When the overall friction of a product is reduced and it can be conveniently accessed, this is when it will gain more users.
We need to focus on ease-of-use. We should be spending as much time considering user experience as we do on smart contracts and blockchains. Truly secure wallets, one of the foundational elements of this technology, are still too complex for the average person. Let’s strive to live up to the science fiction writer Arthur C. Clarke’s saying that “Any sufficiently advanced technology is indistinguishable from magic.” Products should just work for people. A successful decentralized service means that users should not have to know that it is powered by a blockchain underneath, just like traditional applications don’t need users to know that there are underlying database systems.
As an industry, we have been terrible at explaining what we do to users and need to much better explain our solutions. Much of the technical jargon used in the space speaks to cypherpunks and finance wonks, whether it’s proof-of-anything or financial concepts such as yield farming. Granted, it’s natural for innovators and developers to create a common language for working together, but it’s a very limited group of people. It’s important to associate our work in everyday terms that a mainstream audience would value, speaking to benefits such as enablement, convenience, speed and/or lower costs. The efforts by mainstream companies like PayPal and Square should be celebrated, but the decentralized natives would be remiss not to offer their own hopefully superior versions.
In the arc of history, including the history of technology, the world oscillates between centralized and decentralized structures while always tending toward more decentralization. Let’s take full advantage of the approaching trend toward decentralization. As with the internet era, the winners of the decentralized economy may well be those efforts that play to massive addressable markets and connect meaningful value to the masses.
The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.