Shifting Crypto's Center of Gravity

The end of the year is just a date on the calendar, technically no different from the day immediately after it. Yet, it always feels like an occasion of promise and introspection. Because this is my last column of 2022, I will succumb to the temptation to look ahead and try to extract a few words that encapsulate the vast changes ahead. My plan was to avoid looking back – we’ve all been doing too much of that recently. But I realized we can’t look ahead without at least acknowledging the impact that this year has had on our collective psyche, and how that is likely to shape much of what we see in the months to come.

The root of what we’ve been through and what is coming is the changing role of emotion in our collective motivation. This shift tells the story of the past couple of years, and will shape our focus and the outlook for prices in the months to come. This may sound simultaneously obvious and also obscure so I’ll explain.

First, the obvious part: Looking back, the year has been pretty emotional for most in the industry – even if we managed to emerge personally unscathed, we most likely know people who didn’t, and the gloom and fear around us would have been hard to escape. We generally felt betrayed by individuals most looked up to as examples of smart success but who turned out to be abusing people’s trust for self-enrichment, flat out lying and then hiding from taking responsibility.

Slightly less obvious is how we got in the position of such betrayal in the first place. In 2021, the industry made a lot of money. Values and volumes were rising, funding was fluid and we were all feeling pretty good. Emboldened by the validating price performance, we relaxed our instinctive safeguards and looked up to those who were getting really rich, because surely that meant that what they were doing was constructive. We assumed fiat-based metrics had meaning, and the jarring realization that they don’t, at least not to the extent we thought, further sets the stage for what’s ahead.

So, number-go-up made us feel good; that evaporated (as it always eventually does) and the high-profile betrayals compounded the emotional hurt, leaving us scrambling for a positive replacement.

This brings us to the more obscure part, which is the role of emotion in technology. Software and data structures are not normally associated with feelings, but the ideology underpinning the dedication of many early bitcoiners and those driving the growth of other blockchain ecosystems has incited levels of passion not seen in other sectors. This is not surprising – any technological contribution that can make a profound and positive difference to humanity triggers feelings of fulfillment that stem from the gratification of belonging. You can see this in control rooms when rockets successfully take off, in labs when a vaccine breakthrough is achieved and in the eloquence of dreamers of a better world.

Many of us who are old enough will remember the moving rhetoric of John Perry Barlow’s “A Declaration of the Independence of Cyberspace,” which united readers in defiance of those who did not understand the societal change unfolding in lines of code.

This “us vs. them” staging was carried over into the emerging crypto universe, growing on the back of “permissionless innovation” and the dawning realization that philosophy had just been given a new set of tools through which to express itself. Collective determination took hold not just because of the humanitarian potential but also because of the dismissive resistance from legacy participants that either saw the threat or didn’t care enough to bother. The common cause created emotional bonds that fueled resilience and rapid progress, and persists today because most of us feel strongly that what we are working on matters.

To weave the above threads together: Trading profits are good but they’re not exactly going to change the world, nor do they build focused communities. The thrill derived from winning shrinks in consolidating and tainted markets, and with that source of stimulation losing its luster, the emotional center of gravity shifts toward the satisfaction of creation.

This is the scene set for 2023:

The renewed attention will highlight much more than the evolution of new blockchains, the growth of scaling systems and the evolving security of bridges. It will build on the importance of markets by revealing new custody products, decentralized order books and tokenization tools. This will link to the emergence of new types of assets as experimentation continues among private and public issuers, with political progress on central bank digital currencies an influencing factor. It will also tie into the global drive for more secure, rapid and low-cost payments, both local and cross-border. And crypto-based technologies will continue to support the development of renewable energy generation, just as energy politics becomes an even more flammable touchpoint for everyone.

Moving off this earthly plane, the rapid deployment of space and extra-planetary exploration, with public and private entities engaged in low-orbit commercial initiatives and governments in a race to colonize the moon and Mars, will place an urgency on the need for resilient decentralized communication and data storage. The explosion of interest in and capability of artificial intelligence protocols could play an intriguing role in metaverse development, and the role of non-fungible tokens (NFT) will move well beyond that of collectible images at a time when international insurance, property and credentialing industries struggle with transparency issues.

These trends have a very different emotional feel from the roller coaster of markets, just the kind of emotional feel the industry needs after the hurt of recent months – constructive investment that reminds us why what we’re doing matters. Focusing on the work and the societal benefit will help us reconnect with each other, to better engage with critics and weather the regulation pipeline.

With this, we can put a pitiful year behind us, excise selfish individuals from our consciousness and look forward to continuing our collective effort to make the world a better place. Whatever happens in markets, 2023 will deliver plenty to feel good about.