“I want you to back yourself into a corner. Give yourself no choice but to succeed. Let the consequences of failure become so dire and so unthinkable that you’ll have no choice but to do whatever it takes to succeed.”
¯ Jordan Belfort, The Wolf of Wall Street
Anyone who has watched The Wolf of Wall Street knows the effect that money can have. It’s an oft repeated cautionary tale.
Typically, these tales of greed involve an abuse of normal corporate practices. Take Enron for example. Or hype-induced interest in a new or poorly understood asset class, like penny stocks in the case of Jordan Belfort. The hype brings the money, and the greed takes over. It’s tempting to believe that more effective oversight can effectively limit excess. History tells us otherwise. Remember the Great Financial Crisis?
The unfortunate truth is that the issue is human nature. But is the problem just greed? Probably not. The call for tighter regulation of crypto markets has been strong and growing. Yet people only ever fix a problem after a crisis. Regulators are no different. It’s also human nature to aggrandise wealth. The now-disgraced former CEO of FTX, Sam Bankman-Fried, was recently featured as “The Next Warren Buffet” on the cover of Fortune magazine.
Even the world’s most reputable institutions, like the World Economic Forum, were enchanted. And the extent of his political influence in the US is only now coming to the surface.
What role does crypto have to play in the recent collapse of FTX/Alameda? On the one hand, not much, Bankman-Fried made his money like many before him: by buying assets low and selling at a higher price. Crypto was merely the asset class he chose to trade.
All the noise and hype drove the prices to extremes and divorced asset valuation from their intrinsic worth, a trader’s paradise until the tide turned. As an exchange business, FTX profited from buying/selling crypto, with volumes inflated due to the cycle. Underdeveloped oversight and poor knowledge of the asset class created an environment where greed ultimately prevailed over caution.
It’s tempting to write off crypto as an ill-conceived experiment.
Before doing so we should consider if there are there any meaningful examples of crypto projects producing something of value? Is there a crumb of substance, or is it all just hot air?
Aside from progress being made in the digital asset space (which is not a new form of productivity per se), and some of the exciting new applications of DeFi (like DeSci or collaborative scientific research), one set of initiatives that bridges crypto and the real world is decentralized cloud computing.
Networks like Filecoin, Storj, and arweave are gaining traction. Started in 2019, market leader Filecoin, for example, set out to create an independent network of hardware owners providing data storage capacity.
There are now over 4,000 different hardware owners on the network with aggregate capacity enough to host the entirety of Google’s storage needs. Traction is accelerating rapidly as well. in 2022 alone, the real-world data ingested onto the network has grown 8x with no sign of slowing down. Growth is being driven by real-world users like the University of Berkeley, Lockheed Martin, and The Internet Archive.
The aspiration of Filecoin and similar initiatives is to build a cloud computing network for the preservation and use of humanity’s data (at fair pricing); the infrastructure of Web3, the next generation of the internet. This sounds useful, doesn’t it?
In the aftermath of crises real-world use cases for new technologies gradually assert themselves. Time will show that crypto is no different, despite the current headlines. Hype cycles and busts are a human phenomenon. So why hate crypto? Dig deep enough, and green shoots are visible.
Disclosure: The author is an entrepreneur whose business has benefitted from grants from the Filecoin Foundation to develop technology for the network.
