The success of cryptocurrency is an attribute of a supportive community, but a juvenile culture is holding back blockchain’s full potential.
In 2017, four university researchers investigated an irregular spike in the rate of bitcoin that occurred in 2013. The cryptocurrency’s value shot up from $150 to $1000 in just two months, which the researchers were able to determine to be a result of manipulation engineered by one individual holding a high volume of bitcoins.
The researchers demonstrated the benefits of one of the blockchain’s main features: transparency. Although the culprit couldn’t be identified, they were able to conduct their research by leveraging their access to the decentralized ledger which publicly records every transaction.
“Whale” wallets, as accounts holding large volumes of cryptocurrency, have come to be called, are subject to the constant scrutiny of stakeholders concerned with high ownership concentration. The newest cryptocurrency to have its ledger scrutinized is Shiba Inu, which grew 666 percent months after being minted.
Shiba Inu was created to compete with Dogecoin, both of which are the namesake of an internet dog meme popularized circa 2013. Both Dogecoin and Shiba Inu reached all-time highs this year—at $0.69 and nearly $0.00008, respectively. Although dogecoin’s price has since plummeted, the popularity of these novelty tokens is a notable trend.
Cryptocurrencies are highly speculative; thus, community adoption and technical support are the primary sources from which their value is derived. However, Shiba Inu being the third most googled cryptocurrency shows how novelty is currently valued more than innovation. The crypto community must overcome is its own immaturity if it wants to be taken seriously.
The number of crypto investment scams is rising, with Americans having lost over $80 million since October 2020. The most recent was the Squid cryptocurrency scam, a textbook rug-pull scheme that took advantage of the social media zeitgeist surrounding a popular Korean Netflix show. This was driven by a fear of missing out on crypto profits and a lack of education on how to identify risks and frauds.
The abundance of eager investors, especially older ones with less technological literacy, makes crypto fertile ground to plant fraudulent schemes. Meanwhile, financial regulators are preoccupied with legal filings against Celsius Network, a cryptocurrency lending company that offers users interest in exchange for holding cryptocurrency on their platform.
Government regulators are busy distinguishing certain crypto products as securities while failing to address the growing number of cryptocurrency scams being reported to the FTC. Their agenda of fitting cryptocurrencies within a rigid financial framework is misguided and inefficient. A failure to understand the dynamics behind decentralized currencies and why people use them will hinder the government’s ability to protect consumers from fraud.
Two of this year’s most popular cryptocurrencies are internet dog memes and millions of dollars are being lost to crypto exit schemes, but regulators will not take these issues seriously until the crypto community starts taking itself seriously.
It is time to look critically at the dominance of meme tokens within the cryptocurrency discourse. The crypto community must leave behind the culture of jokes and gimmicks and replace that energy with support for innovation. There must be a shift in the narrative that emphasizes the development of decentralized commercial applications and smart contracts which will broaden support for blockchain as a means of making existing industries more transparent and secure.
For instance, the Basic Attention Token aims to address online privacy by empowering users to voluntarily permit advertisements and third-party trackers by digital publishers in exchange for cryptocurrency. Users have full discretion over their tokens, which they can keep or use to support online creators.
Commercial crypto applications like BAT are further incorporating cryptocurrencies into the mainstream of economic activity. It is just one example of how existing industries can incorporate the blockchain framework in ways that also work for users. However, it will take a concerted partnership between the grassroots community, regulators, and corporations to develop blockchain applications that are more innovative and less disruptive.
PayPal and Square have enabled users to buy and sell major cryptocurrencies and El Salvador is the first country to adopt Bitcoin as currency, but all this comes at the cost of decentralization and is antithetical to the blockchain’s founding principles. Government and corporate adoption of cryptocurrencies as a medium of exchange may have its benefits, but they should seek to embrace them out of principle rather than as a strategy. Handing the keys to the traditional financial gatekeepers will undermine the transparency which defines decentralized finance and neuter the blockchain’s technological potential.
The world of crypto is culturally divided between the financial establishment which seeks to capitalize on cryptocurrencies and iconoclasts who embrace blockchain as a means of detachment from the existing financial paradigm. There is common ground between the established financial and commercial institutions and the emerging ecosystem of blockchain applications, but grassroots crypto culture must mature and seriously consider what the blockchain stands for before its fate is determined by the powers that be.