Finding the path that leads to crypto maturity

We are 13 years into the great experiment with cryptocurrency. And for many, it’s a mysterious brew of fun money and speculative assets and a scammer’s playground. In fact, crypto is at a critical turning point on the road to maturity.

The way forward requires closing the massive gap between blockchain’s promise to improve people’s lives and today’s reality, which falls well short. This gap represents one of the biggest innovation opportunities in the coming years for builders – and for the investors who support them.

Bankruptcies, forced liquidations, illegal activity and investor losses dominate the headlines. Like the dot-com bubble of the 2000s, the state of crypto today says less about the technology itself than the speculation surrounding it.

Certainly too many people spent too much money buying too many new cryptocurrencies that should never have existed. This created a huge artificial demand that drove even the most speculative cryptocurrencies.

As the saying goes, it’s all fun and games – until someone stumbles upon the dead body.

The dead body here was influence. Too much of the buying was done by speculators who had never lived through a bear market with other people’s money – money that had no chance of being paid back. Buyers disappeared. Lenders went into survival mode. Their margin calls went to voicemail and borrowers were forced to sell speculative assets into a market without buyers.

Nothing about the great crypto crash of 2022 wiping out $2 trillion of “value” should be a surprise, as we’ve seen this before. “Call it the $1.755 trillion dot.com investment lesson,” reported David Kleinbard in CNNMoney as 2000 drew to a close. “It’s hard to think of a publicly traded Internet company that isn’t at least 75 percent off its 52-week high and hasn’t cut spending or laid off workers.”

Sounds familiar?

A reason to be

“Crypto market rout won’t let up, as token prices plummet, companies lay off employees in waves, and some of the industry’s hottest names rise,” CNBC reported last month. “The chaos has spooked investors, wiping out more than $2 trillion in value in a matter of months.”

To attract the interest in crypto that we saw after the dot-com bubble burst, we need to jump off the Ferris wheel of speculation and onto the path of an industry’s purpose. Just like people who feel most fulfilled when they find purpose, the crypto industry must find its reason for being, just like every other technology before it.

Crypto and Web3 represent the latest advance in a decade-long technological march. We needed the chip and mainframe to get to desktop computers, and then to the laptop and smartphone. The Internet had to exist before AOL made it easy and accessible to the masses. Without all of the above, there is no blockchain, cryptocurrencies and NFTs. World-changing moments in technology are an evolution – and we’re on the cusp of crypto changing everything.

Yet, to make a difference, our purpose must not be to make a quick buck off the backs of consumers and fund managers. It must be justified in the utility and that utility must be unlocked by the technology itself and not be possible without the technology.

We’ve seen this moment before. For the Internet to catch fire, we needed a simple interface (thanks, AOL) and useful services (thanks, Amazon, USATODAY.com, and other early Internet pioneers). We had everything we needed for businesses to harness computing, but we didn’t have a computer in every office (thank you, IBM, Apple, and HP) and programs to make them useful (thank you, Microsoft and Adobe). And now we are at a similar critical moment for crypto and blockchain. We need AOL, Amazon, IBM, HP, Apple, Adobe and Microsoft for this new technology.

Most exciting to me is that many of these companies are now just getting started during this crypto crash.

Mike Lazerow is the CEO and co-founder of Velvet Sea Ventures.