Crypto is in the midst of its worst run ever. Blockchain advocates aren’t necessarily sweating it.
The price of bitcoin remains around $20,000, about a 70% drop from its all-time high in November. The crypto exchange platform Coinbase laid off 18% of its workforce, or 1,110 workers. Celsius Network, one of the biggest crypto lenders, halted withdrawals and transfers last week.
Many industry experts have warned that the developments are signs of a “crypto winter,” but some advocates of blockchains — the distributed computing technology that underpins cryptocurrencies, non-fungible tokens, or NFTs, smart contracts and more — think there’s a silver lining in the declines.
“I’m more optimistic on crypto than ever before,” said Jason Yanowitz, a co-founder of Blockworks, a financial media company.
Yanowitz compared the crypto crash to the tech bubble of the early 2000s.
“That’s the period we’re in now; we’re wiping away the greed and exuberance from the market,” he wrote in an email.
Once the purview of a relatively limited and wonky corner of the tech world, blockchain-based technologies have become a global focus of attention thanks to the seemingly overnight riches enjoyed by early investors in some cryptocurrencies and, more recently, digital art connected to NFTs, which also use blockchain technology. The boom has coincided with an increase in warnings by financial analysts and technologists that the markets looked increasingly unsustainable.
And even some in the blockchain community have argued that the boom-and-bust cycle of crypto has been a false signal, diverting the public from the underlying technological benefit of decentralized computing.
Brian Brooks, the CEO of the Bitfury Group, a bitcoin mining company that has been around since 2011, told CNN that he sees the recent crypto crash as a necessary part of pushing blockchain technology forward.
“Forest management is the analogy I think about,” said Brooks, who was the acting comptroller of the currency in the Trump administration. “At some point the undergrowth has to burn in order for the tall trees to have space to grow.”
Many blockchain advocates point to a bit of a paradox when it comes to the broader crypto boom: What is supposed to be a decentralized technology is becoming rather centralized.
A blockchain works by engaging a network of computers to each compete in a way that makes it almost impossible for a single entity to control the system. But for people who use major crypto exchanges, there’s not that much difference from a centralized bank that holds a person’s assets.
Cleve Mesidor, the executive director of the Blockchain Foundation, an education platform, said Celsius isn’t decentralized even though it handles decentralized cryptocurrencies.
“What happened with Celsius will not impact the future of bitcoin,” she said.
Mesidor added that it is a concern when a company like Celsius garners attention and struggles but that it isn’t representative of the blockchain community.
“As you innovate, you are going to have problems,” she said. “There are models that are not working, and that is what we are seeing with these companies.”
More important than current price points is the confidence that decentralization of markets creates opportunities for financial inclusion and to solve economic inequity, Mesidor said. Blockchains, which are accessible to anyone, are a game changer for minorities, she said.
But blockchain may not be as decentralized as one might think, said Mark Nadal, the founder of ERA, an innovation lab focused on building open-sourced internet applications.
Blockchains, which still require the approval of others on the chain, are just “slow public counting machines,” Nadal said. There are person-to-person technologies out there that allow the sharing of data with no need for others’ consensus, as in a blockchain, Nadal said.
Still, many blockchain advocates seem to be leaning into the crash, letting the market run its course, and asserting that blockchain technology has a bright future.
Even on the doorstep of a crypto winter, there is a silver lining, said Marta Belcher, the chair and president of the Filecoin Foundation, an organization that funds development projects seeking to enhance the decentralized web.
Belcher said she believes that cryptocurrencies are here to stay and that they are the foundation for a better internet — “an alternative to Big Tech that puts people in control of their own data, protects user privacy and security and permanently preserves humanity’s most important information.”
CORRECTION (June 23, 2022, 6:20 p.m. ET): A previous version of this article misspelled the first name of the CEO of the Bitfury Group. He is Brian Brooks, not Brain.