Cryptocurrency’s Place in the Future is About more than Reforming Money

The following is a blog post from Huobi’s Head of Global Business & Markets and Vice President, Ciara Sun.

I read an interesting Tweet thread from the co-founder of Ethereum, Vitalik Buterin that addressed not only the cryptocurrency space and where it finds itself currently but where it will fit in especially in a post-Covid-19 world. 

A lot of people have already started drawing parallels between the 2008 financial crisis and the current economic crisis that appears to be looming, but has probably not fully set in just yet. In the cryptocurrency space, people are starting to look at 2020 as Bitcoin’s prophecy being fulfilled. 

Bitcoin, born out of the financial crisis of 2008 where the housing market collapse highlighted the poor control of the economy and the financial system of the banks, was purported to be the saviour of the people and the bringer of financial freedom.

It has been over 10 years now and while Bitcoin’s impact has been staggering, it has not fulfilled that prophecy of bringing down the banks and ushering in a new financial order — but will it do so soon?

This contrarian view of how the financial system should operate is rather dystopian in many ways, but like a good dystopian novel, it remains more function than truth. Bitcoin now doubt will have a rather big role to play in 2020, and going forward — and the pandemic has accelerated its progression — but what is the end goal of cryptocurrency. 

To quote Vitalik’s point that stuck with me: “ REFORMING MONEY IS NOT SUFFICIENT.”

A financial crisis

Vitalik goes on to explain in his Tweet thread that the 2020 crisis is not a financial crisis, it is a viral crisis and while there have been similar monetary policies enacted as 2008, this is not a crisis coming about directly from the failings of the financial system. 

The initial crisis, or should I say panic, that hit the market in the middle of march and sent the stock market tumbling was not because it was suddenly realized that the banks were propped up on nothing, it was based on the potential impact of lockdown and the economic issues that will surround it. 

And, to say Bitcoin was ready to step in and save investors from losing money in mid-march would be incorrect as the crypto markets fell in correlation with the traditional markets. Cryptocurrencies as a hedge is a tangible narrative, but not an absolute one yet, and this is also the point, the financial side of cryptocurrencies and their disruptive part should only be one consideration.

Finance is less important

Vitalik also concludes that finance is actually a lot less important than it was a decade ago when bitcoin was created, this means that cryptocurrency — and blockchain — needs to start adjusting its focus and working on its full potential.

Yes, Bitcoin at the moment offers an asset that is prone to growth, and volatile enough to make it interesting to traders, but we have already approached blockchain 2.0, and are getting close to 3.0 with things like smart contracts and DeFi (which is still financial, but much broader and more applicable)

But, it is the principles of blockchain and cryptocurrency that are much more prominent today. We look at how people were oblivious and happy for their data to be mined by Facebook and its ilk, but today, the importance of data is at an all-time high as people have changed their priorities and educated themselves.

As Vitalik adds, there is: ” Decentralized censorship-resistant publishing and communication, decentralized communities / governance / DAOs, DAOs for content curation, etc etc,” that we need to start appreciating, and that the cryptocurrency space needs to start pushing forward to play its role in a post-2020 world. 

Ciara Sun.