A Contrary View for the Web 3 Optimists
In his op-ed "The Crypto Collapse and the End of Magical Thinking" for The New York Times, Harvard finance professor Mihir A. Desai discusses his thoughts on the current state of the crypto market. He argues that the popularity of crypto is driven by a "magical thinking" that has infected capitalism, and that it is not backed by tangible assets or intrinsic value. He also mentions that crypto has been used to justify financial excesses and that the crypto market is a speculative bubble that is bound to burst. He also suggests that he has found that the young audience he polls know little about crypto and that they are buying it because they believe it will make them rich in the short term.Â
However, it's important to note that Dr. Desai may have underestimated the potential of decentralization of trust and data sovereignty, which has the potential to disrupt existing financial systems and the big tech FANGG oligopoly, which is a core value of web3 and blockchain technology.
News Alert: Crypto isn't Monopoly MoneyÂ
Let's start by understanding how cryptocurrency is valued. Cryptocurrency is simply a limited asset where the value increases with every fiat invested in it. For example, if I had 10 tokens and each token was purchased for $10, the value of the token market cap would now be $100. There is nothing magical about digital assets.
However, it should be noted that fraud in the industry has been rooted in centralized fiat providers who misuse these held assets, reducing the value of each token after customer investments. There is also a trend of token values being manipulated through wash trading and market manipulation, but as the industry matures, these practices will be regulated and considered fraud.
Infected Capitalism Implies Virality
Great trends in this world often result from viral movements that change how we perceive the world and its contextual structure. When we examine the use of "infected capitalism" as a term, it implies that the entire industry is affected by this sickness. However, it's important to recognize that as the industry matures, manageable structures will be put in place to shape the future of the world and prevent the spread of this flu.
While it is true that the crypto market has experienced a great deal of speculation, it is also important to note that like most technological innovations, the true value of crypto and web3 is only just starting to be realized. The collapse of crypto prices could be seen as the end of the "magical thinking" that has infected capitalism, but it could also be seen as a necessary step towards the maturity of the crypto market.
The Spirit of Web3Â
Cryptocurrency and its associated benefits of decentralization and tokenization are not going away. As Dr. Mihir Desai references, it is possible that the younger generation, who are drawn to the idea of decentralization of power and control, may see the same level of "magical thinking" in other forms of centralized currency systems. In fact, just last year alone, over 4 trillion dollars of currency was printed by national reserves. Where is this "magic money" coming from? Is it rooted in Keynesian economics? These are the questions that our next generation will ask. They are driven by a fear of data misuse and corporate greed, which is what has led to the appeal of decentralization and cryptocurrency as a solution.
One of the main promises of crypto and web3 is the decentralization of power and control over data and privacy. Projects like String, a layer-1 blockchain that is focused on decentralization, privacy, and security, are working towards building the true value of web3 by providing users with more control over their data and privacy.Â
As more and more businesses and individuals look for ways to protect their data and transactions, the demand for decentralized solutions that give users control over their data and privacy will only continue to grow. It is important to note that Dr. Desai may have misjudged the intentions and potential of people in the industry, who are working towards building a decentralized and more secure future for all.Â
The Journey has just begun.Â
We ask those to consider that the future of decentralization is a process that will grow over time and it is absolutely not going anywhere.
Here is a link to Dr. Desai’s Op-ed in the New York Times: https://www.nytimes.com/2023/01/16/opinion/the-crypto-collapse-magical-thinking-capitalism.html
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