Sure, fine, maybe its a bubble. OK its definitely a bubble, but thats a good thing, a bubble brings attention and investment in infrastructure, which breeds real innovation. Right? Look at the dot-com boom. A lot of people lost a whole lot of paper money, but it brought us a cheap worldwide fiber backbone and companies like Amazon and Google. Todays crypto bubble is just like that. Right?
So goes the theory, by which I mean, desperate rationalization. And it was somewhat true, for a while; but not any more. Cryptocurrencies have now ascended to speculative values that actually preclude any non-speculative uses. They have become so expensive that they are preventing innovation.
Most crypto tokens are, in fact, just glorified hash values stored on the Ethereum blockchain literally nothing more than a table of numbers like address A: 10,000. address B: 20,000, wrapped in standard blocks of code (the ERC20 and ERC721 standards, for fungible and non-fungible tokens respectively) so that they can be easily transacted.
Which means that every transfer of such tokens requires a transaction to be performed on the Ethereum blockchain. And as the price of ether has skyrocketed to more than $1,000 as I write this transaction fees have done so as well, so that the average fee for an Ethereum transaction is now around US$2.50.
(Ethereums variable-gas-price mechanism doesnt really help; fees are driven by supply and demand. And of course its not just Ethereum. Blockstacks DNS uses the Bitcoin blockchain as its source of truth, and Bitcoin transaction costs have also gone through the roof. SegWit transactions are cheaper / more efficient but thats noise compared to the overall trend.)
This is fine if youre just speculating, trading hundreds/thousands of dollars worth of tokens at a time. But it is crippling if youre actually trying to build an app that people use for anything else.
If youre trying to build a decentralized name / identity service your names now cost more than many top-level Internet domains that automatically resolve in browsers. If your tokens represent ownership of virtual entities, or access to decentralized storage suddenly just using the token at all, never mind transferring the value associated with the tokens, makes your cost structure somewhere between punitive and prohibitive.
So if youre trying to build anything even remotely high-volume atop an Ethereum token forget it. Your entire business model is catastrophically doomed at todays prices. (Ethereums sender-pays model doesnt help either, although thats due to change sometime soonish.) Only very-low-volume, very-high-value applications need apply. Like the current wave of speculation.
As a result, entire categories of cryptocurrency experimentation and innovation are on hold until the bubble bursts, or until / unless Ethereum finds a way to scale such that transaction fees plummet. Oh, people can still write and deploy code. But nobody will use it. Curious would-be users will be repelled by the nontrivial expense of mere experimentation, never mind ongoing usage.
So developers wont be able to find real-world users, and get any feedback from real-world use; they wont discover any emergent properties; and nobody will use and then iterate on their work. That whole continent of the blockchain ecosystem is now essentially in a deep freeze, covered by glaciers.
It remains an open question whether even much, much lower fees would be viable in the long run. Proponents of micropayments dont seem to realize that the fundamental problem with micropayments is not their cost, or the absence of supporting infrastructure; its the cognitive load that they induce. Parker Thompson of AngelList argues that fee-free decentralized apps are the only ones which might possibly succeed in consumer markets, and I think hes right, but that raises the question of how you prioritize and prevent spam blockchain transactions in the absence of fees.
Today thats a moot point, though. Dont get me wrong; Im not saying the sky is falling, the feepocalypse is upon us, and every decentralized application is doomed forevermore. A lot of interesting work and research has in fact been done regarding scaling Ethereum: sharding, Raiden, Plasma. Hopes for them remain justifiably high.
But until and unless they roll out, and/or the cryptocurrency markets stop being voting machines and start being weighing machines, most non-speculative token projects are doomed to indefinite hibernation. If you care about actual innovation, the inevitable popping of todays bubble wont mark the onset of crypto winter; rather, it will bring a crypto spring.
- Trading Cryptocurrency in 2018: The Definitive Guide - March 14th, 2018
- How would one operate a Cryptocurrency Mining Pool and ... - March 13th, 2018
- Coinbase cryptocurrency index fund - Business Insider - March 10th, 2018
- Cryptosomniac | Cryptocurrency Price Tracker - Bitcoin & Eth ... - February 24th, 2018
- Cryptocurrencies News & Prices | Markets Insider - February 22nd, 2018
- I started cryptocurrency mining at the end of 2017 and was ... - February 20th, 2018
- Cryptocurrency News - Bitcoin, Ethereum, NEO, ICO startups - February 8th, 2018
- 7 Best Cryptocurrency Exchanges to Buy/Sell Any ... - February 8th, 2018
- Electroneum. The Mobile Cryptocurrency. - February 8th, 2018
- Cryptocurrencies trading | your guide in the world of trading ... - February 5th, 2018
- Robinhood trading app introduces cryptocurrency - money.cnn.com - January 28th, 2018
- Robinhood adds zero-fee cryptocurrency trading and tracking ... - January 28th, 2018
- Cryptocurrency Price Prediction, Comparison, Analysis - January 22nd, 2018
- South Korea's major cryptocurrency exchanges ... - reuters.com - January 13th, 2018
- Bitcoin-crazy South Korea may face a ban on cryptocurrency ... - January 13th, 2018
- Cryptocurrency - IC Markets - January 13th, 2018
- Kodak launches cryptocurrency, stock pops 125% - Jan. 9, 2018 - January 10th, 2018
- Coinschedule - The best cryptocurrency ICOs (Initial Coin ... - January 8th, 2018
- CCN: Bitcoin, Ethereum, ICO, Blockchain & Cryptocurrency News - January 7th, 2018
- Cryptocurrency boom: Why everyone is talking about ripple - January 4th, 2018
- Cryptocurrency stocks holding gains despite bitcoin pullback ... - December 29th, 2017
- MobileCoin: A New Cryptocurrency From Signal Creator Moxie ... - December 16th, 2017
- Cryptocurrency Definition | Investopedia - December 6th, 2017
- '$300m in cryptocurrency' accidentally lost forever due to bug ... - November 10th, 2017
- Amazon might want in on cryptocurrency - mashable.com - November 8th, 2017
- What is Cryptocurrency - earnlite.com - October 26th, 2017
- Cryptojacking Lets Strangers Mine Cryptocurrency With Your ... - October 21st, 2017
- Introduction to Cryptocurrency - CryptoCurrency Facts - October 14th, 2017
- Cryptocurrency Flash Crash Is Said to Draw Scrutiny From CFTC ... - October 7th, 2017
- Cryptocurrency Alternatives to Bitcoin - due.com - October 7th, 2017
- Learn BitCoin and master the world of cryptocurrency - October 7th, 2017
- Almost Every Cryptocurrency Is Tanking Right Now | Time.com - September 7th, 2017
- Cryptocurrency boom stalls as regulators focus on ICOs ... - September 7th, 2017
- Why Marketers Need to Pay Attention to Cryptocurrency -- Now - Entrepreneur - September 7th, 2017
- Opinion: That Floyd Mayweather-backed cryptocurrency is another sign of a bursting bubble - MarketWatch - September 7th, 2017
- Putin-Backed Political Group Advances 'Green' Cryptocurrency Concept - CoinDesk - September 7th, 2017
- First He Beat Up His Girlfriend, Now He's Selling Cryptocurrency With Paris Hilton - Daily Beast - September 7th, 2017
- Cryptocurrencies have already recovered from last weekend's crash ... - TechCrunch - September 7th, 2017
- Venezuela Cracks Down On Cryptocurrency Mining - CryptoCoinsNews - September 4th, 2017
- Mobius Foresees Cryptocurrency Crackdown Sparking a Rush to Gold - Bloomberg - September 4th, 2017
- The Aggregate Cryptocurrency Market Cap Is Up 810% Year to Date - Motley Fool - September 4th, 2017
- How to make upwards of $1,000 a month by mining cryptocurrency - Mashable - September 2nd, 2017
- Chinese Officials Contemplate Suspending Cryptocurrency ICOs - The Merkle - September 2nd, 2017
- Cryptocurrency Investment Course 2017: Fund your ... - Udemy - September 2nd, 2017
- Six Banking Giants Just Decided to Partner to Create a New Cryptocurrency - Futurism - September 2nd, 2017
- 7 Cryptocurrency Predictions From the Experts - fortune.com - September 2nd, 2017
- Russia Could Pass Cryptocurrency Law This Year, Senior Lawmaker Says - CoinDesk - September 2nd, 2017
- AxionV: AI Cryptocurrency Fund Leading the Way in ICO Security - HuffPost - September 2nd, 2017
- PayThink Custom tokens are the future of cryptocurrency - PaymentsSource - September 1st, 2017
- Litecoin Prices Surge Above $70 as Crypto Market Tops $175 Billion - CoinDesk - September 1st, 2017
- Dharma wants to let anyone borrow a small amount of cryptocurrency - TechCrunch - September 1st, 2017
- PR: Archain Is Building an Uncensorable Internet Archive Inside a Cryptocurrency - Bitcoin News (press release) - August 31st, 2017
- Cryptocurrency Market Just Reached Total Value of $160 Billion - Futurism - August 31st, 2017
- Another banking trojan is trying to loot your cryptocurrency wallets - The Register - August 31st, 2017
- Cointal Revolutionizes P2P Cryptocurrency Trading - CryptoCoinsNews - August 31st, 2017
- $160 Billion: Cryptocurrency Market Sets New All-Time High ... - CoinDesk - August 30th, 2017
- Central Banks Can't Ignore the Cryptocurrency Boom - Bloomberg - August 30th, 2017
- Whoppercoin is a cryptocurrency you can eat or trade - The Verge - August 30th, 2017
- Learn about cryptocurrency mining with this interactive blockchain demo - TNW - August 30th, 2017
- Good Morning, Cryptocurrency! Vietnam To Create Legal Framework For Digital Assets - ETHNews - August 26th, 2017
- Cryptocurrency mining may void warranty on Inno3D GPUs - PC Gamer - August 26th, 2017
- Russian Deputy PM Says He Supports a State-Backed Cryptocurrency - CoinDesk - August 25th, 2017
- How to Learn About Cryptocurrency In The Bitcoin Era - Daily Beast - August 25th, 2017
- Bernanke to Give Keynote Speech at October Cryptocurrency Event - Bloomberg - August 25th, 2017
- Estonia wants to launch its own government-backed cryptocurrency called 'estcoin' - CNBC - August 25th, 2017
- Aimwise to Create Standards for Cryptocurrency Crowdsales - newsBTC - August 25th, 2017
- A Mysterious New Cryptocurrency Is Surging After Being ... - August 25th, 2017
- Cryptocurrency Cyber Crime Has Cost Victims Millions This Year - Bloomberg - August 25th, 2017
- This European country may hold an ICO and issue its own ... - TechCrunch - August 23rd, 2017
- Bitcoin Skeptic Mark Cuban to Invest in Cryptocurrency ... - August 23rd, 2017
- $150 Billion: Total Cryptocurrency Market Cap Hits New All-Time ... - CoinDesk - August 23rd, 2017
- Cryptocurrency Market cap Sets a New All-time High of Over $150bn - newsBTC - August 23rd, 2017
- South Africa's Central Bank: It's 'Too Risky' to Launch a Cryptocurrency - CoinDesk - August 23rd, 2017
- Mark Cuban backs new $20 million cryptocurrency venture fund - CNBC - August 22nd, 2017
- VR World Decentraland Raises $25.5 Million In Cryptocurrency - UploadVR - August 21st, 2017
- AMD Releases Beta Graphics Driver for Better Cryptocurrency Mining - Bitcoin Magazine - August 21st, 2017
- Philippines Central Bank Grants First Cryptocurrency Exchange Licenses - CoinDesk - August 21st, 2017
- Media A-Listers Back eSports Betting Firm As It Dives Into Cryptocurrencies - Deadline - August 20th, 2017
- 10 Reasons Why Central Banks Will Miss the Cryptocurrency Renaissance - CoinDesk - August 20th, 2017
- Australia Weighs Jail Time for Cryptocurrency Exchange Offenders - CoinDesk - August 20th, 2017