What is Crypto Shame?
Do you ever feel uneasy talking about your involvement in the crypto or blockchain space?
Recently, the term "crypto shame" has been circulating more frequently within the industry. Some people feel ashamed because blockchain has not yet provided meaningful social value, while others feel embarrassed due to the prolonged market slump. This feeling is not limited to everyday investors; it is also shared by long-standing industry professionals, including Ethereum core developers.
On August 5, during a major market slump, Péter Szilágyi, a member of the Ethereum Foundation and the lead developer of Geth, tweeted a comparison between the crypto industry and SpaceX. He pointed out that, unlike SpaceX—which pushes human progress forward through rocket launches and space exploration—the crypto industry is more like a casino for gamblers and has not created real social value.
You might argue that Bitcoin, which emerged from the 2008 financial crisis, along with the rise of stablecoins, DeFi, DEXs, wallets, and other innovations over the past decade, are substantial achievements. Péter acknowledges that stablecoins are useful, but he argues:
- Bitcoin, intended to be a safe-haven asset, has failed due to its high volatility, undermining its original purpose.
- Decentralized exchanges (DEXs) have mostly driven speculation instead of creating real value.
- Market analysis tools like Dune and Messari, while useful, ultimately serve a market that often resembles a "casino."
- Even though we've achieved high TPS, current blockchain applications mainly support meme coins rather than creating valuable products or services.
Indeed, technology is not the goal itself; it should aim to bring real improvements to people's lives. Given the current landscape, it might be smarter to keep quiet about your involvement in crypto for your own safety.
A month ago, a 29-year-old Bitcoin holder in Kyiv, Ukraine, was kidnapped by four men and murdered after they stole about $207,000 worth of Bitcoin from him. At the recent EthCC conference in Brussels, several attendees were also robbed.
In the article, A Bitcoiner’s Guide to Organized Crime, Casa co-founder Jameson Lopp highlighted that organized crime groups in the United States specifically target Bitcoin holders to steal their assets.
With multiple reports of crypto users being targeted, it's understandable why people want to hide their identities.
The volatility of the crypto market also led some in the industry to stay silent. Sharp price declines can shake investor confidence and hurt the public's view of the entire crypto sector.
Is Crypto Really "Shameful"?
To answer this, we first need to acknowledge the current challenges in the crypto industry: a lack of practical applications. Beyond Bitcoin and a few other projects, most still lack substantial use cases, and much of the technological development appears to primarily enable speculation.
Speculators are mainly focused on making profits and care little about what they invest in. However, they provide liquidity to many tokens, bridging gaps in the market. Both value investors and speculators play essential roles. As the saying goes, “clear waters hold no fish”—without speculators, market activity could decline significantly.
Understanding the role speculators play helps us take a more balanced view of the industry. It's also understandable for crypto users to protect their identities for personal safety. However, feeling ashamed due to a perceived lack of value or market volatility may be unnecessary. Crypto has a valid role in the current landscape and holds potential for expanding real-world applications in the future.
The Significance of Crypto Today
Consider Bitcoin, the first successful decentralized digital currency, which operates without the need for central banks or authoritative institutions. This allows Bitcoin to be freely transacted globally without intermediaries. Despite its high volatility, many investors view it as a long-term store of value, similar to gold, providing a hedge against inflation.
In countries with severe inflation, Bitcoin has emerged as an alternative. For example, on June 9, 2021, El Salvador adopted Bitcoin as legal tender to address its currency's devaluation. Additionally, Bitcoin promotes financial inclusion by offering a new method for unbanked populations to make payments and save money.
Furthermore, Bitcoin has introduced blockchain technology, which has applications beyond cryptocurrencies, such as in supply chain management, identity verification, and more.
Stablecoins, known for their price stability, have gained popularity in cross-border payments. For example, PayPal’s Xoom service allows users to transfer money using stablecoins without incurring fees, which reduces costs and enhances efficiency for international transactions.
The Future Social Value of Crypto
Péter's comparison of cryptocurrencies to SpaceX may not be entirely accurate. Rockets have a clear purpose—launching objects into space. However, the purpose of cryptocurrencies and blockchain, similar to the internet, is not fixed. They have the potential to evolve and adapt over time.
A better comparison might be 5G technology. A decade ago, when 2G or 3G was adequate, few could have anticipated the applications of 5G. However, during the recent Paris Olympics, 5G was widely used for live broadcasts and data transmission. For instance, the Olympic Broadcasting Services (OBS) used 5G cameras and ultra-high-definition technology to give viewers around the world a better experience.
Thus, technologies that initially seem to lack clear applications can, over time and with further development, reveal significant social value. Blockchain's core feature—immutability—enhances data transparency and traceability. In the charitable sector, this can build donor trust, while in the food supply chain, blockchain can track the origins and history of food, improving safety. Additionally, blockchain’s encryption capabilities can be used for identity verification, ensuring that only authorized users access specific resources, thereby enhancing data security and reducing the risks of identity theft and data breaches.
While much of today’s development in cryptocurrency and blockchain focuses on infrastructure, like increasing TPS, which is often used for meme coins and speculative purposes, the real potential lies in applying these technologies to more practical and valuable scenarios. Just as 5G technology proved its value as it matured and its applications expanded, cryptocurrencies and blockchain will similarly reveal their true worth as they evolve and find broader, more meaningful applications.
Government Regulation on Crypto
Bitcoin was created in the aftermath of the 2008 financial crisis by Satoshi Nakamoto, who, disillusioned with the traditional monetary system, designed Bitcoin without a central issuing authority. The Bitcoin genesis block famously includes the message:
The Times 03/Jan/2009 Chancellor on brink of second bailout for banks
Cryptocurrencies initially posed a challenge to traditional finance and government systems. However, today, governments worldwide are increasingly developing regulations for the crypto industry, showing some level of acceptance.
In 2023, the European Parliament passed the Markets in Crypto-Assets (MiCA) regulation. This landmark legislation provides a comprehensive regulatory framework for crypto assets throughout Europe, covering aspects such as issuance, trading, and custody services.
This year, the United States also approved Bitcoin and Ethereum spot ETFs, marking a major step for cryptocurrencies into mainstream finance. Additionally, the U.S. is considering a proposal to establish a Bitcoin Tax-Free Digital Economic Zone (DEZ) to encourage Bitcoin adoption and growth by offering a tax-free trading environment.
In August, Russian President Vladimir Putin signed a law legalizing cryptocurrency mining. The Russian government has also identified cryptocurrencies as a promising economic sector and plans to develop a regulatory framework for it.
These regulatory actions, from broad frameworks to specific initiatives, show increasing government optimism about the industry's future and address concerns about "crypto shame."
Conclusion
We don’t think crypto is shameful. Those in the industry should move forward confidently and stay true to their purpose.
However, we don't fully agree with Arthur Hayes' suggestion that crypto holders should proudly show off their wealth—not without first ensuring a secure environment.
We believe crypto is important, especially when we understand the source of its resilience.
For now, patience is key.