What is crypto about, and why is it so confusing?

In my last post I talked about how dangerous it could be to get sucked into a simple and apparently obvious narrative. But what is the crypto bigger picture? Why is it so confusing? Why are there so many competing opinions? What will mass-adoption even look like?

So let’s start; What is crypto actually about?

Gambling your mortgage on novelty Dog Coins.

No, not really.

At its most basic level, crypto wants to build new ways for people to interact through computers. Simply, crypto is trying to create new systems (not just financial) that are fairer, more accessible, more transparent and more upgradable than the existing ones.

These will be systems where anyone can play, where anyone can build, and where the behaviour of the people that you are doing business with is forced to be fair - by code that can only operate fairly. Even if the person on the other side of the transaction is richer, more powerful and better looking than you, they are forced to play on a level playing field because that’s the only way the system works. This is the idealised goal of crypto, but if you follow the news at all, we still have a long, long way to go.

With that in mind, I’d like to give you a high-level view of what is currently going on in the crypto space, why it makes things confusing, and how this will change in the future.

To start, let’s draw a distinction between crypto infrastructure and crypto products. Infrastructure refers to the base level systems that work together to run applications. Products refer to the applications that the user interacts with. For example, the game that you buy from Steam is the product. The infrastructure is both software (like Unreal engine) and hardware (things like a graphics card) that come together to allow the game to be built and to function.

One of the notable things about crypto in 2022 is that the vast majority of major happenings right now are related to infrastructure. Almost all of the top-50 projects are attempting to be tools and services that allow other things to be built on them, rather than the end products in themselves.

This is one of the main reasons why there is so much confusion and lack of clarity among recent entrants to crypto. Because - I hate to say it - infrastructure is boring. Compare the number of people who want to play Call of Duty on PS5, to the number of people that want to understand how many cores there are in a PS5 CPU, or how the graphics engine that runs CoD works under the hood. Can you blame them?

Technical discussions about infrastructure are boring, and it’s OK to think that. When discussion centres around computational benchmarks and the incremental improvement of fundamental tools, it is zero surprise that only a very small proportion of people are “in it for the tech”.

What’s actually surprising is that so many people ARE interested in crypto considering how weighted it currently is towards infrastructure. Well… maybe it’s not that surprising given the prospect of 1000x gains. The lure of fast money has caused a frantic speculative market, bringing in people who would otherwise not pay the slightest attention to concepts like L1s, bridges, or smart contracts.

Right now, “what is actually happening in crypto” is a bunch of base level tools are slowly getting better and, as they improve, more interesting and more accessible things will be built on top of them. If you understand this, then you can start to answer the question;

“What will spark mass-adoption?”

Products. At no point will billions of people around the world suddenly decide that they are interested in atomic swaps, or volitions/validiums, or zero knowledge proofs; luckily, they won’t have to. What will spark global adoption will be products built using these tools in the background. Further, the products will be simple to use and have obvious benefits.

As of now, none of these products exist in a form that would create an expectation of imminent global adoption, but the tools that can be used to create new products are getting better so quickly, these products might only be a couple of years away.

To connect to the internet you used to have to type in rows and rows of code, which limited access to a very small group of people with the technical know-how and interest to do so. Now you can just click on an icon and you’re online.

99% of people who use the internet today don’t understand the infrastructure that runs it. How TCP/IP works. How https works. But that’s the thing, they don’t need to. The point is that the infrastructure works in the background while the user interacts with the products - like web browsers - that work on top.

It will be the same in crypto. By the time mass-adoption happens it will be because all of the technical stuff will just work in the background, while awesome products with obvious use cases and value work on top. There won’t be any sort of challenge to win people over, because the product will simply be able to do things that non-crypto products have never been able to do. You won’t have to wonder “how to I shill this to everyday people” because the products will be obvious, superior and self-explanatory.

This indirectly answers another perennial question; Yes, you are early. You are so early, in fact, that we are still figuring out what the baseline infrastructure will be that powers the eventual products, we’re not really at the products stage (although a number of particularly interesting products do already exist).

So, if you feel like crypto is a mystifying mess of jargon, complicated technical discussion and obscure concepts far outside your comprehension, don’t worry. By the time world-changing crypto products come around, you won’t need to understand any of these underlying tools in-depth. Any more than someone needs to understand TCP/IP to use the internet.

However if, like the early adopters of the internet, you do decide to engage with “the tech”, you will be far better positioned to understand and anticipate future trends and developments. If your investment plan is serious and long term, you will only benefit from a more sophisticated, nuanced and broad understanding of the market. Knowing that crypto is currently an infrastructure-orientated, rather than a product-orientated market, is a good start.

Best of luck out there.