In the following series questions posed by the co-creator of Ethereum Vitalik Buterin. These seven questions are some of the most relevant features of this booming ecosystem. From usability, as in this week’s installment, to governance and everything in between. The series was inspired by a discussion between Buterin and a WeChat group called “Mars Finance Global Family.”
To get started, have a look at the first installment related to Bitmain’s move to centralization and the threat of 51 percent attacks.
It’s Like the Internet
In the late 80’s and early 90’s, AOL was the undisputed king of the online experience. During this era, firms would pay the company anywhere from $50,000 to $250,000 to build out a section of the system for their customers. The analogies that advocates often make is that the current cryptocurrency industry is similar to this period.
With organizations like Amazon, IBM, and others introducing multiple technological products and services, why have we not yet seen the next Facebook or Google in the cryptosphere?
During the first half of 2018, investors have poured more than $12 Billion into cryptocurrency-related companies with some of the largest such as Coinbase successfully raising millions in late-stage capital. Coinbase today is estimated to have approximately 13 million user accounts today after six years of growth. By comparison, Facebook had 100 million user accounts within four years and grew exponentially after that. Even though Coinbase is larger than most investment banks, such as Charles Schwab, they remain smaller than any of the most popular internet applications.
As Bitcoin celebrates its’ tenth birthday on January 3, 2019, we might finally cross the threshold of 30 million wallet addresses. So, why is this technology growing so differently than the early internet?
Consumers Are Mystified by Crypto
Further compounding the issue is that most folks don’t really understand what cryptocurrencies are. Is it an app? Is it a currency? Is it a product? Where can I use it and why would I?
Nearly every article written by mainstream press about Bitcoin discusses it as a virtual currency that is fraught with risks. While many VC-backed companies are implementing some form of blockchain technology and using it variously with AI, internet infrastructure, medical and many other industries, it isn’t altogether clear how these crypto innovations can solve the world’s most pressing problems any better than existing off the shelf technologies.
Michael Dupree of EasyBit in a one-on-one interview discusses how digital currencies are pioneering in the space but still face challenges with user adoption:
“So far as bitcoin adoption, it’s a lot harder to get someone to experiment with their money, with an unproven new type of currency than it is to get someone to test a new search engine or a social media platform, where the potential loss is 0 financially.”
Philip Duncan with InsureEco told that the mainstream consumers’ fear of hacking and mistrust of the burgeoning industry are the most significant barriers:
“In learning about Bitcoin [users] have only learned how to create or lose wealth instead of a way to use it as an application. The lack of wide-scale adoption is due to the lack of understanding, fear of the technology, and frankly, only looking at cryptocurrency as a financial instrument like email is the only way to use the internet.”
What Is the General Magic Formula?
Before the successful launch of the iPhone and Android phone, several companies were working on a portable information appliance. Twenty years before Steve Jobs walked onto the stage with an iPhone, a dream team of very successful Apple Engineers founded a company called General Magic.
Before the internet and browsers and before a national rollout of cell phone towers with high-speed data, these highly intelligent people got together and pieced together a working early cell phone. They failed, however, because they released too early. As Amy Lindburg and John Giannandrea told Adam Fisher of NY Magazine about having the “right idea–way too early.” Lindburg shared:
“We were designing a product for Joe Sixpack—literally they would call the customer Joe Sixpack—and the trouble is that at that time Joe Sixpack didn’t have e-mail! It was too early.”
Engineers from that company then left and founded many of the major companies and products that we recognize today including:
- Google Android
- Apple iPhone
Dupree also sees the similarities between Netscape and Bitcoin’s development:
“Netscape was a browser that brought together many different technologies that were all the result of various ongoing projects. I think the Bitcoin and blockchain hosting are just two of factors that will go into the future ‘Netscape’ of crypto.”
The White Zone Is for Crypto Parc-ing
It took decades and some talented engineers to build the Apple and Microsoft OS and, later on, the Apple iPhone and Android Phones. Each of these massive companies was built after the pioneering work done by engineers in research labs like Xerox Parc. With Crypto just about to finish its’ first decade of development, the industry is still quite young.
Recently, Status.im surveyed more than 100 developers within the Ethereum community and published the results. The most common thread between the all of the respondents is that a common set of tools and standards in the crypto community does not exist. The report summarizes the frustrations and problems in a word cloud:
- Solidity (the Ethereum development tool)
In the midst of all these individual actions, there isn’t yet a single company that is focused on crypto development on a massive multi-billion dollar scale. Magic Leap was funded for $2.3 billion, for instance, and is only just now releasing a product.
Surveying the space, we do see that there are a few individually wealthy cryptocurrency investors like Dan Larimer that have founded systems such as Block.one and EOS.io. However, each of these are technologies still in development and remain disparate from other technologies and systems.
Companies like Coinbase and Bitfinex are purely focused on exchange-level technologies and have not done anything to further the various use cases of cryptocurrencies. Many of the large VC funds, such as Polychain Capital, are focused on many small projects rather than a massive, all-encompassing project that has the size and scale of General Magic.
And there are no crypto research facilities that can be found that operate on the size and scale of Xerox Parc or Fairchild Semiconductors.
The Internet has several standards-bodies such as the Internet Engineering Task Force (IETF) and the World Wide Web Consortium (W3). These organizations are responsible for ensuring that all companies and organizations adhere to a common set of standards for how to make a computer to access a web server (TCP/IP) or how to correctly display a web page (HTML). Each of these standard-making bodies has been developing since the 1980’s.
Although each cryptocurrency has their own engineering and best practice, such as the Bitcoin Improvement Proposal (BIP) and the Ethereum Improvement Proposal (EIP), there is not a single industry-wide standards authority that would enable cross-crypto functionality or even cross-financial instrument functionality.
In 2017 alone there have been 863 ICOs each with their own standards and methods of interfacing with other systems. As developers attempt to create cross-platform systems, they face a seemingly uphill challenge to create a system that will then seamlessly work across all platforms.
By comparison, within the software application development world, there are only a few platforms and tools required to access the mass marketplace. A developer that writes for Windows, Mac, and Linux, will have reached the vast majority of the desktop market. Similarly, with mobile, there are only two dominant systems — Android and IOS.
A new developer to the crypto space now contends with more than 1,000 different platforms and projects all of which have different strengths and weaknesses, and none of these projects work together. In fact, some development groups such as Bitcoin Cash (BCH) are openly hostile to other development groups, such as Bitcoin.
In the midst of this, Dupree shares:
“In short we’re just waiting for that group of entrepreneurs to interface these crypto technologies together with traditional ecosystem [and] to make something amazing.”
The reality is that there is still a lot of work ahead of us to reach that Financial Singularity.
As the industry matures, there is still a fantastic opportunity that is presented to every new entrant to the cryptocurrency space. There has never before been a way to programmatically create trustless and provable transactions within an automated environment.
As groups big and small create companies, organize teams and release new applications, it is all but sure that one of these groups will latch onto something big. The challenge is clear but the process to solve that challenge is not yet known. As with anything in math, it just takes time to create the solution and to publicize it for the world to see.