Crypto has been around for 15 years now - an absolute eon in the digital age. It’s now a valuable, maturing space, even if the loudest narratives are still maddeningly degenerate. In this post, I’ll offer my personal perspective of the various eras in crypto.

2009-2013: Payments, reserve asset, and store-of-value

The first impulse for Bitcoin was two-fold. First was digital payments or digital cash, and the second was a new reserve asset. The latter attracted anarchists, anarcho-capitalists, doomers, and “Austrian economists” (or what they misunderstand as). There were some vast delusions of grandeur by these folks about how Bitcoin will become the new global standard asset. This is about as delusional as Japanese imperial soldiers in the 1960s who were convinced the war was still ongoing and they must fight for the emperor. The world has evolved, and modern monetary policy has proven to be tremendously successful in heralding the most prosperous and innovative times in human civilization. Indeed, these incredible advancements led to Bitcoin being possible in the first place.

The bigger issue, though, is that the current global monetary systems require heavy subjective inputs, which is simply not possible with the objective-exclusive nature of public blockchains. A great example is the COVID-19 nightmare where the global economy shut down overnight. A so-called “Bitcoin standard” would have actually led to a global economic collapse where all but the wealthiest 1% would be plunged into poverty. Given the scope of the calamity, the world’s people did an admirable job coming out of it relatively unscathed - a huge improvement over pandemics of the previous centuries which took decades and even a century to recover from. It was certainly far from perfect - 2022 saw pretty high inflation and it’ll take a couple years more for things to stabilize to pre-COVID levels - but all things considered, it’s clear as a civilization we’re getting a whole lot better at this macroeconomics thing.

The other side was payments - this attracted more of the tech and internet pioneers. At the time, digital payments was still a huge potential market. However, Bitcoin had major issues - high volatility, no scalability, and hostile UX. Meanwhile, fintech iterated fast. Asia led the way, and today, there are multiple payment apps which offer free, instant transactions with perfect UX. India in particular has an ideal solution which combines a global standard (UPI) that its hundreds of apps and thousands of bank can seamlessly interoperate between. Indeed, UPI is being adopted outside of India. Crypto still has a niche for payments, but we’ll discuss that in the next section.

Towards the end of this era, it was pretty clear to most that neither a global reserve asset nor payments were realistic - but something else was, an alternative, non-sovereign store-of-value. A new-age digital Gold, so to speak. This was wildly successful, and to this day remains the #1 usecase of Bitcoin.

2013-2018: Discovering crypto applications

Around 2011-12, most of the “altcoins” being developed were “Bitcoin killers”. But a new category was emerging - what if you could use blockchains for more than just money?

At first, this resulted in application-specific blockchains. The first one I’m aware of was Namecoin. In 2014, we had BitShares, which pioneered several new technologies and features:

• Proof-of-stake with delegations

• DEXs

• Memecoins (Brownie points, anyone?) and NFTs

• Algorithmic stablecoins (bitUSD)

• User-issued assets

• Free transactions with high TPS; at the cost of high system requirements, thus with low verifiability & decentralization unlike Bitcoin

Later, the BitShares codebase was forked to Steem, which expanded blockchains to social networking. Of course, this proved to be unsustainable.

The groundbreaking innovation of this era, though, was the 2014 Ethereum Whitepaper. It listed out pretty much every application that would eventually find lasting product-market fit. The main problem with application-specific blockchains was sustaining lasting economic security. Indeed, almost all L1s from the 2012-14 era have bled in value and have very limited economic security. The only reason why they aren’t constantly attacked is there’s nothing to attack on these ghost chains.

Ethereum offered an elegant solution to this problem, letting application developers deploy on Ethereum instead of starting their own blockchain with its own security budget. This led to a huge boom in experimentation that went far beyond the scope stated in Ethereum’s 2014 whitepaper.

All of this culminated in the 2017-18 ICO mania, where everything and the kitchen sink was through at “___ but blockchain”. Turns out, 99% of it made no sense on blockchains.

In this era, Bitcoin established strong product-market fit as an alternative store-of-value. Perhaps the big story was the “blocksize wars”. In the end, the “small block” Bitcoin won, emphasizing the need for end-user verifiability. By this time, the big players also realized that Bitcoin’s #1 usecase, alternative store-of-value, didn’t actually need scalability. So, it was prudent to not compromise on decentralization and security.

2018-2021: Finding product-market fit beyond alt-SoV

While 99% of crypto projects from the ICO mania proved to be useless, there emerged niches beyond alternative store-of-value that found product-market fit. Unsurprisingly, all of these were described in the 2014 Ethereum whitepaper.

By this time, fintech payment apps had reached ubiquity in many countries, particularly in Asia where most of the world’s population lives, accelerated by the COVID-19 pandemic. However, there were still niches where stablecoins found strong demand to become the #2 most useful application for crypto. These were: 1) easy access to USD in countries with unstable currencies, and where access to USD is otherwise restricted; 2) cross-border payment to countries with poor financial infrastructure or stringent capital controls; and 3) simply as a USD store, or for sending between exchanges. There are of course smaller niches, but those are the big three.

DeFi apps proved to be useful. While they are very limited and inefficient relative to traditional finance, they have found a multi-billion dollar niche. Identity apps also found use, particularly ENS.

NFTs were always cited as a big usecase, but something the discourse in 2014-15 and the Ethereum whitepaper underestimated was the rise of collectible NFTs. While Bitcoin was the digital Gold, collectible NFTs were the fine art used by the wealthiest people as an alternative store-of-value. The overall financial impact may be relatively small, and it’s only really relevant to a few of the top 1% wealthiest people, but it’s still a lasting usecase. There were of course other niches, but ultimately most of it proved to be very small niches.

This was the era where scalability was effectively “solved”, or at least the research was. New technology like validity proofs, fraud proofs and data availability sampling promise near-infinite scale, to the point scalability was not going to be the bottleneck.

Bitcoin saw strong growth, but also severely diminished returns, as it entered its maturity phase. Ether (the asset) also came-of-age as a bonafide alternative store-of-value thanks to overhauled economics and expanded utility.

2021- : Market splits into maturity and degeneracy

Indeed, starting in 2022, we have seen countless L2s and L1s go online, but nearly all of them remain barely utilized. While usage has been growing, it has lagged far behind actual increase in scale. The research consolidated in the previous era will ship in this one, and I expect in the next couple of years there’ll be near-infinite scale enabled by new technologies like validity proofs and data availability sampling that were not possible by monolithic blockchains. Conversely, this era is also the first time we’ve seen stagnation at the application layer, and it’s unclear what will saturate the imminent near-infinite scale. There’ll always be something - the question is, will it be valuable and meaningful? Or just more spam and bloat?

We’ve also seen a pretty direct split in the market. One part of it has doubled down on degeneracy. While in the past gambling was veiled in narratives, starting in 2021 there was no pretension - it was pretty straightforward ponzis all around. Indeed, this has continued on to 2023, as speculation returns to the market. The loudest narratives in crypto have continued to be about hopium, delusion, and blatant ponzis despite the reality of a maturing space.

In the background, though, there’s an industry that’s well into its maturity phase. Bitcoin and Ether have been established as large multi-hundred-billion dollar alternative stores-of-value. Over $30B in stablecoins are settled every single day, mostly across Ethereum/L2s and Tron. DeFi, identity, and NFTs continue to find a sustainable niche. While degeneracy and gambling are the loudest area of crypto today, it continues to be a multi-billion dollar market as well.

The future?

While no one can predict the future, the evolution of crypto has actually been very orderly. Everything that has found product-market fit was described in the 2014 Ethereum whitepaper and discussed in 2014-15. Somethings have been more successful than expected (collectible NFTs) while some are less so (payments, prediction markets) but overall, the industry has found strong product-market fit in a couple of niches and is entering a maturity phase.

Of course, gambling and degeneracy will always be the loudest part of crypto, and that’ll continue to be the case in waves. If that’s your thing - all power to you. If not, tune out of the noise and focus on the maturing aspects of crypto.

What I’d like to see, going forward - consolidation of product-market fits, maturity of sustainable scalability solution using validity proofs etc, more hybrid consumer applications with seamless UX with well-thought usecases with reason rather than vague delusions of grandeur and handwaving. I can hope for less noise and insanity, but let’s face it - that’s never going to happen.