Are There Actual Use Cases for Crypto?
Piercing the Speculative Bubble and Venturing into Value Creation
We could all go for a bit of optimism right now–but in an industry where billions of dollars of VC capital feel wasted post-collapse, it's a bit embarrassing what we have left to show for a multi-year bull market despite so much effort.
At its core, though, nearly everyone agrees that there is at least something novel to crypto technology, something fundamentally different–whether that difference comes down to the cryptography, the use of tokens to coordinate networks, the access to permissionless capital, or something else entirely–that remains to be seen.
As far as criticisms of crypto? Yes–those are abundant, and many of them are fair (and thus, we should take them seriously as an industry). Among the counterarguments that I find most compelling:
Crypto sucks up mind share that could be spent on bigger and more important problems
Crypto is largely a zero-sum game of speculation
Crypto has made many promises that it hasn’t delivered on
So far, crypto use cases are less efficient that traditional rails
Crypto has taken advantage of inexperienced retail entrants
But to say that crypto hasn’t produced anything of value is simply false–there are plenty of cryptographically secure, tokenless networks that have created novel use cases with strong product market fit.
And while Layer Ones like Ethereum and Solana seem to get the most clout on social media, they only provide value to the degree that apps on top of them can provide value. On the other hand, the following five protocols provide clear value for the world, and require cryptocurrency tech to be useful.
So, for the skeptics, or the pessimistic: this one is for you.
It seems simple, but there’s already an entire category of mass-adopted crypto in stablecoins, dollar-backed assets that exist on blockchains to represent stable value. Even the zealous Bitcoin-maximalists admit that stablecoins have enabled people living in hyperinflationary or oppressive monetary regimes (think Argentina, Turkey, and Lebanon) to have a stable store of value to protect their wealth.
In Lebanon, bank accounts were recently frozen, so even though the money retained its value, it wasn’t accessible. With stablecoins; stored in custodial cryptographic wallets (remember, not your keys, not your crypto), no one can restrict access to the movement of your wealth.
I’d guess this vertical isn’t frequently spoken about for one big reason: it’s difficult to speculate on. Stablecoins don't move in price by design. Market share is controlled by Tether (USDT), Circle (USDC), and Binance (BUSD and TUSD), all of which are difficult to directly invest in--although you can invest in BNB token or Coinbase stock. They’re also not decentralized; the three above-mentioned coins are just ‘blockchain-wrapped dollars.’ $DAI is the biggest decentralized competitor, and its token, $MKR is easy to purchase, although many new decentralized competitors are hot on its tail.
Part of Constitution DAOs Viral Marketing
Remember ConstitutionDAO and its PEOPLE token? It was a project that raised an enormous sum of money ($47 million) to establish a DAO (Digital Autonomous Organization) with the express purpose of purchasing an early copy of the constitution. For some reason, the idea went incredibly viral and sparked a saga that started with 13 young crypto natives and ended with a failed phone bid for the collectible at Christie’s Auction House.
Online crowd-based fundraising isn’t really a new thing, but the idea of permissionless tokenized ownership is actually quite novel. Existing models are rent-seeking, as they charge a percentage fee to fundraise (GoFundMe), and they don’t allow for ownership of the underlying DAO or asset.
With ConstitutionDAO, the promise and virality of the idea depended on actual ownership. ‘Own the Constitution,’ they proclaimed, and it was true! By purchasing DAO tokens, you were one of the custodians of the DAO, you had ownership rights over the actual copy of the Constitution. Models like Kickstarter give out a product after a fundraising goal is met, sure, but it’s not actual equity in the underlying organization.
Decentralized fundraising offers a clear path to decentralized ownership, and one that goes beyond simple ownership of a product. It allows anyone to buy equity, and without all of the hoops, intermediaries, fees, and investment banks that serve as gatekeepers to traditional equity.
Arweave is actually a product that we have used here at Crypto Pragmatist. We worked on a project with the legendary DeFi whale Tetranode to use Arweave as a way to prove provenance and ownership of a particular caricature (the Tetranode ‘Tetrachungus’) in a decentralized and permanent way, and establish pseudonymous public ownership of the caricature via Creative Commons License
Many file storage services are centralized or even require some degree of KYC, others are impermanent or could come down at a moment's notice. When you want something to go up on the public internet, and you want it to stay there without worrying about it? That’s where Arweave’s token-based network comes into play. Think of it as a permanent digital billboard, with the billboard maintenance staff rewarded with Arweave tokens.
4. The Graph
The Graph is an incredibly exciting crypto project as it has evolved beyond ‘cryptocurrency success,’ with industry-specific penetration that rivals on monopoly. The project is used by at least 19 Layer 1/Layer 2s, all of which use their services around publicly accessible subgraphs and APIs.
And does The Graph need to operate on crypto tech? Yes, because the Graph becomes more valuable than competitor services thanks to the cryptographic verifiability of its data–the queries are intrinsically more valuable this way than with a centralized, trusted service–essentially a data custodian.
The Graph produces a successful product, beyond the scope of just cryptocurrency-based products, while simultaneously requiring the use of cryptocurrency-based rails to continue operation: it’s not talked about much, but I think The Graph will be viewed as one of the slam dunk proof-of-concepts for the viability of crypto-native products and business models.
Reminiscent of AWS in terms of market penetration, the only thing The Graph has to figure out is how to make money, which is a big ask in the crypto world, where even Bitcoin hasn’t figured out a long-term security model. We’ll see if they can crack the code.
Filecoin was dreamt up incredibly early in the history of cryptocurrency, with the Whitepaper and concept continuing to be influential to this day. Filecoin remains the 33rd biggest cryptocurrency by market cap; what has been the source of this longevity?
FIlecoin is an open-source network and digital payment system designed for cooperative file storage and data retrieval. Similar to the non-token-based decentralized network IPFS (the digital storage home of most NFTs), Filecoin permits users to rent unused hard drive space with a decentralized blockchain mechanism. The blockchain serves to record these ‘commitments’ to store particular files and transmit $FIL, the unit of value exchange on the network.
Like Arweave and IPFS, Filecoin is a decentralized file-storage service. Unlike IFPS, Filecoin effectively solves the incentivization problem around data storage, and Filecoin has a wide variety of applications built on the network. Arweave is more like a decentralized IPFS, but Filecoin has:
Cryptocurrency adds a benefit to each of the use cases we’ve described above: somewhat marginal, in the case of file storage, and non-marginal in the case of stablecoins. And, of course, there’s plenty of innovation that remains, and plenty to be improved around. Nonetheless, if the haters have you down on crypto, point here. There's plenty that's already been built, and there's plenty to come as well.