How can the crypto industry perform so well? What is the secret of the fact that the total value of cryptocurrencies can grow 2.4 times on average every year? Is this trend that has been going on for more than 10 years just financial speculation? If not, how does crypto differentiate itself from other industries? These are the questions that have puzzled me for a while.
I think that the crypto world benefits from a set of ideas that build synergy on top of each other.
The first thing that comes to mind when talking about crypto is decentralization. The fact that servers, where the data is processed and kept, are located in different parts of the world increases the security of blockchain networks. On the other hand, decentralization causes computation costs to increase significantly. Fortunately, computing costs are decreasing exponentially over the years under Moore's law. In this way, as time progresses, the number of feasible use cases in which blockchain technology can be applied increases exponentially.
Is it so important to process data on separate servers? The Internet has given birth to giant technology companies that can do business on a global scale. Thanks to the efficiency impact of large scale, Web 2.0 companies were able to serve consumers in exchange for their personal information. As the years progressed, technology companies came as monopolies in their field. Thus, inefficiencies were formed within their bodies, and their ability to innovate decreased. Likewise, states are now about to lose their monopoly on printing money because of cryptocurrencies. Decentralization allows individuals who do not know each other to cooperate. They no longer need intermediaries like governments, banks, or tech companies to solve the trust problem.
I did not get permission from anyone to start writing in Hive. Likewise, anyone can develop new projects of any kind on this network. This allows people to easily experiment with blockchain ecosystems. With the number of trials, the probability of producing valuable products increases. As a former banker, I know that launching a new financial product is nearly impossible. Because the public authority never wants to take risks in financial matters. However, innovative financial mechanisms are tried in the crypto world, and the successful ones turn into million-dollar businesses after a while. In addition, thousands of people who want to create works of art, produce content or computer games have gained the freedom to do whatever they want thanks to the crypto world.
Confidentiality makes it difficult for competitors to imitate the elements that create a competitive advantage. It helps to cover up the mistakes made and makes it difficult for those who want to make a security breach. On the other hand, the principle of confidentiality of private life and transparent conduct of public affairs is valid today. Because, as citizens and consumers, at this point where technology has progressed, we do not want to be content with balance sheets or budget statements that only show the main expenditure items.
Although rhetorical works are in that direction, it cannot be said that states and large companies transparently conduct their affairs. They hide behind concepts that are difficult to define, such as trade secrets and national security. In the crypto world, the ledgers can be seen in all their details. The fact that there is no barrier to accessing data paves the way for innovation and ensures that mistakes are easily noticed. The use of open-source software is also one of the factors that support innovation.
Blockchain networks are ideal structures for producing and putting into use systems that complement each other like pieces of a puzzle. Each element of the value chain can be charged at the rate of the value it generates or receives its share of the value generated through tokenization. We are observing composite structures concretely in the DEFI ecosystem today. The two apps can easily collaborate to offer users an attractive value proposition. Each project can take certain basic building blocks and use them.
Communities, Participation, Tokenization
The crypto world has made it easier for people with the same interests to come together to share information and do business. We could also share information in Web 2.0 applications, but the value generated in this way largely belonged to the company offering the platform. Web 3.0 applications made it possible to store and share the value co-generated through tokenization. According to their interests, people can make niche investments and earn income from them.
Bitcoin, which was formed by the combination of several powerful ideas, led to the birth of a huge industry in 2008. Over time, new elements have been added to decentralization, cryptography, permissionless, and scarcity that make Bitcoin strong.
It is not possible to easily identify the elements that bring spirit to the crypto world. We are talking about an industry that is constantly evolving.
The law of accelerating returns, mentioned by futurist Ray Kurzweil, is very valid for crypto. Each new technology or concept combines with the previous ones and creates synergy, ensuring exponential development.
The sum of financial assets in the world was $1020 trillion at the end of 2020. (source) If the crypto industry continues to embrace the principles that created it, it seems quite possible that it will take a share of $100 trillion from this pie by 2030.
Thank you for reading.
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