Crypto Needs a New Narrative
The ongoing regulatory battle in crypto feels a bit like two bald men fighting over a comb — and not just because it's Armstrong v. Gensler.
For all the attention it gets, what exactly are we fighting over? Crypto has a $1 trillion market cap (just one-third of Apple's) and a niche following of, what? A few tens of thousands of active on-chain users?
(By comparison, ChatGPT hit 100 million users two months after launch.)
We, of course, think crypto is destined to be many multiples larger than it is now — but we also think we'll get there with or without the US government's permission.
So why does government regulation get so much attention?
I think it's partly because it feels like there's not much else to pay attention to.
That's not to say nothing's happening — a lot is happening. Just not the kind of things that attract attention much beyond those tens of thousands of active users: The activity in crypto is either highly technical or lowly degenerate.
There's not much in between, and that makes it hard to follow.
I am in the privileged position of getting to listen in on a daily Blockworks Research morning call, which keeps me au courant on the latest developments in crypto infrastructure: Rollups, data availability layers, shared staking, cross-chain interoperability, zero-knowledge tech…
For a TradFi refugee like myself, the call is maybe 30% comprehensible.
But it's interesting. And it's a daily reminder that there's still a lot happening in crypto — perhaps more so than ever.
The latest in crypto degeneracy frequently gets mentioned, as well. And that part is 100% entertaining.
Last week included discussion of hamster racing, the "Harry Potter Obama Sonic 10 Inu" memecoin, and Telegram bots that let you get into such memecoins early.
Pretty silly stuff — but not to be dismissed!
Because it may be the silly stuff that tides us over in this bear market time between narratives.
Gambling is fun
Crypto is often disparaged as being "just for speculation." But speculation itself is a substantial use case.
Stake.com, for example, has become the world's seventh-largest gambling group, mostly because it allows people to place their bets with crypto (not US people, unfortunately).
Like any casino, Stake.com makes money because its users lose money. But they know that and keep coming back, anyway, because it's fun: Gambling is an enduring business because it's entertainment.
That includes betting on crypto as well as betting on stocks (if your holding period for a stock is anything less than several years, you're not investing, you're gambling.)
In the case of crypto hamster racing, it also includes betting on events that have already happened, which is especially entertaining.
"Trustlessness" is meant to be a core principle of crypto, but some crypto users are nonetheless trusting enough of the HamstersGG betting platform that they're willing to bet on pre-recorded races.
(You can also bet on the revenue-sharing token HAMS, which went up about fivefold last week before giving it all back today.)
Some users are even trusting enough to forsake all crypto principles by handing their private keys over to untested Telegram trading bots, just to have a better shot at getting in early on sure things, like the Harry Potter Obama Sonic 10 Inu token.
Less entertainingly, DeFi farming continues to be a thing: Much maligned after the excesses of 2020, farming has proven to be an innovative way to give tokens value and fund new projects.
(That's not investment advice: You have to be early, nimble, and deep in the weeds to make any money at it.)
None of these activities will go mainstream, of course. And builders would surely tell you it's not why they've stuck with crypto through the long bear market.
But I'd argue that these types of things are indirectly funding the builders that will build whatever use case does eventually go mainstream.
By attracting users, generating fees, stress testing tech, and giving value to tokens (even if inexplicably), the silly stuff is making a serious contribution to the space.
Fighting the good fight
Still, crypto is in need of a new narrative — something less silly that can attract attention beyond the current limited set of crypto power users.
We've thrown a lot of stuff at the wall over the last few years — DeFi, DAOs, gaming, NFTs — but nothing's really stuck.
All of it, however, has contributed by attracting attention and money to the space.
With VC pivoting to AI, that money now seems to be drying up, however, which leaves the crypto industry with some finite runway — two years, maybe?
To keep the builders funded much beyond that, crypto will need a new narrative that gets people's attention again.
There are several good candidates, like bringing real-world assets on-chain, tokenizing securities, providing the payment rails for autonomous AI agents, or offering proof-of-humanity for non-AI agents.
None of those may be what leads to mainstream adoption, but the next narrative will at least bridge the gap to whatever eventually does.
Let's hope it turns out to be something worth fighting for.
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